Pampa Energia S.A.

Hi. Hi, everybody. Hello, everybody. Good morning, ladies and gentlemen, and thank you for waiting. I'm Margarita Chun from IAR. We would like to welcome everyone to Bump Energia's second quarter 2020 results video conference. We inform you that this event is being recorded, and all participants will be in listen-only mode during the presentation. After the company's remarks, there will be a question and answer section only available at the browser or through the app. Should any participant need assistance during the conference, please contact us, whether through the platform or email. Before proceeding, please read the disclaimer that is located in the second page of our presentation. Let me mention the forward-looking statements are based on the beliefs and assumptions of companies here, management, and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and they of course depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of pump energy and could cause results to differ materially from those expressed in such forward-looking statements. Now I'll turn the videoconference over to Lida Wang, our Investor Relations and Sustainability Officer of Pampa Energia. Lida, you may begin the videoconference.

Thank you, Margarita. Hello, everyone, and thank you for joining our conference call. I hope you all and you and your loved ones are safe and sound. We will. For interest of time, I will make a brief summary of the quarter's key figures, staying back of COVID-19, and the latest events since our last call. We will focus on the core businesses of Tampa, Power and EMP as CES and Eleanor already held their calls earlier this week. You can see our CEO, Gustavo Mariani, and CFO, Mr. Gabriel Cohen, are both here and joining us for Q&A. Before we begin, let me remind you that Tampa's figures follow U.S. dollar as a functioning currency. In case of physical links of theory, such as our impurities, their figures are adjusted by equation and shown in dollars at the end of each reporting period effect. As you can see in the slide, what businesses are included when we talk about of FAMPA consolidated as well as FAMPA restricted growth, a definition we use for covenant purposes. As you know, Argentina has been affected by COVID-19 pandemic and federal government set up a mandatory lockdown from March 20. Restrictions have been softened across the country, but certain places such as Buenos Aires metro area has been extended from time to time. So activity is still limited and therefore affects the economy. Most of Pampa's businesses were deemed essential, and we are running our operations with all the necessary safety and health protocols, such as minimum personnel in place, new workflows to keep social distancing, minimizing exposure, such as lengthen working shifts, as well as off-duty time, and so on. Very important is that no wages have been adjusted, nor personnel subject to furlough, Almost 40% of all Bertonello is working remotely right now. And as we said in the last call, we revisited our CapEx and OpEx budgets, reducing primarily in EMP until improved environment. We also are proud to see Genova's second PCGT operating and an outstanding power generation performance through this tough quarter. EMP faced the lowest prices in the last five years as a result of the Thank you very much. The agreement with the sovereign bondholders constitutes a great step for Argentina. We remain prudent. We witness an improvement in collection rates across all the businesses. This is helping a lot our working capital. So let's start commending the orders he take away. As shown in slide five, revenues fell Thank you. Thank you. Businesses partially upset by new power generation price on their PPAs. In Q2 2020, around 40% of our sales were dollar-linked, but roughly 75% in every other business, including R&R, TGS at our state, and R&R at our stake. But the dollar-linked thing is mainly coming from our core businesses, power, capacity, and EMP. Adjusted BDA decreased year-on-year by 56% to $220 million in the quarter, mainly explained by lower EMP price and volume, direct freeze at utilities, and lesser legacy and plus margin at power generation. Partially upset by new capacity, lower EMP, OPEX, and royalties related to activity downturn. The positive effects from NNOR's liability regularization agreement reached in Q2 last year. and the dilution of peso-denominated costs because of effect depreciation. For year-on-quarter, EBDA decreased by 46% because of the lockdown impact over prices combined with off-peak seasonality, therefore lower spot prices for power and gas. As we show on the right, it takes 70% of the consolidated adjusted EBDA, while EMP takes 5%, purely led by gas, and the rest given by TGS and TransCenet at our equity stakes and marginally by Petrochem. Moreover, as shown in the chart last below, in the second quarter of this year, our capex decreased significantly compared to last year, mainly because Genella Plus expansion project was nearly finished, Yampi halted drilling and completion due to the uncertain pricing environment, lower capex at NNR because of the debile and tariff creep plus the PPC were completed last year. In this slide, I want to briefly show you the impact of the lockdown in the Argentine power grid during Q2. The average demand reached 13 gigawatts, 6% lower than last year. But if we compare it with the pre-crisis year, that is 2018, the drop was 13%. although smooth if we compare it to other sectors of the energy industry or to the GDP, which it is estimated to have fallen by 21% year-on-year. This is according to the Marcos consensus. Industries are the most impacted by the quarantine, especially those considered non-essential, while these costs are hit because of the lapse in the SMEs' consumption but partially upset by residential demand due to the stay-at-home order and colder often. As we go into the winter, demand recovers surpassing 2019. Moving to the power generation segment as seen on slide seven, during the second quarter of 2020, we posted an adjusted VDA of $95 million, similar to the Q2 2019. mainly given by the reduction and pacification of spot prices as from February 2020. In addition to lower margin and volume sold in Energia Plus, the latter and the legacy lack of inflation adjustment plus effects are the negative effects of the COVID-19 in power generation. As from July, this market, the Energia Plus, is improving but still far away from the pre-pandemic level. These effects were partially offset by our stakes in the Ensenada Ragán Power Plant, PP2 and PP3 wind farms with private PPAs, and GENERA Plus capacity increase, as well as lower costs related to the lower energy purchases and the legal impact on our cases-nominated costs. Quarter-and-quarter off-peak pricing for spot energy and lower power dispatch in Q2 2020 contributed to that 16% decrease per-and-quarter in UVDA. While spot energy comprises 65% of our capacity in manual watts, only represented 48% of our power generation in UVDA in the quarter. and we'll keep shrinking thanks to the commissioning of the second CDGPA at Genova, which we are seeing in the P&L in Q3, and further one in SENA expansion in Q9. In Q2, generation was 10% lower year-on-year, in line with the lower electricity demand at the national grid because of the lockdown. As the demand is lower, the marginal units but also renewals are disrupting the ranking. Therefore, the combined cycles are the last units to fulfill the demand. Our two combined cycles at Zoma and Genelua were due a dispatch, as well as our non-conventional energy, but the remaining thermo units open cycles were mostly not required. Quarter-on-quarter, power generation decreased 25% mainly because of the lockdown on Silicon Valley. Despite the demand and contraction witnessed in the country, the power generation business model relies on capacity payments, so lower dispatch does not much impact on the revenue making as long as availability is outstanding, especially for PPA-based energy. The availability rate in the second quarter of 2020 reached 98.6% with install capacity of 4.8 gigawatts operated by Compact. We have a 30 basis higher than the same quarter of last year, mainly because last year, Piedra Buena and Plus Units at Güemes faced out. As I mentioned earlier, we are proud to have achieved one of the most important milestones of Compact's 15-year history. with the commissioning of the second CCGT at Genelva on July the 2nd. CAMESA granted clearance to the second in-turbine for 199 megawatts, completed expansion for a total of 400 megawatts priced under a 15-year PPA computed with CAMESA. Despite the pandemic and the delays incurred until it was deemed essential, AMBA executed COVID-free protocols with contractors that's achieving the COD on time and diverting roughly to $320 million. This is 9% lower than what we budget, mainly because of diluted special capsules. Now, Genela is the largest and one of the most efficient thermal plants in the country, as you can see on the slide A in the picture of the existing . and the new one nearby. It has also a full capacity of 1.2 GWAS located in the gate of Buenos Aires, Detroit. The remaining expansion in the pipeline is in Senadarragan Thermal Power Plant, as you can see on slide 9. This is a 280 megawatt CCGT project at the south of Greater Buenos Aires, which is critical infrastructure for Argentina Group. In May and June, we placed a purchase order for the cooling tower and kept digging to set the foundation base. However, works were halted for most of July, and until July 20, we got an essential waiver, so we resumed operations focusing on the construction of critical paths to achieve COD by Q1 2022, therefore to start building A PPA for 10 years with CAMESA. The lockdown negatively impacted the domestic tax, but way lesser than crude oil and lesser than the GDP, dropping year-on-year to 8% on Q2, mainly driven by the lower industrial consumption because of the non-essential shutdown and the economic downturn. Lesser gas fired by CAMESA because of it. Thank you very much. bringing down traded prices. Gas consumption is rising right now as we are in winter season, but we are still below previous year's watermark. However, CAMESA demand is unfulfilled right now, and it's covering it with imported gas and liquid fuel. Moving on the results on EMP, as you can see on slide 11, during Q2 2020, this segment posted an adjusted VDA Thank you for joining us. which in around 44,000 barrels of oil equivalent sold per day, of which 91% is composed by natural gas. On the oil side, which represents only 14% of the segment's revenue in the quarter, volume sold decreased 17% year-on-year and 23% quarter-on-quarter, which is 4,100 barrels Many due to the collapse in the demand and prices affected by the lockdown and the lack of storage capacity, resulting in drilling activities on standoff. During Q2 2020, the crude oil sales price decreased year-on-year 65% and quarter-on-quarter 58%, reaching $21 per bar. Although in May, the government set barril criollo up Thank you very much. We can see that given the current clean fuel trend, it's pricing premiums may either like oil. We are in gas production on slide 12. We can see Q2 reached an average of 253 million QFC per day per volume sold, 10% lower year-on-year, but stable quarter-on-quarter despite the price collapse due to the lockdown and the lack of long-term contractualization. Lower prices impact on the rate-given equation, therefore, producers respond with a less resilient rate, and natural decline takes place. And because of that, production was lower in Rincón del Mangrucho and Río Neuquén, and a minor decrease at Sierra Chata and Aguaraue blocks, which were partially upset by the increases at El Mangrucho. And this is a block in which evacuation infrastructure was expanded, even the Outstanding productivity and upside potential, and also keep in mind that it is fully owned by us, holding operation, operatorship as well. In Q2 2020, Mangrusha reached 153 million QFC per day of gas production, which is 5% higher than Q2 2019, and contributed close to 65% of our overall gas, ranked the four highest gas-producing block at Mentina Bay. It is also remarkable that 7% of the Q2 production corresponded to shale gas from the completion of two recent awards at El Manrujo block last year. During the second quarter of 2020, our average for gas was $2 per million. 37% lower year-on-year and 15% lower quarter-on-quarter. mainly driven by the sharp prices reductions on CAMESA tenders in April and May. The lockdown led to a drop in demand, especially for large users and lesser thermal power. Supply overhangs forced producers to adjust prices to prevent curtailment and keep building. CAMESA outcomes also affected industrial segments and spot prices. But since June increased also the reference price of $2.7 reflecting the demand recovering due to the winter season at lockdown easing. But prices are still in the lowest point in years and barely covering the replacement cost impacting in the investment horizon. Also, as you can see on right below our production, year-to-date is skewed toward Canessa and our Energia Plus units leaving 15% of two other segments. In the commissioning of Geneloa Plus CCGT, we've been procuring our own gas, rising the inter-segment closure from 14% to almost 25%. The lower domestic prices were partially offset by exports to Chile. This is a GSA ended on mid-May. Since then, we are fully selling domestically, but we are waiting for the Secretary of Energy's clearance to continue exploring Chile. We are in our activities due to COVID-19, mandatory lockdown, and our sense of the uncertainties in gas prices, we have been reassessing our activities as from March of this year, but continuing with the operation of our oil and gas fields with the minimum but essential requirements. Therefore... and completion was rejected in Q2 2020 in line with the sector. Currently, we have 11 wells drilled but pending completion of which eight are located at El Manrujo awaiting for better pricing horizon. Moving on the bottom line in the P&L in terms of net income attributable to the owners of the company, Pampa reported a consolidated profit of $4 million in the second quarter were asked in the same period of last year, $400 million was reported. Many due to the one-off non-cash profits in Edenor of last year of $308 million in relation to lower operating margins in oil and gas and regulated businesses, lesser inflation exposure gain because of lesser passive net monetization, for their position locating the electricity distribution and income tax. Finally, moving to the slide 14, our productivity towards the cash and liability management paid off. In this slide, we show all the layers of the company from restricted rules to consolidated figures, but for covenant purposes, let's focus on the restricted rules that is primarily of our current company. We continue optimizing Every aspect of our indebtedness, highlighting that during Q2 2020, Pampa paid at maturity $28 million in addition to $45 million buyback of space value, partially upset by new short-term PESA bonds for a total of $26 million, as well as net borrowing in pesos of $20 million. Therefore, the restricted group gross debt in Q2 2020 recorded $1.6 billion. This is very similar to The gross debt is 89% dominated in the US dollars, which was 92% in the quarter-on-quarter, mainly availing an average interest rate of 7.7%. Average life remained around 5 to 6 years. The cash account had $393 million, which is slightly higher than the $376 million. in March 2020. Many due to the positive working capital as a result of the lower billing and faster collection. So we have a DSO improvement. Collection of plant gas 2017. So the restricted group net debt remains similar to last quarter below $1.2 billion and net debt to LPMVDA stayed at 2.6 times. After Q2, we issued Peso bonds for $87 million plus domestic net borrowing of $10 million. Pampa also repurchased bonds for $27 million face value and redeemed Peso bond series 4 for $17 million. Therefore, our fuel is shifting. We have already shipped all our banking debt to local couriers. It is worth highlighting that the cumulative maturities from now until 2022 amount to $186 million, which is 90% of local currency. In terms of consolidated, including affiliates and ownerships, Pampa Recorder net debt of $1.5 billion. This is two times ABDA and $105 million lesser than Last quarter of March due to the reduced net leverage at the NNR. Finally, we have a share-buy-buy program with a price cap of $15 per ADR and a spending of $38 million. As of this day, we hold 2.2 million ADRs in treasury, so Pampa's outstanding capital amounts to $61.7 million. So this concludes our presentation. I hope no problems here. Now I will turn to Margarita. We will open the floor for questions. We will gather them in the platform. Please write there and we will read it out loud. Thank you.

Thank you. The floor is now open for questions. If you have a question, please send that to the platform or also you can email us. Thank you.