Pampa Energia S.A.

Thank you for watching! Okay. We apologize. We apologize for the interruption. Good morning, ladies and gentlemen. Thank you for waiting. I'm Margarita Chun from IAR, and we would like to welcome everyone to Pampa Energia's first quarter 2021 results video conference. We inform you that this event is being recorded. All participants will be in listen-only mode during the presentation. After the company's remarks, there will be a Q&A session. Questions can be submitted writing through the Zoom platform available at the browser or through the app. Should any participant need assistance, please contact us through the chat or email, or you can raise your hand. Before proceeding, please read the disclaimer that is located on the second page of our presentation. Let me mention that forward-looking statements are based on Pampa Energia's management beliefs and assumptions and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and 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 Pampa Energia and could cause results to differ materially from those expressed in such forward-looking statements. Now I'll turn the video conference over to Lida Wang, our investor relations and sustainability officer of Pampa Energia. Lida, you may begin the video conference.

Thank you, Margarita. Hello, everyone. Thank you for joining our conference call. I hope you are all safe and well. In the interest of time, I will summarize the latest events and financial figures. For more details, you can check the earnings release or contact us. Our CEO, Gustavo Mariani, and our CFO, Mr. Cohen, are both here and joining us for Q&A. Despite the challenging context, the first quarter showed solid figures from sales to net cash flow, a great proof of the company's resiliency. As of 2021, figures are shown without Adenor, as we announced the divestment last year, and clearance should be anytime. Therefore, Pampa is getting simpler and leaner. The revenues from continued businesses increased 4% year-on-year to $420 million, mainly due to Genelio's new PPA, growing gas self-supply by our EMP. We also recorded higher petrochemical and EMP prices due to the rise in international prices and plant gas TSA. All of them were partially upset by the drop in legacy prices and hydrocarbon volumes, as well as the tariff freeze and devaluation effect over our utility businesses. In Q1 2021, 83% of our sales were dollar linked and almost 88% in EBITDA terms, mainly coming from our core businesses, PPA power capacity, followed by EMP. The adjusted EVDA from continued businesses amounted to $204 for the quarter, 16% higher year-on-year, mainly explained by the same reasons detailed before, plus production efficiencies and decreasing peso-linked expenses due to the devaluation effect. Quarter-on-quarter... ABDA increased by 11%, mainly due to the plant gas, petrochemicals price improvement, and the high seasonality on power and liquid businesses, offset by Barragán's outages and the valuation effect on regulated income. Therefore, oil and gas is regaining exposure by taking 41%, as we show in the right below, while... Excluding Edenor, electricity takes 59% of the consolidated adjusted EVDN. Moreover, during Q1, the capex from the continuing businesses fell 11% year-on-year and 10% quarter-on-quarter, explained by the commissioning of Genelva last year's first half, offset by the recovering EMP activity due to the planned gas and Barragán's expansion project. Moving to the power generation segment, As seen on slide 4, during the first quarter of 2021, we posted an adjusted VDA of $115 million, similar to the Q1 2020, mainly because of Genera Plus CCGT, higher B2B sales, and the devaluation impact on our peso-denominated expenses. These effects were and Mariana De La Fuente. Spot energy comprises 59% of our capacity, but only represented 22% of our power generation EBTA in the quarter. And it will keep shrinking until the regulator grants inflation adjustment, which is imperative to continue with the proper maintenance of these plants under pay considering the contribution to the grids availability. Generation in Q1 21 was 4% down, Thank you very much. Outpacing Hydro and Wind Generation Keep in mind that the power generation business model relies on capacity payment, so lower dispatch does not impact the revenue making as long as the availability is outstanding, especially for PPA-based energy. The availability rate in Q1-21 reached almost 95% with a installed capacity of 5 GW operated all by Pampa, slightly lower year-on-year, mainly due to barragans and availability. We expect exports by CAMESA to remain but slow down as it forecasted drops in the country, meaning that there's more reliance on thermal generation regardless of the fuel. All in all, Our 2021 generation is expected to increase year on year. Regarding our expansions, our crucial project is closing to CCGT at Ensenada Barragan Thermal Power Plant, as seen on Sni-Fi. The project is considered critical infrastructure for Argentina's grid, which will add 280 megawatts in the south of Greater Buenos Aires. The project is 40% advanced, cemented, carry out the steam turbine inspection without any anomalies. We are beginning to install the water system and review the facility's connection to the grid. Around 900 people are right now at the site, working with the strictest protocols to minimize the circulation of COVID. We also implemented a night shift to recover the delays caused by the second wave of the pandemic, to achieve the CLD by second quarter of 2022. Keep in mind that La Capampa operates in Senada Barragán and it is the fourth CCGT project for us. Once closed, the installed capacity will amount to 847 megawatts, contributing to the grid, one of the most efficient thermal units. So moving on to the EMP results seen on slide six, We posted an adjusted EBITDA of $33 million in Q1 2021, 13% higher year-on-year, mainly driven by plant gas, rebounding gas prices as of the beginning of this year. Cruel oil prices also grew to pre-pandemic levels due to the international prices. However, the lower oil demand and gas exports and more royalties because of higher prices compensated the ABDA's increase. Quarter on quarter, the ABDA increase is remarkable considering that they are both quarters, off-peak quarters, driven basically by plant gas and also a little bit higher production, gas production. Efficiency-wise, we recorded $23 million of lifting costs, 24% improvement Q120 driven by higher productivity at competitive gas blocks such as Hermann Gruscio, less oil volume and devaluation. By BOE produce, we reach less than $6 of lifting cost, 19% lower year-on-year and 2% lower quarter-on-quarter. Despite the harsh environment, the industry depletion, and it is worth highlighting that our oil and gas production only decreased 5% year on year, mainly because of lower oil output, and remains similar quarter on quarter. We reach almost 44,000 barrels of oil equivalent per day, of which 90% is gas. On the oil side, We represented 21% of the segment's revenue in the quarter. Volume sold decreased by 39% year-on-year to 3.2 thousand barrels per day, explained by lower domestic demand as refined products haven't recovered to pre-pandemic levels. Although, we resumed exports in April. As per crude oil prices, increased by 11% year-on-year and 34% quarter-on-quarter, reaching more than $55 per barrel, driven by the Brent and bouncing back from the sharp fall at the beginning of the lockdown. Regarding gas, we can see on slide 7, Q1 2021 reached an average of 241 million cubic feet per day of volume sold, 7% lower year-on-year, but similar quarter-on-quarter. and Mariana De La Fuente. at our less efficient gas-bearing blocks, but was partially observed at the steady growth at El Mangrucho, a block with outstanding productivity wholly owned and operated by us. In Q1-21, El Mangrucho reached 165 million cubic feet per day of gas production, 9% higher than Q1-20, and contributing close to 70% of our overall gas, ranked the four largest gas producing block in the Okinawa Basin. During the first quarter of 21, our average gas price was $2.8 per million BTU, 21% higher than last year and 32% higher than Q4, mainly explained by the plant gas where over 70% of our output is sold at $3 per million BTU. Though this GSA does not cover the spot market or the CAMESA additional gas tenders, free prices improved, but haven't reached the planned gas levels. As we approach to the winter season, free prices are expected to converge to planned gas levels. As you can see right below, the quarter sales are more diversified than a year ago, but still mainly destined to Camesa, whether through plant gas or spot sales. Discos are also part of plant gas and will soar during the winter, increasing its share to one third of this year's production. Also, we put in place a campaign to appeal to gas B2B sales with positive results increasing our market share. The only segment shrinking was gas exports. which decreased by half year-on-year. Let me briefly comment again on the importance of planned gas which sets a turnaround for our E&P business. Planned gas grants a four-year GSA intended to revert the declining trend on local gas production. Tampa was the first major awardee and the only producer tendering the largest winter production growth in the Burkina Basin. Winter is seasonally critical because on top of the industrial product consumption, retail and thermal power increase the demand dramatically, resulting in a gas shortage and massive imports, which are paid with hard currency and does not help to the Argentine macro. Under the GSA, we are committed to increase our annual production by 15% and by 28% during the winter season, charging $3 per million BTU off peak and $4.5 per million BTU on peak season. That makes a year-weighted average of $3.6 under this GSA. Therefore, in Q1 2021, we reactivated our investment activity by drilling six Thai gas wells at Rio Neuquén and Sierra Chata and completing two Thai gas wells at El Mangrucho, our main production field. In that block, we are preparing for the output search by building the second gas treatment plant, which will more than double the evacuation capacity to reach almost 300 million cubic feet per day. Drilling activities in the mentioned blocks will increase during the following months to fulfill our commitment, especially for the winter. It is worth mentioning petrochemicals' outstanding performance, despite the economic downturn context. The EBDA increase was mainly explained by the significant rise of International reference prices and local spreads thanks to the growing demand linked to the industry recovery. Exports, which are 40% of our sales, are growing for SBR and reforming products. Continuing with the pricing trend, we expect to achieve similar performance during Q2, but beyond, we are not sure how commodity markets will behave and as they are highly volatile. Finally, moving on to slide 10, our solid performance allows us to keep deliberating our balance sheet, therefore improve our leverage ratios, granting us some degrees of freedom compared to other industry peers amid this challenging environment. This slide shows consolidated figures, including our affiliates at ownership, but let's only focus on the restricted group for covenant purposes. Restricted Group is the parent company plus the hydros. Since Eleanor was deconsolidated, Pampa Under IFRS is the same as the Restricted Group. As of the year end, the Restricted Group gross debt recorded $1.6 billion. Similar to last December, 91% denominated in U.S. dollars, up from 88% in Q4. because we've been paying down short-term peso debt. The dollar debt bears an average interest rate of 7.4%, while the peso debt averages a 39% interest. Average life decreased from 4.8 years to 4.6 years. The cash amounted to $409 million, 12% lower than last quarter's stock, mainly but due to higher working capital by PlanGas, coupon and peso debt payments, and share buyback, partially upset by positive operating cash flow. The restricted group's net debt is similar to the last quarter, amounting to $1.2 billion. The net leverage ratio improved from 2.4 In the next 12 months, the company only faces $165 million of maturities, of which 84% in local currency. After Q1, we paid at maturity $16 million of peso debt and made some share buybacks. We will keep reducing shortened peso debt unless we find another opportunity to capitalize on, either through M&A or further security buybacks. Regarding our affiliates, Barragan amended its BRDs amortization schedule, easing the maturity profile for the next two years. Finally, The last April's annual shareholders meeting approved to cancel another 2.3 million treasury ADRs. As of today, our standing capital amounts to 55.7 million ADRs. Also, keep in mind that our board also approved a new program for up to $30 million last March with a price cap of $16 per ADR. So this concludes our presentation. Now I will turn the word to Margarita. She will poll for questions. Thank you very much.

Thank you, Lida. The floor is now open for questions. If you have a question, please send us through this platform. We will read and answer them in the order received. Also, please make sure your name and company are adequately displayed to introduce you to the audience. Please lower your hand once your question is answered. Should any participant need assistance, send us message or raise your hand. Please hold while we poll for questions. Our first question comes from Frank McCann from Bank of America. He has three questions. The first one is, what are your expectations for the hydrocarbon law in terms of timing and major provisions it will have? How could it affect campus opportunity?