Empresa Distribuidora y Comercializadora Norte SA Q3 FY2022 earnings call

• Edenor guarantees electric distribution to 3.2 million customers, serving ~11 million people, with mission to provide social responsible electricity distribution and lead energy transition.
• Revenues from sales down 11% in real terms due to lack of VAD adjustment, but volume of energy sold increased.
• Maintained service quality with SAIDI and SAIFI improving by 19% and 13% respectively, best historical record.
• Completed cancellation and voluntary exchange of financial debt of Class 9 negotiable obligations, with new senior notes issued.
• Regulatory framework: Stabilized prices of energy in wholesale market, with subsidies for certain users reduced.
• Credit ratings improved: Moody's affirms Caa3 rating and changes outlook to stable; Standard & Poor's raises rating to CCC+.
• Capital expenditures in first 9 months of 2022 totaled ARS 16,802 million, down 11% from prior year but maintained service quality.

Revenues from sales were 11% lower than in the third quarter of 2021 in real terms due to lack of VAD adjustment. However, volume of energy sold increased by 3.2%. Gross margin was ARS 14,730 million, a fall of 34% compared to the same period previous year. EBITDA decreased to a loss of ARS 2,703 million. Financial results were a loss of ARS 20,615 million in the third quarter of 2022, an increase of 130%. Capital expenditures during the first 9 months of 2022 totalized ARS 16,802 million, a 11% decrease in real terms from the same period in 2021. Energy losses in the third quarter of 2022 decreased by 17.7% compared to the same period of the previous year. SAIDI and SAIFI, key indicators for energy cuts, improved by 19% and 13% respectively compared to the same period last year, showing the best historical record. Revenue contribution details: Revenues from sales were impacted by VAD adjustment lack, but volume increase partially offset the decrease.

• Wait for 2023 budget law approval to determine internal tariff review process. No specific forward-looking guidance on tariff review methodology yet.
• For CAMMESA debt regularization, wait for budget approval to discuss 6-month grace period and 96-month payment installments.

Q: According to the 2023 budget law being discussed in the senate, an integral entity should perform the internal tariff review from power distributors no later than 90 days following the budget approval. First sub question: Does this mean that the internal tariff review should be launched or that the new distribution tariff should be already calculated and implemented? Second sub question: How do you expect the study revision to work should it be a wrap-based methodology similar to the 2017 ones with a new asset base, a new regulatory WACC, new volume trend and so forth? Or would it be something simpler and more Adhoc?

A: For the first question, we don't have an answer yet. We have to wait until the senator approves the budget of 2023. And then we will start discussing how we will do the process of this short process of rate in 90 days be implemented. We don't have all the indications and the methodology and mechanisms in which we will -- how we will make this process being able to discuss with the regulatory entity. That's for the first. For the second question, no specific indication on whether it will be wrap-based or simpler yet as we need to wait for budget approval.

Q: My second question is related to the agreement with CAMMESA regarding the regularization of the USD 1 million commercial debt. Could you give us a bit more specifics on the calendar of potential payments and the possibilities of seeing dedicated tariff hikes to take care of this debt?

A: For the second question, what we can say is that in this article of the law also specifies that it's going to be a 6 month of grace period and 96 months of payment installments to regularize the debt of CAMMESA. So we have to wait until that it's approved to discuss further discussions with CAMMESA under the point.

Q: When do you think that the tariff segmentation and the elimination of the sunset of the energy component for the more wealthy consumers could be effectively implemented in household bills, December, January?

A: This is already implemented. So for -- and all this segmentation doesn't have any effect in the value-added distribution of Edenor. It's just a pass-through mechanisms of reducing subsidies for the government, but doesn't affect the value-added distribution of Edenor.