Pampa Energía S.A. (PAM) Q4 2019 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Pampa Energía Fourth 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 the 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.

Thank you, Brent. Good morning, everyone, and thank you for joining our conference call. I will make a brief summary of Pampa's consolidated figures, reviewing the year we just gone by and the quarter's highlights. This time, given that Edenor and TGS already held their calls on Monday, we will focus more on the core businesses of Pampa, that is power and E&P. Our CEO, Mr. Gustavo Mariani; and our CFO, Mr. Gabriel Cohen, are both here and joining us for Q&A. Before we begin, let me remind you that Pampa holds U.S. dollar as functional currency since January 2019. For the 2018 comparative, according to IFRS, figures are reported in pesos adjusted by inflation as of 2018 year-end and shown in dollars at closing FX. This comparison might be difficult to comprehend. Therefore, for a like-for-like basis, 2019 compares with reported nominal figures in Q4 2018 and converted to dollars at average FX. In the case of peso-linked subsidiaries, such as our utilities, the figures are adjusted by inflation and shown in dollars at the 2019 year-end FX. So having made these clarifications, we can start. 2019 was once again a year full of political uncertainty. As a result of the presidential elections, the worsening of the recession that continues striking the country and the general deterioration of all macroeconomic variables, Pampa navigated these tough waters with confidence, owing to the outstanding job done by the whole company over the last years, including the divestment of nonstrategic assets, focus on our core businesses, carry out a significant level of investments, though, at the same time, maintaining high levels of liquidity and extending the average life of our financial abilities among other options. Therefore, in 2019, once again, we can say we had a positive year in several aspects, an achievement that makes us proud. As shown in Slide 4, revenues in 2019 were maintained in similar levers decreasing by 6% despite the peso collapse witnessed again last year. While 50% of our sales were dollar-linked in EBITDA terms, almost 71% came from dollar-denominated core businesses, power and gas. However, E&P is still affected by the downward pricing environment in gas, in addition to the FX volatility and holds to the tariff increases affecting our regulated businesses, offset by higher gas production and power capacity, which contributed to deliver a $950 million EBITDA in 2019, 15% lower year-on-year, but keeping competitive margins. Power generation keeps leading the share, thanks to the new commissionings, PPA outperformance and newly acquired Ensenada Barragán. Companies controlled and co-controlled by Pampa continue pursuing their investment commitment with the country having divested over $1 billion last year, a figure slightly lower than 2018. But if you see the chart below at Pampa, we take pride in having remained committed to the country energy needs throughout our history. Out of the total investment, half was divested for the maintenance of our assets, especially the rendering of a quality service by our regulated subsidiaries and the other half was allocated to expansion projects, mainly distributed between the construction of new wind farms, the closing to combined cycle at Genelba Plus, TGS' Vaca Muerta gas gathering pipeline and the exploration campaign targeting Vaca Muerta Formation. On Slide 5, let's make a quick stop by reviewing the quarter's financial highlights. EBITDA fell year-on-year by 9%, mainly explained by lower hydrocarbon prices, reduced spot remuneration and devaluation effect on our tariff frozen utilities, partially offset by the commissioning of new power units, more gas production destined to sell procurement, more electricity demand at Edenor, the acquisition of Ensenada Barragán and inflation outpacing devaluation during Q4 '19. Quarter-on-quarter, EBITDA decreased by 39%, mainly because of lower legacy and gas prices due to the off-peak season. As we show right -- on the right below, oil and gas share shrunk further at Pampa's consolidated EBITDA, given the current pricing environment in E&P, while electricity takes the other 72%, mostly led by power generation. Moreover, as shown in the chart left below, in the fourth quarter of this year, our CapEx decreased 33% compared to 2018, mainly explained by lower pace in power generation as projects are commissioned and Ensenada's expansion works just begun in addition to a lower Edenor's CapEx because of the devaluation, offset by increased E&P activity in El Mangrullo block. However, CapEx increased by 31% quarter-on-quarter, mainly explained by stronger pace of drawing up in the North Sea investments, measuring dollars and the execution of the final milestones at Genelba Plus closing to combined cycle. So as you can see on Slide 6, in the fourth quarter of 2019, we reached a consolidated adjusted EBITDA of $179 million, 9% less compared to the $187 million EBITDA recorded in Q4 2018, mainly explained by decreases in oil and gas, as we detailed before, lower international spreads at petrochemicals and minor EBITDA from holding and others, partially offset by the increases at power and electricity distribution as we detailed before. Moving to power generation segment as we've seen -- as seen in Slide 7. During the fourth quarter of 2019, we posted an adjusted EBITDA of $107 million, 13% higher than 2018, mainly given by the newly commissioned wind farms with PPAs and Genelba Plus new gas turbines as well as the recently acquired Ensenada Barragán power plant that we co-own with YPF, and we add to our 50% stake and the devaluation impact on our peso-denominated costs. These effects were partially offset mainly by the reduction in legacy former remuneration as per Resolution 1 of 2019, which lowered the capacity payment during spring season of October and November by around 40% for Güemes and Piedra Buena wind turbines as they are the lowest utilization units in our portfolio. The impact of -- on our highest load factor units under legacy thermal that is Genelba and Loma de la Lata combined cycles is smoother throughout the year, but during the off-peak season, it gets 20% lower. Moreover, in Q4 2019, Energía Plus volumes and prices were lower year-on-year. Quarter-on-quarter, winter season pricing for legacy in Q3 '19 contributed to the 18% decrease in EBITDA. For the second consecutive year, we have positioned ourselves as the largest independent power producer in Argentina, representing 12% of the country's total generation. In Q4 '19, generation was 14% higher than last year, mainly due to the higher dispatch at Loma and Piedra Buena because we managed to get the gas and therefore, competitive variable production costs, known as CVP to get dispatch plus it also contributed the commissioning of Genelba Plus thermal power plant's gas turbines as well as the higher generation coming from the wind farms, which ranked senior in the dispatch priority because the cost is close to zero and the operatorship at Ensenada Barragán. These effects were partially offset by the scheduled maintenances at Genelba's old CCGT, lower load factor at Güemes caused by the higher CVP from the partial recognition of the imported gas, therefore, placing them behind the grids dispatch priority plus low water flows at Mendoza hydros. Quarter-on-quarter, power generation decreased mainly because of Genelba's old CCGT overhaul. The availability rate in the fourth quarter of 2018 was almost 98%, with installed capacity of 4.8 gigawatts. That includes the recently acquired Ensenada Barragán similar to the availability achieved in the same quarter last year and also compared to the Q3 2019. Thermal availability in Q3 also -- Q4, sorry, also reached 97% similar to the year of 2018, but a little bit lower than the Q3 of this year -- 2019 cost of Genelba's overhaul. On this new section, as from January of this year, legacy power generation pricing scheme was changed to 1 in pesos and sets up an automatic update factor that follows CPI and PPI, being the latter more correlated to the dollar. Also this new spot pricing changes, the capacity payments, reducing them and making it more variable compared to the previous scheme of Resolution 1, a way to make it more flexible, in line with the government's intention to lighten up power divestments but also seeks to protect the highest load factor units in the grid. Hence, introduces an additional remuneration in the hours of high thermal dispatch. To understand these changes, please turn your attention to the chart on Slide 8. Assuming an FX of MXN 60 per dollar, the thermal units with the highest load factor, especially during this so-called high demand hours in peak or off-peak season, will end up building an average capacity payment of the year a little bit higher than the previous scheme. On the other hand, should the unit dispatch be lower than 70%, power remuneration is reduced by $1,000 per boe month, and it gets wider if the load factor is below 30%. Pay attention that load utilization units now get an average of $3,150 per megawatt per month, which is coincidentally the average back in 2015. Regarding the expansions in the pipeline, we are currently at 99% completion of the closing to combined cycle of the 383-megawatt at Genelba Plus, which began in October 2017. The before and after is remarkable. On Slide 9, you may appreciate how it looked like 30 months ago in October 2017, right before the expansion works began and the great difference compared to now as seen on Page 10. We are preparing for the [indiscernible] run the CCGT commissioning tests before reaching CAMMESA'S final approval scheduled on June 2020. Hence, Pampa will become the largest operator of combined cycles in Argentine grid with 4 of the 25 combined cycles installed in the country, thus contributed to generate the least possible impact to the environment. Also, as you can see on Slide 11, a few days ago, we kick off with the expansion works to CCGT at Ensenada Barragán, a 280-megawatt project at the [indiscernible] of Buenos Aires City. Hence, once finished, will become one of the most efficient and largest thermal plants in the country. We estimate COD by the end of 2022, which makes our PPA for 10 years with CAMMESA. The capital required is fully pre-financed, not representing an issue for the expansion project. As you can see on Slide 12, during Q4 2019, the oil and gas segment, we posted an adjusted EBITDA of $20 million, 60% lower than in Q4 2018, mainly because this is still reflecting the downward trend in the gas oil prices driven by CAMMESA, lower oil prices resulting from the FX freeze discretionally set by the government and drop in the international oil reference prices, the increasing activity at the Mangrullo high gas exploration and transportation costs and lower oil production, partially offset by 15% higher production of gas motivated by integral -- vertical integration with power generation, lower royalties and peso-linked expenses. EBITDA quarter-on-quarter decrease was similar mainly explained by the lower gas prices and production as Q4 is mostly off-peak months, partially offset by less deval impact on the peso- linked expenses as well as the slightly higher oil production. Our overall production in Q4 2019 increased 12% year-on-year, but quarter-on-quarter decreased 4%, reaching to nearly 48,000 barrels of oil equivalent per day, of which 90% is composed by natural gas. On the oil side, production level year-on-year decreased 8%, reaching to 5,000 barrels of oil per day; but quarter-on-quarter, it grew 4% mainly because of the lower well completion rate at El Tordillo and lesser drilling activity at Río Neuquén offset by production resuming at Chirete since last November as well as shale oil contribution from Rincón de Aranda since last August. During Q4 2019, the crude oil prices decreased year-on-year by 17%, but slightly increased quarter-on-quarter, reaching to $50 per barrel, mainly explained by the government imposed freeze in prices in pesos for domestic oil until November 2019, selling at an average of 20% discount in addition to brand prices falling in Q4 2019. 55% of our oil production is Escalante heavy oil, which is sweet and given the current clean fuels trend, narrows the Medanito prices. Please turn to Slide 13, where we want to explain in deeper detail the situation in gas. Regarding the gas production, the quarter reached an average of 256 million cubic feet per day, 15% year-on-year increase, but decreased 5% quarter-on-quarter, mainly explained by the increase in El Mangrullo, a block in which evacuation infrastructure was expanded accordingly, given the outstanding productivity and upside potential, and also keep in mind that it's fully owned by us, holding operator share as well. In Q4 2019, El Mangrullo reached 151 Mcf per day of gas production, 53% higher than Q4 2018 and contributed almost 60% of our overall gas, ranked fifth highest producing block [indiscernible] It is also remarkable that 10% of Q4 2019 production corresponding to shale gas from the completion of 2 horizontal wells in El Mangrullo block in last August. These positive effects were partially offset by the lower production in other gas-bearing blocks because of the lack of visibility on sale prices, which impacts on the breakeven equation. Prices have been going down due to the excess of supply, driven by the restructuring of shale development, specifically backed up by the floor design of the unconventional gas plant as well as the local demand drop due to the seasonal and inability to pass-through actual prices to the consumers. This effects negatively impacted on Rincón del Mangrullo block with lesser drilling and natural decline and a minor decrease in Río Neuquén and Aguaragüe blocks. In the case of Chirete, it gets a similar production due to the completion of 2 horizontal type wells in the last September. During fourth quarter of 2019, our accrued weighted average sell price of gas $2.6 per MMBtu, roughly 25% lower year-on-year and quarter-on-quarter, mainly due to the reduction on the reference price for gas-fired power plants and the tenders on an interruptible basis conducted by CAMMESA, as well as the demand seasonality compared to Q3. Since September, the drop in CAMMESA reference price reflected the off-peak season, whereas last winter sale price was 37% higher in dollars. This effect also impacted negatively the commercialization in industrial segment and other spot prices. The fuel procurement -- self procurement for our power generation helped to recover the gas production levels, testing most of our production there. So it did not improve the pricing. We covered our breakeven costs and it helped to have a certain offtake especially during the weak demand periods and to monetize some synergy between power and gas. Although our largest power plant, Genelba was under program maintenance during the one month in Q4 2019, export biding volumes to Chile increased and also we have made use of our bids awarded to CAMMESA tender. Moreover, since December 30, 2019, the gas supply management for power plants, except for Energa Plus was restored to CAMMESA. Therefore, today, we are selling roughly 70% of our production directly to CAMMESA. As you can see on Slide 13, the average price -- gas prices that we are recording to demand have been plunging since second half of 2018, falling to the lowest point in years and hardly recovering the country's marginal breakeven costs. Winter season pick up prices, but as evidenced in the past, the domestic production was not enough to cover the domestic gas demand needing to cover 15%, and during the worst times, 30% of the gas consumed with gas imports from LNG and Bolivia at much higher prices than those paid by 2 domestic producers. We find that a significant reduction in the uncertainty overhanging the gas sector, which is so critical for the country is paramount. We are concerned about the lack of predictability faced by the business, which has caused the activity to be at historically low levels. This added to the fact that at present more than half of the national gas production comes from unconventional fields, which the decline rate is much higher than a conventional, makes us feel that if the negative trend in reserve development is not reversed, the country might fall again into growing need for gas imports with a resulting negative macroeconomic impact. We believe CAMMESA understands this. And since February tender CAMMESA changed the approach by adding a 30% deliver or pay binding condition, raising the price at wellhead at an average of $2.50 per MMBtu at Neuquen Basin. As we can see in the chart on Page 14, this is a huge step compared to the previous situation where nonbinding tenders were getting bids at an average of price low as $1.73 per MMBtu, which were detrimental to the development of domestic gas. Before I move on from the oil and gas, I wanted to give you a quick update of our E&P operations. We closed the year 2019 with 57 wells drilled and 51 completed. In the case of gas wells, more than 90%, we're targeting unconventional gas. Tight gas wells targeting simultaneously 2 tight sand formations were drilled at the Mangrullo as well as workovers to formally Mulichinco wells targeting to another formation called Agrio, which is very important for the maintenance of the record production in the block. We also drilled and completed 2 horizontal wells in Sierra Chata as we said, hoping to sustain the production. During 2019, we began derisking our resources in Vaca Muerta formation. In the gas window, we drilled and completed 2 wells at Mangrullo each with horizontal extension of 8,000 feet completed with 35 fracking stages, which resulted in an outstanding joint initial gas production of more than 30 million cubic feet per day. Today, it's around 20 Mcf per day. Moreover, a vertical pilot well was drilled in Sierra Chata and completed with the first pilot vertical well and its horizontal branch with an extension of 7,000 feet at Rincón de Aranda, completed with 27 fracturing stages, resulting in initial flow of 1100 barrels per day, in line with expected rate. As a result of this exploration campaign, 8% of our production in 2019 came from shale and oil, a major milestone for our businesses, which we expect to increase in 2020 by completing the remaining two wells drilled last year and if the context improves with new drillings. The remarkable results allow us to certify [Technical Difficulty] reserve from Vaca Muerta Formation for the first time in Pampa's history, even with a year-on-year growth in production. We also recorded once again a 1.3 positive replacement ratio and an average life of roughly 8 years, with proven reserves reaching 135 million barrels of oil equivalent, being 90% gas. In terms of the net income attributable to the owners of the company, Pampa reported a consolidated gain of $9 million in the fourth quarter; whereas in the same period of 2018, $289 million was recorded, mainly explained by the lower accrual of losses from FX difference and inflation exposure as a result of the change in the functional currency as I explained in the beginning of this call, lower gains from affiliates and higher loss from the impairment of fixed assets. Finally, moving to Slide 17, we must highlight the resilient balance sheet of the company 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 narrow window in the international markets. We continue redeeming lending facilities, highlighting that in 2019, paid at maturity and precancel roughly a total of $366 million. After Q4, we paid down $25 million more. Therefore, the outstanding maturity for 2020 is $76 million. Despite the challenging situation in Argentina, we continue receiving support from the capital markets, we recognize Pampa's credit extending the maturities by the issuance of a 10-year international bond for $300 million back in July in addition to new banking debt in pesos for $74 million. Therefore, the consolidated gross debt, including affiliates at ownership remained at $2.4 billion, $25 million lower than September 2019, mainly because of an offering purchase of own bonds and loan amortization. Consolidated gross debt is 93% denominated in U.S. dollars, same as the last quarter closing, bearing an average interest rate of 7.7% and 75% is placed at the parent company. The average life remain around 5.4 years. Consolidated cash amounted $719 million, which is higher than the $699 million in September 2019, due to the lower CapEx and collection of credits. Consolidating a restricted group net debt remained unchanged at $1.7 billion and $1.2 billion, respectively. Moreover, net debt-to-EBITDA remain low at 1.8x at consolidated level and 2.2x at restricted group. During 2019, we also continued with the company's share buy program started almost 2 years ago buying back further 10% of the outstanding capital stock at a considerable discount to the intrinsic value and 5% of the notional value of the company's bonds. Based on our conviction on Pampa's financial strength, which includes a sustainable generation of funds, strong cash position and comfortable debt maturities profile, this allowed us to undergo the volatility and uncertainty with the least impact possible and leverage our position to analyze acquisition opportunities if they arise. Meanwhile, we have also analyzed the available alternatives for cash allocation and have concluded that the risk return equation favors the investment in our own assets. Since the first buyback program, we have acquired a total of 18 million ADRs. That is 22% of the initial capital stock of 83 million ADRs. Currently, excluding capital reductions and shares held in treasury, the outstanding capital amounts to 65 million ADRS. Also, Pampa's Board approved a share buyback program for $27 million with a price gap of $13 per ADR. So this concludes our presentation. Now I will turn the word to the operator, who will open the floor for questions. Thank you.

[Operator Instructions]. Our first question comes from Bruno Montanari with Morgan Stanley.

I have two questions. First, I believe the company prior to this oil downturn was considering perhaps to move a little bit more to oil investments, taking advantage of the better fundamentals. Now, I think with the decline in the commodity, probably that no longer makes sense. So I was wondering if we could get an idea of what is the priority for capital allocation, at least in 2020, which would be super helpful. And then second question, I think the company has done a very good job on executing the buybacks. It's not only announcing, but following through with it. But how much of the total cash position would the company be willing to deploy on the buybacks, say, over the next 1, 2 years?

Bruno, Gustavo Mariani speaking. Thank you for the question. Regarding the first question regarding our oil investments going forward, we did our first shale oil well in Rincón de Aranda late last year and it started -- and we started production early this year with excellent results in the same way that we did our first 2 wells in the shale formation in Vaca Muerta to the gas window in El Mangrullo also in the second semester of last year with excellent results as well. Our idea initially was to do another 2 or 3 exploration wells in Rincón de Aranda, that is on the oil window this year. We are operators of Rincón de Aranda, but -- and we are partners with Total. And we wanted to do 2 or 3 more wells this year, but Total was way more conservative than us and didn't want to go forward. So the decision...

Sole risk.

Yes. And we didn't want to do it on a sole risk basis. So those wells has been postponed. So currently, we don't have any new wells to be drilled this year on the oil window in Vaca Muerta. Actually, we are very -- we are not planning new wells on the -- on gas either this year because of the price environment, and we will look forward to more certainty and to a price signal from the government going forward. Otherwise, we don't have any new wells to be drilled either in oil or in gas. We have a stock of gas wells to be completed, that we may do so as the winter approach in Argentina, but it will depend also on the pricing scenario, which we are -- we have currently uncertainty. So a very modest capital deployment on the E&P business going forward this year. And the same can be said about power generation, where we are finishing -- in a few months, it will start operation, the new Genelba plant, the new combined cycle at Genelba, that Lida mentioned. That is almost 95% already -- everything paid. There's a small amount of money remaining to be paid to complete that expansion. That will provide new EBITDA in the second semester of this year. The decision that we have taken together with YPF is to move forward in -- starting the closing of the cycle of Ensenada Barragán which is a subsidiary, 50% owned by each of us. It's a project that requires about $200 million of investment. But with the cash position, the company already has, that is $120 million plus, the cash generation of the company going forward, that CapEx is by this subsidiary is already -- is fully funded. So it will not require a capital deployment from Pampa or from YPF. So all in all, in terms of CapEx, we're going to be very conservative this year until this scenario -- there's new scenario. Regarding -- sorry, Lida?

Buyback.

Yes, the buyback. You ask how much of the cash we're planning to use, and I don't have an answer to that question because we will monitor as the year advances. We feel that the company is producing a healthy free cash flow. So using part of that free cash flow to buyback our stock or for our debt depending on price movement is a wise thing to do. How aggressively, it will depend on pricing and on the scenario that we see in the future. So unfortunately, I cannot give you -- I have no figure, but it's something that we will monitor, and we will continue as long as we feel comfortable.

Our next question comes from Jamie Nicholson with Crédit Suisse.

I have two questions. My first relates to the debt that you have bought back. And I'm just wondering if that's accounted for on your balance sheet in financial assets at fair value or if you've canceled the debt? That's my first question. And then my second question is, if you could update us on any payment delays you're seeing from CAMMESA if you're seeing trade receivables increasing or how you're monitoring the payment from the CAMMESA.

Jamie, so regarding the bonds that we repurchased, total, we have $ 84 million face value that they are net in our loans that it's shown in the balance sheet. We put a footnote as well. So they're net. They're not canceled, but they're net. So there it's lesser debt for face value, okay? Then regarding the payments delays, there's a thing -- tomorrow, I think we have the January maturity of the transaction for power and for gas as well. During 2019, we've been selling the gas through our facilities, through our power generation. Very little was sold directly to CAMMESA. So the days were like very similar. But now we have to see power generation, we'll have higher delays than gas or vice versa. Today, power generation is carried out at 75, 70 -- a little bit above 70 days of delays. This is as of the December transaction.

Sorry, just one correction. It's not 70 days of delay it, 30...

Yes. 30 days, yes.

…30 days of delay. Because CAMMESA paid...

42

At 42 days, that's...

The rule.

That's the rule that's been in place since the '90s. So it's 30 days of delays that CAMMESA is paying currently compared to last year, that was...

8 days. 8 days, yes. So that's it. What we've been hearing from gas producers that they sold to CAMMESA directly last year, that they haven't been collecting in 30-day delay. They have been collecting a little bit more. So we'll see. So far, right now they're part and parcel.

Our next question comes from [indiscernible].

Just one question regarding the oil and gas business. You already show a very good production in terms of natural gas, maybe from some works made on Mangrullo over the year and also in 2019. What's your expectation on production for the CR? Is your expecting also reduce some level of CapEx?

Thanks for the question. No, as I tried to explain in my first answer, because of the lack of visibility and the uncertainty, especially today, after these events that we all know about, we also have uncertainty about what's going to happen with the oil price in Argentina. But what concerns us more because 80% of what we sell is natural gas is uncertain environment regarding natural gas. And we -- since we are not drilling new wells and we don't know whether we will put in operation the stock of wells that we have already drilled, but we have not completed, today what is expectable is that our production will decline...

End naturally.

Yes, that was the natural decline of production for the year going forward. The situation in the industry is that all the players are in the same situation that we are. So that nobody is drilling new wells. And although we don't expect a major impact this winter, it will certainly have a high-impact on 2021 if this situation is not reversed. So we hope that the authorities -- yes. I know that they are aware of this situation. They understand that now total production in Argentina, more than 50% comes from unconventional production, which, as you know, declines much more quickly than conventional production. So with no new investments in the industry, the local production of natural gas sooner or later will start to decline at a higher rates that have been -- have declined in the past when we faced this problem back -- I don't know, 2000...

10 years ago.

Yes, 10 years ago. So I hope that [indiscernible] that we are not going to face -- we're not going to repeat exactly the same problem, and I hope that the authorities react as soon as possible. But that's as much as I can tell you. And we have -- as I said a very uncertain scenario.

Our next question comes from Carolina Carneiro with Crédit Suisse.

Just wanted to know if there are any updates in regards to the discussion for the VAD of transmission unit tariff update after the tariff fees was set last December? Do you have any time line or possible calendar for the discussions of the future tariff increase?

No, there's no calendar at all about this. It's -- and when we speak with government official at the technical level, they are all aware that they need to face -- they need to get rid of the freeze of tariff as soon as possible. Because the country also face a fiscal restraint. So with this high inflation environment, the freeze of tariff is very painful for the -- and it will soon impact the fiscal account. But it's the politicians who take the decision. And so far, they have announced that we have a freeze of tariff for at least not -- sorry, for up to 180 days. But yes, since December, but we although we -- when the law was published with this up to 180 days of freezing of tariff, we felt very optimistic that, that they were aware of the problem and they would try to stop the freeze sooner than 180 days. Today, we are not that optimistic, and we think that we don't expect any news on the tariff front until June of this year.

Our next question comes from Alejandra Aranda with Itaú.

In the past, we had the government requesting those endless excels to fill out with information in order to be able to figure out what to do in policy terms. At this point, have you been approached by government officials requesting that kind of information from you? Are they moving ahead? Or is it just standstill until the debt is solved?

We haven't been approached with those kinds of requests, no, not at all. So yes, I think solving the debt issue is the number one priority today. And -- but it's not that the rest of the government is on paralysis until that is solved. I'm sure that the energy team is working on explaining the situation to their bosses and making proposals. But so far, yet we haven't heard of any -- they haven't expressed any decision regarding these matters.

[Operator Instructions]. Our next question comes from [indiscernible]

Just a question regarding the use of cash. As you are making some share buyback programs, are you also expecting to back to the bond buybacks? Or at current levels, do you believe that we will wait a little more?

Bond buyback. So we are not holding up on bonds back.

Yes. The question was whether we will buy back bonds again, again it will depend on prices. We bought this $85 million -- $84 million of face value of debt, I think it was in September -- it was in August of last year at an average price of $0.75. After this week's event, prices have fallen, not yet reached that level. So again, we will monitor the situation, but we don't disregard that we might do bond buyback if prices fall again.

Our next question comes from Chris Dechiario with Marathon.

Just wanted to know if there was any update or if you've had any maybe further discussions with government authorities, let's say, this year relating to sort of a future disposition of the PPAs, any renegotiation of the PPAs, whether that's the 287s, the Resolution 21s, the 220s, just anything that may have transpired on that front this year so far? And also, if your outlook for those has changed at all?

Our vision has not changed, and I think we have been saying for a while -- for a long time, the same thing is that is basically that, making changes to those PPAs on a unilateral basis is going to be very -- yes, they're very painful or will have several implications down the road that are going to be very bad for Argentina. So as you know, since -- basically since 2001, because from the crisis of 2001 until 2010, there was no new installed capacities in Argentina. Since 2010 until today, all the new installed capacity was done through PPAs. The country because of the installed capacity of the build in the last few years and because of the recession and the hike in tariff, the demand is not growing. So currently, Argentina doesn't need new capacity. But if things reverse sooner rather than later, and also keep in mind that doing a combined cycle, it's a project that takes at least 3 years since the moment that you start thinking about it. So at some point, in the next couple of years, Argentina will need to begin thinking about new installed capacity in power generation. And if they touch the unilateral PPAs, so they will have problems attracting the private sector to do those investments. So I think that despite all that has been talked about last year, I think that this administration understands this which -- that means that PPAs are untouchable? No, it will depend on the degree of the macro deterioration in Argentina, what happens with the debt restructuring, et cetera, and et cetera. So we believe that the government will do an effort to maintain the PPAs without touching them, but it will depend on how it goes with the macro situation and the degree of the deterioration basically.

Our next question comes from Antonella Rapuano with Santander.

I just wanted to know on the generation segment, 2 things. If you could give us some guidance of the impact of the price cut and the specification of the legacy energy from last February, how much that would be the impact in EBITDA in an annual basis, if you could give us some guidance on it. And the second question is on the Ensenada Barragán CapEx. I recall you said it's about $200 million. But I was wondering if this is total CapEx or this is Pampa CapEx? Or is $200 million includes YPF, also, a part? And also, when do you plan to move forward with these works in Ensenada Barragán?

Okay. The works at Ensenada Barragán, we have taken the decision a couple of weeks ago, and they have already started. It's less than $200 million, the total CapEx, and as said already, fully financed. So no -- Ensenada Barragán will not need capital...

Further capital.

Yes, further capital from the shareholders. And the first part of the question?

Generation. The legacy...

Yes. The legacy will be something -- the impact for us, we estimate that will be around $30 million of less EBITDA in 2020. That would -- and obviously, it will depend on the availability of the equipment, the availability on the requirements of -- yes, it will depend on several things, also how we move the inflation vis-à-vis the official exchange rate, et cetera and et cetera. But we are assuming something around $30 million -- less than $30 million.

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

Thank you so much for joining our call. Please take care. Anything you may need, just contact us, we are more than available for you. Thank you, and have a good day.

The conference has now concluded. You may now disconnect.