On top of the Albanesi we know – that is, the issuer of the international bond – there is a sister company, Albanesi Energia, that owns Renova, a very efficient thermal plant. Creditors never liked the idea of merging Albanesi Energia with Albanesi, as Renova had better economics, particularly much lower net leverage. However, management did the work to refinance and replace the lenders with domestic creditors, and now it will be easier to combine the two.

We asked management about the timeline for a combination, and the response was that Albanesi would rather wait until at least the end of 2024, when it has a much higher EBITDA (as a result of the CODs on the way) before merging the two companies. We think it will be beneficial for Albanesi bondholders to have a larger and more efficient pool of assets, but seems like there will be a little bit more of a wait.

Looking at Albanesi’s debt, let’s start with the positive. The Argentine energy generator successfully completed a very difficult task, refinancing foreign-currency debt and at the same time obtaining funding for the new expansion projects and refinancing debt at Albanesi Energia (different company, but same management).

Now, we think the company should focus on simplifying the myriad of debt it has between the tons of domestic bonds, bank credit lines and the small and amortizing international bond. Even though Albanesi has proved it can consistently refinance large volumes of debt in the domestic market (and lower the average interest rate), it would be beneficial to narrow the debt instruments and potentially issue a larger (USD 400m-USD 500m) international amortizing bond. This would reduce refinancing pressure and maybe attract a different pool of bondholders, such as asset managers that usually stay away from issuances of less than USD 250m-USD 300m.

Indebtedness – Beware about the dynamic in the coming quarters

Consolidated net leverage stood at 9.3x and leverage for the restricted group was 6.3x, both up QoQ. However, the importance here is the dynamic going forward. As a reminder, the debt of the expansion projects is so far labeled as non-recourse or limited-recourse, so it technically doesn’t count for the restricted group. The issuances for the expansion of Ezeiza, Maranzana and Arroyo Seco were done via SPVs, but those SPVs “disappear” and become consolidated with Albanesi once the project reaches COD. As an example, Ezeiza aims to reach COD before 1Q24 end, so when the company releases its figures in mid-May, we will see a spike in recourse debt (because the debt to expand Ezeiza will be “added” to Albanesi’s), but we will have very little EBITDA coming from the new assets (See Figure 1).

Given that Albanesi is going to reach COD of its different assets sequentially between 1Q24 and 2Q25, we won’t see an increase in consolidated net leverage. On the contrary, we should start to see a small decline as the EBITDA of the projects starts to count, while the debt is already there. However, we will see a significant increase in the restricted group debt, as large amounts of debt are no longer labeled as non-recourse and are added to the restricted group. Payments are structured so that Albanesi receives funds from market administrator CAMMESA and then contributes to some sort of reserve account to fund the next one or two debt service payments and is able to keep the “excess” cash.

Financial highlights for 4Q23

EBITDA was USD 26m in 4Q23 and USD 111m for all of 2023, the lowest annual total in a long time and the second worst quarter since 3Q17 (the worst was 2Q23, but it had a couple of one-offs as we have mentioned). In November, the La Banda thermal plant was disconnected. In fact, it was an inefficient 32MW power plant, remunerated under the Energia Base scheme, and so it was probably cheaper to take it offline than continue maintaining it.

Excluding the one-offs, Albanesi’s EBITDA could be USD ~30m per quarter. Ezeiza will add USD 9m-USD 10m per quarter, probably starting in 2Q24. In 4Q24, there will be USD 7m more from Maranzana and USD 2m-USD 3m more from Arroyo Seco. Supposedly, Peru should also start contributing USD ~4m per quarter in 3Q24.

A valid question is what happens with CAMMESA’s payment delays, which today stand at ~95 days. Management said it has available credit lines to tap, but that it expects the delays to remain at similar levels. Hopefully, President Javer Milei’s government will not further increase the delays (See Figure 3)