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 Energías Third Quarter 2024. We would like to 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 only be submitted in writing through Zoom. Should any participants 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 Pampanergia'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.

Hello. Thank you, Raquel. Hello, everyone, and thank you for joining our conference call. I will make a quick summary of Q3. You might find more details in our earnings release and financial statements. Today, we are having our Q&A with our CEO, Gustavo Mariani, our CFO, Mr. Nicolás Lindin, and Horacio Turri, our head of EMP. Let's start with the quarter of three years marked by the solid performance from gas upstream and power generation, which helped to overcome the winter peak. This is the year's most critical period. Gas production increased 8% year on year with a growing contribution from Shell. Our CCGTs achieve high-low factors supported by strong gas and capacity availability. Our balance sheet remains solid with extended maturities and improved liquidity, bringing net debt to its lowest level since 2016 when we acquired Petrobras Argentina. The adjusted VDA amounted to $279 million, up 14% from last year, driven by increased gas deliveries through the new pipeline, under planned gas, higher spot prices, and excellent dispatch and availability performance in our power generation segment. Tariff increases also boosted contributions from PGS and Transener, lower gas exports, Power and gas B2B sales and pet can margins partially offset these gains. The quarter-on-quarter decrease is explained by warmer September temperatures, gas pipeline curtailment, and higher operating costs. It is worth noting that 75% of the quarter's EVDA was dollar-linked. and EMP leading the share. Excluding most regulated types of businesses, the dollar share goes up to 85%. CapEx in Q3 is 59% lower year on year, mainly because of the shale gas ramp up and PP4 construction in 2023, partially upset by final payments for PP6 ongoing development in Rincon de Aranda. Moving on to power generation on slide four. We posted an EVDA of $112 million in Q3. This is a 23% increase year-on-year, mainly explained by the operating performance and higher legacy prices, partially upset by lower industrial demand, increased operating expenses, and the divestment of Mario Cebreiro. Q3 dispatch rose 19% year-on-year, driven by our CCGTs at Genelva, Barragán, and Loma, supported by greater gas and power availability. Lower water levels at Pichipicún del Fú, Hydro, and the divestment of Mario Cebrero partially upset the decrease. Take or pay capacity payment, especially from PPAs, contributes most of the EVDA. It is driven by capacity availability. And in Q3, we reached 96% up from 94% last year, helped by fewer thermal outages. A quick review on PP6 expansion. The civil works were completed. All windmills are installed. since October, and the project now is 98% advanced. Between September and October, 50 MW were commissioned additional work commissioned by Camisa, reaching 130 MW operational out of the total planned 140 MW. We are now conducting the final tests and full COD is expected just next week or before the end of the month. The sixth energy will be sold under B2B PPAs in Matar. Moving on, slide seven, our EMP business posted an EBITDA of $122 million in Q3. This is 8% down year-on-year, largely due to higher operating costs related to Rincón de Aranda, reduced exports to Chile, and lower industrial sales due to the economic downturn. These factors were upset by increased gas production from the latest round of gas. The beginning of Rincón de Aranda pilot plan and increased gas treatment costs raised the total lifting costs by 16% year-on-year. However, lifting costs per VOE slightly rose to $6 per VOE. Higher output lowered the gas lifting costs by 2% to $0.80 per milliview. Total production averaged nearly 88,000 VOE per day, and 8% higher than last year, when we assumed mean crude oil represented only 6% of the output and 16% of the EMP revenue, while gas accounted for 90% of our production. Gas production in Q3 rose 3% year-on-year. As you can see here, the deliveries have been increasing throughout the year, thanks to the new gas pipeline and peak during the winter. However, bottlenecks due to the delays in the commissioning of compressor plants, warmer September and more significantly sub-demand from industries in Chile impact the volumes. Still, deliveries stay above take-or-pay levels during the winter. In Q4, demand is expected to ease with warmer weather. El Mangrucho contributed 57% of the quarter's production, and Sierra Chata provided a growing share of 29%. Sierra Chata's production grew 18% year-on-year and reached a new all-time high record of 5 million kilos per day in July without connecting or drilling any wells this quarter. Mangrucho experienced the same thing, no new wells tidying, and a 7% increase year-on-year. The Irish gas price for the quarter was $4.4 per million BTU, 6% down due to the lower exports to Chile and sales to industries partially upset by better retail prices due to tariff increases. As you can see right below, increased local gas deliveries were directed to retail and thermal power generation. On slide 10, Before we move on from EMP, let me briefly summarize what we presented during the investor day about Rincón de Aranda. Production is currently at 1,000 barrels per day. This is primarily crude, low water, low gas company. The development plan targets a production plateau of 45,000 barrels per day by 2027. This is aligned with the ongoing pipeline expansions. We are building facilities, securing evacuation capacity in Bacamorta Sur, and planning to drill seven paths annually for the next two years. This is why we procure four drilling rigs right now. We estimate to invest over $700 million in 2025, with a total of $1.5 billion in capex between 2025 and 2027. Quick note on petrochemicals. We posted $2 million on EBDA in the Q3. This is an 88% drop year-on-year due to higher costs and peak demand due to the economic downturn, partially upset by higher volumes and prices of reforming products. Though the spread to official effects shrink, the export dollar helped that tend to stay afloat this quarter. Okay, so moving to the slide 12, we show restricted group figures that reflect the bond parameter. In Q3, free cash flow reached $80 million, supported by improved working capital with days of sales outstanding at 48 days, just six days delayed, besides the robust operating cash flow. Last year's CapEx was shale gas ramp-up. This year's spending, capital spending, was mainly maintenance at $74 million. In September, we issued a $410 million international bond, maturing in 2031, and to improve the debt profile, partially redeeming at par the 2027 notes. Overall, this resulted in a net cash increase of $272 million, raising our cash position to $1.2 billion by the end of September. This is a 23% increase compared to last year, September, and $150 million more compared to June of this year. This slide shows our consolidated financial position, including our affiliates and the ownership, but let's keep it on restricted group figures. On top of the 1.2 billion cash that we described before, we posted a gross debt of $1.7 billion, up 5% year-on-year and 93% in dollars. However, the net debt recorded $539 million, down 20% year-on-year, and 0.8 times to the last 12 months of BDA, the lowest ratio and amount in the last eight years. So this concludes our presentation. Now I will turn the word to Raquel. She will pose for questions. Thank you so much.

Thank you so much, Leal. 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 received. Also, please make sure your name and company are correctly displayed to introduce you to the audience. Should any participants need assistance, please send us a chat message or raise your hand. So to begin, first question comes from Bruno Montanari for Morgan Stanley. First question he asked is, can you talk about the initial performance of Rincón de Aranda and how should we think about the path of drilling in the coming quarters through the end of 2025? Good morning.

Bruno and all the audience. Regarding Rincón de Aranda, as Lida mentioned before, we have two rigs actually working, two high-spec rigs plus one spadder. And our forecast is to drill from today to the end of 2025, seven pads of four wells each. So we will be drilling around 28 wells. wells in the period November 24, December 25. In terms of our forecasted production, we are expecting to hit 12,000 barrels by April-May 2025 and 18,000 barrels by September of 2025.

Thank you, Horacio. Next question is for you too, I think. Regarding evacuation capacity, can you remind us of Pampa's and Argentina's gas evacuation capacity today and how that should evolve into 2025 and after? And how about oil? How are the discussions related to how we would state for oil evacuation in Bagamorta Sur evolving?

Hi, Bruno, Gustavo. First of all, I want to thank Horacio who's coming right from the airport. He's not our millennial EMP director, but he's been very kind to rush from the airport to the office to take the call. Regarding evacuation capacity, producers don't own evacuation capacity for natural gas. So the ones who owns the transportation capacity are either the distribution companies or the industries. if your question relates to the situation of the gas evacuation capacity of the Neuquena Basin, this year, early in the winter, one of the compression plants of the Gasoducto Néstor Kirchner became online, though increasing its capacity from 11 to 16 million cubic meters of natural gas per day. And the second plant, I think, is supposed to be online anytime soon, despite the fact that during the summer it's not needed. It will be needed and used next winter, and it will be for sure ready by then. By that moment, the evacuation capacity of the Nestor Kitchener will be a total of 21 million cubic meters per day. And the situation will not improve until a new infrastructure project is online. So the other change that happened this year was with the inauguration of the project, the reversion of the north pipeline. So now the pipeline that used to bring gas from Bolivia and the north of Argentina to the center of Argentina is reversed and the Neuquina Basin can supply to the north and eventually export gas to the north of Chile and to Brazil. But just to keep in mind, that is not additional um production from the neuquina basin is gas that used to go to the littoral to the east of argentina and now it's able to to go to to the north um relating uh oil um we as uh would mention i think uh i recall correctly in the previous call, we are part of the consortium that has been formed for the project Vaca Muerta Sur for several weeks or more than weeks. There are currently daily meetings to discuss the documents. We are very optimistic that this project, that we will finish the documentation and we will sign the final agreement among the different players of the industry, probably by month end, and that the project will be launched before year end.

Thank you, Gustavo. Third question from Bruno. is regarding Argentina's LNG project. How have discussions about LNG projects evolved? Is Pampa still interested in being directly involved? And if so, in which portions of the projects would the company be more interested in? The floating units, the land facilities, or perhaps only the infrastructure part?

Definitely, we are very interested in the LNG projects that are being discussed currently in the country. Our interest is basically because we want to monetize our very competitive dry gas reserves that we have in Sierra Chata, and we see the export of natural gas through through an LNG facility is the only way to do so in a significant number in the long term. We believe floating units make more sense than the land facilities, basically because of the fact that given capital restrictions and high cost of capital for Argentina, It makes more sense to hire or to rent the facilities than having to own it and build them and own them. But so far we are giving priority to all evacuation. So today we are focused on the Vaca Muerta Sur. That's our priority. And the LNG project can come once we have... Once Vaca Muerta Azul is on the way.

Thank you, Hugo. Next question comes from Alejandro de Michelis from Jefferies. It's regarding Exxon's process. How do you see the situation of the Sierra Chata block and a potential change in the partner there?

Thank you.

Hello, good morning. So we do not have information about the process relating to this asset. I think in the only official statement from Edson did not specify whether this asset was included in the package or not. So that's the only information we have. But the important thing about this is that we are the operators of the area and we will continue to operate the area in the same way. So our plans are not changing because of the results of this process.

Thank you, Nico. Next question comes from Marina Mertens from Latin Securities. First one is regarding energy base or spot energy prices. The latest increases granted to the energy base scheme outpass devaluation, improving legacy asset remuneration. Do you expect this trend to continue?

Hi, Marina. Yes, we expect this trend to continue as the remuneration of the legacy assets are despite the improvement, are still at very low levels. So, yes, we do expect this trend to continue. On the marginal, not something huge, but similar to what has happened in the past few months, that the increases were a few points above the average inflation. And we expect this trend to continue until... The deregulation that we expect to be announced at some point next year is finally published.

Thank you, Hugo. The second question from Marina says, there has been news about a potential urea plant in Vallablanca. Given Pampa's focus on developing Rincón de Aranda in the coming years, can we expect a start date or a go or non-go decision on the urea project?

Yes.

You are totally right that today's focus for Pampa is definitely Rincón de Aranda, which is a major challenge and a significant capital deployment. Having said that, as we mentioned a few times, despite its size and given the free cash flow generation of the other two segments of Pampa, gas production and power generation, we don't expect a significant impact on our ratios, on our net indebtedness because of the development of Rincón de Aranda. So Pampa having the... that profile that we have and the cash position that we have, we feel totally comfortable to move ahead with a project the size of the urea project once we are convinced that it makes sense. when we will be convinced or when we will know if it makes sense or not it will not be before one year from now in the next six months we will be the team will be working in designing and preparing the documentation so that we can request from the epc providers the the turn the the price for a turnkey project to build the urea project we don't expect to receive that the soonest will be around one year from now because we need to to prepare the documentation that will take us now we hope to be ready by at some point in the first quarter of next year. And then the EPC providers will require like another six months to prepare their bid. So the go, no-go decision will happen probably at some point in the second half of next year.

Thank you, August. Next questions come from Daniel Guardiola from BTG. First one was about a Sierra Chata situation, but we already answered that. So second question is about Oléval. He asks for an update on the entry date for the doubling capacity and how many barrels of capacity are guaranteed in this pipeline. Considering there will likely be spare capacity, how many barrels do you expect to transport by doubling in 2025? All right.

The Oldelbal Duplicar project is expected to come online by April of 2025. We have already secured 6,000 barrels in this first stage of Oldelbal. And on top of that, We already have agreements with other producers in order to make use of their idle capacity for an additional 6,000 barrels. So we will be then in a position to have by April of next year, 2,000 barrels of evacuation capacity, which will match our production forecast. On top of that, we have enough treatment facilities by September of 25 in order to produce 18,000 barrels, which we expect to be in a position to make use of idle capacity of other producers in the original Oil del Val duplicate project and move those additional 6,000 barrels through that pipeline. At the same time, we are working with Olderval still in the first steps of what might be an additional increase in their total transportation capacity that adds up to approximately 120,000 additional barrels, out of which we will be in a position to eventually contract 12,000 barrels additional capacity.

Thank you, Horacio. Next question from Daniel was about Rinconderana's plans, but we already answered that. So the fourth question is about power generation. What would be the impact in Pampa's units if Pampa decides to adhere to the Secretariat of Energy Plans? And we would like to know if this plan would involve additional CAPEX commitments. Have you considered increasing the company's footprint with new generation plans? what is the current state of Argentina's energy matrix and when do you foresee an energy shortage?

Okay, regarding the impact on EVDA of this crisis, this incentive that the government has published a few weeks ago, we estimate that it's an impact of around $10 million per year. And regarding CapEx, obviously, it requires in all of the equipment some additional CapEx that we're still working on. We haven't replied yet the request from the Secretary of Energy, so this is a work in progress. But yes, it requires additional capex in terms of EVDH around $10 million per year. Regarding increasing our footprint in power generation, it's a possibility, but today we've been doing so on on renewables and we are, as Lida explained, we are about to complete our sixth wind farm with 140 megawatts of capacity. In terms of thermal generation, we presented last year a proposal for a 300 megawatt thermal plant in Genelva. but that was for the auction that was finally, this administration decided to cancel or postpone. And today, given the regulatory environment, In terms of thermal generation, there is no possibility to increase because the deregulation has not happened yet. And you also ask about the situation of the energy matrix or the energy generation. I think Argentina has enough capacity in place to supply the system most of the time. There are a few weeks during the year, so there are probably six weeks a year with very extreme weather conditions. Those could happen in summer in Argentina. They could happen either in December or in February or March. January, because of the holidays, usually there is no problem. But in those months, in the weeks with prolonged, very extreme weather, the requirements of the system might put the system to a limit. As long as we are able to import, as we have been importing electricity from Brazil mainly and from Uruguay, we should be okay. unless something unexpected happened. And during winter is the same situation with a little bit less stress. So there are a few weeks a year with a stressful situation and that needs to be addressed. Other than that, the system is okay for its current requirement.

Thank you, Robos. Next question from Daniel says, could you give us an update on the gas transportation and transmission tariff schemes?

Basically, TJ has already requested to extend the date. Right now, it's no longer RTI. The name is RQI, right? King Kenya, like for the next five, it's RQI. And basically they're requesting to extend the due date of December 31st to more because that, uh, the processes of the delay behind against the electricity utilities, electricity utilities. However, they did have a schedule, uh, probably hearing for transcendent on November 4th. And it was, uh, It was postponed with no date. And we are expecting a new date. I am talking about. And then TGS. What we've been doing lately. Actually it's focusing on extending the license. And actually. I think last week we had. That's what the other week. We had the. Two weeks ago, right? Yeah, the license extension probably hearing that this that was a very key part of the process to get the license extended. So, but the processes are pretty good. The idea is to have the RQIs or RTI sooner than later.

Thank you, Liz. Last question from Daniel is about Camensa. What is the current status of Pampas and its subsidiaries receivables with Camensa? And in what time frame are the invoices being paid?

They're basically paid on time, as has been the case since early this year. We are paid, last six months, we have been paid with three or four days of delay. So right on time, both from Camesa and from Enarza.

Thank you. Next questions come from Ignacio Snikowski from Invertir en Bolsa. First one says, do you see any chance of renewing Mendoza's Hydros concessions?

The government has not yet decided what to do with those concessions, although we believe that the intention of the government is that they will remain on private hands or operated by private operators. So... So... Once they decide how they move forward, we will be able to give you a more straight answer. Definitely, we do have interest in hydroconcessions. It could be the Mendoza's or it could be any other hydroconcession in the country because if they are auctioned again by the government, it could be... all of the concessions will be for an opportunity, a potential opportunity.

Thank you, Os. Next question from Ignacio. It's about a Vaca Muerta Sur project. So we already answered that. And the last one, it's about OCP Ecuador. What are the negotiations or extension plans for the concession of Osepec Wallon?

So, finally, we've been informed that the government has decided that the asset should be returned to the state at the end of the concession on November the 30th. We plan to launch a new bidding process later on. So now we are collaborating with them and following all the contractual steps needed for the return of the asset to the government in this initial phase that they are proposing.

Thank you, Nico. Next question comes from Gustavo Faria from Bank of America. First one is about Rincón de Aranda, so we already answered that. And the second one is regarding the reversal of the northern gas pipeline. How do you see the upsides from gas from local market and exports to Brazil in terms of production and pricing? And what are the pending developments to increase the gas exports from Argentina.

OK. Regarding the opportunities of exporting gas to Brazil, We've been developing contacts with Brazilian traders. The issue here is what's going to be the final transportation tariff to go from Neuquén to eventually the end consumer in Brazil. That's going to be basically the big question mark on whether the Argentinian gas is going to be competitive in Brazil or not. But luckily, we do have an alternative for the gas flowing through the northern pipeline, which is the Chilean generation market in the mining sector of Chile, in the north of Chile. So it would be a competition of these two markets for the Argentinian gas flowing north, which accounts approximately from 4 to 5 million cubic meters per day. So in a nutshell, we do have two markets, one which is the Chilean market, which seems pretty anxious to get some of the Argentinian gas, as well as the Brazilian, with the, in this case, a question mark of how competitive the overall transportation tariff is going to be.

Thank you, Horacio. Next question comes from Raul Sin. Can you please provide guidance related to gas production for 2025 and onwards? Yes.

We are forecasting to end 2024 with a production of on average of around 13 million cubic meters per day reaching peaks of around 16 million cubic meters per day. Next year we see the average production of Pampa increasing a little bit to 13.1, 13.2 million cubic meters per day and reaching peaks of around 14.3, 14.5 million cubic meters a day, including exports to Chile. So that's more or less the answer to the question.

Thank you, Horacio. Next question comes from Florencia Mayorga from MetLife. After refinancing 27 and leverage at 0.8 times, which are the next steps for the group?

So hello, Florencia. So after the refinancing of the 27th, I think it was a very good deal for the company and the country issuing debt with the minimum coupon for an Argentine company in the last five years. We are very comfortable with our level of indebtedness and our debt profile considering all of the projects that the company has in the pipeline nowadays. So we do not see a necessity to go to the markets in the short term, although we do not rule out taking action in the coming month to extend the maturity of the remaining 27 if we see a very favorable window in the markets.

Thank you, Nico. Next question comes from Matias Casaruzzi from AdCap. First one says, with the proposed government reforms allowing free contracting in the term market, how does Pampa plan to position itself competitively?

Thank you for the question.

Our competitiveness, we are very optimistic. We are eager for this regulation to happen because we believe Pampa has many strengths to manage itself in a free market. For two big reasons. One is because Pampa is an integrated company, so the flexibility of being able to So the fact that we produce the gas that our thermal plants will burn give us a significant competitive advantage. The second is related to our portfolio of power generation plants. And not only we have several combined cycles, extremely efficient in terms of thermal efficiency, but they are also well located in terms that the cost of gas transportation because they are located at wellhead is insignificant or inexistent and that give us a competitive advantage vis-a-vis other power generation plants that need a They need expensive transportation capacity and even they need a new infrastructure to be built. So the third thing is that we have a very seasoned team with a lot of expertise. Our commercial team for... Empower Generation is well-trained with a lot of expertise. We are one of the biggest players on the matter. So we are very comfortable to face that expected new environment.

Thank you, Hugo. Next question from Matias is regarding hydroconcessions. So we already answered this. Now, Sebastian Lacunza is asking regarding LNG projects, which we already answered. And the next question says, is Pampa seeking to sell legacy plants in Tucuman?

So, first of all, we don't have power plants in Tucuman. Secondly, we are not seeking buyer for any of our power generation assets.

Thank you, Juanico. I don't know if we have more questions. There's one from

from Mattia Cataruzzi, I think it's a follow-up, says, how much upside can you have from the deregulation of the segments of ETA in the following years? I guess he's talking about power, right?

Yeah, but that's too soon to tell. Let us read the new regulation and do the math and, yeah, I'll come back to you, but...

we don't know what is it going to look like yet so we don't have any more questions thank you everyone for your questions and now I will turn to Lida to final remarks

I know. Horacio, thank you so much for speeding up to get here. Nico, I don't know if you have any remarks that you wanted to add. I think we covered it all pretty well, right? The next call is next year, so we don't see you all until the next year. Beforehand, if you have any questions or doubts or if there's any and answer questions, just let us know. Contact us, investor.pampa.com. We're always happy to help you. I bid you a good day. Bye.