Pampa Energia S.A.

Good morning, everyone, and thank you for waiting. I'm Raquel Cardaz from IAR, and we would like to welcome everyone to Pampa Energía's first quarter 2024 results video conference. We would like to inform you that this event is being recorded. Our participants will be in listen-only mode during the presentation. After the company's remarks, there will be a Q&A session. Questions can only be submitted in writing through Zoom. Should any participant need assistance, please send us a chat message. Before proceeding, please read the disclaimer 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 information currently available to the company. They involve risks, uncertainties, and assumptions because they are related to future events that may or may not occur. Investors should understand that general economic and industry conditions and other operating factors could also affect the future results of Pampa Energía 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. Please go ahead.

Thank you, Raquel. Hello, everyone, and thank you for joining our conference call. I will make a quick summary of Q1. You may find more details in our earnings release and financial statements. Today, we are having a Q&A with our CEO, Mr. Gustavo Mariani, our CFO, Mr. Nicolás Mindin, Mr. Horacio Turri, our head of EMP, and also Adolfo Súder-Bühler, our finance director. Let's just start with the quarter figures. After a soft Q4 gas and power demand, recover. Pampa delivered 31% higher gas production year-on-year and 32% quarter-on-quarter, thanks to the new gas pipeline online in August of last year. Remember that Pampa was awarded 4.9 million cubic meters per day out of the 11 of the pipeline's capacity. This is very important as this late summer bloom prevented the country from importing gas and firing alternative fuels. Therefore, there is more local gas output, less RFX outflow, a friendlier carbon footprint, and more power efficiency. Also, we kept boosting shale gas production, representing 40% of our total output of this quarter, a significant increase compared to last year's 14%. In contrast, we've been experiencing significant delays in collecting CAMESA payments, bearing higher working capital. We learned that the Secretary of Energy instructed CAMESA to pay December 2023 and January 2024 transaction in face value dollar bonds. So we book a $34 million impairment loss on trade receivables. We are awaiting the final resolution, analyzing the course of action. The adjusted VBA for the quarter amounted to $189 million. This is a decrease of 8% compared to last year's amount because of the payment haircut on CAMESA's January receivables, and lower gas exports, in addition to the drop of PECM, petrochemicals, and energy spot prices, the latter affected by the sharp peso depreciation in December. Higher domestic Gas demand and lower net operating costs partially offset these effects. However, the VDA grew 70% quarter-on-quarter, mainly due to this recovery in gas and power demand. Notice that the Q4-23 VDA is also affected by Kimisa haircut because of December's transaction. CapEx in Q1 slowed down. being 36% lower year-on-year, mainly because of the strong shale gas activity, and PP4 was developed in 2023. Plus, in Q1, we carry out the last diversions of PP6, our last wind farm, which is estimated to be fully commissioned by October of this year. This was partially upset by the beginning of the pilot plan for shale oil in Rincon de Aranda. Moving on to the power generation as seen on slide four, we posted an adjusted BDA of $85 million in Q1, 22% lower year-on-year, mainly explained by the $17 million impairment of Canvesa's January 2024 invoice explained before. It is also impacted by the peso devaluation on the spot prices and Mario Cerreiro's divestment, partially upset by lower operating costs and the commissioning of 54 in June last year. Q4 dispatch increased 3% year-on-year. This is mainly due to Barragán's new CCGT, higher water levels at Mendoza Hydros, and PP4's contribution, partially upset by lower fuel and fire generation, and Lomas gas to ride number five that, after being out of service for six months, resumed dispatch on January. Take-or-pay capacity payment, especially from PPAs, explains most of our EBITDA in this segment. It is driven by availability. And in Q1, we reached 96%. This is higher than last year, 93%, because last year there was a lot of thermal outages. Let's do a quick review on PP6 expansion. The project's progress is 89% advanced, so it's pretty advanced. We mounted the eighth wind turbine on Monday, as seen on the installation status report that you see here. Meanwhile, the tower components keep arriving at the site. The four power transformers have already been commissioned, tested, and cleared by CAMESA and TransCener, but they are still awaiting for China's approval. Finally, to avoid power transmission curtailments, we connected the wind farm to a new 500 kV power high voltage grid the first three points line protection system in already is a rail line and the second has begun to process for commission the estimated full cod will be in october of this year pp6 energy will be sold under b2b dpas in matter Moving on to EMP, I wanted to quickly comment on the gas deliveries, which recovered after Q4 soft demand, thanks to the late summer bloom. As you can see here, domestic sales are way above take or pay, although exports to Chile are still struggling, but better off than what last Q4. The winter season began this May, and we are hitting peak production soon. Commenting on the segment's performance on slide seven, our EMP business posted an adjusted VBA of $70 million in Q1. This is 14% higher year on year. This increase was driven by higher domestic gas demand unlocked by the commissioning of this new pipeline and the hot weather, lower gas exports, which I mentioned before, and the crude oil sales that were lower offset these variations. In Q1, our total production averaged above 73,000 barrels of oil equivalent per day. This is 27% higher than last year. Summing in crude oil represented 6% of our EMP output, but 16% of the segment's revenue. Gas keeps taking the lead, representing 94% of the total production. Higher maintenance, treatment, and transportation costs in Mangrush and Sierra Chata, due to the increased activity, explain that our total lifting costs likely grew by 4% year on year. Still, this is very important, the rising output mostly possibly impact on the lifting cost per BOE, which decreased 19% year-on-year, recording $5.8 per BOE. Also this quarter, we started activities in Rincón de Aranda, which yielded promising results. We completed one DUC well targeted in Vaca Muerta with initial production of over 1,300 barrels and currently producing practically at the same rate. Once the well testing is done and duplicated partially commissioned, that is due this year, a stage of it, we plan to resume production in the well tithing back in 2018. Focusing on gas, our production in Q1 increased by 31% year-on-year and 32% quarter-on-quarter, arranging almost 12 million cubic meters per day, again, because of the local demand. 64% of the quarter's production came from El Mangrucho and 20% from Sierra Chata, both our flagship shale gas fields. Regarding the campaign, We drilled one well and completed another free shale gas wells in Sierra Chata. The productivity was outstanding, so we almost doubled our gas production there. On the other hand, in El Mangrucho, we experienced a 29% increase compared to last year without new drill or tidying wells. In non-operated areas, Rio Neuquén tied in five wells this quarter, maintaining production levels. The average gas price for the quarter stood at $3.2 per million BTU. This is 18% down due to lower exports in volume and price to Chile, as we explained before. We can see right below, the higher deliveries of local gas were destined for thermal power generation. The petrochemicals business posted $11 million ABTA in Q1. This is a 58% growth year on year, mainly because of the higher sales in the reformer and lower costs because of VFX, upset by sub-domestic sales due to the economic activity and lower international prices. Quarter or quarter, the EBITDA decreased by 45%. This is mainly because the export dollar income was lower. The reformer led the output mostly, upset by the reduced demand for ceramics. Well, in Q1, moving to cashflow, we recorded a free cashflow flow of $187 million. Besides the $17 million haircut on Camesa's January invoice that impacted the EBTA, this outflow is purely explained by the sharp increase in working capital due to the payment delays from Camesa, which rose from 73 to 89 days in the quarter. Now it is over 120 days if all the free-due bills are paid today. May 10 is the due March invoice, so the debt will pile four bills if nothing changes. The higher working capital is upset by lower debt service, mainly due to the reduced peso stock, debt stock. However, we took advantage of the local market conditions and issue new debt to recover the increased working capital. Also, it is worth highlighting that we collected $45 million in dividends from OCP, Co-Control Oil Pipeline Company. This is the second largest and only private pipeline in Ecuador. In summary, we increased $11 million of net cash in the quarter despite the high working capital, achieving an $845 million cash position. by the end of March. Moving to the slide 12, we show our consolidated financial position, including our affiliates at ownership, but let's just focus on the restricted group that reflects the bottom of the perimeter. We posted a gross debt of almost $1.6 billion. This is 6% lower year on year and 10% growth in cash. we kept diversifying the currency and source of our debt. And as a result, 75% of the gross debt is in US dollars. The net debt recorded $718 million. It's 21% lower year on year and 1.1 times leverage. The average life was 2.8 years until 2027. We do not face any relevant death maturities. So this concludes our presentation. Now I'll turn the word to Raquel. She will call for the questions. Thank you very much.

Thank you very much, Lida. The floor is now open for questions. If you have a question, please send us through Zoom chat. We will read and answer them in order with you. Also, please make sure your name and company are correctly displayed to introduce you to the audience. Should any participants need assistance, send us a chat message or raise your hand. Please hold while we pause for questions. So the first question comes from Anne Milne from Bank of America. The first question is, how do you see the evolution of the power generator sector on such things as spot energy pricing and price adjustments, construction on future generation facilities, future PPA contracts, And what are the implications for the profitability of Argentine generators?