Slide Deck

1. Business Overview & Industry Structure

The Asset Base and Generation Portfolio

Central Puerto S.A. (CEPU) operates as the largest private-sector power generation company in the Argentine Republic, possessing an installed capacity of 6,938 megawatts (MW) distributed across 16 generation facilities.¹ In the fiscal year 2025, the company generated 18.6 Terawatt-hours (TWh) of electricity, securing a 14% market share of the Argentine Interconnection System (SADI).² The company’s generation matrix is diversified across multiple technologies, though it remains structurally anchored by legacy thermal assets. The portfolio comprises 1,440 MW of hydroelectric capacity, which is predominantly derived from the Piedra del Águila concession—a critical grid-stabilizing asset whose operational tenure was recently extended through to 2055.¹

The renewable generation footprint accounts for 574 MW of wind and solar capacity, built largely during the RenovAr program’s operational window.¹ Furthermore, CEPU holds substantial combined-cycle thermal capacity through 2,554 MW of fractional stakes in the FONINVEMEM program, specifically the San Martín, Manuel Belgrano, and Vuelta de Obligado plants.¹ In a highly aggressive counter-cyclical maneuver in 2023, CEPU vastly expanded its thermal footprint by acquiring the 2,305 MW Central Costanera complex in Buenos Aires from the exiting multinational Enel.¹

Beyond the core competency of power generation, CEPU has engaged in highly unorthodox horizontal diversification. The company currently stands as the largest private forestry operator in Argentina, managing over 160,000 hectares of pine and eucalyptus plantations through its “Forestal Argentina” subsidiary, an entity constructed via the acquisitions of EVASA and Masisa.¹ Additionally, CEPU has allocated capital to the speculative mining sector, acquiring a 9.9% equity stake in AbraSilver Resource Corp, the developer of the Diablillos silver-gold project, and an interest in the Tres Cruces lithium project.⁷

The Structure of the Argentine Wholesale Electricity Market (MEM)

To critically analyze Central Puerto, one must completely deconstruct the deeply flawed historical structure of the Argentine Wholesale Electricity Market (MEM). For the past two decades, the MEM has not functioned as a true market. Instead, it has operated as a politically managed clearinghouse dominated by CAMMESA (Compañía Administradora del Mercado Mayorista Eléctrico S.A.), the state-controlled dispatch agency. Under this legacy framework, CAMMESA historically acted as a monopsony buyer of electricity and a monopoly supplier of subsidized natural gas to generators.⁸

Under the original 1990s market design, dispatch priority was determined strictly by marginal variable costs, incentivizing efficiency. However, following the 2001-2002 sovereign default, successive administrations intervened. Because the state provided the fuel to thermal plants to artificially suppress end-user tariffs, generators essentially operated as tolling facilities. Pricing was dictated by arbitrary government resolutions rather than the intersection of supply and demand, severely decoupling returns on capital from operating efficiency. Generators were remunerated via fixed capacity charges denominated in Argentine Pesos (ARS)—revenues that were routinely decimated by hyperinflation—and variable charges that merely covered non-fuel operating and maintenance (O&M) expenses.

Revenue Mix Evolution

Historically, CEPU’s revenue composition was heavily skewed toward these highly regulated, peso-denominated capacity payments, leaving the equity exposed to rapid inflationary decay and continuous currency devaluation.¹⁰ However, the revenue mix has undergone a radical, structural transformation over the trailing five years, culminating in a paradigm shift in 2025. As of December 2025, an astounding 97% of CEPU’s energy-related revenues are effectively USD-denominated.¹²

This transformation is the result of two intersecting dynamics. First, the systematic growth of the MATER (Renewable Energy Term Market) and legacy Power Purchase Agreement (PPA) contracts has allowed generators to bypass CAMMESA and sell electricity directly to large industrial users (GUDIs) under hard-currency contracts. In the third quarter of 2025 alone, CEPU’s contracted MATER and PPA generation reached 1,961 GWh.¹³ Second, and vastly more critical to the legacy thermal fleet, the regulatory overhaul implemented by the Milei administration (specifically Resolution SE 400/2025) has re-pegged spot thermal revenues to the US dollar to mitigate inflation and currency risk, permanently altering the quality of CEPU’s earnings.¹³

Competitive Positioning and Industry Returns

CEPU competes within an oligopolistic market against a concentrated group of major independent power producers (IPPs). A rigorous analysis requires contrasting CEPU’s operational scale and strategic focus against its primary peers: Pampa Energía, YPF Luz, and Genneia.

Competitor	Market Focus & Strategic Posture	2025 Estimated Capacity
Central Puerto (CEPU)	Dominant legacy thermal scale, major hydro, pure-play downstream, non-core forestry/mining	~6,938 MW 2
Pampa Energía	Vertical integration (Vaca Muerta gas E&P to power generation), high thermal efficiency	~5,472 MW 14
YPF Luz	Captive corporate demand, aggressive renewable and thermal growth, integrated with YPF	~3,200 MW 15
Genneia	Undisputed leader in pure-play renewables, dominant MATER market share	~1,616 MW 15

Evaluating whether Argentine power generation is a fundamentally “good business” requires stripping away the narrative and focusing entirely on structural returns on capital. Viewed through a strict unit-economics framework, the historical answer is unequivocally negative. The industry is highly capital-intensive, requires continuous maintenance capital expenditures, and has operated in a jurisdiction where the sovereign routinely abrogated contracts, froze tariffs, and defaulted on payment obligations. The structural return on invested capital (ROIC) for Argentine IPPs has historically trailed their weighted average cost of capital (WACC), resulting in the systematic destruction of shareholder value over full economic cycles.¹⁷

However, the rapid transition toward a liberalized marginalist market under the current political administration is actively shifting the industry from a structurally impaired “bad business” to a moderately attractive, cash-flowing infrastructure play. If the current regulatory regime holds, the massive sunk costs of legacy thermal assets will begin to generate economic rents.

2. Competitive Advantage Assessment

A foundational tenet of disciplined fundamental analysis dictates that only a business with a durable competitive advantage is worthy of long-term investment capital. A true competitive advantage must invariably manifest in superior Return on Invested Capital (ROIC), durable and widening unit economics, or impenetrable barriers to entry that preclude competitive capital from destroying excess returns.

Evaluation of CEPU’s Economic Moat

Subjected to rigorous scrutiny, CEPU’s competitive advantage is revealed to be weak. It is primarily predicated on scale, legacy asset location, and regulatory relationships, rather than genuine pricing power, network effects, or proprietary intellectual property.

The first pillar of CEPU’s pseudo-moat is asset location and grid interconnection. CEPU’s 2023 acquisition of the Central Costanera complex provides the company with unparalleled access to the Greater Buenos Aires (GBA) demand center.¹ The Argentine national grid is currently paralyzed by severe transmission bottlenecks, which serve as the primary limiting factor for the integration of new renewable capacity.¹⁵ In such a constrained environment, owning legacy thermal assets directly adjacent to the largest demand node ensures high dispatch priority, insulates the assets from curtailment, and guarantees baseline capacity payments.

The second pillar rests on CEPU’s hydroelectric concessions. The Piedra del Águila hydro plant (1,440 MW) provides a genuinely low marginal cost base. The December 2025 extension of this concession for an additional thirty years, securing operations through to 2055, locks in a long-term, high-margin cash flow stream.² Hydroelectric assets feature structural barriers to entry—exclusive water rights, massive upfront capital requirements, and insurmountable environmental permitting hurdles—that render them impossible for new entrants to replicate.

However, the critical vulnerability in CEPU’s business model is a total absence of pricing power. Until the regulatory shifts of November 2025, CEPU operated purely as a price-taker in a centrally planned market. The company possessed zero pricing power over its core product. While the recent implementation of Resolution 400/2025 allows CEPU to contract up to 20% of its thermal production directly with large users—scaling to 100% by 2030—electricity remains a commoditized product.¹³ CEPU cannot charge a premium over Pampa Energía or YPF Luz for an identical megawatt-hour. Therefore, the company’s returns remain highly sensitive to overall market supply and state-mandated capacity clearing prices.

Return on Equity (ROE) and Return on Invested Capital (ROIC)

Assessing historical returns for an Argentine entity presents an extraordinary analytical challenge due to the enforcement of International Accounting Standard (IAS) 29. This hyperinflationary accounting standard mandates the continuous restatement of non-monetary assets and equity to reflect current purchasing power, artificially inflating equity bases and creating phantom “monetary gains” that severely distort statutory profitability.¹¹

In nominal terms, CEPU’s ROE has exhibited wild and uninvestable volatility. Statutory ROE spiked to nearly 37% in mid-2024—an anomaly driven entirely by inflation adjustments (RECPAM) on a highly leveraged capital structure—before crashing to a range of 3.17% to 6.98% in late 2024 and early 2025 as the macroeconomic environment stabilized and inflation decelerated.¹⁹

When translating these distorted metrics into true economic returns (ROIC), CEPU, much like its closest peer Pampa Energía, struggles to consistently exceed its cost of capital. Pampa Energía’s annualized ROIC in late 2025 was calculated at a mere 2.47% to 4.92% against an estimated WACC of 9.52%.¹⁷ CEPU’s historical return on investment metrics have similarly stagnated in the low single digits, ranging between 1.8% and 7.3% over the 2021-2023 period.²⁰ This empirical data confirms the core thesis: operating legacy thermal plants in Argentina without massive state subsidies or exorbitant capacity payments has not historically generated superior economic profits. It has been a mechanism for capital destruction.

Unit Economics vs. Peers

Analyzing the underlying unit economics reveals a structural disadvantage for Central Puerto relative to its vertically integrated peers. In the third quarter of 2025, CEPU realized an average revenue per MWh of US$ 45.6/MWh for its thermal segment and US$ 62.3/MWh for its renewable segment.¹³ For comparative context, Pampa Energía reported an overall gross margin of approximately US$ 26.6/MWh across its generation fleet.²¹

CEPU’s structural vulnerability lies in its lack of vertical integration. Pampa Energía is a major upstream producer of natural gas in the prolific Vaca Muerta shale basin.²² As Argentina transitions back to a market framework where generators must source their own fuel to bid into the spot market—a mandate explicitly outlined in Resolution 400/2025—Pampa can hedge its fuel costs internally, transferring margin from its upstream E&P division to its downstream power division.⁸ CEPU, completely devoid of upstream oil and gas operations, must procure natural gas on the open market. This exposes CEPU to severe margin compression during winter demand spikes when domestic gas is rationed, or when infrastructure bottlenecks force the company to burn highly expensive, margin-destroying imported liquid fuels.²⁴

3. Argentina Macro & Regulatory Environment

The investment thesis for any Argentine utility rests disproportionately on the regulatory and macroeconomic environment. In this jurisdiction, political risk is not a theoretical tail-risk scenario modeled by risk departments; it is the absolute, primary determinant of corporate cash flows and equity viability.

History of Tariff Freezes and Political Intervention

Over the past decade, successive populist administrations, primarily under the Kirchnerist coalition, utilized utility tariffs as an artificial anti-inflationary anchor. By freezing end-user electricity prices while underlying system costs—including imported fuel, imported turbine components, and foreign-currency debt service—compounded at high double-digit inflation rates, the government effectively bankrupted the electricity distribution sector, including major players like Edenor and Edesur.²⁵

Because these distributors could not collect sufficient revenue from the population to cover the true cost of energy, they systematically defaulted on their wholesale payments to CAMMESA. In turn, CAMMESA accumulated massive operating deficits and was forced to delay payments to generators like CEPU. The entire grid survived only through continuous, inflationary injections of printed money from the Central Bank of the Argentine Republic (BCRA).¹⁰ Generators were trapped in a cycle of delayed receivables, deteriorating asset bases, and evaporating real returns.

The Milei Administration Reforms (2024-2026)

Since assuming the presidency in December 2023, Javier Milei has implemented a program of severe economic shock therapy designed to unwind this structural deficit. The regulatory landscape governing the energy sector has shifted dramatically, directly and immediately impacting CEPU’s top-line revenue and profitability.

Resolution SE 400/2025: Issued by the Secretariat of Energy in October 2025 and implemented on November 1, 2025, this resolution serves as the cornerstone of the wholesale electricity market’s normalization.⁸

• Decentralized Fuel Procurement: It officially abolishes CAMMESA’s monopoly on fuel procurement. Generators are now legally responsible for sourcing their own natural gas and liquid fuels, permanently reintroducing competitive bidding, heat-rate efficiency, and fuel management as the primary drivers of thermal profitability.⁸
• USD-Linked Spot Remuneration: To combat currency devaluation, spot market remuneration has been explicitly linked to the official BCRA wholesale exchange rate (Communication “A” 3500).⁸ Standard capacity payments have been set at US$ 12/MW-month for available spot capacity.¹³
• Reliability Reserve Services (SRC): A new compensation structure rewards grid availability. Legacy thermal units, which constitute CEPU’s core asset base, receive an additional base SRC payment of US$ 1,000/MW-month. To stimulate non-existent private capital formation, new generation investments are granted a highly lucrative additional SRC payment of US$ 9,000/MW-month, locked in for up to 10 years.⁸

This comprehensive regulatory shift fundamentally de-risks CEPU’s income statement. By translating what were previously peso-denominated capacity availability metrics directly into hard-currency equivalents, CEPU successfully transitioned its revenue base to be 97% USD-denominated by December 2025.¹²

CAMMESA Receivables and BOPREAL Bonds

The legacy of the Kirchnerist system left generators holding massive, rapidly depreciating unpaid receivables from CAMMESA. In mid-2024, facing an imminent breakdown of the payment chain, the government forced a restructuring of these arrears. The Ministry of Economy settled past-due debts to gas producers and electricity generators using BOPREAL (Bonds for the Reconstruction of a Free Argentina) Series 4 bonds.⁹

These sovereign bonds, denominated in US dollars, carry a 3% annual yield and mature in October 2028.²⁶ Because the bonds traded at a discount in the secondary market upon issuance, generators accepting them effectively took a marked-to-market haircut on the present value of their receivables. While painful from a strict Net Present Value (NPV) perspective, this operation forcefully cleared the backlog, allowing CEPU to reset its working capital position. Going into 2026, the power sector reports normalized, on-time payment cycles from CAMMESA, significantly improving cash flow predictability and reducing counterparty credit risk.

Currency Exposure and Capital Controls (Cepo Cambiario)

Argentine equities are historically plagued by the cepo cambiario—strict capital controls that prevent foreign investors from repatriating dividends and restrict corporations from freely accessing foreign exchange to service foreign-currency debt or import capital goods. Throughout 2024 and 2025, the Milei administration achieved fiscal balance, curbing debt accumulation and enabling a phased, partial easing of these controls.²⁹

Crucially for minority equity investors, as of early 2025, the BCRA permitted corporate entities to access the Official Exchange Market to distribute dividends to non-resident shareholders, provided the distributions correspond to retained earnings generated in fiscal years beginning on or after January 1, 2025.³⁰ Furthermore, restrictions on paying for imported goods and services were significantly relaxed, easing operational bottlenecks for maintenance equipment.³¹ While the cepo is not entirely abolished for capital accounts, the restrictions on corporate capital remuneration have been sufficiently lifted to make CEPU investable for offshore institutional capital seeking yield.

4. Growth History & Opportunities

A competitive advantage without the capacity for capital-reinvesting growth results in a stagnant equity stub. CEPU’s historical growth trajectory has been characterized by brilliant, opportunistic acquisitions executed during periods of maximum macroeconomic distress, juxtaposed against a slow, mandated pivot toward renewable generation.

Capacity Growth Trajectory

Over the past decade, CEPU evolved from a pure-play legacy thermal operator in Buenos Aires into a diversified national IPP. Key milestones in this trajectory include:

• 2018-2020: The commissioning of foundational wind and solar farms (Achiras, La Castellana I & II, La Genoveva I & II, Manque, Los Olivos). This growth phase took advantage of the government’s RenovAr program, which offered long-term, USD-linked PPAs backed by World Bank guarantees, sheltering returns from local sovereign risk.¹
• 2019: The acquisition of the Brigadier López Thermal Power Plant (281 MW), integrating a key strategic asset in Santa Fe.¹
• 2023: The highly accretive, distressed acquisition of the Central Costanera complex (2,305 MW) from Enel for an immaterial $48 million.¹ This purchase price represented a fraction of the physical replacement cost, executed at peak macro pessimism just prior to the regime change.
• 2025: The acquisition of the Cafayate solar farm (80 MW) in Salta for US$ 48.5 million. This asset operates under an ongoing RenovAr PPA extending through 2039, guaranteeing long-term USD cash flows.²

Current Project Pipeline

CEPU’s near-term organic growth pipeline is highly credible, fully funded, and shifts focus toward capacity expansion and grid stability:

1. Brigadier López Combined-Cycle Expansion: A US$ 150 million capital expenditure project designed to close the combined cycle of the existing plant. This will add 140 MW of highly efficient capacity without requiring any additional fuel intake.³ This project is financially de-risked by a 10-year PPA with CAMMESA, generating an estimated recurring EBITDA of approximately US$ 60 million per year ³, implying a highly attractive un-levered payback period and robust Internal Rate of Return (IRR).
2. AlmaGBA Battery Energy Storage System (BESS): CEPU successfully secured contracts for two large-scale BESS projects totaling 205 MW of storage capacity, scheduled for commercial operation in 2027.² Backed by a US$ 300 million financing package from the International Finance Corporation (IFC) ³⁴, this represents the largest utility-scale storage contract in Argentina to date. The economics are highly attractive: CEPU secured a capacity fee of US$ 10,161 to US$ 11,147/MW-month and a discharged energy price of US$ 10/MWh, supported by 15-year USD-denominated contracts.¹³

The Vaca Muerta Gas Opportunity and Grid Demand

While CEPU does not produce natural gas, it is a massive consumer of it. The ongoing expansion of pipeline infrastructure from the Vaca Muerta unconventional shale play—specifically the ongoing reversal of the Northern Gas Pipeline (Gasoducto Norte)—is a critical margin catalyst for CEPU.³⁵ Historically, during winter demand peaks, severe natural gas shortages forced thermal plants to burn highly expensive imported diesel or fuel oil. This compressed operating margins, caused severe mechanical wear on turbines, and increased forced outage rates. Firm, year-round access to cheap domestic shale gas will structurally lower CEPU’s variable production costs, increase plant availability factors, and expand the spread earned under the new marginalist pricing regime.²⁴

However, overall electricity demand growth faces severe physical limitations. Argentina’s high-voltage transmission grid is fundamentally saturated.¹⁵ While the MATER market offers high-margin corporate PPAs, generators cannot construct new renewable capacity if they cannot connect it to the SADI grid. To circumvent this, CEPU has signed strategic agreements, such as a joint venture with YPF Luz, to build a $250-400 million private transmission line in the Puna region to supply off-grid clean energy directly to the booming lithium mining sector.³⁷

5. Capital Allocation

Management’s capital allocation is the undeniable link between business value and shareholder value. An assessment of CEPU’s management—directed by the controlling shareholders comprising the Reca, Miguens-Bemberg, and Escassany families ⁴—yields a decidedly mixed conclusion. Their stewardship is characterized by brilliant counter-cyclical asset purchases in the core utility business, severely offset by highly questionable, value-destroying diversification strategies in unrelated sectors.

Uses of Cash and Stewardship

The Bull Case for Stewardship: The controlling families have demonstrated exceptional timing and operational execution in the power sector. The acquisition of the 2.3 GW Central Costanera complex for US$ 48 million in 2023 was a masterstroke of capital deployment.⁴ Buying distressed capacity from a fleeing multinational at the absolute nadir of the Argentine macro cycle allowed CEPU to realize massive, immediate upside when the Milei administration subsequently re-pegged capacity payments to the USD.⁸ The internal rate of return on the Costanera acquisition is staggering.

The Bear Case for Stewardship (Diworsification): Conversely, CEPU’s management has systematically diverted free cash flow away from the core utility business into entirely unrelated, highly cyclical commodity sectors in which they possess zero competitive advantage.

• Forestry: The acquisitions of EVASA and Masisa assets for tens of millions of dollars made CEPU the largest forestry owner in Argentina, managing 160,000 hectares of land.¹ Management justifies this as a “carbon credit” and “biomass energy” play ⁵, but it fundamentally dilutes the IPP business model.
• Mining: More alarmingly, CEPU recently acquired a 9.9% equity stake in AbraSilver (developer of the Diablillos silver-gold project) and entered the lithium exploration space via 3C Lithium (Tres Cruces project).⁷

From a strict analytical framework, this is capital destruction. If an institutional investor desires exposure to Argentine silver mining or commercial timber, they can allocate capital to pure-play equities. A regulated utility should dividend out excess free cash flow or repurchase shares rather than engaging in amateur conglomerate-building. This capital allocation strategy raises severe corporate governance red flags regarding management’s internal hurdle rates for new projects and their alignment with minority shareholders.

Balance Sheet, Dividends, and Ownership

Despite the questionable M&A strategy, the corporate balance sheet remains pristine. As of Q4 2025, CEPU boasts a Net Debt of only US$ 106.3 million, yielding a remarkably low Net Leverage Ratio of 0.3x Adjusted EBITDA.² Total cash, cash equivalents, and current financial assets stand at a robust US$ 231.5 million, entirely neutralizing any near-term refinancing risk.³⁹

Furthermore, management has demonstrated a willingness to return capital to shareholders following the relaxation of the cepo cambiario. After a hiatus dictated by capital controls, CEPU resumed dividend payments, authorizing special distributions in late 2023 and aggressively increasing them throughout 2024 (e.g., paying $0.3098 USD per ADR in November 2024).⁴⁰

Corporate governance appears stable on the surface. The Board of Directors consists of nine members, with four qualifying as independent under the local CNV criteria.⁶ While management claims there is “no controlling shareholder group” ⁶, the historical alliance of the founding families effectively dictates strategic direction, meaning minority shareholders are entirely reliant on the Reca/Miguens syndicate for fair treatment.

6. Financial Analysis

Five-Year Financial Trajectory and IAS 29 Distortions

Analyzing CEPU’s financials strictly in nominal Argentine Pesos (ARS) is an exercise in futility that obscures fundamental reality. International Accounting Standard (IAS) 29 mandates that companies operating in hyperinflationary economies restate their financial statements to reflect current purchasing power.¹¹ This continuous restatement creates massive non-cash “monetary gains” or “losses” (RECPAM) that flow directly through the income statement, artificially boosting net income and rendering local-currency operating cash flow analysis obsolete.²⁵

Consequently, the only analytically sound method to evaluate CEPU is through USD-translated Adjusted EBITDA and Free Cash Flow, which strip out the hyperinflationary noise.

Key Financial Metric (USD Millions, Translated)	FY 2023	FY 2024	FY 2025	2024-2025 YoY Growth
Total Revenues	~$520.0	~$668.9	$782.6 2	+17.0%
Adjusted EBITDA	~$223.0	~$288.2	$337.2 2	+17.0%
Net Income (Statutory)	~$25.0	$52.0	$254.1 39	+388.6%
Net Financial Debt	~$280.0	~$190.0	$106.3 2	-44.0%
Net Leverage Ratio (Debt/EBITDA)	~1.2x	~0.6x	0.3x 2	–

Note: Historical USD equivalents for 2023/2024 are approximations derived from trailing average exchange rates to provide context for the precise 2025 filings.

The exponential step-change in profitability and net income from 2024 to 2025 is directly attributable to the implementation of the new spot remuneration mechanism under Resolution 400/2025, the full-year integration of the highly accretive Costanera assets, favorable hydrology in the Comahue basin, and the stabilization of the ARS/USD exchange rate.⁸

Valuation: Cheap Asset or Value Trap?

At a prevailing share price of roughly 2.3 to 2.4 Billion) ⁴⁰, CEPU trades at the following approximate valuation multiples based on trailing 2025 performance:

• Enterprise Value (EV) / EBITDA: ~7.4x (assuming an EV of $2.5B / $337M EBITDA)
• Price to Earnings (P/E) Ratio: ~11.8x ⁴⁰

Comparison to Peers: Domestically, Pampa Energía (PAM) trades at a trailing P/E of roughly 12x and an EV/EBITDA of ~7.8x.⁴³ CEPU trades at a slight structural discount to Pampa. This discount is highly justified. Pampa controls highly lucrative, cash-flowing upstream oil and gas assets in Vaca Muerta, physically sheltering its downstream power division from input cost volatility and providing superior organic growth vectors.²² CEPU is a pure-play generator burdened by cash-burning, non-core forestry and mining exploration assets. Regionally, Latin American utility peers operating in stable jurisdictions (such as Engie Brasil or Enel Chile) routinely trade between 5.0x and 7.5x EV/EBITDA while offering superior legal security, deep capital markets, and higher structural ROICs.

The Value Trap Argument:

A critical, risk-averse analyst would argue that an EV/EBITDA of 7.4x is extremely expensive for a utility operating in an emerging market with a fifty-year history of expropriation, currency collapse, and sovereign defaults. CEPU is not genuinely undervalued on a risk-adjusted basis; it is currently pricing in a “Milei Premium.” The equity valuation assumes that the administration’s free-market reforms, USD-pegged capacity payments, and the lifting of capital controls are permanent features of the Argentine state—an assumption that history suggests is highly dangerous.

The Undervalued Asset Argument: Conversely, the bullish perspective highlights that CEPU is entering a massive cash-harvesting phase. With the Brigadier López combined-cycle expansion and the AlmaGBA BESS projects scheduled to come online by 2026 and 2027 respectively ¹², management explicitly projects +25% EBITDA growth for 2026 and +35% EBITDA growth by 2028 relative to the 2025 baseline.⁶ If CEPU successfully executes this pipeline and achieves $450M in Adjusted EBITDA by 2027 while maintaining a near-zero leverage ratio, the forward EV/EBITDA multiple drops to roughly 5.5x. If management commits to paying out 50% of Free Cash Flow as USD dividends, the stock will yield double-digits, making it deeply undervalued at current prices.

7. Risks & Recent Developments (2024-2026)

Major Developments (2024-2026)

1. Market Normalization: The transition to a decentralized, marginalist electricity market under Resolution 400/2025 has fundamentally altered CEPU’s revenue quality, shifting it from a rapidly depreciating peso stream to 97% USD-denominated revenues.⁸
2. IFC BESS Financing: Securing a $300M financing package from the IFC for the 205 MW AlmaGBA BESS project signals renewed access to international credit markets and positions CEPU at the absolute forefront of grid-stabilization technology in South America.³⁴
3. Hydroelectric Concession Extension: Retaining the Piedra del Águila concession until 2055 permanently removes the single largest terminal value risk hanging over the company’s legacy asset base.²

Risk Assessment (Ranked)

1. Macroeconomic & Political Reversal Risk (High Probability, Severe Impact): The entire fundamental bull thesis rests entirely on the survival of the Milei administration’s free-market agenda. If social unrest, legislative deadlock, or a return of populist/Kirchnerist governments occurs in the 2027 elections, the USD-pegged tariffs will be immediately frozen, capital controls will rigidly tighten, and CEPU’s equity will face massive impairment.
2. Currency & FX Pass-Through Risk (Moderate Probability, High Impact): While CEPU’s revenues are nominally “USD-denominated,” they are physically paid in Argentine Pesos calculated at the official BCRA exchange rate.⁸ If the government attempts to maintain an artificially strong official exchange rate (a crawling peg) while domestic inflation drastically outpaces it, CEPU’s real operating margins will compress dramatically as local-currency costs (wages, local maintenance) soar against stagnant ARS revenues.
3. Capital Allocation Risk (High Probability, Moderate Impact): Management’s continued diversion of cash flows into mining (AbraSilver) and forestry (EVASA) destroys shareholder value.⁷ If management attempts a larger, more dilutive acquisition in these non-core spaces, public markets will severely penalize the equity multiple, creating a conglomerate discount.
4. Transmission Grid Bottlenecks (High Probability, Moderate Impact): Argentina’s high-voltage transmission grid is physically saturated.¹⁵ While the MATER market offers high-margin corporate PPAs, CEPU cannot construct new utility-scale renewable capacity if it cannot physically connect it to the SADI grid to evacuate the power.
5. CAMMESA Payment Relapse (Low Probability near-term, Severe Impact): While the BOPREAL issuance cleared the backlog ²⁶, any failure by distribution companies to pass along real costs to consumers will eventually bankrupt CAMMESA again, resulting in a return to severe payment arrears for generators.

Conclusion: The Bull vs. Bear Synthesis

Has the Milei reform agenda meaningfully improved the investment case for Argentine utilities, or is the improvement merely sentiment-driven? The data unequivocally shows that the improvement is fundamentally backed. The transition to decentralized fuel procurement, the implementation of USD 1,000 to USD 9,000/MW-month capacity payments, and the clearing of CAMMESA receivables via BOPREAL bonds have materially transformed CEPU’s balance sheet and cash flow profile. The 388% year-over-year increase in net income for 2025 is physical proof of this fundamental shift.³⁹

What must go right: For CEPU to be a successful, market-beating investment from current levels, the Argentine sovereign must successfully avoid default, domestic inflation must irreversibly converge to international norms, and the government must respect the capacity payments instituted in late 2025. Operationally, CEPU must successfully commission the AlmaGBA BESS and Brigadier López projects on budget, driving EBITDA toward the $450M target by 2027. Crucially, management must return this generated cash to shareholders via aggressive dividends and share repurchases, rather than funding speculative silver exploration in the Andes.

What must go wrong: If the Argentine consumer collapses under the weight of real electricity tariff increases, political pressure will inevitably force the government to abandon the Resolution 400/2025 framework. CAMMESA will revert to delaying payments, creating an immediate working capital crisis. Simultaneously, CEPU’s non-core mining and forestry assets will burn cash during commodity downcycles. In this bearish scenario, the current 7.4x EV/EBITDA multiple will violently contract to its historical mean of 3.0x to 4.0x, resulting in permanent capital destruction for the equity holder.

Central Puerto possesses formidable scale and a pristine balance sheet, but it critically lacks the vertical integration and deep competitive moat of its peer, Pampa Energía. Ultimately, committing capital to CEPU is not a conservative investment in a durable, moat-protected, compounding utility; it is a highly leveraged, directional bet on the political survival and successful execution of Argentina’s libertarian economic experiment.

Frequently Asked Questions

Cyclicality & Earnings Nature

Are earnings at a cyclical high or low? Are they driven by the external environment? Earnings are currently at an artificial, regulatory-driven cyclical high. Central Puerto’s net income exploded by 388% year-over-year in 2025, reaching US$ 254.1 million. This was not driven by internal operational breakthroughs, but entirely by the external environment—specifically, the Milei administration’s implementation of Resolution SE 400/2025, which re-pegged spot thermal remuneration to the US Dollar.

How stable are revenues and what is the market outlook? Revenues are only as stable as the Argentine sovereign’s willingness to honor its own resolutions. As of December 2025, an incredible 97% of CEPU’s energy-related revenues are effectively USD-denominated. However, the underlying domestic electricity demand is actually shrinking slightly (down 1.4% year-over-year in Q1 2025). The growth thesis relies entirely on capturing market share in the corporate PPA market (MATER) and expanding capacity, rather than secular domestic demand growth.

Business Quality & Competitive Moat

Is this a profitable business? What is the ROIC and ROE? In real economic terms, power generation in Argentina has historically destroyed capital. CEPU’s historical Return on Investment (ROI) has languished in the mid-single digits, ranging from 3.9% to 7.3%. While nominal statutory Return on Equity (ROE) spiked to nearly 37% in 2024 and 2025 , this is a phantom metric severely distorted by hyperinflationary accounting. When measured against its cost of capital, CEPU struggles to generate genuine economic profit. Its vertically integrated peer, Pampa Energía, posted an annualized ROIC of just 2.47% to 4.92% against a WACC of 9.52%.

What is the nature of competition and are there barriers to entry? The industry is a concentrated oligopoly, with CEPU competing primarily against Pampa Energía, YPF Luz, and Genneia. Barriers to entry are massive (capital intensity, water rights, and severe transmission grid bottlenecks) , but CEPU lacks a durable cost advantage. Because CEPU does not produce its own natural gas, it operates at a structural unit-economics disadvantage compared to Pampa Energía, which actively hedges fuel costs with its own upstream Vaca Muerta production.

Financial Condition & Balance Sheet

How CapEx hungry is this business? Extremely. The business requires continuous capital deployment just to maintain dispatch priority. CEPU’s current growth plan envisions US$ 202 million in CapEx for 2025 , allocated toward completing the Brigadier López combined-cycle plant and deploying 205 MW of Battery Energy Storage Systems (BESS).

How conservative is the accounting? Is net income diverging from cash operations? The accounting is highly distorted, and net income diverges violently from actual operating cash flow. Under International Accounting Standard (IAS) 29 for hyperinflationary economies, CEPU is forced to restate its financials, generating massive non-cash “gains on net monetary position”. In 2025, this accounting rule artificially inflated statutory income, making price-to-earnings (P/E) ratios highly misleading.

Does the company have off-balance sheet or unrecognized assets? Yes. Management’s aggressive horizontal diversification has left CEPU holding over 160,000 hectares of prime timberland in Argentina through its “Forestal Argentina” subsidiary. While carried on the balance sheet, public markets assign virtually zero value to these forestry assets within a utility sum-of-the-parts valuation.

Capital Allocation & Management

What is management’s philosophy, and have they made significant acquisitions? Management’s capital allocation strategy is schizophrenic. On one hand, they execute brilliant counter-cyclical utility acquisitions—such as buying the 2.3 GW Central Costanera complex from Enel in 2023 at the absolute bottom of the market , and paying US$ 245 million in 2026 to secure the Piedra del Águila hydro concession until 2055.

On the other hand, they routinely “diworsify” free cash flow. In 2024 and 2025, management inexplicably deployed utility shareholder capital to acquire a 9.9% stake in AbraSilver (a pre-revenue silver/gold mining developer) and assets in the lithium exploration space.

Are they buying back shares or issuing to insiders? Who controls the company? CEPU recently initiated a minor share buyback program, repurchasing 2.75 million shares for approximately US$ 2.54 million. While the company claims there is “no controlling shareholder group,” strategic control rests firmly with the founding Reca, Miguens-Bemberg, and Escassany families.

Valuation & Market Data

Is the stock an ADR? What is the valuation? Yes, it trades as a sponsored ADR on the NYSE under the ticker CEPU. At current prices, the company trades at an EV/EBITDA of roughly 7.4x to 10.9x and a trailing P/E of approximately 11.8x. Relative to Latin American peers like Enel Chile or Engie Brasil, which operate in much safer jurisdictions with similar multiples, CEPU offers no margin of safety for its sovereign risk profile.

Risks & Downside

What is the risk of a catastrophic loss? The risk of a catastrophic equity wipeout is entirely political. If the current Milei administration fails to stabilize the economy or loses the 2027 elections to a populist coalition, the government will instantly reverse Resolution 400/2025, freeze tariffs, and reinstate rigid capital controls (cepo cambiario). Under this scenario, CAMMESA would immediately return to default on its obligations to generators. Historically, the government resolved these multi-billion-dollar CAMMESA arrears by forcing generators to accept distressed, long-duration BOPREAL sovereign bonds (as they did in mid-2024), effectively forcing a massive haircut onto shareholders.

Recent News & Events

What has changed recently? The regulatory environment has shifted from catastrophic to highly favorable.

1. USD Revenue Peg: Spot market capacity is now remunerated in USD, drastically improving earnings quality.
2. IFC Financing: CEPU secured a massive US$ 300 million financing package from the International Finance Corporation (IFC) to fund the AlmaGBA BESS project and the Piedra del Águila concession.
3. Dividend Repatriation: The Argentine Central Bank has relaxed capital controls, explicitly allowing the distribution of dividends to non-resident shareholders for earnings generated after January 1, 2025.

Summary Verdict: CEPU is not a compounder with a durable moat. It is a well-managed but structurally disadvantaged price-taker. At an EV/EBITDA over 7x, you are paying full price for a flawless execution of Argentina’s fragile macroeconomic recovery, while accepting the immense risk of management burning cash in speculative mining ventures.

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