Transportadora de Gas del Sur SA TGS

I'm Carlos Almagro, head of investor relations. I would like to welcome everyone to TCS third quarter 2025 earnings video conference. TCS issued its earnings release yesterday. If you didn't receive a copy of the release, please contact us at inversores at tcs.com.ar. Before we begin the call, I would like to inform you that this event is being recorded and all participants are in listen-only mode. Following the company's remarks, we will host a Q&A session. All questions will need to be submitted in writing through the Q&A chat box. I would also like to remind you that forward-looking statements made during today's video conference do not account for future economic circumstances industry conditions or company performance, and financial results. These statements are subject to a number of risks and uncertainties. All figures, included herein, were prepared in accordance with the International Accounting Report standard and IFRS, and are stated in Consonants and Pesos as of September 30, 2025. unless otherwise noted. Joining us today from DGS in Buenos Aires is Alejandro Basso, Chief Financial Officer. I will now turn the videoconference over to Mr. Basso. Alejandro, please begin.

Thank you Carlos.

Thank you Carlos for calling everyone and thank you for joining us today to discuss TGS's 2025 third quarter earnings and highlights. To begin the call today, I will start by sharing some of the most recent news about the company. As you remember, back in June 24, a private initiative was admitted to the government to expand the transportation capacity of the Perito Moreno pipeline by 14 million of kilometers per day. As a result, Enarsa launched a tender offer in May. By the closing of the tender on July 28, only TGS had presented a bid. The project was finally awarded to TGS on October 17. The expected capital amount is $560 million and it involves the construction of three compressor plants as well as the expansion of the Tratagen compressor plant. totaling an additional 90,000 horsepower. By April 2027, we must commission the incremental capacity while operating and maintaining the Berito Moreno pipeline for a 15-year period. We are also entitled to commercialize the incremental capacity and collect a dollar denominated unregulated tariff during the period, after which the facilities will be reverted to Enarsa. Last week, we filed this project with the REI authorities in order to obtain the approval soon and get the tax benefits this regime provides. In addition to that project, TCS will invest another $220 million to expand the capacity by 12 km per day for its regulated pipelines between Saliquelo and Red Buenos Aires by adding 20 km of pipeline and increasing compression capacity by 15,000 hp in one of the compressor plants. Moving to slide 4, I will briefly highlight the key financial results for the third quarter of 2025. Please keep in mind that all figures presented for this quarter and comparisons made with the previous quarters are expressed in constant Argentine pesos as of September 30th, 25th, following the provisions established by the FRAs for financial reporting in hyperinflationary economies. As seen in the slide, we reported a total net income of 112 billion during the third quarter of 25 compared to 68.8 billion reported in the same quarter of 24. These higher earnings were mostly explained by the better performance of the liquids business, which contributed with the higher EBITDA of 37 billion, and the continuous EBITDA growth in the mainstream business segment, which rose by 14.5 billion. In the quarter, we also recorded lower negative financial results, amounting to 31 million, which boosted our third quarter earnings, but were partially offset by the natural gas transportation EBITDA decline of 10.5 billion. Moving on to slide 5, EBITDA for natural gas transportation business in the third quarter of 2025 totaled 101. and 2.4 billion, which is slightly below the almost 113 billion recorded in the third quarter of 24. The 10.5 billion EBITDA reduction in the regulated business segment was mainly due to that the tariff adjustment from August 24 to August 25, which resulted in a 29.2 billion revenues nominal increase, were insufficient to offset the inflation adjustment effect of 42.2 billion. In addition, operating expenses rose by 2.4 billion, while revenues also increased by 4 billion, mainly due to incremental interoperable transportation services provided in the third quarter of 25. On slide 6, you can see how EBITDA for the liquid segment tripled, amounting to 55.2 billion during the third quarter of 2025, compared to 18.2 billion reported in the same quarter of 2024. Most of the EBITDA increase was explained by the higher volume exported of 61,000 metric tons, rising from 43,000 to 104,000 metric tons. which contributed to a higher EBITDA by 18 billion. In addition, higher ethane volumes of 38,000 metric tons were sold, rising from 53,000 to 91,000 metric tons and adding 11.7 billion to the third quarter EBITDA of 25. This higher volume is mainly related to the higher production, which increased from 173,000 tonnes to 315,000 metric tonnes, as a result of the higher richness of the natural gas process in this quarter, and the three-week programmed plant shutdown for maintenance works implemented during the third quarter of 2014. In addition, EBITDA increased by 13.2 billion due to higher Boutin prices in the domestic market following the deregulation of the Boutin price under the program AUGAR starting January 25, which allowed us to sell at export parity price. To a lesser extent, operating expenses decreased by 5.4 billion and monetary effects were positive by 1.1 billion. The positive effects on EBITDA were partially offset by 8.9 billion Australian expenses incurred as a result of the March 7 flood, which we expect to recover from the insurance company in the coming months. Additionally, the natural gas price increased from 3.1 to 3.4 dollars per million of BTU, which impacted negatively EBITDA in 4.3 billion. Turning to slide 7, EBITDA from Midstream and other services rose to 61.2 billion compared to 46.7 billion in the sub-quarter of 24. This increase was mainly driven by higher sales derived from the incremental build volume of natural gas transported and conditioned in Vatamuerta, totaling almost 21 billion. Transported natural gas build volume rose from an average of 29 million cubic meters per day in the third quarter of 24 to 32 million cubic meters per day during this quarter. The natural gas condition in volume also increased from an average of 16 million cubic meters per day to 29 million cubic meters per day. In addition, the monetary effect increased a bit by 3.2 billion. These effects were partially offset by 10.4 billion in higher operating expenses. As seen on slide 8, we recorded a positive variation in the financial results amounting to $31.1 billion. This was mainly due to a $43.4 billion increase in income from financial assets given the much higher yields achieved in the domestic financial investments. Additionally, inflation exposure loss decreased by $10.7 billion. These positive effects were partially offset by a higher foreign exchange loss amounting to $21.8 billion during the third quarter of 2025, following the central bank's decision to make the US dollar exchange rate float, starting early April and the consequent depreciation of 15%, compared to the 16% rate in the same quarter of 2024 and under the previous regime of 2% monthly crawling PEC. Finally, turning to the cash flow on slide 9, our cash position in real terms increased by 22%, or 160 billion, during the third quarter of 25 to 875 billion, equivalent to approximately 638 million dollars at the official exchange rate. EBITDA generation during the third quarter amounted to almost 219 billion, of which 47% was generated by the regulated transportation business, and 53% by the non-regulated businesses. CAPETs for the period amounted to 87 billion. Working capital decreased by $46.4 billion and we paid interest amounting to $29 billion and income tax payment totaled $61 billion. In addition, we obtained short-term loans by $28.6 billion. We finally recorded higher yields from our financial investment by 53 billion in real terms, resulted mainly due to the higher increase of the foreign exchange rate over inflation of this quarter. This concludes our presentation. I will now turn it over to Carlos, who will open the floor for questions. Thank you.

Thank you, Vale. The floor is now open for questions. If you have questions, please send them through our Zoom chat. We will read and answer the questions in the order in which they are received. Please make sure to state your name and company so we can introduce you to the audience. Any participant need assistance, please send us a message in the chat box. Please hold while we poll for the questions. Thank you. Well, the first question is from Santiago from Alaria. Hello, Santiago. It's regarding the capex to be made in the expansion of the transportation system and the Perito Moreno and our final trenches. How is the breakdown of the deployment of the new $780 million? So this is the first question.

Hi Santiago, how are you doing? Well, regarding the deployment of the 780 million from the expansion project, for this year we have some advances to suppliers and some part of the works amounting up to 150 million dollars. Then for the following year, 26, we are expecting to spend 450, and the remaining 27, the first four or five months of 2017. The financing of the project, we already have almost 70 million bank loans to fund the imports, which is a regulatory requirement under RIGI, and we are currently considering other sources of financing for the remainder.

His second question is regarding the insurance claim status for the complete COSERI event. He can share what is the total expected recovery amount from the insurance and the timeline for collecting the payment.

Regarding the recovery amount, we are estimating that this amount could be more than $50 million. And the expectation for the collection may be $10 million this year and the remainder the following year. I don't know, maybe in the second quarter.

Okay.

We have a question from Mattia Cattaruzzi, by Mattias from APCA. A question regarding the strong recovery of the liquids in this quarter. We can comment on whether the current levels of production and margins are sustainable into fourth quarter of this year, and how we see prices in 2026.

Okay, well, regarding the level of production at CERRI this year, it's an extraordinary level, which was driven by the richness of the gas stream coming from Vaca Muerta. You know that that's non-conventional gas. is replacing the conventional and also the increase in oil production with associated rich gas, the level of the richness of the gas is higher. And I could say that this level of richness could be substantial for the next three years. Regarding the four quarter in special where it's a different time of the year. So, the gas production is lower in the fourth quarter as compared with the third quarter. So, the richness could be there, but the gas production should be lower. In spite of that fact, the gas stream coming in our plant is higher than the total capacity of the plant. It's going to be a sort of arbitration between these two variables. Regarding prices for 26, well, current level of international prices are lower than we used to have a couple of months ago, so maybe liquid prices could be lower than the average of this year, but you can know it's very hard to anticipate that. Okay.

Well, the next question is from Risa Belem. Hi, Risa. Well, her first question is regarding what you just explained regarding the liquid business in the future. And her second question is if we expect an acceleration in cash capex deployment until year end.

Yes, regarding our capets, our cash capets is going to be higher than previous levels as we have already started out with the private initiative project, okay, with the Perito Moreno expansion. As I previously mentioned, we are expecting to spend $150 million this year, mostly in the last quarter.

The next question is from Daniel Guardiola. Daniel, how are you? One of his first questions regarding the Trito Moreno pipeline that generally we provide all the explanation that we can share. His second question. If we are interested in participating in the project to build a brand new gas pipeline toward the south to provide gas to LNG facilities, CESA Southern Energy is planning to end by 2027, 2028.

Regarding the new gas pipeline, currently we are evaluating our participation in this project. I cannot anticipate any news on that by now.

This question is from George Castout. From Latin Securities, a good morning short. We are expecting to face a significant cash income taxes against again next quarter.

The high George, well, regarding income tax payments, the payments could be quite similar in the fourth quarter as compared with the third one, okay? the bulk of the income tax payment was paid in May this year and then you have advances that are quite similar from June to April next year or March next year so as compared fourth quarter with third quarter the payments should be in pesos quite similar

Next question from Daniel Guardiola. When do we expect to reach FID for the Tratacien facility in Likudse?

We are working very, very hard on the project. FID could be at the first quarter of next year, hopefully.

Next question is from Andres Semigliaro from Balance. Hi Andres. Well, his question was answered because it's regarding the Enshield project. That was answered. Another question from Agustin Pacheco. Hi Agustin. From Banco Marido. Well, his question is regarding the Enshield project. a it was a answer and but all both question are regarding the ancient project thank you so it was answered Another question, Matthew Tosted from Citi. Well, his question regarding the entry project, it was explained, it was answered. Perhaps an additional question from him is, How many companies engage with both of these from a balance sheet perspective of the participation on the project and shunning with partners or perhaps tapping equity markets?

Hi Mateus. Well, we are working on that. The idea is to have partners, especially in the part of the dikwits project that comprise of the transportation and functioning and dispatching facilities. Our idea is to go with partners in that part of the project and we are working on that. Tapping equity markets, I think that's not, we are not analyzing that at this moment. That's, okay.

Another question from Ezequiel Harari from ASCA. regarding the financing of the GPM project that Alejandro explained. Another one. Well, Patias from ACAP is acting on the same question regarding the financing of the Perito Moreno pipeline project he was playing. Another question from Matias, if we see further mystery segment synergy by 2027 with this increased transport capacity of the CPM?

Well, the answer is yes, with the additional volumes transported in the expansion of the CPM, Our business is going to benefit from that with higher volumes also. To the limit of the capacity of our pipeline, of our gas treatment facilities. In the pipeline we have plenty of space. In the gathering pipeline.

Then we have a question from Facun Pastor. He is asking about the challenge adjustment accumulated in the first nine months of 2025. The accumulation is 14.8% up to the adjustment we received in the beginning of September that impacted on the nine-month period. Another question from Guido from Alaria regarding the Perito Moreno de Iniciativa Privada project. We provide all the information that we can share. Thank you, Guido. We have another question from Valentino Garamotti from Criteria. And for your question, it's the same question regarding the financing of the Perico Moreno that we explained. Another question from Guido. Well, the FID project was answered. Well, for the time being, we have no other question.

No.

Well. Okay, this concludes the question and answer section. Now we will turn to Alejandro for final remarks.

Well, thank you all for participating in this year's third quarter 95 conference call. We look forward to speaking with you again when we release our 25th quarter results. If you have any questions in the meantime, please do not hesitate to contact our Investor Relations Department. Have a good day.