Edenor(EDN)2025-04-22 19:42Economic Environment - In 2024, the Argentine Peso depreciated by 27.7% against the U.S. Dollar, impacting financial results [27]. - The average exchange rate for 2024 was Ps. 916.42 per U.S. Dollar, with a period-end rate of Ps. 1,032.00 [29]. - Inflation in Argentina was reported at 117.8% during 2024, which may continue at similar levels in the future [58]. - The Argentine economy remains vulnerable, characterized by high inflation, currency depreciation, and low investment as a percentage of GDP [57]. - Argentina's real GDP decreased by 1.7% for the year ended December 31, 2024, compared to 2023 [58]. - The Peso appreciated in real terms by 40% against the U.S. Dollar during the year ended December 31, 2024 [60]. - Inflation rates in Argentina were reported at 117.8%, 211.4%, and 94.8% for 2024, 2023, and 2022 respectively, indicating significant inflationary pressures [72]. - The Argentine Government has obtained a new IMF agreement amounting to SDR 15.267 billion (approximately 12 billion [88]. - The average interest rate on Argentina's foreign currency external bonds was reduced to 3.07% from 7.0% following a restructuring agreement in 2020 [82]. - The Argentine Government's historical influence over the economy and the highly regulated environment may affect the operations of the energy distribution industry, including the company [67]. - Argentina ranked 99 out of 180 in the Transparency International's 2024 Corruption Perceptions Index, indicating risks related to institutional deterioration and corruption [104]. - The Argentine Government has implemented measures to strengthen institutions and reduce corruption, but the effectiveness of these measures remains uncertain [107]. - Argentina's economy remains vulnerable to external shocks, which could materially affect the company's results of operations and financial condition [98]. Regulatory and Legal Risks - The company is subject to regulatory risks, including potential changes in tariffs and government interventions in the electricity sector [33]. - The company is subject to various legal proceedings that could adversely affect its financial position and results of operations [6]. - The Argentine Government's intervention in the economy, including expropriation and price controls, could negatively impact the company's business [93]. - The company faces risks related to potential strikes, expropriation, and changes in taxation policies due to economic, social, or political crises in Argentina [70]. - The company is subject to significant regulatory fines and penalties, which could adversely affect its financial condition and results of operations [161][176]. - Legal proceedings involving the company may result in unfavorable decisions, impacting its financial position and operational results [177]. - Argentine securities laws may deter takeover attempts, potentially affecting the market value of the company's shares and ADSs [209]. Operational Challenges - Energy shortages and high temperatures have impacted the provision of energy services, affecting operational performance [33]. - The company faces significant risks related to currency fluctuations and may not effectively hedge its currency risk [6]. - The company must manage energy losses, including theft, to maintain operational efficiency and financial health [35]. - The company has experienced significant fluctuations in the value of the Peso, which could adversely affect financial results [33]. - The company faces uncertainty regarding future tariff adjustments by the Argentine Government, which may impact operating costs and demand [124]. - Energy shortages and disruptions in the transportation system could adversely affect the Company's ability to deliver electricity, leading to customer claims and penalties [129]. - The Company has experienced power shortages due to demand outpacing distribution capacity, which could result in customer complaints and fines [131]. - Compliance with environmental regulations and potential changes in laws related to greenhouse gas emissions may increase operating costs for the Company [147]. - Severe weather events have previously impacted service continuity, leading to increased operating costs and potential fines for service disruptions [151]. - The exclusivity of the Company's electricity distribution rights may be threatened by technological advancements, potentially leading to increased competition and lower revenues [135]. - The increase in illegal constructions and energy theft in the concession area poses risks to the company's ability to distribute energy and maintain public safety [162]. Financial Condition - The company faces liquidity shortfalls if it cannot recover future cost increases through tariff adjustments, potentially leading to debt restructuring [158]. - The company may experience adverse effects on its financial condition and results of operations due to fluctuations in the Peso's value against the U.S. Dollar [91]. - The company has accrued fines and penalties totaling Ps. 62,124 million, Ps. 136,933 million, and Ps. 156,194 million for the years 2024, 2023, and 2022 respectively, which represent 3.9% of net energy sales in 2024 [161][166]. - The company has outstanding financial debt including U.S.95.8 million Senior Notes due 2026, among others, totaling significant liabilities [190]. - The company acknowledged owing the WEM Ps. 26,388 million for the period between September 2022 and February 2023, to be paid in 96 consecutive monthly installments [184]. - As of December 31, 2024, the company had a past due principal balance with CAMMESA of Ps. 127,667 million, compared to Ps. 142,988 million as of December 31, 2023 [187]. - The company is exposed to currency risk as revenues are collected in Pesos while a significant portion of its financial indebtedness is in U.S. Dollars [180]. - The company may face liquidity shortfalls if it cannot recover expenses related to social tariffs for certain neighborhoods [189]. - Shareholders' ability to receive cash dividends may be limited due to the depositary's ability to convert dividends paid in Pesos into U.S. Dollars [200]. - The NYSE and BYMA may suspend trading or delist the company's ADSs and Class B common shares if financial conditions deteriorate [196]. Human Resources - The company employs 4,642 employees, with 79% being union members, which could lead to organized labor actions affecting operations [172]. - The concession is set to expire on August 31, 2087, with the possibility of a 10-year extension if requested at least 18 months prior to expiration [169]. Internal Controls and Governance - Effective internal controls over financial reporting are necessary to provide reliable financial reports; failure to maintain these controls could negatively impact investor confidence and market price [208]. - If the Argentine Government expropriates 51% of the capital stock represented by Class A shares, it would adversely affect the financial condition and market value of the company's securities [207]. - ANSES owns 26.8% of the capital stock and jointly appointed five Class B and five Class C directors at the last shareholders' meeting [205].