TWST: May we start with a short history and overview of your company?
Mr. Pagano: Edenor is the largest distribution company in Argentina. We distribute electricity in the northern area of the city of Buenos Aires and the province of Buenos Aires. We have more than 2.5 million customers out of which 2.1 million are residential customers. We have the largest market share in Argentina in terms of electricity distributed. We are a company that is listed both on the New York Stock Exchange and on the Buenos Aires Stock Exchange. We have approximately a 49% float of our shares and our auditors are PricewaterhouseCoopers.
TWST: Would you give us a broad overview of the utility market in Argentina as well as the area that you operate under?
Mr. Pagano: The utility market in Argentina is regulated basically since the privatization that took place in 1992. The electricity sector has been unbundled in three separate activities: generation, transmission and distribution. In generation, there are in the range of 43 generating companies out of which 90% are private. In transmission: seven companies. The largest one is Transener, which has a 95% market share. The remaining is transmitted by regional companies. Then you have distribution with 28 relevant companies out of which 70% are private.
TWST: What are you seeing as far as population growth is concerned in your area as well as the economy?
Mr. Pagano: The demand growth is not only a function of population, but also a function of purchasing power. The economy in 2002 had tumbled dramatically by the GDP plunge of 10%. It has recovered consistently since then and the electricity demand in our area of concession has increased dramatically since 2002 till today north of 45% demand increase. We have seen double-digit demand increase in the residential demands because for the residential customers our tariffs have remained basically unchanged since 1992 up to July 2008. The first tariff adjustment that was done to the residential customer was in July of this year. But still, given the number of electric appliances and the growth of new developments in our area of concession, demand for electricity in the residential sector remains very strong. So it's a function of purchasing power and it's really inelastic also to the GDP activity. Argentina had a GDP contraction of 10% in 2002, but demand for electricity went down only 20 basis points in our area of concession. So there is resilience in electricity demand definitely, which is shown by the figures that I mentioned.
TWST: Going forward, what is the strategy for success?
Mr. Pagano: The strategy going forward is basically based on three goals. The first one is cost control; second, overhaul of our systems. Edenor is a technology driven company. If we feel we are going to sell electricity in the next years as we did in the last 50, we are not going to succeed. The third goal is to be extremely transparent with our shareholders and in the communications to the market.
TWST: You are now trading on the New York Stock Exchange. Have you been able to increase your shareholder base in the US?
Mr. Pagano: No, because we've already made a 49% float. According to our concession contract, the controlling shareholder (EASA) has to have always 51% of all the shares outstanding.
TWST: What would be the most compelling reason for an investor to buy shares in Edenor?
Mr. Pagano: Basically, it's definitely a growth story. The values that the company has today are the lowest in Latin America. The company is very well managed. The senior management is extremely experienced.