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…

[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.