Central Puerto: Ps. 1.16 Billion Net Income, Purchase of Brigadier López and Commencement of Operations of La Castellana II

BUENOS AIRES, Argentina–(BUSINESS WIRE)–Central Puerto S.A (“Central Puerto” or the “Company”) (NYSE: CEPU), the largest private sector power generation company in Argentina, as measured by generated power, reports its consolidated financial results for the quarter and six-months period ended on June 30, 2019 (“Second Quarter” or “2Q2019”, and “First Half” or “1H2019”, respectively).

A conference call to discuss the results of the Second Quarter 2019 will be held on August 13, 2019 at 13:00 Eastern Time (see details below). All information provided is presented on a consolidated basis, unless otherwise stated.

Financial statements as of and for the quarter and six-month period ended on June 30, 2019 include the effects of the inflation adjustment, applying IAS 29. Accordingly, the financial statements have been stated in terms of the measuring unit current at the end of the reporting period, including the corresponding financial figures for previous periods informed for comparative purposes. Growth comparisons refer to the same period of the prior year, measured in the current unit at the end of the period, unless otherwise stated. Consequently, the information included in the Financial Statements for the quarter and the six months period ended on June 30, 2018, are not comparable to the Financial Statements previously published by the company.

Definitions and terms used herein are provided in the Glossary at the end of this document. This release does not contain all the Company’s financial information. As a result, investors should read this release in conjunction with Central Puerto’s consolidated financial statements as of and for the quarter and six months period ended on June 30, 2019 and the notes thereto, which will be available on the Company’s website.

A. Highlights

2Q2019 energy generation increased 4% to 3,256 GWh, as compared to 3,145 GWh during the same period of 2018 (see section C. Main Operating Metrics), mainly due to a 16% increase in thermal generation, and the energy generation from wind farms Achiras and La Castellana which started operation during the 3Q2018, partially offset by a 36% decrease in energy generation from hydro units.

Consolidated Net income and Net income for shareholders of Central Puerto, were Ps. 1.35 billion and Ps. 1.16 billion respectively (see section D. Financial).

“During the last months, we had important advances in our expansion projects. We purchased the Brigadier López Plant adding 280 MW to our current installed capacity.

On the renewable energy side, we also had good news, with the start of operations of our first MATER project, La Castellana II, which will allow us to serve our customers directly”

Jorge Rauber, CEO Central Puerto

Purchase of the Brigadier López Power Plant. On June 14, 2019, Central Puerto and IEASA (Integración Energética Argentina S.A., a state-owned company) signed the transfer of the Brigadier López plant. Currently, the plant has an installed capacity of 280 MW (Siemens technology gas turbine).

According to the transfer contract, the legal, economic, and other effects, were considered as of April 1, 2019. However, applying IFRS 3, for accounting purposes, the results associated to the Brigadier López plant have been included on Central Puerto’s Income Statements starting on June 2019. Additionally, as a result of the application of said method, the Company considered the trade receivables and accounts payables of April and May 2019 as part of the fair value of the assets and liabilities acquired at the acquisition date, included in the Consolidated Statement of Financial Position.

The amount paid for this acquisition was US$ 165,432,500, consisting of a cash amount of US$ 155,332,500, plus an amount of USD 10,100,000 canceled through the transfer to IEASA of LVFVD.

In order to finance this transaction, the company entered into a loan agreement for US$ 180 million, which were fully disbursed on June 14, 2019. Under the terms of the contract, this loan accrues a variable interest rate based on the LIBO rate plus a margin and is redeemable quarterly in 5 equal and consecutive installments starting 18 months after the signing of the loan contract.

Additionally, according to the terms of the agreement with IEASA, Central Puerto assumed the trustor status, related to the Trust Agreement. The balance of the financial debt as of June 14, 2019, was approximately US$ 154,662,725. In accordance with the terms of the trust agreement, the financial debt accrues an interest rate equal to the LIBO rate plus 5% or equal to 6.25%, whichever is greater, and shall be repaid in monthly installments. As of June 30, 2019, there were 38 remaining installments.

Collections of the CVO trade receivables. During the Company continued with the collection of the installments related to the CVO trade receivables as scheduled. Additionally, during June and July, Central Puerto collected Ps. 2,562 million and Ps. 825 million (including VAT) respectively, approximately equivalent to US$ 57,2 million and US$ 19,8 million using the exchange rate of the date of each collection, related to the installments corresponding to the March-December 2018 of the CVO agreement.

Loan facility from KFW. On March 26, 2019 the Company entered into a loan agreement with Kreditanstalt für Wiederaufbau (“KfW”) for an amount of 56 million dollars to finance the Luján de Cuyo project. Under this loan, the company received US$ 43.7 million in May 2019, and US$ 4.9 million on July, respectively. Central Puerto expects to receive the remaining US$ 7.4 million before the end of the 3Q2019. The Company expects that the project will reach the COD in November 2019, as originally planned.

Renewable energy

Term Market form Renewable Energy (MATER). As of the date of this release, Central Puerto has already signed long-term PPA contracts with private customers for 79% of the estimated energy generation capacity of the term market projects (considering the median -Percentile 50%- of the expected energy production) developed under Resolution No. 281-E/17 regulatory framework, which are currently under construction.

La Castellana II loan facility agreement and disbursement. On May 24, 2019 CPR Energy Solutions S.A.U., a subsidiary of the Company, entered into a loan agreement with Banco de Galicia y Buenos Aires S.A. for US$ 12,5 million for the project La Castellana II. The company received the full disbursement during May 2019. According to the terms, this loan accrues a fixed interest rate equal to 8.5% during the first year and shall be repaid in 25 quarterly installments starting on May 24, 2020.

La Genoveva I loan facility agreement. On June 21, 2019 Vientos La Genoveva S.A.U., a subsidiary of the Company, entered into a loan agreement with International Finance Corporation for US$ 76.1 million for the project La Genoveva I. The company expects to receive the first disbursement during the 3Q2019. According to the terms, this loan accrues an interest rate equal to LIBO plus 6.50% interest rate and shall be repaid in 55 quarterly installments starting on November 15, 2020. The Company expects that the project will reach the COD during the 2Q2020.

B. Recent news

Renewable energy

La Castellana II reaches commercial operation date (COD). On July 16, 2019, the wind farm La Castellana II (14.4 MW) started its commercial operations. This wind farm sells energy directly to large users under the MATER regulatory framework.

La Genoveva II loan facility agreement and disbursement. On July 23, 2019 Vientos La Genoveva II S.A.U., a subsidiary of the Company, entered into a loan agreement with Banco de Galicia y Buenos Aires for US$ 37.5 million for the project La Genoveva II. The company received the disbursement in full during July 2019. According to the terms of the agreement, this loan accrues a LIBO plus 5.95% interest rate, and shall be repaid in 26 quarterly installments, starting from the ninth calendar month counted from the disbursement date. The Company expects that the project will reach the COD during the 3Q2019.

C. Main operating metrics

The table below sets forth key operating metrics for 2Q2019, compared to 1Q2019 and 2Q2018, and 1H2019, compared to 1H2018:

Key Metrics

2Q

2019

1Q

2019

2Q

2018

Var %

(2Q/2Q)

1H

2019

1H

2018

Var %

(1H/1H)

Continuing Operations

Energy Generation (GWh)

3,256

3,549

3,145

4%

6,806

5,839

17%

-Electric Energy Generation-Thermal*

2,444

2,547

2,109

16%

4,990

3,973

26%

-Electric Energy Generation – Hydro

665

846

1,035

(36%)

1,511

1,866

(19%)

-Electric Energy Generation – Wind

147

156

0

N/A

304

0

N/A

Installed capacity (MW; EoP1)

4,082

3,811

3,811

7%

4,082

3,810

7%

-Installed capacity -Thermal (MW)

2,493

2,222

2,222

12%

2,493

2,222

12%

-Installed capacity – Hydro (MW)

1,441

1,441

1,441

0%

1,441

1,441

0%

-Installed capacity – Wind (MW)

148

148

148

0%

148

147

N/A

Availability – Thermal2

92%

93%

79%

13 p.p.

92%

84%

8 p.p.

Steam production (thousand Tons)

266

277

285

(7%)

543

560

(3%)

Source: CAMMESA; company data. * Includes generation from Brigadier López starting on April 2019.

1 EoP refers to “End of Period”

2 Availability weighted average by power capacity. Off-time due to scheduled maintenance agreed with CAMMESA is not included in the ratio.

In the 2Q2019, energy generation increased 4% to 3,256 GWh, compared to 3,145 GWh in the 2Q2018, mainly due to a 16% increase in the thermal generation, which during the 2Q2018 was affected by extension of the maintenance of the Puerto Combined Cycle, which was partially offset by a 36% decrease in the generation of our hydro plants, due to less waterflow in the Limay and Collón Curá rivers. Additionally, during 3Q2018, La Castellana I (99 MW) and Achiras I (48 MW) wind farms commenced their commercial operations. During 2Q2019 these plants generated and sold, under the RenovAr Program, a total of 147 GWh. As a reference, domestic energy generation decreased 9.1% during the 2Q2019, compared to the 2Q2018, according to data from CAMMESA.

During 2Q2019, machine availability of thermal units reached 92%, compared to 79% in 2Q2018 (affected by the unscheduled extension of the maintenance mentioned above), showing a sustained level and well above the market average availability for thermal units for the same period of 80%, according to data from CAMMESA.

Finally, steam production showed a decrease of 7% totaling 266,000 tons produced during 2Q2019 compared to 285,000 tons during the 2Q2018, due to lower demand by our client.

In the 1H2019, energy generation increased 17% to 6,806 GWh, compared to 5,839 GWh in the 1H2018, mainly due to a 26% increase in thermal generation, which during the 2Q2018 was affected by extension of the maintenance of the Puerto Combined Cycle. Additionally, during 3Q2018, La Castellana I (99 MW) and Achiras I (48 MW) wind farms commenced their commercial operations. During 1H2019 these plants generated and sold, under the RenovAr Program, a total of 304 GWh. The increase in the generation from thermal and renewable sources was partially offset by a 19% decrease in the generation of our hydro plant, due to less waterflow in the Limay and Collón Curá rivers. As a reference, domestic energy generation decreased 9% during the 1H2019, compared to the 1H2018, according to data from CAMMESA.

During 1Q2019, machine availability of thermal units reached 92%, compared to 84% in 2Q2018 (affected by the unscheduled extension of the maintenance mentioned above), showing a sustained level, and well above the market average availability for thermal units for the same period of 80%, according to data from CAMMESA.

Finally, steam production decreased 3% totaling 560,000 tons produced during 1HQ2019 compared to 543,000 tons during the 1H2018, due to lower demand by our client.

D. Financials

Main financial magnitudes of continuing operations

Million Ps.

2Q

2019

1Q

2019

2Q

2018

Var %

(2Q/2Q)

1H

2019

1H

2018

Var %

(1H/1H)

Revenues

5,819

6,829

3,350

74%

12,648

6,483

95%

Cost of sales

(3,278)

(4,007)

(1,799)

82%

(7,285)

(3,317)

120%

Gross profit

2,541

2,822

1,551

64%

5,363

3,166

69%

Administrative and selling expenses

(421)

(498)

(409)

3%

(918)

(760)

21%

Operating income before other operating results

2,120

2,324

1,142

86%

4,445

2,407

85%

Other operating results, net1

705

3,166

7,348

(90%)

3,871

21,575

(82%)

Operating income1

2,825

5,490

8,490

(67%)

8,316

23,982

(65%)

Depreciation and Amortization

342

527

397

(14%)

868

757

15%

Adjusted EBITDA1,2

3,167

6,017

8,886

(64%)

9,184

24,739

(63%)

1. Include, among others, the following concepts:

  • CVO effect

13,485

  • Foreign Exchange Difference and interests

    related to FONI trade receivables

377

3,203

7,097

(95%)

3,580

7201

(50%)

See “CVO effect” below for further information.

Average exchange rate of period

44.01

39.01

23.58

65%

44.01

21.63

103%

Exchange rate end of period

42.46

43.35

28.85

50%

42.46

28.85

47%

NOTE: Exchange rates quoted by the Banco de la Nación Argentina are provided only as a reference. The average exchange rate refers to the average of the daily exchange rates quoted by the Banco de la Nación Argentina for wire transfers (divisas) for each period.

2. See “Disclaimer-Adjusted EBITDA” below for further information.

Adjusted EBITDA Reconciliation

Million Ps.

2Q

2019

1Q

2019

2Q

2018

Var %

(2Q/2Q)

1H

2019

1H

2018

Var%

Consolidated Net income for the period2

1,352

1,347

4757

(72%)

2,699

16,693

(84%)

Loss on net monetary position

1,180

1,461

769

54%

2,641

1,108

138%

Financial expenses

589

1,614

2,192

(73%)

2,203

2,928

(25%)

Financial income

(556)

(419)

(1,385)

(60%)

(975)

(1,675)

(42%)

Share of the profit of an associate

(239)

(106)

(484)

(51%)

(345)

(663)

(48%)

Income tax expenses

500

1,593

2,640

(81%)

2,093

5,929

(65%)

Net income of discontinued operations

0

0

N/A

(338)

(100%)

Depreciation and amortization

342

527

397

(14%)

868

757

15%

Adjusted EBITDA1,2

3,167

6,017

8,886

(64%)

9,184

24,739

(63%)

1. Include, among others, the following concepts:

  • CVO effect

13,485

  • Foreign Exchange Difference and interests

    related to FONI trade receivables

377

3,203

7,097

(95%)

3,580

7,201

(50%)

See “CVO effect” below for further information.

2. See “Disclaimer-Adjusted EBITDA” below for further information.

2Q 2019 Results Analysis

Revenues from continuing operations increased 74% to Ps. 5,819 million in the 2Q2019, as compared to Ps. 3,350 million in the 2Q2018. The increase in revenues was mainly driven by:

  1. an increase in the energy generated during the 2Q2019 of 4%, as compared to the 2Q2018, and 13 percentage points increase in the availability of the thermal units under Energía Base, which was 92% during 2Q2019, as compared to 79% during the 2Q2018,
  2. an increase in the exchange rates for the 2Q2019, higher than the inflation for the period, which impacted tariffs set in US dollars, in terms of argentine pesos current at the end of the reporting period. As a reference, the average foreign exchange rate during 2Q2019 increased 87% compared to 2Q2018, while the inflation rate for the twelve-month period ended on June 30, 2019, was 56%,
  3. an increase in the fuel remuneration for units under Energía Base regulatory framework (and other related concepts), which amounted to Ps. 1,784 million during the 2Q2019, mainly because of income in accordance to Res. 70/18, in some of the units under the Energía Base regulatory framework (see “—Factors Affecting Our Results of Operations—Our Revenues—The Energía Base”), compared to Ps. 202 million during the 2Q2018,
  4. a 445% increase in the Sales under contracts, which amounted to Ps. 546 million during the 2Q2019, as compared to Ps. 100 million in the 2Q2018, mainly due to the energy generation of wind farms Achiras and La Castellana, which started operation during the 3Q2018, and the revenues related to the recently acquired Brigadier López Plant accrued during June 2019 (see Section A. Highlights for more information) which amounted Ps. 344 million.

This was partially offset by the decrease in energy and power prices for units under the Energy Base Regulatory framework established by Res. 1/19, starting on March 1, 2019. As a reference, the new tariffs are:

Items

Thermal

Hydro

Power capacity

payments Res.

1/191

Up to US$ 7,000 per MW per month

during December, January, February, June, July and August

Up to US$ 5,500 per MW per month

during March, April, May, September, October and

November

These prices, are multiplied by a percentage, which depends

on the average Utilization Factor (UF) of each unit during

the previous last twelve months (mobile year):

  • If UF >= 70%, the unit receives 100% of the price
  • If the is between 30 and 70%, the machine receives

    UF*0.75+0.475 of the price (lineal proportion)

  • If UF<30%, unit receives 70% of the price

US$ 3,000 per

MW per month

Energy payments

Res. 1/192

US$ 5.4 per MWh for generation with natural gas

US$ 8.4 per MWh for generation with fuel oil/gas oil

US$ 4.9 per

MWh

1 Effective prices for capacity payment depended on the availability of each unit, and the achievement of the Guaranteed Bid Capacity (DIGO in Spanish) that each generator may send to CAMMESA twice a year. For further details, see “Item 4.B. Business Overview—The Argentine Electric Power Sector—Remuneration Scheme—The Current Remuneration Scheme” in the annual report on Form 20-F filed with the SEC on April 30, 2019.

2 Energy payments above mentioned includes the tariffs for energy generated and energy operated as mentioned in Res. SRRyME 1/2019.

Gross profit increased 64% to Ps. 2,541 million, compared to Ps. 1,551 million in 2Q2018. This increase was due to (i) the above-mentioned increase in revenues, which was partially offset by an increase in costs of sales that totaled Ps. 3,278 million, a 82% increase as compared to Ps. 1,799 million in the 2Q2018. The increase in the cost of sales was primarily driven by:

  1. An increase in the purchase of fuel (and related concepts) used in our units that sell steam, or electricity under contracts or Energía Base (when applicable), which totaled Ps. 1,822 million during the 2Q2019, as compared to Ps. 445 million in the 2Q2018, due to:

    1. The cost of the self-supplied fuel purchased in accordance to Res. 70/18 described above;
    2. a higher price of natural gas used in the units that generate steam or electric energy under the Energía Plus framework, mainly due an increase in the exchange rate for 2Q2019 as compared to 2Q2018, which was higher than the inflation between this periods, which impacted in the US dollars denominated price of natural gas, in terms of argentine pesos current at the end of the reporting period. As a reference, the average foreign exchange rate during 2Q2019 increase 87% compared to 2Q2018, while the inflation rate for the twelve-month period ended on June 30, 2019 was 56%,
  2. a 8% increase in non-fuel-related costs of production, which totaled Ps. 1,456 million in the 2Q2019, as compared to Ps. 1,355 million in the 2Q2018, mainly due to (i) a Ps. 69 million increase in compensation for employees, and a (ii) Ps. 106 million increase in maintenance costs, which was partially offset by Ps. 53 million decrease in fees and compensations for services.

Gross Profit Margin totaled 44% during 2Q2019, as compared to 46% in the 2Q2018. This change was mainly related to the effect of Res. 70/18, which increased both the income and the cost of energy production from thermal units.

Operating income before other operating results, net, increased 86% to Ps. 2,120 million, compared to Ps. 1,142 million in the 2Q2018. This increase was due to (i) the above-mentioned increase in gross profits, and (ii) a less-than-proportional increase in administrative and selling expenses that totaled Ps. 421 million, a 3% increase as compared to Ps. 409 million in the 2Q2018. This increase was mainly driven by (i) a 38% increase in taxes on bank account transactions, due to increased revenues, costs and the acquisition of the Brigadier López Plant, among others.

Adjusted EBITDA was Ps. 3,167 million in the 2Q2019, compared to Ps. 8,886 million in the 2Q2018. This variation was mainly due to (i) a loss of Ps. 701 million during the 2Q2019, from the foreign exchange difference on operating assets (mainly the FONI trade receivables), compared to a gain of 7,097 million during the 2Q2019; which was partially offset by (ii) the increase in operating results before other operating income, net mentioned above, and (iii) Ps. 1,449 million during the 2Q2019, as compared to Ps. 345 million from interest accrued on the trade receivables denominated in US dollars, mainly related to the FONI program.

Consolidated Net income was Ps. 1,352 million and Net income for shareholder was Ps. 1,158 million or Ps. 0.77 per share, in the 2Q2019, compared to Ps. 4,757 million and 5,066 million, respectively, or Ps. 3.37 per share, in the 2Q2018. In addition to the above-mentioned factors, net income was (i) positively impacted by lower financial expenses that amounted to Ps. 589 million in the 2Q2019, compared to Ps. 2,192 million in the 2Q2018, and (ii) negatively impacted by lower financial income which amounted to Ps. 556 million during the 2Q2019, compared to Ps. 1,385 million in the 2Q2018, in each case under (i) and (ii), mainly due to the lower foreign exchange difference over US dollar denominated debt and financial assets (which excludes FONI and other trade receivables). Additionally, and the results from the share of profit of associates decreased to Ps. 239 million in the 2Q2019, as compared to Ps. 484 million in the 2Q2018, mainly due to weaker results from the operations of Ecogas.

Finally, loss from exposure to the change in the purchasing power of the currency totaled Ps. 1,180 million during the 2Q2019, as compared to Ps. 769 million in the 2Q2018.

FONI collections totaled Ps. 3,041 million in the 2Q2019, -including VAT- (approximately equivalent to US$ 72 million, at the exchange rate as of June 30, 2019), associated to the FONI trade receivables for San Martín, Manuel Belgrano, and Vuelta de Obligado Plants, including a portion of the amounts related to the installments 1 to 10 (See section A. Highlights above for more information).

1H2018 Results Analysis

Revenues from continuing operations increased 95% to Ps. 12,648 million in the 1H2019, as compared to Ps. 6,483 million in the 1H2018. The increase in revenues was mainly driven by:

  1. an increase in the energy generated during the 1H2019 of 17%, as compared to the 1H2018, and 8 percentage points increase in the availability of the thermal units under Energía Base, which was 92% during 2Q2019, as compared to 84% during the 2Q2018,
  2. an increase in the exchange rates for the 1H2019, higher than the inflation for the period, which impacted tariffs set in US dollars, in terms of argentine pesos current at the end of the reporting period. As a reference, the average foreign exchange rate during 1H2019 increased 103% compared to 1H2018, while the inflation rate for the twelve-month period ended on June 30, 2019 was 56%,
  3. an increase in the fuel remuneration for units under Energía Base regulatory framework (and other related concepts), which amounted to Ps. 4,554 million during the 1H2019, mainly due to the income in accordance to Res. 70/18, in some of the units under the Energía Base regulatory framework (see “—Factors Affecting Our Results of Operations—Our Revenues—The Energía Base”), compared to Ps.

Contacts

Chief Financial Officer

Fernando Bonnet

Investor Relations Officer

Tomás Daghlian

Tel (+54 11) 4317 5000 ext.2192

inversores@centralpuerto.com

www.centralpuerto.com

Read full story here