Edenor Q1 results solid despite peso depreciation, penalties
Argentine power distribution company Edenor's financial performance markedly improved over the first quarter of 2018 compared with the same period in the previous year, despite higher penalties imposed by regulator ENRE and a rise in financial costs due to the depreciation of the peso.
Edenor's net income increased by over 1bn pesos (US$40mn) in 1Q18 year-on-year, recording profits of 1.45bn pesos. This was mainly due to an improvement in the gross margin as a result of a government program to revise energy tariffs and eliminate energy subsidies. The resulting sales revenue jumped over 105% from almost 5.4bn pesos in 1Q17 to over 11bn pesos during the first quarter of this year.
Operating expenses increased by 43.3% to almost 2.7bn pesos in 1Q18, against nearly 1.9bn pesos 1Q17. This is mainly accounted for by a 676% increase in penalties from ENRE to 326.8mn pesos. Edenor said it is analyzing the possibility to appeal one of these penalties, an April fine of 87mn pesos, stating that the fine "does not conform to the applicable legislation in force."
The acceleration in the Argentine peso's depreciation against the US dollar caused the firm's financial costs to jump over 231% to more than 530mn pesos in the first quarter of 2018, against just over 160mn pesos for the same period in 2017. This loss is also due to the increase in dollar-denominated debts resulting from the ICBC bank's US$50mn loan in 2017, which caused a total negative impact of more than 336mn pesos to company finances; higher commercial interest from a 93.3mn-peso CAMMESA debt; and a 44.8mn-peso increase in interest.
The firm's adjusted Ebitda increased to around 2.72bn pesos fromn 914mn pesos in the same period in 2017.
The firm's capex increased by some 22% in peso terms year-on-year to around 928mn pesos, a increase in dollar terms of less than 1%.
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