Transportadora de Gas del Sur SA TGS

Hello, good morning everyone. I'm Carlos Almodovar, Head of Investor Relations. I would like to welcome everyone to PCS Transporter 2026. I'm in the conference. PCS issue is already released yesterday. You will be able to receive a copy of the lead. Please contact us at inversores.pcs.com. 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 remarks, we will host a Q&A session. All questions will need to be submitted in writing to 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 These statements are subject to a number of risks and uncertainties. All figures, including herein, were prepared in accordance with international banking standard, IFRS, and are stating in constant Argentan pesos as of March 31st, 2006, unless otherwise noted. Joining us today from the city of Buenos Aires is Alejandro Basso, Chief Financial Officer. I will now turn the videoconference over to Mr. Basso. Alejandro, please begin.

Thank you Carlos, good morning everyone, and thank you for joining us today to discuss TGS's 26 first quarter earnings and highlights. To begin today's call, I'd like to share some of the most recent corporate developments. In terms of the natural gas transportation expansion, which is currently under construction, and following the open season launch last February, We have received bids for incremental firm transportation capacity to be fully repaid for a total capacity of more than 30 million of kWh per day. Of the total, almost 5 million kWh per day were awarded, and we will collect prepayments amounting to $400 million prior to the commissioning of the expansion, which is scheduled for May 27th. Bits for the 9 million cubic meters per day remaining capacity, which will be paid on a monthly basis, will be received and allocated next month. It is relevant to mention that the energy security, through resolution number 66 of the year 26, has established the reconfiguration of Argentina's natural gas transportation system, with the purpose to adapt the contracted capacity system to the current natural gas production, which is mostly concentrated in the Vaca Muerta formation. This reconfiguration will imply that TCS will lose some transportation capacity contracted from the southmost of the country, which will be offset by additional new transportation capacity contracted from Vaca Muerta. As a result, this reconfiguration, that has been effective since this month, will have a neutral impact on our revenues. Moving to slide 4, I will briefly highlight the key financial results for the first quarter of 26. Please, keep in mind that all figures presented for this quarter and comparisons made with the previous quarter are expressed in constant Argentine pesos as of March 31st, 26, following the provisions established by the AFER-RS for financial reporting in hyperinflationary economies. As seen in the slide, we reported a total net income of $160 billion during the first quarter of 26 compared to $142.3 billion reported in the sixth quarter of 25. Overall, EBITDAs across all our business segments increased for a total of around $66 billion which was partially offset by a 9.2 billion lower financial results. Moving on to slide 5, EBITDA for natural gas transportation business in the first quarter of 26 totaled 139.9 billion, which is higher than the almost 129 billion recorded in the first quarter of 25. It is worth noting that even with the revenues increasing by $36.7 billion following the monthly tariff adjustment, they were not enough to offset the inflation loss effect of $48.5 billion. However, more transportation services mainly interrupted with transportation amounting to $3.2 billion together with the $10 billion extraordinary negative result resistor in the first quarter of 25 related to the climate event and 10 billion less in property plan and equipment maintenance expenses contributed to generate an increase in EBITDA in the first quarter. On slide 6 you can see how EBITDA for the liquids segment increased to 96.7 billion during the first quarter of 26 compared to the low 63.8 billion reported in the same quarter of 25. The increase in EBITDA was mainly attributed to higher volume sales, increasing from 210,000 metric tons to 323,000 metric tons, as was mainly explained by the processing plant shutdown for more than a month caused by the flooding suffered on March 7, 2025. Higher volumes sales generated a higher EBITDA of $36.2 billion. In addition, we collected almost $12 billion in a partial expense reimbursement from the insurance company, and recorded $4.9 billion extraordinary expense resisted in the first quarter of 2025 related to the climate event, which also explained the EBITDA increase. Furthermore, the 70% unexpected increase in the average natural gas price in March 26, due to the war in Iran, also contributed with an additional 4.3 billion in EBITDA. However, lower LPG reference international prices partially offset the above-mentioned positive effects in 18.7 billion, along 5.8 billion of higher operating expenses. It is worth noting that the average natural gas price, which is the main variable cost for the liquid business segment, remained stable below the $2 per million of BTU in both quarters. Turning to slide 7, EBITDA from Midstream and other services rose by 46%. to 69.8 billion compared to 47.7 billion in the first quarter of 25. This increase was mainly driven by higher sales derived from the incremental built volume of natural gas transported and conditioned in Vaca Muerta totaling almost 17 billion. Transported natural gas built volume rose from an average of 28.3 million cubic meters per day in the first quarter of 2025 to 30.1 million cubic meters per day during this quarter. The natural gas conditioning volume also increased, from an average of 21 to 27.7 million cubic meters per day, as a result of the commissioning of the last new conditioning module in February of 2025. In addition, operating expenses decreased by 4.4 billion and the positive monetary effect result increased EBITDA by 1.5 billion. As seen on slide 8, we recorded a negative variation in the financial results amounting to 9.2 billion. This was mainly due to a $36.1 billion decrease in income from financial assets given the lower yields achieved in domestic and financial investments, $15.1 billion higher interest costs mainly attributed to the $500 million bond issued in November 2025, and inflation exposure loss increased by $10.6 billion. These negative effects were partially observed by the 54 billion positive variation of foreign exchange results, as the Argentine peso appreciated in the first quarter of 26 compared to a deep valuation occurred in the same period of 25. Finally, turning to the cash flow on slide 9, our cash position in real terms decreased by $173 billion in real terms during the first quarter of 26 to $1,806 billion equivalent to approximately $1.3 billion at the official exchange rate. EBITDA generation in the first quarter reached 306.5 billion, with 54% generated by non-regulated business, even after considering the fuel normalization of the natural gas transportation segment. This result highlights the increased relevance of the non-regulated activities within the company's overall results. Capets reached 143.4 billion for the period, while working capital rose by 35.5 billion. We also paid 35.3 billion in interest and 42 billion in income taxes, and we reduced our debt by 52 billion. Lastly, real returns from financial investments declined by 171 billion, mainly due to the 5% exchange rate decrease, while the Argentine peso inflation was 9.4% during the first quarter. This concludes our presentation. I will now turn it over to Carlos, who will open the floor for questions. Thank you.

Thank you.

The floor is now open for questions. If you have questions, please send them through our Zoom chat. We will read it 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. To any participant who needs assistance, please send us a message in the chat box. Please follow while we follow for the questions. Thank you. Well, the first question is from George Gastow, from Latin Security. Hi George. The question is, if the strong reside in the first two, in the transportation, the discernment held high by any cost reduction versus 44025, or it's just a peso appreciation.

Hi, George. The reductions in cost, mainly in the transportation business in the first quarter, were one-time expenses that we have there related to internal inspection of our pipelines. Yes.

The next question is from Matheus Toast from Citi. Hi Matheus. The question is about the NCLS project. How near we are from signing the agreement?

Hi Matheus. Well, we are working a lot with our counterparties in the NCLS project. I cannot give any assurance for the time, but it is going to be soon, maybe this month, hopefully.

Well, the second question is regarding our view for the liquid business data considering the new price scenario for this year.

Okay, it's difficult to share a sensitivity or a verdict. What I can say is that regarding the propane and butane prices, the correlation with the oil prices are not perfect, so obviously we are having an increase in these prices for our exports, but not at the same level of the oil prices. and it depends on offer and supply and demand in the States and in Europe, so it's difficult to advance, anticipate an exact sensitivity. Regarding natural gas prices, in this case the natural gas price that we export our product is quite correlated with oil prices.

and now to some questions from the new guardiola from btc um regarding uh from the fiv and the capex involved in projects what we expect from funding the balance in this project and the risk to mitigate some potential delays in the construction period and potential overruns.

Hi, Daniel. Well, regarding the FID, I already answered this. We expect at the end of this month. Total cap is expected to be around 3 billion. The funding structure, we are working in two sets of structures, one for the imports. that we are obliged to finance due to the requirements of around $500 million. We are well advanced in a couple of agreements with four banks regarding the import financing, and we also are working with a higher group of banks regarding a project finance structure. Regarding engineering risk, a mitigator of potential delays, I think that our projection and the suppliers, the EPCs, the different EPCs that we are selecting for this project are, in our opinion, they are very strong, solid companies. The same for the equipment. Potential cost of run, obviously we have some contingency there, the PCs are all lump sums, so we are very confident that we can finalize the project in time and under budget. Regarding the Perito Moreno expansion, it smoothly advances as it was planned.

well the next question from daniel was answered about the sensitivity of the of the our liquid our liquid prices regarding the current prices but we can say that the one that is more correlated to the brand is the natural gasoline in the case of the propane which has its own As we know that the gasoline price increased around 70%, 78%, meanwhile the propane chain increased by 30%, so that's a different evolution. The next question from Daniel is when we are expecting to collect the claims related to the flooding and the survey conference.

Well, as you know, we have already collected 10 million dollars. and we expected to collect the rest during this year, maybe in four months or three months, something like that. The liquidators have already finalized their work, so they have made a couple of questions that were answered, so we are optimistic regarding the collection of this claim during this year, maybe in the third quarter.

Another question from Daniel is what is our parents' spare capacity in the mid-term regarding pipeline and the provision plan.

Regarding the transportation gathering capacity, currently is utilized at 30%, 50% sorry. And regarding the capacity in the conditioning plant, well, I think that maybe we have a spare capacity of 5 to 10% depending on conditions of the natural gas quality and the contracts, obviously.

This question is from Juan Ignacio López by Juan. He was asking about the price dynamics in the US settlement. Another question from him is how our exposure to the foreign place environment is really, if we are pricing at export parity, how far we are from that benchmark?

Hi, Juan Ignacio. We price all our domestic products, propane and butane, at export parity. Except for the thing which is sold to Dow Chemical, to a subsidiary of Dow Chemical at a price that has a pass-through mechanism, not natural gas price, but plus a premium. So it's export parity. It has some delay with the international prices because the export parity for domestic products is established by the Secretary of Energy every month. But it's export parity. So the evolution should be related to the export prices.

The question from Andres is, in the year of unbalance by Andres, for you, the total tariff adjustment during the quarter preceding the monthly inflation, the monthly inflation are up days, the quarter the adjustment was around eight eight percent it was eight percent okay considering the the portion of the initial character attachment that we made last year Now we have Haivisa Belem from Modern Styling for our view. She wants to cut some color in the program. We can share some information about the steps in the coming month related to the CPM expansion, perhaps for the open season. But we mentioned in the call, Alejandro mentioned that in June, we will receive the remaining offers, bids for the remaining capacity of 9 million in the per day, so from the commercial point of view we will be closing soon. We are working, respecting the timetable with the plans and Another question from Luisa is regarding input cost for the NGL segment in the quarter regarding natural gas prices.

We already mentioned that natural prices were around $2 per million BTU in the first quarter.

some color regarding the carpets in the the expansion project if we can provide more color on the space if we can share is that up to last year we we made capex of around 160 million dollars and for this year we spent 500 million dollars remaining the beginning of this year of the commission

And also you have to consider that we have made advancements to suppliers, to EPCs that are included in the working capital evolution. So that's why you may have some below your expectations in this period. Mainly in the fourth quarter of 25 when we started out with the project. And we have not suffered any delay in the project, no refacing, nothing significant.

Hi, Matias. We are playing with all the timelines, the Perito Moreno. The CAPS target is going to change.

This is April 27th, not 26th.

Yes, it is April 27th. The question of ID, the answer.

Some questions from Alan Permanent, that we will answer.

Questions from Juan Goycoa, from DT Spiritist, all these questions we will answer.

um,

Another question from George Gaston, that is about the security, if we expect NISPM growth to flow over the next few portals? And what are the drivers of this enhancement before the CPU expansion comes around?

Well, regarding our missing growth, especially in Vaca Muerta, growth level for the next years should be obviously slower than we have in 25, 26, 24 due to the expansion, more than $300 million expansion. Nevertheless, we can run some of the bottlenecking in our plants, in our plant there in Vaca Muerta, to be able to process additional volumes, or to be able to increase the conditioning revenues and also the transportation revenues, the gathering revenues, but at a much lower level. It's going to be just the bottleneckings. For instance, we right now are building a new stabilization facility with a total investment of $37 million, which will help us to provide additional capacity for the conditioning plant. Because the Vaca Morta gas is getting richer every year, I would say. So we have to be able to condition in richer gas. Obviously, with the GPM expansion, we are going to have additional natural gas coming through our facilities. But I say that the existing capacity is enough to gather and transport all this, to gather and condition all this new gas.

Now we have a question from Augusto Sotobauman from ProCental Inversiones. Given Pampa's energy, I recently announced the Pampa-Curia project under the RIGI framework, which elaborates on whether TCS could potentially participate as a natural gas supply plant, natural gas transportation for the project. Similarly to the project details, considering the strategic relationship between Pampa and TCS.

Yeah, in the case that Pampa goes ahead with the Fertile Pampa project, TCS could provide additional transportation services to Pampa. It probably will require an additional expansion of the GPM pipeline, You know that under the bid that the Secretary of Energy Anne Narsa ran in 2005, there is up to 6 million cubic meters capacity of optional capacity expansion of the GPN. The option is TGS, obviously, and it will depend on the rates of return of the project, obviously.

the question regarding how high the prices of LPG are performing in the second quarter. What we see is that the natural gas price, the gasoline, the gasoline price is keeping high, around $900 per tonne. And the propane in the chain is around 400 and it keeps the same level as in March. What we can see perhaps in this quarter is the impact in the local prices, just for parity. Local prices because in March were not reflected because it is for parity considered the average prices of the last two months. So perhaps in the second quarter will be impacted. We will see higher revenue for the domestic health. Another question from George regarding the topics of CTN that we answered that will be made clear.

A question from Alan Feldman.

Why is the cost in BPCM more faster than revenue? What we can answer is that in revenues, as we explained in the, as Alejandro explained before at the beginning, in fact, the prices of the propane and the chain before the start of the war were very low. compared with the fourth quarter and the first quarter of 2025. So, in fact, when the world started, the LPG prices increased 30%. So, in total, as you can see in the presentation, the prices, the variation of the sales the revenue due to the price is changing the price is evolution went down okay so probably as we explained before the second quarter we can see a better performance okay yes Another question from Matias is that the last dividend payment was, this question is with the additional cash that we are generating from the liquid prices, we consider another dividend payment if prices remain at this level.

Regarding dividends, I cannot give any assurance because it's going to be a shareholder decision. Nevertheless, as we have all these significant projects ahead, I don't think that we are going to pay new dividends. Nevertheless, it's not my decision, obviously.

with the role of directional decision, the stakeholder decided to create the result for the multi-purpose uses. Well, I have no more questions. This concludes the question and answer section. Now I will turn to Alejandro for final remarks.