Empresa Distribuidora y Comercializadora Norte Sociedad Anónima
Q4 2018 Earnings Call Transcript

Published: 11 Mar 2019

[Operator:]

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Edenor's Fourth Quarter 2018 Results Conference Call. We would like to inform you that this event is being recorded. [Operator Instructions]. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Edenor's management and on information currently available. They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Edenor and could cause results to differ materially from those expressed in such forward-looking statements. Now I'll turn the conference over to Mr. Leandro Montero, CFO of Edenor. Mr. Montero, you may begin your conference.

[Leandro Montero:]

Thank you very much. Good morning, everyone, and thanks for joining our fourth quarter 2018 earnings conference call. First, we will focus on the main events that recently took place and then briefly review the results of the quarter. As you know, you can always call any member of our team for more details on the results of the period or any doubts you might have. In first place, it was mentioned in that because of the Argentine economy is understood as hyperinflationary pursuant to International Accounting Standard No. 29, as of December 31, 2018, financial statements have been restated to reflect changes in national purchasing power of the company's functional currency, the Argentine peso. Consequently, the company's financial statements are presented in terms of the measuring unit current at the end of the reporting period. As regards this report, especially for the readers' convenience, figures will be kept at historical levels to continue the previously published periods. Regarding the transfer of Edenor's concession tariff fixing, on February 28 this year, the federal government, the province of Buenos Aires and the autonomous city of Buenos Aires executed an agreement which provides that from March 1 this year, the process for the transfer of Edenor and Edesur to the jurisdiction of the province and city of Buenos Aires begin, whereby this jurisdiction will be vested within [indiscernible] power, our utility service provided by the concessionaires. The main three aspects of the agreement are

[Operator:]

[Operator Instructions]. The first question comes from Frank McGann with Bank of America.

[Frank McGann:]

Just two things, if I could. One is just there are a lot of tariff adjustments that are moving around and some which will have a bigger impact as you go through the first quarter and the rest of the year. I was wondering how you were thinking about overall profitability in 2019 versus 2018 relative to the adjustments that we know about currently. And then secondly, in terms of the regulatory changes and the moving of the jurisdiction for tariffs and other issues to the province and a city, will ENRE still be making all of the determinations until those new regulatory agencies are fully set up? I was just wondering if you had any thoughts on the time frame that's involved in that change.

[Leandro Montero:]

Going to the first question, I can say that maybe the good thing is that since March 1, we have our tariff fully implemented. All the assessments set under the comprehensive tariff review are applied in the tariff, and the deferred adjustment, which was one in August 2018 and the other in February this year because it was deferred 1 month, is fully included in the tariff. So today, we have a normalized tariff, which includes the recovery of the difference between the money we should have collected during the last 7 months and that we didn't collect because of the deferred increases. So the next increase should take place in August this year, including or taking into consideration the inflation for the first semester 2019. So that's the following step in which we will have our tariff review. And going to the second question, the -- with the province of Buenos Aires, city of Buenos Aires and the national government and with last February 28 was to start the process in order to change the jurisdiction for the company from the federal government to the local government. As I said, it's a process. So the following steps we think will be -- or we are waiting for 2 following steps. The first one is a new agreement in which the companies, Edenor and Edesur, should be part. We are waiting for resolution for the pending claims. This is an agreement we should find or agree with the national government, with the federal government. And the third part is the creation of the new regulatory agency, which should be enforced as soon as possible. And -- but what we have till now is that, for the moment, all the rules and the decisions made under the last comprehensive tariff review will be kept in place.

[Operator:]

[Operator Instructions] Frank McGann with Bank of America.

[Frank McGann:]

Just in terms of demand level, I was just wondering what you've been seeing to date in the first quarter. Any changes in the churn that you had seen in the fourth quarter? Similarly, with losses, if there's any potential for an improvement as you get to this year or with the tariff increases, maybe you would expect some further deterioration so you see those bottoming out.

[Leandro Montero:]

Okay. Well, this first quarter, what we are watching is -- the first thing is that demand is still lower. In fact, in January, the demand decreased in comparison to the previous -- to the same month last year. We should take into account that the first quarter in 2018 was a very high-growth quarter in comparison to this quarter in terms of industrial activity. And on the other hand, in particular with your -- regarding your question about energy losses, we have been implementing the different actions or additional actions, especially to have more presence in the streets in our grid in order to avoid fraud from our residential customers. And we are developing a new kind of grid in order to -- especially to those areas where we don't have a current grid, where we don't have any facility. We are building a new kind of grid in order to avoid the fraud from our residential customers. But we will see the result of these actions, I hope so, during the second quarter.

[Operator:]

This concludes the question-and-answer session. At this time, I would like to turn the floor back to Mr. Montero for any closing remarks.

[Leandro Montero:]

Thank you. Well, thank you very much for joining the conference call. We hope the following year will be a better one so -- and thanks all of you for joining all the conference calls during the year and following our results of operation. Thank you very much, and have a nice day.

[Operator:]

Thank you. This concludes today's presentation. You may disconnect your line at this time, and have a nice day.