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Edited Transcript of PAMP.BA earnings conference call or presentation 12-Nov-19 3:00pm GMT

Q3 2019 Pampa Energia SA Earnings Call

Dec 4, 2019 (Thomson StreetEvents) -- Edited Transcript of Pampa Energia SA earnings conference call or presentation Tuesday, November 12, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Gabriel Cohen

Pampa Energía S.A. - CFO & Director

* Lida Wang

Pampa Energía S.A. - IR Officer

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Conference Call Participants

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* Daniel Guardiola

Banco BTG Pactual S.A., Research Division - Director of Equity Research

* Ezequiel Fernández López

CrediCorp Capital, Research Division - VP of Utilities

* Guilherme Levy

Morgan Stanley, Research Division - Research Associate

* María Florencia Mayorga Torres;TPCG Group;Corporate Research Analyst

* Petr Grishchenko

Barclays Bank PLC, Research Division - Fixed Income Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to the Pampa Energía Third Quarter 2019 Results Conference Call. We would like to inform you that this event is being recorded. (Operator Instructions)

Before proceeding, let me mention that forward-looking statements are based on beliefs and assumptions of Pampa Energía's management and on information currently available to both companies. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, 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 conference over to Lida Wang, Investor Relations Officer of Pampa Energía. Ms. Lida, you may begin your conference.

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Lida Wang, Pampa Energía S.A. - IR Officer [2]

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Good morning, everyone, and thank you for joining our conference call. I will make a brief summary of every business segment, reviewing the quarter's key figures and the latest events since our last call in August. Our CFO, Mr. Gabriel Cohen, is here for the Q&A session.

Before we begin, we want to remind to you that Pampa adopted the U.S. dollar as functional currency. Therefore, transactions are recorded in U.S. dollars since January of this year. For the comparative period of 2018, according to IFRS, figures are reported in pesos adjusted by inflation as of the year-end 2018 and shown in U.S. dollars at closing FX. This comparison might be difficult to read. Therefore, for a like-to-like -- like-for-like basis, we are considering nominal figures reported last in Q3 in nominal terms and converting to dollars at an average FX.

In this case, the peso-linked subsidiaries such as the utilities, they continue to report under peso functional currency. So their figures are adjusted by inflation and shown in dollars at September 2019 closing FX.

In order to analyze their performance organically and to be in line with the reporting, the comparative figures in pesos adjusted by inflation until the end of 2019 and show in dollars at closing FX.

So having made these clarifications, we can start. On Slide 5, we can -- we want to make a quick stop by reviewing the quarter's financial highlights. Revenues fell year-on-year by 21%, mainly because of the 36% devaluation of the peso, affecting our peso-linked businesses like Edenor, Transener, TGS; in addition to lower gas prices and FX freeze in E&P, oil E&P; and reduced legacy remuneration of power generation. Negative effects were offset by the commissioning of new capacity since May 2019, adding more than 300 megawatts to the grid and higher gas production.

Quarter-on-quarter, revenues also decreased by 24%, mainly explained by the high peso depreciation affecting our regulated utilities; lower exports and production at our petchem facilities, partially offset by winter season pricing for legacy and gas reference price at CAMMESA; the new capacity commission since last May; and higher gas production.

EBITDA also fell year-on-year by 5%, mainly explained by lower hydrocarbons prices, reduced legacy remuneration for our power plants and devaluation effect on our peso inflation-adjusted utilities, partially offset by the commissioning of new power units, the acquisition of Ensenada Barragán power plant, higher gas production and dilution of peso-linked expenses due to the deval.

Quarter-on-quarter, EBITDA increased by 10%, mainly because of new power units explained above and full quarter of Ensenada Barragán, highly -- a higher legacy remuneration and higher gas production and prices because of winter season, offset by peso depreciation and FX freeze at oil prices.

As we show on the right below, oil and gas share represents 1/4 of Pampa's consolidated EBITDA given the current pricing environment at E&P, while electricity led by power generation takes the other 3/4. Also, it is worth highlighting that almost 70% of PAMPA's consolidated EBITDA is dollar linked mainly from gas and power.

Moreover, as shown in the chart left below, in the third quarter of this year, our CapEx decreased 3% compared to the same period of the last year, mainly explained by lower pace in power generation expansion CapEx. As in Q2, we commissioned PEPE's wind farms and Genelba Plus new gas turbine, which is a key part of our CCGT ongoing project in addition to lower Edenor's CapEx due to the devaluation. If we compare to the last quarter, CapEx decreased by 29%, mainly driven by the peso deval at Edenor, mostly -- that mostly have peso CapEx; deceleration of peso -- power expansion CapEx due to the latter stages of Genelba project; and the end, the finish of PEPE wind farms, offset by increased gas production, mainly at El Mangrullo block.

So as you can see on Slide 6, in the third quarter of 2019, we reached an adjusted EBITDA of $270 million, 5% less compared to the -- an EBITDA of $283 million recorded in the same period of 2018, mainly explained by decreases in electricity distribution, oil and gas, holding and others, partially offset by increases at power generation and petrochemicals.

Moving to power generation segment. In the third quarter, we posted an adjusted EBITDA of $131 million, 19% higher than 2018's, mainly driven by the recently acquired Ensenada Barragán power plant that we co-own with YPF, and we are at our 50% equity stake. Moreover, it also contributed our newly commissioned wind farms with PPAs and Genelba Plus new gas turbines as well as the devaluation impact on our peso-denominated costs and better Energía Plus margins. These effects were partially offset mainly by the reduction on legacy [energy] remuneration as per resolution first -- 1, effective as from March 2019, by which capacity payment during spring season of September was reduced around 40% in dollars for Güemes steam turbines in Piedra Buena as they are the lowest dispatch rate units in our portfolio.

The impact on our highest load factor units under legacy capacity, that's Genelba and Loma combined cycles, is smaller. But during September, which is the off-peak season, it got 20% lower.

Quarter-on-quarter, winter season pricing for legacy PEPE wind farms with B2B PPAs and Ensenada Barragán contributed to the 31% increase in EBITDA.

Generation was 16% higher on year-on-year basis, mainly due to the gas turbines at Genelba Plus thermal power plant that are part of the closing to combined cycle project as well as better load factor at the combined cycle legacy combined cycle at Genelba; higher dispatch at Loma de la Lata because we managed to get the gas and, therefore, competitive variable production costs, aka CVP, so they get dispatch; plus higher generation coming from the wind farms, which ranks senior in the dispatch priority because its variable cost, the CVP, it's close to 0. These effects were partially offset by lower load factor at Güemes, Pilar and Piquirenda thermal power plants caused by their higher CVP for the partial recognition of imported gas, even higher during the winter season. Therefore, placing them behind in the dispatch priority in the grid, plus we got lower dispatch required at Ingeniero White and Piedra Buena thermal power plants because their variable costs was not competitive vis-à-vis wind generation in the south.

Quarter-on-quarter, power generation increased, mainly because of the higher electricity demand in the grid because it's during -- it's winter season in addition to new thermal and wind units, partially offset by lower dispatch and at lesser competitive thermal power plants.

The availability rate in the third quarter was outstanding at 95%, with installed capacity of 4.8 gigawatts. That includes the operation of recently acquired Ensenada Barragán thermal power plant, similar to the 94% achieved -- availability achieved during the same quarter last year and also similar quarter-on-quarter.

Regarding the expansions we have in the pipeline. We are currently in the final stages of the closing to combined cycle of 383 megawatts at Genelba, as you can see in the picture on Slide 8. Last June, we increased current gas turbine #3 capacity by 19 megawatts and commissioned new gas turbine #4 for 188 megawatts. They are billing as legacy until the closing to combined cycle begins operations. However, in mid-October, we experienced heavy rains, and a flood caused damages to the facilities, causing some delays. But we are optimizing the cycle's commissioning procedures, so we expect to achieve COD expected in Q2 2020.

On the other hand, as you can see on Slide 9, by the end of last June, we jointly acquired with YPF the thermal power plant Ensenada Barragán with an installed capacity of 567 megawatts, running a PPA until 2022. It has an expansion project to close the cycle, increasing 280 megawatts more with another PPA for 10 years with CAMMESA. By the end of September, the joint venture company executed an EPC agreement with SACDE and Techint. But once the engineering optimization is done, the works kick-off is subject to Pampa and YPF's decision.

Regarding the existing debt of Ensenada for approximately $229 million, at the end of August, the joint venture company agreed improving repayment schedule and lending conditions subject to the finish of the expansion by the end of '21 if all commercial conditions prevail.

Moving on briefly to the distribution segment, which was reviewed by our CFO at Edenor, Mr. Leandro Montero, yesterday in their earnings call. As shown in the Slide 10, during the third quarter of 2019, the EBITDA remained similar to the same period of 2018, amounting to $59 million in the quarter, mainly because of the FX variation was higher than the own distribution costs update, a.k.a. CPD, which is overweighted in the salary index that also lacks the CPI and the PPI in addition to lower demand and higher energy losses. These effects were partially offset by devaluation impact on labor and peso-linked operating costs; lower penalties due to the Liabilities Regularization Agreement executed in last May, as a result -- and as a result, lower penalties of Edenor's investments to improve quality of service; and collection of retroactive installments and social tariff caps that did not happen in 2018.

Year-on-year, during Q3 2019, we experienced lower demand of electricity by 5% due to mild weather, downturn in the economy activity and price-demand elasticity. Quarter-on-quarter, the demand improved because of the winter season.

Energy losses reached 23% rate in the third quarter of 2019, 265 basis higher than the 20% for the same period of 2018 and 390 basis above last quarter, identified in residential end users, especially low-income users that do not have access to the gas distribution grid, partially offset by lower volume of energy demanded. We are targeting end users that steal electricity from us by performing market discipline actions and installing customized precharged meters. Therefore, we are increasing our customer base, but this is being offset by plugging off of SMEs and large users due to the GDP recession.

Energy costs decreased by 21% in dollars year-on-year due to the peso depreciation, offset by the gradual subsidies removal. But this is still half subsidized of the full cost of the electricity. The cost of electricity is a pass-through for our users.

Moving on to the news update in the segment. In mid-September 2019, Edenor agreed with the federal government to keep billing the tariff schedules in force. Therefore, the 19% CPD update as well as seasonal price for electricity were both deferred. However, Edenor was allowed to keep collecting the retroactive installments for delayed application with the previous tariff adjustment in March 2019.

As you can see on Slide 11, Q3 2019, in the oil and gas segment, we posted an EBITDA of $52 million, 32% lower than the Q3 2018, mainly because it is still reflecting the downward trend in gas sale price since August 2018; lower oil prices, mainly due to the FX freeze discretional measure by the government; and higher gas treatment costs at El Mangrullo, partially offset by 13% higher production of gas, driven by the integral -- vertical integration with power generation and lower royalties and expenses that are peso-linked.

On the other hand, quarter-on-quarter, EBITDA was similar, mainly explained by the higher gas production and better pricing and seasonal demand starting on June, partially offset by lower oil prices because of the FX freeze.

Our overall production in Q3 2019 increased 11% year-on-year and 3% quarter-on-quarter, reaching to nearly 50,000 barrels of oil equivalent per day, of which 90% is natural gas.

On the oil side, production level year-on-year decreased 10%, reaching to 4,800 barrels of oil per day but quarter-on-quarter remained similar, mainly because the lower well completion activity at El Tordillo and no contribution from Chirete in the quarter. This is a block that is in process for exploitation.

During Q3 2019, the crude oil prices sale price decreased year-on-year by 26% and quarter-on-quarter by 18%, reaching $49 per barrel mainly because the government imposed an FX freeze at oil domestic prices as of August 9 for 90 days and Brent reference of $59 per barrel, selling 20% lower than it should have been.

61% of oil production is Escalante heavy oil. That is sweet. And given the current clean fuels trend, it narrows Medanito prices.

Please turn to Slide 12, where we want to explain in deeper detail the situation in gas. Regarding the gas production, the quarter reached an average of 270 million cubic feet per day, 13% increase year-on-year and 3% increase quarter-on-quarter, mainly explained by the production increase at El Mangrullo, a block in which gas evacuation capacity was expanded since the last year-end and is fully operated by us. By September 2019, the gas production level of El Mangrullo reached 155 million cubic feet per day, 60% higher than in September of last year and contributing almost 60% of our overall gas production. These positive effects were partially offset by lower production in other gas-bearing blocks because of lack of visibility on sale prices, which was affected by excess supply driven by the disruption of shale gas development, partially specifically backed up by the unconventional gas plan Resolution 46 and especially during the winter season, bottlenecks at the main transportation pipelines. These effects negatively impacted on, Rincón del Mangrullo block with a lower drilling rate and natural decline and a minor decrease at Río Neuquén and Aguaragüe blocks. In the case of Sierra Chata, it remained similar production due to the completion of 2 horizontal wells in Q3 2019.

During third quarter, our accrued weighted average sale price was -- for gas was $3.3 per MMBtu, 26% lower year-on-year and slightly higher than last quarter, mainly due to the reduction on the reference price for gas fire at power plants and gas tenders on an interruptible basis conducted by CAMMESA. Since June, gas prices rebounded as it marked the beginning of the winter season, with a 36% increase in dollars at power plants reference price by CAMMESA and higher spot price due to the seasonal demand. But since September, it returned to the off-peak season prices, reflecting excess of capacity -- excess of supply and transportation bottlenecks, also impacting negatively the commercialization in the Industrial segment. The fuel procurement for our power generation helped to recover the gas production levels. We are testing almost all our production there. So it does not improve pricing. We cover our breakeven costs, and it helps to have a certain offtake, specifically during weak demand periods and to monetize some synergies between power and gas business.

As you can see on Slide 12, the average gas prices that we recorded on demand have been plunging since second half of 2018, falling to the lowest point in years and hardly covering the country's marginal breakeven costs. Winter season picked up prices, but as evidenced in the past, the domestic production was not enough to cover the domestic gas demand needing to cover roughly 20% deficit of gas consumed in winter season with gas imports from LNG and Bolivia with much higher prices than those paid to domestic producers.

Moving on the news update in the segment. On August, the Undersecretariat of Hydrocarbons and Fuels approved the terms and conditions to export gas to Chile on a firm basis during the off-peak season. In this sense, Pampa was granted a permit to export gas from our production in Neuquina Basin to ENAP in Chile for a maximum volume of 21 million cubic feet per day at a price of $3.1 per MMBtu. That is net of export duties and transportation costs. Additionally, exporting companies should compensate the higher cost incurred by the power grid due to the use of alternative fuels like LNG or fuel or power plants supported by the government.

Regarding the gas billed to the residential segment. There are 3 news affecting Pampa and TGS. First, regarding the tariff flattening for winter consumption. We estimate that as of September, receivables collectible by Pampa and TGS will amount to roughly ARS 48 million and ARS 1.3 billion, respectively. But no regulation was issued establishing the payment.

Second, the FX difference on natural gas treated between April last year and March this year that was set to be collected from the federal government in installments as from October, Pampa adhered to this procedure and estimated receivables at ARS 966 million, but the collection is pending as of today.

Finally, the gas regulator decided that the FX variation of natural gas prices and TGS cost variation update should -- that should have been granted in October 1, 2019, both to be deferred to January 2020.

Before I move on from oil and gas, I wanted to give you a quick update of our operations during the third quarter of 2019. 26 wells were drilled and 23 wells were completed. Our focus is the development of blocks with tight gas reservoirs. During Q3 2019, 7 tight gas wells were drilled at El Mangrullo, which is very important for the maintenance of the record production in the block. We also completed 2 horizontal tight gas wells at Sierra Chata as I mentioned before.

During August 2019, 2 shale gas wells in Vaca Muerta were completed at El Mangrullo block, both with horizontal extension of 8,000 feet with 2 different landing points using zipper frac technology with 36 fracturing stages per well using 4,500 sacks of proppant per stage, 7,200 tons of proppant per well. The results of the completion of these wells, which are still in testing phase, are very promising, producing at expected rates over 400,000 cubic meters per day since October 2019.

Another important milestone was the drilling of a shale oil well at Rincón de Aranda, targeting Vaca Muerta during Q3 2019, an exploratory block operated by us with 55% equity stake. And we partner there with Total. The well has horizontal extension of almost 7,000 feet. And currently, we are carrying out the final completion works, thus ready for testing phase at the end of the year.

In petrochemicals, we posted an adjusted EBITDA of $3 million during the third quarter of 2019, higher year-on-year and higher quarter-on-quarter, mainly because of higher reforming price spread, lower peso-linked costs due to the deval, plus low cost of gas given the market negative trends and virgin naphtha purchased domestically instead of importing. These effects were partially offset by lower styrenics demand and lower spreads.

In operating terms, total sales volume of our petchem segment in Q3 2019 decreased 12% year-on-year and 22% quarter-on-quarter, totaling 75,000 tons due to lower exports and closing of ethylene and BOPs plants, offset by higher SBR domestic sales.

Finally, our holding and others segment presented an adjusted EBITDA of $25 million in the third quarter of 2019, 22% lower year-on-year, 38% lower quarter-on-quarter. This is mainly due to the lower EBITDA adjusted by our ownership from our affiliates, TGS and Transener, because of the peso devaluation, and that outpaced the cost variation adjustments in addition to lower income from fees collected at holding.

I'm going only briefly review TGS as they just had their earnings call last Friday. TGS' EBITDA, adjusted by our direct and indirect stake of 25.7%, contributed to Pampa $18 million in the quarter for an implicit total of $71 million, 36% lower than Q3 '18, mainly due to the FX variation, higher than the lagged granted PPI that covers cost variation for the regulated gas transportation business; the drop in reference prices; denominating dollars for NGLs; lower natural gas process volumes because of the lowering ethane sales due to the Dow Chemical technical outage, which was normalized in October, partially offset by lower cost of gas per MMBtu.

In relation to the midstream project of the Vaca Muerta pipeline, the northern tranche for 35 miles was finished, connecting the Rincón la Ceniza field with the southern tranche of this pipeline. So far, 85% of this gathering pipeline is commissioned.

Regarding the other pipeline, the Littoral main gas pipeline tender, the government postponed the opening of feeds until 2020, March 2020. Moreover, in October, TGS' Shareholders' Meeting approved the distribution of a dividend consisting in 29.4 million common shares in treasury and a cash dividend to offset taxes, if applicable.

As for Transener, its EBITDA adjusted by our indirect shareholding of 26.3% contributed $10 million in the third quarter for an implicit total of $37 million. This is 4% higher than the same period of 2018, mainly because of Transener got their corresponding tariff increase of 19% in August 2019. But in August 2018, the rescheduled tariff increase was delayed to November into Q4.

Regarding share buybacks, so far, we acquired 7.5 million ADRs, of which in October of this year, 6.1 million ADRs were approved to be canceled by the Shareholders' Meeting. Because of the market volatility and the difference between the value of the company assets and the quota price of Pampa in the stock exchanges, we consider repurchasing our own shares, one of the best investment accretive actions towards shareholders, that we are undertaking. Therefore, Pampa's board approved the fifth share buyback program for $50 million with a price cap of $14.5 per ADR.

In terms of net income attributable to the owners of the company, Pampa reported a consolidated gain of $116 million in the third quarter of 2019. Whereas in the same period of 2018, a loss of $128 million was recorded, mainly explained by lower accrual of losses from FX difference as a result of change in the functional currency as I explained at the beginning of this call.

Finally, moving to the Slide 16. We must highlight the low and well-spread leverage of the company as well as the solid cash position held compared to other peers in the industry and in Argentina. We have always been very proactive towards the cash and liability management, especially after witnessing volatility, high yields and narrow window in the international financing markets. We continue redeeming the short-term facilities, highlighting that so far this year, Pampa redeemed at maturity and precancelled this year roughly a total of $310 million.

The consolidated gross debt, including affiliates at ownership, decreased to $2.4 billion, $115 million lower than June 2019, mainly because of the repurchase of owned corporate bonds that so far at Pampa, we bought back $84 million face value plus debt repayments, and to a lesser extent, the deval effect on the peso-bearing bonds. Consolidated gross debt is 93% denominated in dollars. This is lower than the previous June 2019, 99%, bearing at an average interest rate of 7.8%, and 75% is placed in the parent company.

Consolidated cash amounted to $699 million, which is lower than the $863 million in June 2019. Also in Q3 2019, we were holding 93% of our cash in dollars. We also show here stand-alone key debt figures for our bondholders. Even after canceling roughly $310 million, the principal maturities belonging to Pampa stand-alone that are left in 2019 and combined until 2022 amounts to $236 million, which is, by far, exceeded by the $550 million cash position at the parent.

Net debt slightly increased to $1.7 billion. However, at the restricted group, the net debt fell to $1.2 billion, and the net debt to 12-month EBITDA remained low at 1.9x at consolidated level and 2x at the restricted group.

So this concludes our presentation. Now I will turn the word to the operator, who will open the floor for questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Petr Grishchenko with Barclays.

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Petr Grishchenko, Barclays Bank PLC, Research Division - Fixed Income Analyst [2]

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I guess first question, my understanding of project financing at subsidiary level is basically nonrecourse. And now I'm seeing Pampa actually guarantees payments under the trust -- under the financial trust and syndicated loan agreement, so I want to get more color on that. And I wanted to clarify this amount is $229 million. And I guess, as it relates to Barragán, the EPC and turnkey agreements are also guaranteed or not?

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Lida Wang, Pampa Energía S.A. - IR Officer [3]

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Petr, so this is nonrecourse as long as we comply with the closing to combined cycle to project.

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Petr Grishchenko, Barclays Bank PLC, Research Division - Fixed Income Analyst [4]

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And just to understand this point a little bit more, if the combined cycle is not reached by basically in 2 years, then the company will be obligated to make the repayment for this? Basically, they won't be accelerated. Is that right?

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Gabriel Cohen, Pampa Energía S.A. - CFO & Director [5]

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As long as Pampa -- Gabriel speaking. Yes, as long as Pampa and YPF will buy -- at that amount in time, basically Pampa and YPF are required to honor that the debt terms.

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Petr Grishchenko, Barclays Bank PLC, Research Division - Fixed Income Analyst [6]

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Okay. Had another question.

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Gabriel Cohen, Pampa Energía S.A. - CFO & Director [7]

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It's important to note that, that warranty, it's only at the -- by that of schedule project completion, okay?

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Petr Grishchenko, Barclays Bank PLC, Research Division - Fixed Income Analyst [8]

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Right. Okay. I guess second question. Can you maybe provide some more color on the decline in dispatch rates across various plants, even if you do new capacity? Just trying to understand, is this just demand-driven? Or there were some outages during the period that led to lower dispatch?

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Lida Wang, Pampa Energía S.A. - IR Officer [9]

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Yes. Well, it's demand-driven, actually. Q3 in the grid was one of the lowest points of demand, though it rebounded a little because it's winter season. But still, we are at levels of 2014, 2015 demand levels. This is first thing. Second thing, for the units that are located in the north or from the center to the north, that's Piquirenda, Güemes, Parque Pilar, they are -- their variable costs have a gas price that it's kind of influenced by the imported gas from Bolivia. So in the variable cost, they kind of like are lagging behind in the dispatch priority. Okay? This is the first thing, first.

Second, renewals also have a disruptive influence because in the north, we have solar, though it's -- there's bottlenecks in the transportation line. It doesn't come to the question, but renewals are getting disruptive in the dispatch, ranking in the dispatch. And also in the south, where historically, our power plants have the lowest variable cost in the dispatch ranking because the gas is the cheapest in the country. They even got outpaced by the wind generation but demand-driven, of course. We are experiencing around, I think, 33,000, 34,000 gigawatt hour of demand in the quarter in the country where we usually used to be at almost 40,000. So it's quite -- this is -- since the last year, the demand in the country has been going down dramatically. This is in line with the GDP, right, the GDP recession, right?

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Petr Grishchenko, Barclays Bank PLC, Research Division - Fixed Income Analyst [10]

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Right. Yes. We're aware of that. And I guess, switching gears a little bit. Can you maybe discuss a little bit what do you see in terms of payment delays from CAMMESA or any kind of extensions? If you could please maybe quantify them a little bit. I don't know if you mentioned it during the presentation, I probably missed that.

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Lida Wang, Pampa Energía S.A. - IR Officer [11]

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Regarding the other question, these are important. The availability in our units were 95%. So as long as you're available, you collect the capacity take-or-pay, okay? So dispatchability was slow, yes, lower than expected, but because of demand and CVP thing, but our availability was outperforming.

Now regarding CAMMESA, we are quite in the same days than lately we've been. We are around 50 -- less than 50 days of delays. So this is -- CAMMESA is doing the payments accordingly.

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Petr Grishchenko, Barclays Bank PLC, Research Division - Fixed Income Analyst [12]

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Repeat that. I probably missed that. What number did you give?

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Lida Wang, Pampa Energía S.A. - IR Officer [13]

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50 days, less than 50 days. The rule is 42. The highest point was a long time ago, so -- but they're around that levels.

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Petr Grishchenko, Barclays Bank PLC, Research Division - Fixed Income Analyst [14]

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Okay. That's helpful. And last question, if I may. Can you maybe give some more color on how you're seeing debt amortizations next year? And generally speaking, what refinancing options do you think are available to the company? Anything on that kind of front would be very helpful.

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Gabriel Cohen, Pampa Energía S.A. - CFO & Director [15]

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Yes. Well, in terms of our debt amortizations, the most important thing to be said as of today is that it's our cash position. So in that respect, what I would say is that we have -- the biggest thing to be amortized is the 2023 bonds. That it's the -- that's the relevant amortization that we have, and it's quite far in the horizon. On the other side, whatever it's due for Pampa Energía, it's bank transactions that at that moment in time, we can either repay with our own cash position, or we should expect to be able to refinance. In that respect, we have, as you may have seen, already 2 transactions that have been refinanced through peso. And we have other dollar amortizations. So at this stage, I would say that whatever is peso will be clearly very easy to refinance, it will depend essentially by -- on cost at that moment in time. And whatever is dollars, we'll see at -- when they can do what -- if we were going to cancel that or refinance maybe in the local market. So far, bank lines are still available. It's essentially a matter of costs rather than of liquidity.

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Operator [16]

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Your next question comes from Guilherme Levy with Morgan Stanley.

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Guilherme Levy, Morgan Stanley, Research Division - Research Associate [17]

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I wanted to understand better what are the capital allocation priorities should the macro situation in Argentina remain challenging for longer. And in this case, for how long should we expect a continuation of share repurchase programs? And how should we think about CapEx going forward? And second question, if I may, related to the first one, actually. Specifically for upstream, what are the next steps now? Is directly investing in LNG an option? Or could we maybe see the company deploying more cash in oil rather than gas? What we -- what should we expect in the coming quarters?

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Gabriel Cohen, Pampa Energía S.A. - CFO & Director [18]

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Yes. In terms of the macro situation in Argentina, clearly, we should expect new information with -- once the new administration is in place. So I think we cannot tell anything in terms of our future plans until we have basically the eventual new rules or not or a change or not. So it's not possible to say what will happen and how long it will be there. What we are doing as of today is that basically, we are focusing on maintaining the current expansions in terms of generation. And in terms of E&P, we have...

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Lida Wang, Pampa Energía S.A. - IR Officer [19]

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The commitments.

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Gabriel Cohen, Pampa Energía S.A. - CFO & Director [20]

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The commitments and some exploratory wells in -- some exploratory wells. So once we have a new administration and we'll see the policy that it's implemented, we will speak again and tell you what our plans. Then in terms of share buybacks, well, as you see, the new share buyback program, it's limited to the amount and it's being reviewed periodically in terms of how we see prospect going forward and always having in mind to keep a strong cash position and what we consider conservative leverage. Another question, Guilherme?

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Guilherme Levy, Morgan Stanley, Research Division - Research Associate [21]

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Yes. The second question was specifically to upstream. Is -- are there any options to help monetize the gas reserves? I mean would the company consider directly investing in LNG, for example?

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Lida Wang, Pampa Energía S.A. - IR Officer [22]

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Well, about that, we have our TGS, our affiliate for that. So that's their investment, their project. From Pampa, our focus is on gas production, E&P. As Gabby said, we -- in our 2020 budget, we only have our committed CapEx for the blocks, some exploratory wells to shale formations. The minimum to maintain at least our production that today, what we are doing is just testing that to our power generation. In power generation, the expansions, basically Genelba, it's almost nearing to finish. We don't have any other projects in the pipeline.

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Operator [23]

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Our next question comes from Ezequiel Fernández with CrediCorp.

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Ezequiel Fernández López, CrediCorp Capital, Research Division - VP of Utilities [24]

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Thanks for the Q&A, the earnings materials, the usual useful comparisons on adjusted and unadjusted monetary variables. I connected a little bit late to the call, so sorry if I go into any topic that you referred already. I have 4 questions.

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Gabriel Cohen, Pampa Energía S.A. - CFO & Director [25]

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Sorry, it's very difficult to understand what you're saying.

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Ezequiel Fernández López, CrediCorp Capital, Research Division - VP of Utilities [26]

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I'd like to go one by one, if you don't mind. The first one is related to oil and gas. If you'd give us a ballpark -- sorry, can you hear me any better now?

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Lida Wang, Pampa Energía S.A. - IR Officer [27]

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A little bit rough.

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Ezequiel Fernández López, CrediCorp Capital, Research Division - VP of Utilities [28]

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All right. I'll take it off the call. I'll give you a call later.

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Lida Wang, Pampa Energía S.A. - IR Officer [29]

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Okay.

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Ezequiel Fernández López, CrediCorp Capital, Research Division - VP of Utilities [30]

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Okay. I'll repeat my question. If it's fine, then you tell me. Can you give us a ballpark for your 2019 full year CapEx on the oil and gas segment and its mix between exploration and infrastructure development? And what can be considered the run rate for your current output? And if you have anything to add about 2020, great.

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Gabriel Cohen, Pampa Energía S.A. - CFO & Director [31]

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In respect of guidance, we don't have guidelines. In respect of information for 2019, give us...

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Lida Wang, Pampa Energía S.A. - IR Officer [32]

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$200 million for this year.

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Gabriel Cohen, Pampa Energía S.A. - CFO & Director [33]

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For this year, we'll be in line of $200 million.

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Ezequiel Fernández López, CrediCorp Capital, Research Division - VP of Utilities [34]

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Okay. Great. $200 million for this year. I don't know if you could split that between exploration and recurring?

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Gabriel Cohen, Pampa Energía S.A. - CFO & Director [35]

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One second.

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Lida Wang, Pampa Energía S.A. - IR Officer [36]

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The exploration CapEx, out of this $200 million forecast for this year, is $70 million. It's for what we call expansionary CapEx. Basically, these shale wells, exploratory wells plus another facilities that we do, Mangrullo -- at El Mangrullo, a little bit at Rincón de Aranda and Sierra Chata.

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Ezequiel Fernández López, CrediCorp Capital, Research Division - VP of Utilities [37]

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Okay. Great. All right. My second question is regarding the power distribution side. If you could comment a bit on the hikes that were granted already and implemented? And whether it's old or still pending?

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Lida Wang, Pampa Energía S.A. - IR Officer [38]

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Are we talking about power generation or old utilities?

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Ezequiel Fernández López, CrediCorp Capital, Research Division - VP of Utilities [39]

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Power distribution, Edenor.

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Lida Wang, Pampa Energía S.A. - IR Officer [40]

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Okay. Edenor. Edenor, we got -- so here's the thing. We got schedule freeze, okay? And that schedules include some retroactive installments that was from the delays of the tariff -- previous tariff adjustment granted in March. So kind of like we were (inaudible) imports. We shouldn't (inaudible) granted 19% in October. But with these retroactive installments that had -- should have been stopped in August that we keep collecting, roughly half of the tariff increases cover. The other half, the idea from the agreement with government is to get paid in 7 installments as from January 2020.

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Ezequiel Fernández López, CrediCorp Capital, Research Division - VP of Utilities [41]

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Okay. Great. My third question is related to your direct link between the gas unit and power generation. You seem to care about being able to self-deal gas to your plants. But at the same time, supposedly, it's not that relevant in terms of margins. What kind of advantage you see there that is important for you?

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Gabriel Cohen, Pampa Energía S.A. - CFO & Director [42]

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What's the advantage in -- because it's hard to understand what the advantage that we have by -- in terms of our gas with our power generation? That's the question?

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Ezequiel Fernández López, CrediCorp Capital, Research Division - VP of Utilities [43]

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Yes. What advantage do you see in selling gas to your own power generation units, considering that the margin is not that big?

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Lida Wang, Pampa Energía S.A. - IR Officer [44]

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Let me tell you why. In the past quarter, a number -- a significant number of wells in the country has been curtailed in gas. And we didn't. Let me tell you why, because we have a certain offtaker. The offtake, it's our 2 best-performing power generation units. They are combined cycles. They are very competitive in the dispatch ranking, Loma de la Lata and Genelba. So we -- because they are always dispatched no matter what, because their variable cost is very cheap, and that's why we plug our gas to them. That's around 70% of our production. 70%, 65% of our production, we plug it to Loma de la Lata and Genelba. In Loma de la Lata, this is an advantage. Loma de la Lata, it's very close to our production blocks, so there's no transportation needed, right?

The second well for Genelba, we need the transportation, and we have it granted for 1 year. So here is -- this is the very first thing. Certain offtake, we have it. The vertical integration is very valuable. Though the pricing is very not very attractive, but it's certain. We collect dollar-linked and we collected through our power generation collection. So power generation is in charge of selling this amount of gas on behalf of the E&P. E&P and power generation are in the same company. This is not an interco, so there's -- we are waived from internal taxes. We avoid financial transaction taxes. And then the most important thing is that if we didn't have this integral -- vertical integration, power -- E&P should sell this gas even in this spot, which is -- they will -- could kill you in the off-peak season. Or sell it to CAMMESA directly, and CAMMESA will send it to our power plants. So this triangle is avoided. But before, we were subject to a high level of working capital that now, we have been reduced dramatically because power generation sells gas on behalf of E&P. I don't know if it's -- if I made myself clear. It's more qualitative improvement than quantitative improvement.

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Ezequiel Fernández López, CrediCorp Capital, Research Division - VP of Utilities [45]

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That's very clear. And it has actually taken care of my fourth question. So I'm done, and sorry for the bad connection.

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Operator [46]

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Our next question comes from Florencia Mayorga with TPCG.

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María Florencia Mayorga Torres;TPCG Group;Corporate Research Analyst, [47]

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Just 2 questions. The first one regarding E&P. In how many days distribution -- gas distribution companies and industrials are making payments regarding that? And the second one is the outlook regarding production after the growth already seen in the third quarter.

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Lida Wang, Pampa Energía S.A. - IR Officer [48]

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So distribution, distributors, it's very tiny of our production. So it's like 5% or less on our production. They are paying at 60, 65 days. This is a sale that we practically do in pesos, right? We record it as such in our financial statements, but it's very tiny from our sale. The major part, it's CAMMESA. CAMMESA is paying at 40 -- 50 days, almost 50 days, as I said in an earlier question.

Industrials. Well, industrials, we can agree, but they are at premium. It's around 30, 30, 45 days. And we are also exporting since September this year, we are collecting at 60 days. There. But basically, the major bulk of our sales are collecting at less than 50 days of collection.

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María Florencia Mayorga Torres;TPCG Group;Corporate Research Analyst, [49]

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Perfect. And regarding production, do you expect that the same level exhibited this quarter, we will be seeing in the fourth quarter after the growth from Mangrullo? Or do you expect a small decline or remain flat?

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Lida Wang, Pampa Energía S.A. - IR Officer [50]

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So Q4, it's a very difficult quarter for the country, for the gas production because I mean again, seasonality comes along. It's off-peak season, but we managed to get our gas production kind of flattish. Again, we are exporting 600,000, 700,000 cubic meters per day. That's roughly 10% of our production. And El Mangrullo is flat. It's a main contributor of our production. El Mangrullo is flat.

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María Florencia Mayorga Torres;TPCG Group;Corporate Research Analyst, [51]

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Perfect. And the last question, I believe that you mentioned that you have some credit lines available. Can you disclose how much available credit lines that Pampa have as of today?

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Gabriel Cohen, Pampa Energía S.A. - CFO & Director [52]

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First of all, credit lines are not committed. So it's -- we cannot really disclose any in that respect. What we can tell you is that basically, credit lines of the major banks give us most of their lending capacities available to us.

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Operator [53]

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Our next question comes from Daniel Guardiola with BTG Pactual.

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Daniel Guardiola, Banco BTG Pactual S.A., Research Division - Director of Equity Research [54]

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I have a couple of questions. So my first question is related to the oil and gas segment. Considering that on an annual basis, the average price of gas have dramatically declined, I wanted to know your thoughts on the likelihood that Pampa may have to post a negative revision to its gas reserves related to lower oil price. So that's my first question. And my second question is related to the much awaited hikes in the tariffs of the utility companies. And considering the increase in social unrest and discontent that we have seen in Latin America, I want to know if you could share with us how likely you think it is that the new administration is going to honor the expected hikes that are related to the RTI.

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Lida Wang, Pampa Energía S.A. - IR Officer [55]

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Our reserves as of December 2018 was 130 million BOE. They are mostly tight unconventional gas. There's no shale book there. So in that sense, we don't have a shale gas book. And that's -- and the breakeven cost for shale, it's way higher than the prices that we are realizing today. That's why this impairment, it's kind of not likely on Pampa. Though of course, this affects our -- the assessment of the share and of our reserves for the December 2019. Though we are, as we said in the call, we are already producing and already drilled, completed wells have shale gas formation, and we expect to book some of them to our reserves. So we will see what kind of -- it's yet too early to tell. But yet, we will have to see what kind of contribution will make it. Then for -- I'm sorry, I lost your question. That's the only one I could retain.

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Daniel Guardiola, Banco BTG Pactual S.A., Research Division - Director of Equity Research [56]

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The second question is regarding the tariffs, the adjustments that we are expecting in the tariffs of the utility companies in January 2020. And I wanted to know how likely it is that the new administration is going to honor these hikes considering the increase in social unrest and social discontent that we have seen across Latin America.

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Gabriel Cohen, Pampa Energía S.A. - CFO & Director [57]

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Yes. Again, it's not possible to answer the likelihood in that respect, so it's -- basically, we cannot answer that. But what we can say is that whatever they don't pay, it's going to become, again, a fiscal deficit. And it's rather -- it's what we're saying at the beginning of the call. We need to see what's going to be the plan of the government in terms of an integral plan, so considering they have to consider different aspects and imbalances of macroeconomic front.

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Daniel Guardiola, Banco BTG Pactual S.A., Research Division - Director of Equity Research [58]

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Okay. Just let me rephrase the question. When you're considering, when you're forecasting your budget for 2020, are you considering these hikes?

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Gabriel Cohen, Pampa Energía S.A. - CFO & Director [59]

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Clearly, we consider the hikes. On the other side, you need to manage your liquidity, considering that maybe you have delays as it has happened in the past.

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Operator [60]

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This concludes the question-and-answer section. At this time, I would like to turn the floor back to Ms. Wang for closing remarks.

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Lida Wang, Pampa Energía S.A. - IR Officer [61]

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Thank you so much for joining our call today. Our team is fully available for you if you have any further questions. Have a good day.

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Operator [62]

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The conference has now concluded. Thank you for attending today's presentation. You may disconnect your line at this time, and have a nice day.