Executive Summary / Key Takeaways

• Resolution 400/25 transforms CEPU's risk profile from peso-exposed to dollar-denominated, potentially adding $70-80 million annually to EBITDA through market-based pricing and capacity payments of $12 per megawatt.
• The Brigadier Lopez combined cycle and San Carlos solar farm reaching commercial operation in Q4 2025 represent immediate earnings catalysts, contributing $60-65 million and $3-5 million in full-year EBITDA respectively.
• Diversification into battery storage (205 MWh by 2027), mining investments (27.5% stake in Tres Cruces lithium), and high-voltage transmission creates multiple growth vectors beyond conventional generation, reducing regulatory dependency.
• Operational excellence demonstrated through 88% thermal availability, successful navigation of Argentina's 2001-2002 crisis, and completion of complex maintenance projects positions CEPU to capture market share in the liberalized environment.
• Trading at 13.87x EV/EBITDA with net leverage of just 0.5x, the market has not fully priced the earnings inflection from regulatory reform and project completions, particularly as industrial demand from mining and automotive accelerates.

Setting the Scene: Argentina's Largest Private Generator at a Regulatory Inflection Point

Central Puerto S.A. was formally incorporated on March 13, 1992, and commenced operations on April 1, 1992, as Argentina privatized its electricity sector. Headquartered in Buenos Aires, the company has evolved from a conventional thermal generator into the country's largest private power producer, controlling 6,938 MW of installed capacity and capturing over 20% of Argentina's private energy market. This scale provides negotiating leverage with regulators, economies of scale in fuel procurement, and the financial capacity to invest across multiple energy transition technologies simultaneously.

The company makes money through four distinct segments: conventional thermal generation (70% of capacity), renewable energy (553.80 MW across wind and solar), natural gas trading and distribution, and forestry operations. More recently, CEPU has ventured into mining equity investments and high-voltage transmission development. This diversification reflects a deliberate strategy to capture value across Argentina's entire energy value chain, reducing dependence on any single regulatory framework or fuel source.

Argentina's Wholesale Electricity Market (MEM) has historically been administered by CAMMESA , with generators selling power through regulated contracts and spot markets denominated in pesos. This structure exposed CEPU to Argentina's chronic inflation and currency devaluation, creating a structural deficit in CAMMESA's accounts during the 2001-2002 crisis when frozen end-user tariffs collided with rising fuel costs. The company's survival and expansion through that period demonstrates management's ability to navigate extreme macroeconomic volatility—a capability that becomes more valuable as Argentina undergoes its most significant energy market reform in decades.

The competitive landscape includes integrated players like Pampa Energía (PAM) (5,472 MW with upstream gas production), state-linked YPF Luz (YPF) (3.4 GW), technology-focused AES Argentina (AES) (2,985 MW), and renewable pure-play Genneia (1,400 MW). CEPU's differentiation lies in its hybrid model: scale larger than any competitor, diversification across thermal, hydro, and renewables, and operational flexibility to serve both regulated and deregulated markets. While Pampa's gas integration provides cost advantages and YPF Luz benefits from state relationships, CEPU's independence and diversified portfolio position it uniquely to capitalize on market liberalization.

Technology, Products, and Strategic Differentiation: The Hybrid Advantage

CEPU's core technology is not a single innovation but an integrated portfolio approach that balances baseload reliability with growth optionality. The conventional thermal segment operates at 88% availability, with combined cycles achieving 96%—metrics that maximize revenue capture in a market where capacity payments reward reliable generation. The Brigadier Lopez combined cycle, expected to reach commercial operation by mid-December 2025, represents the latest evolution of this strategy, adding 140 MW of highly efficient capacity that can flex between spot and contract markets.

The renewable segment, totaling 553.80 MW across seven wind farms and multiple solar projects, provides a natural hedge against fuel price volatility and carbon regulation. The recent acquisition of the 80 MW Cafayate solar farm and the imminent completion of the 15 MW San Carlos project demonstrate CEPU's ability to execute renewable development in parallel with thermal operations. This positions the company to serve industrial customers seeking green power while capturing premium pricing in the term market.

Strategic differentiation extends beyond generation. The company's registration as a natural gas trader in July 2018 and subsequent expansion through Puerto Energía S.A.U. create a vertically integrated fuel procurement capability. This proves critical under Resolution 400/25, which decentralizes fuel management and allows generators to capture margins on fuel purchases. As a major buyer, CEPU's trading operation can negotiate better terms than competitors reliant on CAMMESA procurement, directly improving thermal segment margins.

The battery energy storage system (BESS) projects—205 MWh awarded in September 2025 with $130-140 million in capital expenditure—represent a technology moat that competitors lack. Scheduled for operation by mid-2027, these systems will provide grid stability services and enable CEPU to arbitrage price volatility in the liberalized spot market. This capability transforms the company from a passive generator into an active market participant, capturing value that thermal-only competitors cannot access.

Financial Performance: Evidence of Operational Leverage

CEPU's financial results demonstrate accelerating operational leverage as regulatory reforms take hold. Adjusted EBITDA for Q3 2025 reached $101.1 million, a 64% quarter-on-quarter increase and 8% year-over-year growth, driven by effective fuel cost pass-through and solid performance across both renewable and thermal portfolios. This shows the company can expand margins even while investing in growth, a combination that supports valuation multiple expansion.

The conventional generation segment delivered 19.57% revenue growth in the nine-month period ended September 30, 2025, reaching ARS 644.49 million. This growth was not volume-driven but resulted from higher spot and contract market prices plus successful completion of maintenance at Central Costanera. The extraordinary $18-20 million boiler upgrade in Q2 2025, while depressing short-term results, positions the plant for 20 years of reliable operation at 90-95% availability—an investment that will generate returns through enhanced capacity payments under the new regulatory framework.

Renewable segment revenues declined 5.7% year-over-year to ARS 107.04 million due to lower hydrology at Piedra del Águila, yet adjusted EBITDA increased 12.6% to ARS 97.40 million. This margin expansion demonstrates the segment's resilience and ability to generate cash even during suboptimal conditions. The acquisition of Cafayate and completion of San Carlos will add scale and geographic diversification, reducing weather-related volatility.

The balance sheet provides strategic flexibility that competitors cannot match. Net debt of $159.9 million represents just 0.5x adjusted EBITDA, while the company maintains a voluntary reserve of ARS 533.7 billion for future dividends. The October 2025 bond issuance of $89 million, used to repay maturing debt, demonstrates access to capital markets at reasonable terms. This financial strength enables CEPU to self-finance its $130-140 million BESS capital program while maintaining share buyback capacity—2.8 million shares repurchased as of September 2025 with a new $20 million program approved in September.

Outlook and Management Guidance: A Phased Liberalization

Management's guidance reveals confidence in a multi-year earnings inflection. The 20-25% EBITDA increase from Resolution 400/25 translates to $70-80 million annually, contingent on dispatch levels and fuel consumption. This estimate excludes potential upside from selling up to 20% of production directly to large users, a capability that becomes available under the new framework. The company's confidence in reaching this 20% threshold by year-end indicates industrial demand is strong enough to support premium pricing above spot market rates.

The Brigadier Lopez combined cycle represents the most immediate catalyst. With construction 80% complete as of Q2 2025 and COD expected by mid-December, management projects $60-65 million in full-year EBITDA contribution. This single asset will increase CEPU's efficient thermal capacity by 3%, but more importantly, it enters service just as the market transitions to dollar-denominated pricing, maximizing its revenue potential. The plant's expected "full dispatch and full speed" operation with no additional maintenance for years provides visibility into sustained cash generation.

The San Carlos solar farm, also "very near COD," will contribute $3-5 million annually—smaller in absolute terms but significant as a proof point for renewable development execution. Together, these projects demonstrate CEPU's ability to deliver both thermal and renewable capacity on schedule, a track record that will prove essential when competing for future hydro auction capacity.

Management acknowledges that full market liberalization will be phased, not immediate. Natural gas market liberalization remains tied to Plan Gas contracts expiring in December 2028, after which generators will assume full fuel management responsibility. This timeline creates a three-year transition period where CEPU can gradually optimize procurement while still benefiting from CAMMESA's bulk purchasing power. The company's early move into gas trading positions it to capture margins during this transition, while competitors without trading capabilities will face a steeper learning curve.

Risks and Asymmetries: What Could Break the Thesis

The most material risk is regulatory execution. While Resolution 400/25 promises dollar-denominated revenues and market-based pricing, Argentina's history of policy reversals creates uncertainty. If the Milei government fails to maintain reform momentum or subsequent administrations reverse course, CEPU could revert to peso exposure and compressed margins. The company's survival through previous crises provides some comfort, but investors should monitor the October 2025 effective date and early implementation signals closely.

Fuel market liberalization presents a second risk. Management's comment that "if you don't have a liberalization of the natural gas, it's difficult to deregulate all the legacy market" highlights the interdependency. If Plan Gas contracts are extended beyond 2028 or domestic gas prices remain artificially low, CEPU's ability to optimize fuel procurement will be constrained. This would limit the margin expansion potential from the new regulatory framework, particularly for the 70% of capacity that is gas-fired thermal.

Competitive dynamics could pressure market share. Pampa Energía's integrated gas model provides a natural hedge that CEPU lacks, while YPF Luz's state relationships may secure preferential access to large industrial customers. However, CEPU's scale and operational efficiency create a partial offset. The hydro auction process, expected to conclude before mid-December, will test this competitive positioning. If CEPU fails to secure attractive concessions, its growth trajectory may rely entirely on organic development rather than strategic acquisitions.

On the upside, the BESS projects represent an underappreciated asymmetry. The $130-140 million investment for 205 MWh of storage capacity positions CEPU to capture grid stability revenues that could exceed base-case projections if renewable intermittency creates more volatility than anticipated. Similarly, the mining investments—27.5% of Tres Cruces lithium and 9.9% of AbraSilver—provide commodity price optionality that is not reflected in the generation-focused valuation.

Valuation Context: Pricing the Inflection

At $17.20 per share, CEPU trades at 13.87x EV/EBITDA based on trailing twelve-month figures. This multiple sits modestly above the sector median of 12.8x, yet the company is on the cusp of a 20-25% EBITDA step-up from regulatory reform alone. The implied forward multiple of approximately 11x EBITDA suggests the market has not fully internalized the earnings inflection from Resolution 400/25 and project completions.

Cash flow metrics reveal a more nuanced picture. The price-to-operating cash flow ratio of 14.32x appears attractive for a business generating $166.5 million in annual operating cash flow, particularly given the 0.5x net leverage. However, the price-to-free cash flow ratio of 90.40x reflects heavy capital investment in growth projects—$130-140 million for BESS alone. This dynamic is typical of utility companies in investment phases and should normalize as projects reach COD and convert to cash generation.

Balance sheet strength provides a valuation floor. Net debt of $159.9 million against a market capitalization of $2.94 billion creates a conservative capital structure with debt-to-equity of just 0.25. The current ratio of 1.40 and quick ratio of 1.07 indicate adequate liquidity to fund the 2026 capital program without dilutive equity issuance. This financial flexibility is particularly valuable in Argentina's volatile macro environment, where access to capital can be constrained.

Peer comparisons highlight CEPU's relative positioning. Pampa Energía trades at 10.07x EV/EBITDA but carries higher debt-to-equity (0.52) and lower return on assets (2.37% vs CEPU's 4.52%). AES Argentina's 12.49x multiple comes with significantly higher leverage (3.03 debt-to-equity) and lower margins. CEPU's premium appears justified by its superior operational metrics, lower financial risk, and clearer earnings growth catalysts.

Conclusion: A Regulated Utility Becoming a Market-Driven Power Platform

Central Puerto stands at the intersection of Argentina's most significant energy market reform in three decades and its own project delivery inflection. Resolution 400/25's shift to dollar-denominated, market-based pricing directly addresses the historical currency and inflation risks that have compressed valuations for Argentine utilities. The estimated $70-80 million EBITDA uplift from this reform alone represents a 20-25% increase that is not yet reflected in the 13.87x EV/EBITDA multiple.

The company's ability to deliver complex projects on schedule—demonstrated by the imminent COD of Brigadier Lopez and San Carlos—provides tangible evidence that operational excellence can translate regulatory opportunity into financial results. This execution track record, forged through navigating the 2001-2002 crisis and subsequent macro volatility, creates a competitive moat that integrated players like Pampa and state-linked competitors like YPF Luz cannot easily replicate.

The ultimate investment case hinges on two variables: the faithful implementation of Resolution 400/25's market liberalization provisions, and CEPU's success in capturing premium pricing from large industrial users in the newly deregulated term market. If management achieves its target of selling 20% of production directly to big users while maintaining operational availability above 90%, the combination of earnings growth and multiple expansion could drive meaningful shareholder returns. The downside is protected by a fortress balance sheet, diversified revenue streams, and a management team with proven crisis navigation skills—attributes that matter more than ever in Argentina's evolving energy landscape.