Transportadora de Gas del Sur SA TGS

I'm Carlos Almagro, Head of Investor Relations. I would like to welcome everyone to TGS Second Quarter 2026 Earnings Video Conference. TGS issue is earning release yesterday. If you didn't receive a copy of the release, please contact us at inversores at tgs.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. industrial 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 International Accounting Reporting Standards and are stated in constant Argentine textos as of June 30, 2026, unless otherwise noted. Joining us today from TGS in Buenos Aires is Alejandro Basso, Chief Financial Officer. I will now turn the video conference over to Mr. Basso.

Alejandro, please begin. Thank you, Carlos. Good morning, everyone, and thank you for joining us today to discuss TGS's 2026 second quarter earnings and highlights. To begin the call today, I'd like to share some of the most recent corporate developments. First of all, The most relevant news is the FID for the NCL project, announced a few weeks ago, with key commercial agreements representing more than 90% of the project's total capacity already executed as of today. This is a $3 billion CAPEX project and the construction is expected to take about a 45-month period, with the COD expected in March 2030. In addition, we have also requested that this project be approved under the RIGI. The project consists of a new gathering pipeline in Vaca Muerta, a processing plant to be built in Tratagem, and a 475 km polydute, a fracturing plant in Cervé and storage facilities in Portugal D.A. In terms of the natural gas transportation expansion, which is currently under construction and following the open-season launch last February, and after the allocation of 5,000,000 m2 per day under a fully prepaid basis in the first round, last June we received bids for over 100,000,000 m2 per day capacity in order to allocate the remainder capacity of 9,000,000 m2 per day. We submitted our capacity allocation to our regulators some weeks ago and are waiting for its approval. It is important to highlight that, last May, the Perico-Molero pipeline expansion was approved by the Ministry of Economy to be included in the Regie, which will result in tax benefits for the projects. Finally, in June, S&P upgraded the long-term local and foreign currency debt ratings from B- to B, following the revision for asset finance, transfer and convertibility risk assessment. Similarly, in July, Moody's upgraded rating of our notes from B2 to B1 as a consequence of the Argentina sovereign rating upgrade Moving to slide 4 I will briefly highlight the key financial results for the second quarter of 2019 Please keep in mind that all theories presented for this quarter and comparisons made with the previous quarter are expressed in constant and sentient pesos as of June 30th, 2026, following the provisions established by the FRS for the financial reporting in hyperinflationary economies. As seen in the slide, we reported a total net income of $133 billion during the second quarter of 2026. compared to 53.8 billion reported in the same quarter of 25. This relevant net income increase is mainly explained by the 60.2 billion positive variation in our financial results as well as the important liquids EBITDA growth of 48.4 billion and to a lesser extent the 12.3 billion increase related to the natural gas transportation EBITDA. Moving on to slide 5, EBITDA for natural gas automation business in second quarter of 26 totaled 132 billion, which is above the almost 120 billion recorded in the second quarter of 25. It is worth noting that tariff increases generated higher revenues by 50.2 billion, which was more than the 48.6 billion negative effect of inflation. In addition, two negative events in the second quarter of 25 also explained partially the higher EBITDA in the second quarter of 26 of 19.2 billion. The first event was related to a trade reasonable write-off of 11.2 billion and the second one was the climate event occurred in March of 95 which damaged some natural gas transportation assets and generated a positive rate deviation of 8 billion of 8 billion. Finally, the revenues generated by field transportation contracts decreased by 9.3 million following the Natural Gas Transportation System reconfiguration, which became effective starting as of May 26, whose initial negative effect will be partially observed by future small monthly tariff adjustments. On slide 6, you can see how EBITDA for the liquid segment increased to 82.3 BD during the second quarter of 26 compared to a low 33.9 BD reported in the same quarter of 25. The increase in EBITDA was mainly attributed to higher volume sales, which rose from 211,000 metric tons to 330,000 metric tons and was mainly explained by the low volume sales in the 25th quarter due to the processing tank shutdown caused by the flooding suffered on March 7, 2025. The plant started to operate by mid-April with low level of production and increased its production to reach normal levels in the beginning of May. the higher volume sales generated a higher EBITDA of $46.7 billion. Moreover, high international reference prices as a consequence of the geopolitical conflict in the Middle East raised the EBITDA by $23.2 billion. These positive effects were partially observed by the ETH take-or-pay annual compensation collected in the second quarter of 2025 of $8.5 billion. together with the negative monetary effect of 7.4 billion, the lower retained price which generated lower revenues of 5.8 billion and a higher average central gas price which increased to 3.4 dollars per million of BTU from 3.3 and generated higher costs by 2.5 billion. Turning to Slide 7, EBITDA from midstream and other services decreased slightly to 64.1 billion compared to 69.3 billion in the second quarter of 2025. Revenues generated by midstream services rendered in Vaca Muerta increased by 13.2 billion. transported natural gas billed volume flows from an average of 30 million cubic meters per day in the former quarter of 2025 to 35 million cubic meters per day during this quarter. The natural gas condition in volume also increased from an average of 27 to 30 million cubic meters per day. However, this higher revenue was more than offset by the negative monetary effect of 10.5 billion as inflation was higher than the foreign exchange rate increase along with higher operating expenses of 5.6 billion. As seen on slide 8, we recorded a positive variation in the financial results amounting to 60.2 billions. This was mainly due to $130.1 billion increase in income from financial assets given the higher yields recorded for the domestic financial investment and to a lesser extent to a higher level of financial investments. This positive effect was partially observed by a $46.7 billion higher foreign exchange loss $15.2 billion in higher interest fences, both of which are mainly attributed to the $500 million bond issued in November of 25, as well as the $7.6 billion higher inflation exposure loss. Finally, turning to the cash flow on slide 9, our cash position increased by $274 billion in real terms during the second quarter of 26, to $2,206 billion, equivalent to approximately $1.5 billion at the official exchange rate. The big bad generation in the second quarter was $278.4 billion, of which 53% was generated by non-regulated businesses, even after considering the full normalization of the natural gas transportation segment. These results highlight the increased relevance of the non-regulated activities within the company's overall design. Capes amounted to $155 billion, largely driven by investments in the pipeline expansion project. Working capital decreased by 186 billion, primarily due to the collection of the first prepayment installment of approximately 140 billion from customers that contracted 5 million qubits per day of incremental firm transportation capacity. We also paid 31.3 billion in income taxes and 30.8 billion in interest, and we incurred new debt amounting to 20.8 billion. This concludes our presentation and we now turn it over to Carlos who will open the floor for questions.

Thank you, Ale. 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 say your name and company so we can introduce you to the audience. Should any participants need assistance, please send us a message in the chat box. Please call while we poll for questions.

Thank you.

Well, first question is from Bruno Montagnari from Morgan Stanley. Hello, how are you Bruno? The first question is regarding the GPN expansion. How much capital is still left to secure in the coming quarters?

Hi Bruno, well as of June 30th and 26th we have already invested around 180 million dollars so we have 600 million dollars left for the remainder of quotas until May the 1st or until May next year.

The second question is regarding the new equity project. How should we think about the capital distributions over the years?

Well, we have for this year around 500 million dollars, 800 million dollars for 27, 1 billion in 28, and 600 millions in 29 approximately. Yes. And the reminder... The first quarter on 23rd.

The first question is regarding the financing of the project. already secured all the finance requirements?

We have signed agreements with banks for the import financing for around approximately $300 million for the first year and we are working with a group of banks for the financing of the remainder of the MGS MGS is the the second VPU with the total investment of $2 billion and we are working with this group of funds to finance 60% of the total investment of this $2 billion. The tenure of the import facilities, finance facilities is three years. First course is approximately 8.5% cooling.

Now we have a question from Matthew Stoss. Hi Matthew. His question is regarding the Transportation Segment Revenues or EBITDA, how the EBITDA on this second quarter, why it was weaker in dollar terms compared to the first two, even as we have a real gain in tariffs.

Hi, Mateus. As you may know, we have a reconfiguration, a regulation, a new regulation of the capacity in the whole transportation systems in Argentina as the natural gas currently is coming from the west, from Paca Muerta, from Leuquén, replacing the gas that used to come from the north, from the Bolivian Basin and from the northern basin and also from the south. so some contacts were transferred from one system to the other so TGS has an impact there because of the important position that we have in the southern contacts the transportation contacts coming from Tierra del Fuego so you are going to see this loss of volumes or lower volumes in the future Also, this reconfiguration has made more efficient the system, so lower IT services, interruptible services are rendered by TCS and TCL. At the same time, we have a compensation in tariffs, but the compensation in tariffs is calculated in the future, so you may see a small compensation for this weakness in the transportation revenues, but it's not significant.

The second question is regarding the liquid business, which are the strivers of higher cost versus the fresh fuel. Can you explain why Marshall and Evita were weaker despite good energy prices?

Well, that has to do with the cost of natural gas. In the winter season that starts on May every year, you have, you may see higher natural gas prices than obviously in the summer season the first few at the same time the cost of gas is higher than the previous year especially in the sports market that is compared with the same quarter of last year

Now we have a question from Charles Gastos, Contracting Securities. But the question that was answered in the first...

In the previous one.

In the previous one, regarding the transportation revenues compared with the FQ26. The second question is also, well, it was explained regarding the financing of the project that Alejandro explains specifically.

Then we have...

Well, now we have a question from Juan Ignacio Lopez. Hi, Juan. His first question is regarding the CAPEX deployment for the second half of 2026 regarding the CPM, the Eritrean Marino Pipeline, and the initial project.

Okay, regarding the Perito Moreno expansion, we are estimating for the remainder of this year around 400 million dollars and a similar amount, higher than that, a bit higher than that for the NCIS project for this year.

The second question is regarding the strong cash flow print supported Juan Ignacio, as I said in the call 5 million out of 14 kms per day or out of 12 kms per day from the

and for the transportation TCS transportation system or expansion were collated as prepaid they were they were repaid by the clients it's an option that we have in the other clients also have in the open season 40% of the total capacity may be offered and sold at the TGS under a prepaid scheme. So they prepaid the capacity for the 15-year contract, and so that's $100 million almost that we collected in the second quarter, which is the important federal impact in our working capital.

Now we have a question from Andres Sinigliaro from Bala. The same question that was answered before regarding the deployment of the $3 billion in these years. Now, another question is from George Astle. regarding the Pampa project, the Uria project, which will require an additional 3.5 million cubic meters per day of transportation capacity of Baja Muerta. We expect to exercise the Perito Moreno 6 million cubic meters per day additional expansion option to meet this demand.

Yes, George, we are analyzing the business opportunity to follow up to six million kilometers per day. It may be less than that, but it could happen.

Now we have a question from Melina Eina from EPA. The question is regarding the 3 billion cap tax, at what level do we expect the net debt to EBITDA ratio to peak during the investment phase and in which moment we think this will occur?

We obviously, Marina, we expect to increase our net debt to EBITDA ratio maybe in the year 29 or 28. We could be around three times or below three times. Obviously, much below the maximum. under our bond contracts that is 3.5

Now we have a question from Alvaro Leyva from BTG Actual. Hi Alvaro. Well, your question was answered regarding the financing of the project.

And also the HTS.

A question from Santiago Herrera from Alaria regarding the project. What is the new maintenance process once the project is finished? I think that is around, in the total project, $10 million per year. In addition to what we currently have. That is 90 million dollars plus another 10 that was the other... That new project?

Yes.

Now, we have a question from Ramiro Guerrero. Hi, Ramiro, from Bull Market. His question regarding the interagency project. What portion of the $3 billion investment do we expect to finance through project finance at the SPD level? And what portion will require contribution from TGS?

Hi, Ramiro. I would say the other half of the total investment. because we are going to finance with a 60% of leverage the second VPU, which is a $2 billion investment, and at least $300 million of finance, of import finance in the first VPU, which is $1 billion. So a total of 1.5 out of 3 billion.

That's our expectation. We are working on that.

We have another question from Ignacio Valdez, another one regarding the INSEAD project, if we consider adding a partner to participate in the project?

Ignacio, well, we may consider adding a partner. It will depend on new opportunities, business opportunities and the context.

Now we have a question from Agustin Pacheco from Grupo Mariba. Hi Agustin. His first question was answered regarding the first year of how much we expect to invest. His second question is, is re-approval a prerequisite for starting construction and committing the main expenditures or could some early stage investment begin before approval?

Hi, Agustín. In fact, we have already started investing in the project, so the REGEE approval is not a prerequisite. Nevertheless, we are quite confident that the REGEE is going to be approved soon. We already signed the REGEE on June 5th, so we are expecting to have the approval in a few months, I would say.

And that's all. Another question from Federico Cadelli that were answered previously. Another question from Alan Feldman from Criteria. How, Alan, your question was answered regarding the working capital debt variation. Bueno, Alejandro explained that we expect for the following quarter to receive another $300 million, $200 million in 2026 and $100 million more in the first quarter of 2027 or before in April of 2026. Thank you. Another question from Adam Feldman regarding the working capital What underlying free cash flow would be used as a run rate and how should the market think about the sustainable conversion of EBITDA into cash considering this deployment?

Okay, hi Adam, as we already we are being paid 40% of the new volumes of the expansion volumes of the GPM expansion and the transportation TGS transportation system expansion so we are not going to have those revenues after those 40% of the revenues collected after the project COD next May So, approximately, I would say, $40 million of the revenues per year are not going to be collected because we have already, at that time, we will have already collected them.

We have another question regarding financing the project. So, in Pozansar, I have another question from Jorge Mauro. I have a question regarding the peak leverage in the next three years.

I have a question regarding the Tampa project in Wausau.

This concludes the questions and answers sections Now we will turn to Alejandro for final remarks

Thank you all for participating in TGS second quarter 2026 conference call. We look forward to speaking with you again when we release our 2026 product order results. If you have any questions, in the meantime, please do not hesitate to contact our Investor Relations Department. Have a good day.