Central Puerto Charts Growth Path Despite Hydro Setback

Central Puerto ((CEPU)) has held its Q4 earnings call. Read on for the main highlights of the call.

Central Puerto’s latest earnings call painted a broadly upbeat picture, combining solid 2025 growth with clear 2026 catalysts. Management acknowledged short‑term pressure from weaker hydro output and heavy maintenance, yet stressed strengthened assets, low leverage and dollarized pricing as the foundation for a more profitable, less volatile earnings profile ahead.

Revenue Growth and Profitability Trends

Revenues for 2025 rose 17% year over year to $782.8 million, with fourth‑quarter sales up 3% from a year earlier despite a sharp 26% sequential drop. Adjusted EBITDA followed a similar pattern, jumping 17% for the full year to $337.2 million while 4Q 2025 EBITDA climbed 30% year over year but slipped 16% quarter on quarter as maintenance temporarily curtailed output.

CapEx Execution and New Capacity

Central Puerto underlined 2025 as a year of heavy but productive investment, recording $202.4 million in capital expenditures tied to major projects. The Brigadier Lopez combined cycle reached commercial operation in early 2026 and the San Carlos solar farm came online in November 2025, lifting installed capacity to 6,938 MW, a net gain of 234 MW versus 2024.

Renewables Push and Portfolio Expansion

The company accelerated its renewables strategy, with San Carlos and the Cafayate acquisition effectively doubling its installed solar capacity and expanding the renewable portfolio by around 20%. Renewable revenues edged up about 3% on the back of 5% higher wind volumes, as Central Puerto completed three thermal or renewable projects and folded Cafayate into its growing green platform.

Piedra del Aguila’s Long-Term Extension

A central highlight was the 30‑year extension of the Piedra del Aguila hydro concession through 2055, secured with a $245 million winning bid paid in January 2026. Management framed this as a strategic move that locks in a key hydro asset for decades, supporting the company’s baseload profile despite current hydrology challenges.

Market Normalization and Dollar Pricing

Regulatory changes are also working in Central Puerto’s favor, with Resolution 400 supporting U.S. dollar‑denominated spot prices and margins over variable costs from November onward. By December 2025, about 97% of the company’s revenue was already dollarized, which management argued reduces currency risk and stabilizes cash generation in a volatile macro backdrop.

Balance Sheet Resilience and New Financing

The balance sheet remains a key strength, with a net leverage ratio of just 0.3 times adjusted EBITDA at year‑end 2025 and total financial debt of $337.8 million. The company also secured a $300 million A/B syndicated loan with IFC, which carries an average life of five years and will help fund the Piedra del Aguila payment and upcoming battery storage projects, while it holds an additional $118 million FONINVEMEM receivable.

Operational Reliability Amid Maintenance

Operational metrics underscored that 2025 disruptions were largely planned and nonrecurring rather than systemic issues. Thermal fleet availability reached 77% and combined cycles 89% despite major overhauls, which management cited as evidence that the system is well positioned to benefit once all units are running under the new spot regime.

Battery Projects and Growth Pipeline

Looking ahead, Central Puerto is leaning into storage, having been awarded two battery energy storage system projects and targeting roughly 205 MW of BESS capacity by 2027. Management sees these initiatives, together with the new Brigadier Lopez PPA, spot market improvements and renewables, driving an estimated $150 million to $160 million in incremental annual EBITDA at steady state.

Market Leadership and Competitive Position

Despite a challenging operating year, the company retained its role as a key player in Argentina’s power system with around a 14% share of total SADI generation. Executives argued that this scale, combined with a diversified mix across hydro, thermal and renewables, gives Central Puerto an edge in capturing future growth and regulatory opportunities.

Generation Declines and Hydro Weakness

The main blemish on 2025 results was a 14% drop in total generation to 18.6 TWh, driven by historically poor hydrology and downtime for maintenance. Piedra del Aguila’s output fell about 38% year over year on weak inflows, while Central Costanera and Lujan de Cuyo saw generation fall roughly 15% and 24% respectively, reflecting concentrated maintenance campaigns.

Short-Term Revenue and EBITDA Pressure

These operational headwinds fed directly into quarterly numbers, with fourth‑quarter revenues down 26% from the prior quarter and adjusted EBITDA down 16%. Management stressed that the bulk of this impact stems from major maintenance outages at key combined‑cycle units and that these should not recur at the same intensity once the work cycle is completed.

Contracting and PPA Market Frictions

The call also highlighted difficulties in expanding legacy generation sales beyond the regulatory 20% allowance into private contracts. Slow responses from distribution companies and local pass‑through rules have constrained progress, leaving distribution deals uncertain even as the company targets covering the full 20% of eligible combined‑cycle energy with private customers.

BESS Returns and Cost Pressures

While Central Puerto remains committed to storage, management warned that higher input costs for batteries, including lithium and copper, are compressing returns. This makes broad participation in nationwide BESS auctions harder to justify financially, so the company is prioritizing on‑site or strategically located projects where the economics remain more compelling.

Hydro and Fuel Price Uncertainty

Hydrology remains a wild card, with the hydro year only starting in May and management unwilling to assume a quick rebound in Piedra del Aguila inflows. On the fuel side, potential gas transmission expansions are unlikely to deliver meaningful gas price relief before existing contracts run off around the end of 2028, and distribution constraints near Buenos Aires limit the ability to swap diesel or LNG in the near term.

Dividend Outlook on Hold

Income‑focused investors heard a cautious message on shareholder returns, as the company gave no guidance on 2026 dividends. Management emphasized that the board still needs to assess payout capacity in light of hefty near‑term investment needs in hydro concessions, storage and other growth projects, suggesting capital recycling will take priority for now.

Guidance and 2026 Outlook

Forward guidance centers on an operational recovery and disciplined growth, with a rebound expected in the first quarter of 2026 as major maintenance winds down and more combined‑cycle capacity returns. Central Puerto also aims to fully use the 20% contracting window for legacy plants by March and to unlock a projected $150 million to $160 million EBITDA uplift over time from Brigadier Lopez, spot market normalization, the extended Piedra del Aguila concession and additional renewables, alongside 205 MW of planned storage by 2027.

Central Puerto’s earnings call ultimately balanced near‑term softness with convincing long‑term levers, combining robust 2025 growth, a dollar‑linked revenue base and a solid balance sheet. Although weak hydro, maintenance and contracting hurdles pose execution risks, management’s visibility on future EBITDA drivers and its strengthened asset platform suggest the company is positioning itself for a more resilient and profitable 2026 and beyond.