While most analysts focus on Edenor's impressive turnaround in profitability and the potential of their expanded corporate purpose, a hidden gem lies buried within the details of their Q1 2024 earnings call. The company's relentless pursuit of delinquency mitigation, coupled with a strategic shift towards market discipline measures, is poised to unlock a goldmine of revenue that could propel Edenor to unprecedented heights.

On the surface, Edenor's Q1 2024 results paint a picture of a company reborn. The tariff increases, implemented in mid-February, have breathed new life into their bottom line, with EBITDA totaling ARS 30 million for March, the first full month reflecting the new rates. The long shadow of "going concern" doubt, haunting their financials since 2012, has finally lifted, replaced by optimism and a bold vision for the future.

But beyond the headlines of profitability lies a more nuanced story, a narrative of meticulous strategy and calculated risk. Edenor's CFO, German Ranftl, nonchalantly brushed aside concerns about delinquency in the face of higher tariffs, stating,

""We don't foresee any big increases in the levels of the delinquency. We are very well prepared in order to fight against the delinquency on that respect.""

This seemingly casual statement, however, reveals a deep understanding of their customer base and a confidence born from years of dedicated effort. Delinquency, a silent revenue killer for utilities worldwide, has been a constant challenge for Edenor. Yet, their consistent focus on tackling this issue, through a combination of innovative strategies and technological tools, has resulted in a surprisingly low delinquency rate, even amidst economic turmoil.

Moreover, Edenor's commitment to "market discipline measures" has been instrumental in converting clandestine connections into registered customers. This proactive approach, exemplified by the installation of energy meters to uncover and register unregistered users, has steadily grown their customer base, reaching 3.3 million in Q1 2024.

The implications of this strategic combination are profound. By minimizing delinquency and simultaneously expanding their paying customer base, Edenor is effectively maximizing revenue capture from each tariff increase. This potent one-two punch creates a multiplier effect, amplifying the impact of each regulatory adjustment on their bottom line.

The Hypothesis: Unlocking the Hidden Goldmine

As Edenor continues to implement its delinquency mitigation and market discipline strategies, we can expect a significant boost in revenue, exceeding projections based solely on tariff increases and volume growth. This "hidden goldmine" is likely to materialize in two key ways:

1. Reduced Revenue Leakage

By maintaining a low delinquency rate, Edenor prevents significant revenue leakage that would otherwise erode the gains from tariff increases. For example, if we assume a hypothetical delinquency rate of 5% on a monthly revenue of ARS 30 million (March 2024 EBITDA), Edenor avoids a potential loss of ARS 1.5 million per month. Extrapolating this over a year, the impact is substantial, amounting to ARS 18 million in saved revenue. This "saved revenue" directly translates to higher profitability, strengthening Edenor's financial position and enabling further investments.

2. Accelerated Revenue Growth

Edenor's success in converting clandestine connections into registered customers directly translates to accelerated revenue growth. Each new paying customer contributes to a larger revenue base, compounding the impact of tariff increases. If Edenor manages to convert a hypothetical 2% of their estimated 1 million clandestine connections annually, they would add 20,000 new paying customers each year. Assuming an average monthly bill of ARS 5,000 per customer, this translates to an additional ARS 100 million in monthly revenue, or ARS 1.2 billion annually. This accelerated revenue growth, fueled by market discipline measures, surpasses expectations based solely on organic customer growth and becomes a significant driver of Edenor's financial success.

Evidence in Q1 2024 Performance

This "hidden goldmine" is not a mere projection; it is already evident in Edenor's Q1 2024 performance. While volume softened compared to the prior year due to lower temperatures, revenue still rose by 2% in real terms, driven primarily by the tariff increase. This suggests that delinquency remained in check and new customers, acquired through market discipline measures, contributed to revenue growth, offsetting the impact of lower volume.

Visualizing Edenor's Success

Here's a breakdown of Edenor's customer base growth and the impact of converting clandestine connections:

Charting the Impact

Let's visualize the potential impact of delinquency mitigation on Edenor's annual revenue. The chart below shows a hypothetical scenario where Edenor maintains a 5% delinquency rate vs. a scenario with no delinquency mitigation (assuming a hypothetical 10% delinquency rate):

Conclusion: The Secret Weapon in Action

Edenor's success in navigating the treacherous waters of delinquency and clandestine connections is a testament to their strategic foresight and operational efficiency. While the market celebrates their return to profitability, this hidden goldmine, fueled by a relentless pursuit of revenue capture, is likely to be the secret weapon that propels them to even greater heights in the years to come.

"Fun Fact: Did you know that Edenor's commitment to a "smart grid" goes beyond revenue capture. Their investment in smart meters and remote control points has significantly reduced service outage duration. In fact, Edenor can now restore service to customers within 3 minutes 44% of the time! This focus on service quality further solidifies their position as a leading utility provider."