Central Puerto S.A. (CEPU) Q4 2025 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Welcome to Central Puerto's Fourth Quarter of 2025 Earnings Conference Call. A slide presentation is accompanying today's webcast and will be also available on the Investors section of the company's website, centralpuerto.com/en/investors. [Operator Instructions] Please note, this event is being recorded. If you do not have a copy of the press release, please refer to the Investor Relations Support section on the company's corporate website at www.centralpuerto.com. In addition, a replay of today's call will be available in upcoming days by accessing the webcast link at the same section of the Central Puerto's website. Our host today will be Mr. Fernando Bonnet, Central Puerto's CEO; Mr. Enrique Terraneo, the company's CFO; Mrs. Maria Laura Feller, Head of Investor Relations; and Mr. Alejandro Diaz Lopez, Head of Corporate Finance. Maria Laura, please go ahead.

Good morning, everyone, and thank you for joining us. We will walk you through Central Puerto's fourth quarter and full year 2025 results, discuss key operational and market developments and then open the line for questions. Before we begin, please note that my remarks may include forward-looking statements and references to non-IFRS measures, such as adjusted EBITDA. These statements are subject to risks and uncertainties, and actual results may differ materially. Definitions and reconciliations are available in our 4Q '25 earnings presentation and financial statements. Revenues for 2025 reached $782.8 million, up 17% year-over-year. 4Q '25 revenues were $172.8 million, decreasing 26% quarter-on-quarter and increasing 3% year-on-year. 2025 adjusted EBITDA was $337.2 million, an increase of 17% year-over-year. And 4Q '25 adjusted EBITDA was $84.7 million, down 16% quarter-on-quarter and up 30% year-on-year. Total generation for the year was 18.6 terawatt hour, down 14% year-over-year, largely reflecting historically low hydrology at Piedra del Aguila. And also in 2025, we undertook nonrecurring maintenance works in Central Costanera combined cycles and Lujan de Cuyo generation asset. Regarding business performance, 2025 marked a pivotal year of consistent growth and market normalization. The company strengthened its strategic positioning and reinforced its power generation asset portfolio for long-term value creation. Throughout 2025, Argentina's wholesale market -- power market advanced toward normalization. Since November 1, Resolution 400 has supported U.S. dollars-denominated spot prices and recognized a margin over variable costs. In December 2025, 97% of our revenues were denominated in U.S. dollars and we also progressed in the new thermal term market, signing around 11% of total volumes in the contracted market with approximately 900 megawatt hour delivered to industrial customers during November and December. Our CapEx plan in 2025 included fully executed projects over the year and additional projects that allow us to look forward and continue delivering growth. In 2025, our total CapEx was $202.4 million, consisting of concluding with 2024 projects such as the closing of the Brigadier Lopez combined cycle that achieved commercial operation during 1Q '26, and we concluded also the San Carlos solar farm project, our first solar greenfield project. The asset reached commercial operation in November 2025, adding 15 megawatts of renewable capacity to our portfolio. Together with Cafayate, our two 2025 solar projects doubled our installed solar capacity and increased our total renewable portfolio by 20%. Also, in 2025, we extended Piedra del Aguila concession. The company was awarded the concession under the Comahue Hydroelectric Complex privatization process, extending the operation -- the operating term of the Piedra del Aguila hydroelectric facility through 2055. Winning bid offer was $245 million paid in January 2026. The company is also focused on the battery energy storage system projects, looking forward to add 205 megawatts of new technology in 2027. Our growth plan is [ backed ] by our financial strength, flexibility and low leverage ratio. In December 2025, net leverage ratio was 0.3x annual adjusted EBITDA, which positions us well to add new financial debt to finance Piedra del Aguila concession extension and the fee payment and the battery energy storage system projects. 2025 revenues stood at $782.6 million, 17% above 2024 revenues despite the 14% decrease in generation volumes. Spot revenues growth in 2025 reflects additional revenues from the realignment of the spot price over the year and the Resolution 400 since November 2025. Also, we see the effect of the self-procured fuel oil with the associated cost pass-through in revenues. Offsets came from lower water inflows from Piedra del Aguila and the maintenance works in Central Costanera combined cycles. PPA sales growth include new MAT contracts in November and December 2025, including also cost of fuels incorporated in the energy component. Renewable revenues increased by 3% as wind farm volumes increased 5% due to higher wind resources and the full contribution from Cafayate solar plant since the end of August 2025. Full year 2025 EBITDA reached $337.2 million, a 17% increase year-on-year, primarily driven by revenue growth and the market normalization and higher margins from self-procured fuels, which added approximately $8 million. In 2025, total generation reached 18.6 terawatt hours, representing 14% decrease compared to 2024. Central Costanera's generation volumes decreased by 15% year-over-year, primarily due to maintenance work in both Mitsubishi and Siemens combined cycle during 2025. Second, Piedra del Aguila generated 38% less than in 2024, mainly due to historically low water inflows affecting hydro production. Finally, Lujan de Cuyo was 24% lower year-on-year, largely explained by maintenance works in the co-generation asset in the fourth quarter. Moving to installed capacity, our portfolio reached 6,938 megawatt hours in 2025, representing an increase of 234 megawatt hours compared to 2024. The increase was driven by several developments. Brigadier Lopez combined cycle was completed and the San Carlos solar project added 15 megawatts of solar capacity. Together with Cafayate solar farm acquired in August 2025, these two solar projects contributed by 20% of the renewal capacity additions during the year. Regarding market position, Central Puerto maintained its market leadership, reaching 14% market share of total SADI generation. Finally, looking at operational performance, our thermal fleet continued to show solid availability levels. In 2025, total thermal availability reached 77%, while combined cycle availability stood at 89%, reflecting strong operational reliability. During 2025, three thermal and renewable projects were completed, combining greenfield developments and M&A transactions, further expanding our generation portfolio. First, the Cafayate solar farm, which was acquired through an M&A transaction is already in operations. Second, we finalized Brigadier Lopez combined cycle project, which is also already in operation since January 2026. Third, the San Carlos solar farm also entering in operations in November 2025. In addition, we were awarded two battery energy storage system projects, which were granted in August 2025. These projects are currently under development and are expected to begin operations during the first half of 2027. Finally, an important milestone regarding the Piedra del Aguila hydroelectric plant was that Central Puerto successfully secured a 30-year concession extension for the plant through the privatization tender process. The concession fee payment was successfully completed in January 2026, marking another key step in strengthening our long-term asset base. In 2025, the Argentine power system reached a new record for the demand with a peak of 30,257 megawatts on February 10, 2025. Renewable generation rose 16.5% year-over-year and supplied about 19% of total demand, including hydro renewables representing roughly 39% of the total annual energy mix. Thermal fuel consumption declined 2.6% year-over-year with gas oil down 53% and fuel oil 60%, partially offset by 1.2% increase in natural gas and 5.2% increase in coal. As of December 31, outstanding financial debt was $337.8 million and net leverage ratio stood at 0.3x adjusted EBITDA. On December 19, we signed a $300 million syndicate A/B loan with IFC with an average life of 5 years to fund Piedra del Aguila concession fee and Central Puerto's BESS project. Also, our outstanding FONINVEMEM receivable credit was $118 million as of year-end. Overall, 2025 was a year of solid growth and continued progress as the market normalized. During the year, the company kept expanding and strengthening its generation portfolio to support long-term development. Looking ahead, we will focus on three priorities: discipline contracting commercialization, operational excellence and advancing our growth agenda.

2025 was a pivotal year for Central Puerto, marked by Piedra del Aguila concession extension by 30 years more, portfolio expansion, market normalization and strategic progress across our assets. We enter 2026 from a position of strength with robust liquidity and resilient business model. Thank you for your continued confidence in Central Puerto. Please let's stay connect. And now we will open the line for questions.

[Operator Instructions] Our first question comes from Martin Arancet with Balanz.

I have three. I would like to run them one by one, if that's okay. First, I was wondering if you could give us some color on why the decrease in the quarter-over-quarter EBITDA given that the market liberalization should have been at least positive for thermal exposed to the spot market.

Martin, thank you for your question and your interest in Central Puerto. The main topic affected the 4Q 2025 is that we have a strong maintenance in our combined -- Central Puerto combined cycle and Mendoza combined cycles, the two of our biggest combined cycles. And because of that, we don't catch in those units, the benefits of the new regulation scheme. But it's only regarding to that. The rest of the equipment was okay and the new regulation is in place. So we expect that will be recovered in the first quarter 2025 -- '26, sorry.

Okay. And sorry for this follow-up because probably you already disclosed this, but are those plants already working again?

Yes, yes, yes, they start working at the end of December and the other one early January. So we don't expect additional maintenance for those units until 2027, '28.

Okay. Then regarding one of your main focus for 2026, I was wondering how much of the thermal capacity that was under the legacy scheme do you think can compete for energy PPAs? How much of that do you already have contracted? And how do you see the market for signing the rest of the energy that you have? I don't know if you are seeing much interest. I don't know if you have discussed this with distribution companies. And if you expect probably a stronger interest for industrial consumers as we approach the winter where you have higher seasonal prices?

Well, in terms of our capacity, we are -- we can contract, as you know, 20% of our combined cycles that are the spot legacy scheme. That is around 2 gigawatts, the whole combined cycle. So it's the 20% of that with the private customers, with big industries. And then this -- and we are doing around that 20% yet. During January, February and March, we're going to cover that capacity contracted. For -- to exceed that, we need to go to -- as you mentioned, we need to go to the distribution companies. And that is coming slower. The distribution companies need to discuss with the regulators -- each regulator because it's not only federal, it has local regulators in each provinces. And this is coming slowly because they need to discuss and receive a pass-through possibility in order to make the pass-through to the demand. So by now, we are entering with not a lot -- we are not doing a lot of transaction with distribution companies. Right now, we are, of course, in discussions. We are having advances, but we are not closing big deals yet. We expect that it could happen -- start happening during this year.

Okay. Right. So do you think that to sign contract with distribution companies, you probably will require I don't know, some backup from CAMMESA or something like that, like it happened with the battery project?

No, no, no, no. We -- of course, we're going to make our credit analysis, and we're going to pick the distribution companies that we think that they are suitable to giving credit, but we don't request additional CAMMESA backup. Talking about, as I mentioned, legacy energy selling because this is month on month, and we can cut the provision if they doesn't pay. So -- but talking about other projects like new generation or perhaps, [indiscernible] this is different. This will be different.

Okay. And my last question then regarding the other main focus that you will have for 2026. I was wondering where do you see growth opportunities coming this year and probably also the next year? Because it seems that there is not enough incentives yet to add thermal capacity. Now with the thermal capacity competing also for PPAs with renewables, we have seen lower [ tenures ] in new PPAs and at slightly lower prices. So I don't know if adding more battery is now the best idea. And there has been a lot of comments regarding probably new renewable capacity for mining and oil and gas, but it doesn't appear to have materialized yet. So I was wondering where do you see the growth opportunities coming in the near term?

Okay. Well, first of all, we have right now an auction in place for new battery storage system for the other provinces than Buenos Aires that was -- that we get awarded last year. So we are looking spots over the interior in different province Santa Fe, Mendoza, [ Corrientes ], Cordoba, there are opportunities there. This new auction is in place and will be -- have the due date in May this year. So this is an opportunity of expansion that we're going to look at. As you mentioned, in terms of renewables, right now, it's getting difficult to get new PPAs with existing demand. So we are looking for new demand. Now the existing one, as you mentioned, mining companies are one of them. Oil and gas companies are other possibilities, companies that needs -- perhaps gain efficiency in the product in their processes, like introducing steam, perhaps we can work on co-generations there. And looking forward for perhaps in the middle of this year or perhaps in the third quarter of an auction for new capacity that need to be set for cover some areas, specific areas like specifically Buenos Aires area. And I see there are opportunities, not -- as you mentioned, not trying to catch the existing demand with renewable because, as you mentioned, it's been challenging right now because the thermal are entering in the market and are stressing prices. Also, the hydros are entering the market and put some pressure there also. But I see opportunities, as I mentioned, in storage system capacity, in new demand coming from new players in the market like mining companies and a possibility in capacity -- new thermal capacity coming in some auction during this year.

Okay. Great. So this thermal auction that you mentioned, something similar to the Terconf that got canceled?

Well, it's not completely established by the government yet, but we have talking with them that could be something similar, but with different perhaps approach to the to the demand. So something like receiving a payment for capacity from CAMMESA. But well, it's something that are under discussion right now.

We are going to go now for the question with Lucas Lombardo with BACS.

I want to know the percentage of new term contract that -- the income from -- for the company.

Okay. I think you are referring to how much of the 20% that we can sell to private consumers we reach. That is the question.

Yes.

Yes. We expect during March to cover all those 20%.

Our next question comes from Matias Cattaruzzi with Adcap.

I wanted to ask first about the outlook for 2026 and the -- how do you see volumes coming for next year, especially hydro volumes? And then how do you expect the PPA versus spot mix to be in next year regarding the new regulation? Do you expect PPAs to grow more in generation?

Okay. Thank you. Talking about volumes for Piedra del Aguila specifically, the hydrological year starts on May. So it's difficult today to say that we're going to see better inflows than the previous year. Of course, the previous year was a low year, so in our expectations are to be better than that. But to have a clear view, we need perhaps 2 more months in order to see how the year comes. In terms of the thermal generation, we expect an increase because, as I mentioned before, two of our combined cycles were in maintenance during the whole month of December and the other one was in maintenance the whole month of September. So we don't see those maintenance in 2026. So we expect an increase of our thermal generation also. In terms of new PPAs coming, we -- as I mentioned, we are trying to catch additional demand from the distribution companies. This will unlock the possibility to sell the legacy energy above the 20% that we have already granted -- so we expect to have news on that this year. It's difficult to predict, as I mentioned before, it's difficult to predict the volume that we can reach there because the distribution companies are discussing with the regulators, the feasibility of make that pass-through directly to the demand and the terms of that pass-through. So right now, it's difficult to forecast the potential there, but we see potential. So I think we can catch more than the 20% that we are already selling, and we can go over that going to distribution companies.

Great. And then do you intend to participate in the upcoming tender for national batteries?

Yes, we are looking at, yes. Yes. We are looking at -- of course, it's different from the participation that we have in the last year because we are looking in places different for our facilities in -- the ones that we awarded last year, we established inside our facilities and it's convenient or very convenient for us. And right now, this new auction is all over the country. So we are looking at places. And the new reality in the battery storage system prices because the lithium goes up, the copper, all the materials the batteries used. So -- and the price according to the last auction. So we are looking at returns on that places that are outside from the -- our facilities -- are far from our facilities is not the same. So we are looking at, but we need to do more work in order to understand if something suitable for us or not.

Great. Do you expect to participate in the upcoming privatizations by ENARSA assets?

Yes. Yes, we are looking at. We don't have the mandate yet to move forward, but we are looking at.

Great. And do you have any updates on the OpenAI-Sur Energy project?

No, we have discussion with them. After that we award Piedra del Aguila that was very important for them that we have a huge hydro backup in us to give power to them. That was a great news for them. We discussed with them that, but we don't have a clear timing on any additional news coming from that place.

Great. And last, can you give us like an EBITDA bridge for upcoming years until 2028?

Well, I can give you some perhaps information regarding 2026. 2028 is, of course, need to -- we will expect to maintain that, but talking about increasing will be challenging regarding the expansion, as I mentioned, of new PPAs and how we're going to do in terms of the new coming auctions. But talking about 2026, we have some certainties that can share with you and the rest of the listeners. One important thing or the biggest improvement that we are seeing for 2026 and onwards is that the PPA, the Brigadier Lopez closing combined cycle PPA going to bring additional $60 million for our EBITDA. The other improvement, as we talked in the previous calls, the new regulation for spot market bring another between $70 million and $80 for our EBITDA. Piedra del Aguila also have an improvement compared to the old regime that compared to this new concession will bring additional $15 million. And if you perform the full year of the renewables that we acquired and build last year, this will add additionally $8 million and -- between $8 million and $10 million more. So [indiscernible] terms will be an improvement of $150 million, $160 million.

Great. And I have two more questions. One is if you expect distributing dividends in 2026? Yes. And the second one would be more operational. With the upcoming IP for the Perito Moreno pipeline expansion, do you expect that your plants in the central area would get some more upside with lower costs due to lower gas prices because of the expansion of the [indiscernible] Perito Moreno?

Okay. In terms of dividend, that is something that we'll be discussing by the Board of Directors. Right now, we have no guidance regarding to that, specifically because, as I mentioned, we have different projects under our pipeline, and we are performing some projects right now. So this is something that Board will be -- discuss in the next coming month. Talking about the TGS pipeline, we are -- we don't see a reduction on prices because the gas prices are set right now by the plant gas contracts that CAMMESA and the government signed during the former administration. So we received these prices -- or these prices are fixed until the end of 2028 when those contracts get to the end. So we don't see big reduction on prices until this plant gas goes to the end. In terms of the capacity or the transportation capacity of the TGS, we are analyzing the convenience or not to acquire that capacity. The problem is that going further in a big 10 or -- contract is like 15 -- of course, you can do less, but normally it will be 15 years of contract, is not fully discussed the regulation scheme in which we can recover this additional cost because this additional transportation will have an incremental cost related to what -- one that we are paying now. So it's not clear for us yet the new regulation scheme that will be available or the regulation scheme that will be available to recover that incremental cost. So right now, we are looking at, but we don't have a decision yet.

Great. But wouldn't it be better for gas prices in the winter? Wouldn't you need less liquids or gasoline or fuel oil?

Yes. The problem is to get here to our terminals, you do not only need the TGS expansion, you will need distribution here and the distribution in Buenos Aires area are very constrained. So we don't see a full elimination of diesel and LNG during winters for a while. Of course, will be a reduction because the TGS will inject here and also have some volumes that could go to the north. But we'll see a reduction, but not a full elimination of diesel and LNG.

This concludes our Q&A session. I would like to turn the conference back over to Mr. Fernando Bonnet for any closing remarks.

Well, thank you for your interest in Central Puerto. I will encourage you to ask any questions to our team that you may have. Thank you very much, and have a good day.

This concludes today's presentation. You may now disconnect, and have a good day.