Pampa Energia SA (PAM) 2018 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for waiting. At this time, I would like to welcome everyone to Pampa Energía First Quarter 2018 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 call over to Ms. Lida Wang, Investor Relations officer of Pampa Energía. Ms. Lida, you may begin the conference, ma'am.

Good morning, everyone, and thanks for joining our conference call. Since this quarter, we are only presenting Pampa, and, as you may know, Edenor's conference call took place yesterday morning, so we will briefly review key figures and news per business segment and head to the Q&A. As you may know, you can always call me or Margarita or anyone on our team for more details on the results or any doubts that you may have.

In order to objectively report the financial performance of each business segment as from 2018 and for the comprehensive periods, Pampa's corporate expenses that need to be reported under holding in others segment will be redistributed among the operating segments. That is, power generation, oil and gas, refining and marketing and petrochemicals. Also, in spite of the divestment close after the Q1 '18, we are not concealing discontinued operations figures in the actual and comparative figures.

So as you can see on Slide 4, beginning with adjusted EBITDA, in the first quarter of 2018, we recorded an EBITDA of ARS 7.7 billion, 151% more compared to the EBITDA of ARS 3.1 billion in the same period of 2017, though actual and comparative quarters do not consider the figures from divested assets. The large variation was due to increases in ARS 1.3 billion in power generation, ARS 2.1 billion in electricity distribution, ARS 474 million in the oil and gas segment, ARS 55 million in refining and distribution, ARS 35 million in petrochemicals segment and ARS 616 million in holding and others plus intersegment eliminations.

The higher EBITDA of ARS 1.3 billion at our generation segment was mainly driven by the update on -- in the legacy capacity remuneration, which currently is 77% of our total 3.8-gigawatt installed capacity. During the entire Q1 2018, the legacy capacity was billed under the new scheme with full fare remuneration, while in the Q1 2017, only February and March were billed under the minimum remuneration, and January 2017 was in peso denominated under the former and lower pricing scheme peso -- pricing scheme.

Peso devaluation also positively impacted our EBITDA since our entire segment invoices in dollars, in addition to increased power generation performance by 8% year-on-year, mainly contributed by Loma de la Lata new gas turbine #5, online since August last year, and the 15 million -- 15-megawatt encasement at the combined-cycle steam turbine. That current -- that turbine originally set to guarantee 178 megawatts. But because of the technical problems in the turbines in the world back in 2010, the contractors recommended by then to modify them, being finally restored as of January of this year.

Also, the outperformance was due to the higher dispatch at Pichi Picún Leufú hydro power plant and Güemes and Piedra Buena thermal power plants, plus the new power plants under PPAs we commissioned last year under the fast track tenders. The increases were partially offset by lower dispatch at the Plus open-cycle turbine in Genelba power plant and lower dispatch at the hydros Los Nihuiles and Diamante power plants because of low water flow.

Also, we managed to maintain an outstanding availability rate of 97% with increased installed capacity, which is higher in comparison with the 80% achieved in the same quarter of last year mainly because of Piedra Buena's recovery from last year's outages from the maintenances.

Before I move on from generation -- power generation, I wanted to give you a quick update of our expansion projects.

We began in Q4 last year with Genelba's closing to combined cycle for 383 megawatts as soon as we got awarded. And as you can see in the picture, we just finished setting the ground and about to start with the proper construction. This line will be operating as open cycle in Q2 2019 and as a combined cycle in Q2 2020.

In the renewal front, we've just begun with the construction of Pampa Energía and De la Bahía wind farms for 106 megawatts, which is due second quarter of next year. Remember that these 2 wind farms' electricity will be sold to large users through private PPAs, targeting with need to comply with the national renewables law. And regarding to the Corti wind farm, we have everything ready to begin operations, on time with the committed [COV]. Again, we are proud of achieving this milestone of commissioning our first wind farm at Pampa, a significant one for the country, and also sticking with the committed date, as we did in the other projects, remarkable compared to other peers' projects.

Moving on briefly on the distribution segment, which is -- was previously reviewed by Leandro yesterday in Edenor's earnings call.

During the first quarter of 2018, the EBITDA increased by ARS 2.1 billion compared to the same period of 2017 mainly because of the full fare billing on the distribution tariffs granted within the Comprehensive Tariff Review, the RTI, as from February 1, 2018, plus the cost variations recognized in August 2017 and February 2018 of cumulative 25%. Additionally, as from February 2018, Edenor started invoicing 2 out of the 48 installments generated by the gradual application of 2017's tariff increase. The sales increase is also explained by the growth in SMEs and industrial demand, which pay higher tariffs rates compared to residentials, partially offset by the decrease in residential consumption mainly due to elasticity demand, to -- and the -- it's probably because of the tariff increase and finally because of the temperature.

In line with the actions for energy recovery, we experienced a 3% increase of registered users year-on-year mainly because of installation of the special inclusion meters to foster consumption self-management and integration of users having a non-regular income.

Losses showed a slight increase, reaching 16.3% in the first quarter of 2018 compared to 16.2% for the same period of 2017, but its associated costs increased by 147% year-on-year due to the application of the new seasonal price tax, by the way still subsidized compared to the full cost of generation.

In the oil and gas segment, in the first quarter of 2018, we posted an EBITDA of -- for continuing operations of ARS 1.8 billion, 36% higher than the Q1 2017. This variation is mainly due to the improved oil and gas prices in U.S. dollars and Argentina peso as an effect of the devaluation, partially offset by lower crude oil production mainly because of the service termination at Medanito La Pampa block by the end of last year, October, in addition to higher lifting costs because of the effect from the peso devaluation over the dollar-denominated cost. The EBITDA considers total OldelVal's EBITDA adjusted by our ownership, 23.1%, which contributed ARS 29 million.

Our production in Argentina in Q1 2018 declined 88% -- 8%, sorry, compared to Q1 2017, reaching 45,900 barrels of oil equivalent per day composed by 247 million cubic feet per day of natural gas, 90% of total production, and 44,700 (sic) [4,700] BOE per day of crude oil production that is 10% of the total production.

The gas production in Q1 2018 remained stable year-on-year; also quarter-over-quarter, where in Q4 2017, gas production, excluding the divested assets, was 244 Mcf per day. This was mainly due to the increase in the drilling activity at El Mangrullo, Río Neuquén and the shale development that we are doing in Parva Negra Este block, offset by the natural decline of the block and lower drilling rate at Rincón del Mangrullo block.

During Q1 2018, our weighted average sales price was $6.3 dollars per million BTU, of which 23% was contributed by the Plan Gas subsidy. This price is slightly higher than the same period in 2017 mainly because of the greater incremental production recognized under the Plan Gas second generation, which considers declining rates to the baseline production, unlike the Plan Gas for unconventional gas. That's the new Plan Gas. Keep in mind that Pampa's Plan Gas second generation ends on June 2018 this year. After that, the unconventional production at our fields in Neuquen Basin will qualify the new Plan Gas, of which the incremental amount defined in the new scheme is lower, and so it's contribution to the pricing, but it's offset by the increasing price paid by the demand, especially from residential and gas for cars as they are converging towards import parity.

In the oil side, if excluding the divested assets, the decline in production of 4,000 barrels of BOE per day respond mainly to the end of Petrolera Pampa's service Medanito La Pampa block and, in a lesser extent, to the gradual decline in the mature El Tordillo oilfield block in [Sarcosa] Basin.

During Q1 2018, the crude oil sales price increased by almost $4 year-on-year, reaching $58.5 per barrel because in October 2017, the domestic price fully converged and moves with the international price of barrel.

During the first quarter of 2018, we continued with our investment budget plan for the year of 92 wells to be drilled and 83 to be completed, meaning, in both cases, more than 50% targeting unconventional gas. As of March 2018, 13 wells were drilled and 17 were completed. Our focus is the development of blocks with tight gas reservoirs, which are Rincón del Mangrullo, El Mangrullo, Río Neuquén and Sierra Chata. In the tight gas blocks, during the Q1 2018, we drilled 5 wells and completed 6. Hence, Q1 2018 production run rate kept very similar to the past quarter performance. In that sense, YPF our partner in the blocks Rincón del Mangrullo and Río Neuquén already submitted to the Neuquén authorities the investment plan as required by the new Plan Gas. And in the case of Río Neuquén blocks, the plan was approved by the provincial authority. Regarding the concession's extension with Sierra Chata and El Mangrullo blocks, we expect to conclude the negotiation for licensed station -- extension in the short term, so we'll be joining the new Plan Gas and the committed investment approved by the provincial authorities. Once all investments plans are approved, they need to be validated by the Ministry of Energy.

In addition to our shale activities, in Parva Negra Este block, we -- a block in which we drilled and completed a well to Vaca Muerta with 2,500 meters of horizontal branch, as of April, the production of that well is above 6 Mcf per day, which is evacuated for Sierra Chata for a pipeline, producing steadily and with potential for growth. The accumulated production is 1 Bcf so far. Moreover, in 2018 April, we requested the automatic 1-year extension as it is provided in the exploratory license.

Moreover, in April 4, we closed the sale to Vista of Pampa's oil-bearing blocks announced back in January 2018. The final price reached almost $399 million paid by Vista upon the closing. The divested production reported for the quarter dropped 4% to 19.8 BOE per day due to the liquids production decline because -- but that was offset by the gas production increase. And the adjusted EBITDA for these divested assets posted ARS 814 million in the Q1, 24% higher than the Q1 in 2017 mainly due to the better oil prices and the devaluation and partially offset by lower oil production and the end of the Planned Gas subsidy for gas production in PELSA as it expired on December 31, 2017.

So with the proceeds of this transaction, we wanted to align our capital to the strategy -- our strategy and develop our tight and shale gas resources, which we see we were with more -- much more potential because as long as the country continues importing LNG to cover its consumption, gas margins are implicitly protected by the import parity as it is the marginal price to cover the gas supply deficit.

Also this quarter, we managed to settle the conflict that EcuadorTLC, our fully owned subsidiary established in Ecuador, held with other members of the Bloque 18 Consortium against the government of Ecuador. In exchange of not pursuing an award, the consortium got in their favor that -- they got in their favor from [un central] court, they agreed -- Ecuador agreed to waive fiscal and labor claimants -- claims to Ecuador TLC amounting to more than $100 million and paid $54 million before June 2018. So far, we already collected $34 million.

Finally, in oil and gas segment, on April 3, the Ministry of Energy, through Resolution 97, approved the procedure for the cancellation in 30 equal installments, consecutive installments, for the compensations owed under Plan Gas until Q1 2018 payable as from January 2019. Pampa holds $148 million approximately in credits. And in May 2, we granted consent and acceptance to the resolution.

The refining and marketing segment for continuing operations, which is basically Refinor's EBITDA adjusted by 28.5% ownership, contributed to Pampa ARS 53 million in Q1 2018 compared to EBITDA loss of ARS 3 million recorded in the same period of 2017.

On May 9, the company closed the sale of -- to Trafigura of the Bahía Blanca refinery, the Caleta Paula logistics plant, the lubricants plant and the gas station network operated under Petrobras branding. Thus, we no longer have the refining and marketing business as we used to do in controller basis.

The latter 2 will be [gradually] -- will be transferred to Trafigura rebrand -- as Trafigura rebrands then with Puma Energy trademark. The price after adjustments amounted to $125 million, which is on top of the sale of 3 parts where Pampa-owned gas stations operated for a total amount of $41 million. Pampa also transferred personnel, including corporate staff and avoids to divert capital for rebranding and compliance with clean fuels regulatory CapEx.

The divested assets' sales volume of refined products totaled 452,000 cubic meters in Q1 2018, 6% lower than the same period 2017 mainly due to the lower load factor in the refinery, lower imports of diesel, partially offset by higher sales of asphalt and IFOs, I-F-Os, due to the market activity and prices' movement. The adjusted EBITDA posted ARS 232 million for these divested assets in Q1, 180% higher than year-on-year mainly because of price improvement in Argentine pesos, thanks to the end of the producers' and refiners' agreement, partially offset by higher cost of diesel imports and crude oil as raw material.

In petrochemicals, we posted an adjusted EBITDA of ARS 49 million during the first quarter of 2018, ARS 35 million higher compared to the same period in 2017 mainly due to the high international pricing reference mostly denominated in U.S. dollars that increased at a faster pace than operating and raw materials cost denominating in U.S. dollars as well. The adjusted EBITDA does not consider a contingencies update with customs of ARS 171 million and excludes the gain from the penalty due Oil Combustibles due to its failure to deliver raw gasoline.

In operating terms, total sales volume of our petrochemicals segment decreased by 30% in Q1, totaling 87,000 tons compared to the same period 2017. This decrease mainly responds to the halt in the refining plant as Oil Combustibles is not delivering the raw materials of virgin naphtha that they closed, affecting not only the lower production of reforming products for domestic sales but also for export, in addition to the lower export sales for -- of octane, followed by styrene products and the decline in styrene product demand mainly because of the international prices' increase.

Finally, our holding and others segment presented an adjusted EBITDA of ARS 988 million in the first quarter of 2018 compared to ARS 351 million in the same quarter of 2017. This is mainly due to higher income from fees and the adjusted EBITDA by ownership adjustments from TGS and Transener, partially offset by higher third-party fees and labor costs.

TGS EBITDA, adjusted by our indirect stake of 25.5%, contributed to Pampa ARS 690 million in the quarter for an implicit total of ARS 2.7 billion, significantly higher compared to the same period of 2017 mainly due to the tariff increase resulting to -- from the RTI or gas transportation business, being implemented 181% cumulative, increasing April and December of 2017. That is, 2 out of the 3 installments plus the PPI adjustment. Moreover, the margin improvement in the liquids processing segment, which was due to higher prices as well as sales volumes, contributed to the EBITDA's performance in TGS.

Also, on March 27, after the approval of several ministers -- ministries and the National Congress, the National Government executed the Integral Renegotiation Agreement for the license signed by TGS on March 2017, therefore ending the RTI process initiated back in April 2016. Effective as from April 1, the ENARGAS passed the last installment to the tariff increase, which represents a 50% rise in the tariff schemes applicable to TGS' natural gas transportation utility and the Charge for Access and Use that involved a 7% increase for the final users. Moreover, on April, TGS was granted a concession to build and operate a gathering gas pipeline crossing different blocks in the Vaca Muerta formation operated by well-known producers such as Total, Pluspetrol, Shell, Exxon, YPF, PAE and, obviously, us. Additionally, TGS will build and operate a gas conditioning plant at the end of the gathering pipeline but before the injection to the main pipeline. The Vaca Muerta project will have 57 miles long pipeline with a transportation capacity of 11.3 Bcf per day, extendable -- 1.3 Bcf per day extendable to 2 Bcf per day. The conditioning plant will have an additional -- an initial capacity of 1.7 Mcm -- 177 Mcf per day extendable in modules until we reach the full capacity of 2 Bcf. The first stage of the Vaca Muerta project will require a $250 million investment and will take 19 months to be completed.

In the case of Transener, its EBITDA adjusted by our indirect shareholding of 26.3% contributed ARS 311 million in the first quarter of 2018 from an implicit total of ARS 1.2 billion, 23% higher than the same period of 2017 mainly explained by the application of the tariff from the RTI in only one installment as from February of 2017 and the cost variations update in August 2017 and February 2018 of 20% -- 24% cumulative. The next update for the costs variation is due on August 2018.

Moving on to last -- latest news in the segment regarding collapse of former Petrobras Argentina, we obtained all the pending approvals needed to execute the merger. And yesterday, we announced the share exchange of the outstanding 10% of Petrobras Argentina shares into Pampa. Therefore, Pampa will issue 102 million out of the 246 million ordinary shares needed for the 2 mergers. Remember that the second merger collapsing Petrolera Pampa and some power generation companies, such Loma, Güemes and the hydro holdcos, was approved by shareholders last April 27. Therefore, once the second merger is duly registered before the Argentine Public Registry, the share capital will be composed by 2,083,000,000 shares or 83.3 million ADRs of Pampa Energía.

Moreover, in light of the market turbulence worldwide and in Argentina and, therefore, the divergence between the assets' implicit and market value as well as that we'll take into consideration the strong cash position and fund availability of the company that it holds today, the board on April 27 approved the repurchase of owned shares up to $200 million, being the maximum to be bought 10% of the share capital and the maximum price of ARS 50 per ordinary share or $60 per ADR. As of today, the company repurchased 851,000 ADRs at an average price of $53.02 per ADR. Thus, the capital of Pampa, the outstanding shares, net of repurchases, is 2,061,000,000 ordinary shares. Edenor and TGS followed this, and they also have a share repurchase program of $40 million and ARS 1.7 billion, respectively.

In terms of net income attributable to the owners of the company, Pampa presented a consolidated gain of ARS 3 billion in the first quarter of 2018 compared to ARS 1.9 billion in the same period of 2017. This is mainly explained by the better pricing of our results -- as a result of tariff reviews, increases in remuneration and FX effects, partially offset by the higher operating cost and the performance of these financial instrument.

Finally, moving on to news related to debt in the Slide 16, we must highlight the low leverage of the company compared to other peers in the same industry and within the country as a result of an active liability management. Just 2 weeks ago and despite the market's turbulence, our gas midstream affiliate, TGS, was able to issue a 7-year $500 million bond -- bullet bond at 6.8% yield to maturity, an outstanding pricing that was very tight to the sovereign. The issuance was oversubscribed by more than 6x, highlighting the importance of the timing and the management. The proceeds will be used to cancel the 2020 bonds with 9 5/8 fixed rate amounting to $207 million in total. The remainder will be used to finance the Vaca Muerta midstream project that we were talking about mere moments ago.

As of March 31, 2018, the consolidated gross debt, including affiliates at ownership, reached to $2.3 billion, of which 93% is denominated or linked with U.S. dollar and 80% is placed at the parent. As we did with the corporate expenses in our earnings release, you can see how we are redistributing the debt and cash among our operating businesses at the parent to properly reflect their capital structure. The average interest rates are 6.6% for dollars and 22.2% for pesos debt. Average life is below -- way below 6 years.

Cash including the sales proceeds collected between April and May amounts to $1.6 billion. Of course, this isn't -- doesn't consider the repurchase -- share repurchase program. And the net debt is reduced to $690 million. The strong cash position allows the company to comfortably face the strategic investments in its core businesses such as power generation and gas upstream.

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) The first question we have will come from Frank McGann, Bank of America Merrill Lynch.

Just 2 questions, if I could. One, just looking at the year in 2 segments. One, power generation. What plants will be adding to -- potentially to the generation capacity as you go through the year versus the prior year? And are there any other -- or any downtime plan for any plants that might affect overall capacity...

(technical difficulty)

In the upstream business, what are the -- what is the expectation for trends in output from your continuing operations? How much capacity or how much production in natural gas?

I'm sorry, but I hear you cut. Can you repeat the 2 questions?

Okay, sorry. (inaudible) my line, I don't know. In terms of generation, what plants do you think will be adding or have additional capacity over the next 3 quarters for the rest of the year what -- versus where you are in the first quarter? And secondly, in oil and gas, what is the expectation...

(technical difficulty)

Additional production coming out of further gas developments?

Okay. So regarding the first question, power additions, the only one that we have is next week, 22 if the wind is with us. We are commissioning Corti wind farm, 100 megawatts. In [Mayo Langa], as you can see -- here you saw in the picture in the presentation, it's 100 megawatts. It's a PPA with CAMMESA. So that's the only one for 2018. Next year, it's the 2 wind farms that we are building of 106 megawatts in the Q2. And also, we are -- next year, we -- in Q2, we are opening the open cycle, the additional open cycle to the Genelba project. The total, once everything is installed, is 4.4 gigawatts in installed capacity in Pampa if we don't do more, right. These are the ones we have in the pipeline. Then the downtime program, the downtime we have, well, now is -- the winter season is coming, you can expect that the hydros won't perform because this it's icy, it's the winter season, there's no water. The most important programmed downtime was in Genelba, and we already finished it just in April, so. And there's another downtime, a programmed downtime in Loma de la Lata, I think, in October of this year in the CCGT. So that's it. In the upstream business, we are budgeting an increase of gas production at the end of the year of reaching to 8.2 million cubic meters per day of production. But that will be kind of online in the fourth quarter, so -- because we are building facilities to the (inaudible) gas and treatment facilities. Here with me is [Maya], our new business and planning E&P Director. So any questions you may have, just shoot it.

The next question we have will come from Luis Adaime of Newfoundland Capital Management.

Just wondering specifically on Transener. I know you have full control with the government, but any update on how the M&A process is going or the sale of the government stake? And also, just in terms of a potential greenfield project for -- or growth opportunities for transmission lines in Argentina, how are you seeing the dates and the time line for that? And how do you expect competition -- or what level of competition do you expect for transmission?

About the M&A of Transener, I think last week, the government finally announced who's going to be the adviser. It's going to be PricewaterhouseCoopers. We have the full control, so we have a shareholders' agreement. And the -- we cannot grow -- or we cannot hold the control of that company for antitrust provisions. So we cannot buy it, but we have the shareholder rights that they are granting there just because we have a right to choose our partner. The M&A concession, that's the latest. We don't have any time line. The latest -- this is the latest. But prior to that, it was the announcement, proper announcement, in February of this year. And that's it. So that's what I've heard about it. Then -- what we've heard about it. Then in the greenfield transmission, PPP expansions, it is true the government already announced that it's going to be 2,800 kilometers of expansions that will be done through PPP tender, but there's no news or there's no time line when that is going to be available and going to be tender. But that one is for sure has to be done. Otherwise, we have bottlenecks everywhere. Last year, the country grew installed capacity 2.6 gigawatts. This year, it's likewise. So there's no more room to grow full capacity, especially for renewables capacity, if the transmission lines are not -- are facing bottlenecks.

Perfect. I also understand from your comments on the press release that the adjustment is fully implemented on Transener. Is that correct for transmission?

That is correct. Yes, that's correct. The thing is that, well, in February, they gave us in 1 installment. They -- we asked for review because we feel like the capital base was not reflecting what we were requesting and not reflecting at all what happened to the company. We asked for a reconsideration. We've been granted. Not much to our -- we requested, so we ask for -- we pursued another action, administrative action, complaining about it, but that's it.

Okay. And just one final question, please. We've seen the -- a lot of cuts in the tax rate, especially for capital-intensive businesses such as yourselves when you reinvest the earnings across your subsidiaries or even at the E&P level. And we've seen the paritarias, the salary agreements, coming in below the targeted inflation or be at least based on future expectations. And there are -- and you have a more depreciated currency, which I imagine, at least for your companies that have peso costs like personnel like Edenor, must help. Any idea of the improvement in the return on invested capital? I know it's a difficult question, but any figures that maybe you could share with us? Or are the expected returns sort of the same because of competition? Any sort of color that you can give us in that sense?

I tried to follow you, sorry. But I guess what you mean is how -- the FX devaluation. And everybody is asking, right? We take this opportunity to address this matter. On FX...

Well, more on the returns -- sorry, more on the returns on your invested capital given lower taxes, lower -- or personnel cost increases lower than inflation and the FX depreciation. All that together, does it improve, does it deteriorate your invested capital because -- or your potential returns because, I don't know, you can't really pass through your dollarized costs? Any color that you can give us in that sense?

Here's the thing. Yes, we are using 30% right now. And we -- what we have with this 30% is that with the FX devaluation and as our debt is mostly in dollars but maturing more than 5 years and beyond, we are accruing every quarter carryforwards, tax losses. So last year, so December of last year, we -- outstanding carryforwards was ARS 1.8 billion, and we -- if we didn't sale Trafigura or we didn't sell to Vista, this will allow us to not pay income tax for 2 fiscal years. But now that we sold, we felt, okay, we continue all the carryforwards. And now that the FX is already moving, depreciating, the -- so the peso is depreciating, we have carryforwards again. And that's the -- for the return in the investment (sic ) [invested] capital, that's positive. Then -- this is for cash flow basis, right? Then the other thing that is very important to address is that power generation, E&P, petrochemicals, that's the 2 core of Pampa at the parent. The 2 core of Pampa that are 100% owned by the company are in dollar invoicing. So -- and of course, as you said it very well, most of our OpEx are long peso because it's mostly labor. So in that sense, we get our margin improved. Of course, in the CapEx, that's the other question, you will say, well, CapEx, how is it affected? Well, CapEx actually is mostly in dollars because we -- in E&P and power generation, which is the big bulk with CapEx, they are -- we are investing in fixed assets, and those fixed assets are remunerated in dollars. So we are kind of hedged. We are hedged. I don't know if that answers your question. I hope that -- I -- this is what we got. Really has a -- very, very often question, so I take up - take the opportunity to...

And next, we have [Patrick Wolfe] with [Grand Master].

I have 2 questions. One is really sort of specific to Pampa; and the other, I guess, more macro. So regarding the results. I think it would be very helpful if you could try to explain, particularly on future calls, the sort of normalized run rate level of EBITDA that you think you're now able to achieve. And I realize it's still a moving target. There's obviously expansion projects in power generation. Oil and gas, of course, is going to be very uneven. But it seems at this point, some of your earnings power has become more normalized. And maybe if you could talk to it a little bit here, and maybe if in future calls you could try to give us some understanding, can we multiply this number or this quarter's number by 4 to get some general idea of what you can earn in 2018? Or is -- do you think that's not sort of an appropriate way to try to project for 2018 and beyond? Not taking into account the expansion projects but just sort of the asset that you have right now. So that's my first question. And the second question pertains to any legislative risks that you see, particularly, I suppose, as it pertains to TGS. But any other parts of the business, are there any risks that you see in terms of political backlash?

We don't give guidance. But it's true we keep moving always. We keep changing. This is -- that is what characterizes us, is that we never stay the same. It's true that we have -- what we have is the normalized EBITDA or regulatory EBITDA for the utilities. That's the first guidance that we can have. And what we achieved last year, that's quite -- E&P is quite -- a benchmark without these divested assets, of course. That's -- I will say that will be a platform for EBITDA calculation. And in power generation, it's true. It keeps moving up. It's because we -- if you take -- we are commissioning new capacity every year with very good PPAs. So they have a big contribution to the EBITDA. It is not correct to analyze because believe it or not, this is an energy company that is totally seasonal, to give you an idea. Power generation during the first quarter and the fourth quarter perform best compared to the Quarter 2 and 3. Why is that? Because in the summer season, we have more water from the hydros, okay. So there's more dispatch. In the second and third quarter, it's the winter season. So thermal machines tend to perform better and, now that the gas is becoming more available, will perform even better. But the hydros don't. So it's not quite you can do analyze, quite. In E&P as well. E&P, we produce our peak -- biggest winter because there's much demand. But we try to make it stable, and we -- if you see -- if you've been following our quarter-to-quarter -- of course, this is for the third quarter. Consecutively, we are producing the same or a little bit more, like very slightly increasing. And that's not considering the divested assets right. But during the summer season, the demand -- the retail demand drops a lot. So there's plenty of gas in this country. I don't know if I helped you there, but sorry, we -- our management philosophy is to not give guidance. But of course, if we can help in any way to model, Margarita will attend you the phone, not me. Then on the second question about macro legislative risk, I think this is self-responded. The President already said it. He will see to it. And he did it before with other laws that the opposition party wanted to pass, and he wasn't -- he agreed. He bears the political cost of that, yes, but he make it very clear, the consequences of passing such a law that -- I was saying in this call TGS' and the -- TGS' tariff increase, their RTI was approved by the Congress. All these tariff reviews have been duly done with a process, the Supreme Court ruling in 2016 that they're saying you have to follow public hearings. The public hearings have a time and a process time of opposition. If all these people, politicians and congresswomen and men have any opposition, they could explicit it during the tariff review process, but they didn't. So this is not the -- this is now our take. The tariff reviews are out there. It's for us. It's there. We don't see that as a risk, especially when the President explicitly said that he will see to it.

(Operator Instructions) Next, we have [Camilla Ramirez] of (inaudible).

I like to go a little -- to have a little more detail on the impact of the peso depreciation. And for that, if you could give me the percent that's of sales and costs are in USD and local currency for each of the business.

For each of the business, okay, we can't say all that. I will do it very quick. So in dollars, I would say power generation, E&P, petrochemicals are in dollars. And TGS is liquid business, which we do not fully own, but we own 25.5% of it are -- and midstream as well in TGS, it's in dollars, all right. Then in pesos, it's the utilities and in old Transener, cash transportation TGS, okay. We lastly divested the downstream business, and that was a peso revenue business. So it's no longer in place. Then we have the OpEx. The OpEx is quite peso long mostly because of the labor. It depends on the segment. For example, E&P and petrochemicals are the most dollar-weighted OpEx. But again, peso is larger. Peso is bigger. And the latest I remember from E&P, 60% in pesos. In petrochemicals, it's a little bit lower, 55%. But it's a so small business, you check it that the EBITDA of petrochemicals was ARS 49 million. That's nothing. In power generation and the utilities, the peso weight of the OpEx is larger. It's -- it can get to 80% of the OpEx.

What about distribution?

Yes, so utilities.

Oh, you gave it.

80%. This is approximate numbers, okay. This is approximate numbers, all right, because we have -- in our budget, we have dollar-denominated OpEx, we have peso but inflation-linked. And now inflation, the question mark is how does FX effects will pass through or not to the inflation. And then we have labor. Labors are following the salaries. Salaries are following inflation. So -- correct?

Correct. And if you could give me how much of the cash you have is in USD?

Right now, it's 55% of our cash is in USD.

55%?

55%.

Okay.

Remember that we have to operate this company every day. We have 10,000 employees, direct employees that we have, and we have to operate this daily basis. The good thing about us -- I know that it sounds 55-odd-percent is less, but we have a very active cash management. If you check on our financial statements, our cash management, it's always keep -- kept on rate. We try to minimize the carry of the cash that we keep available to use it because we -- and we have to spend a lot of things every day basically.

Okay. And finally, regarding the gasoline tariffs, I understand you're going to freeze them for 2 months. What is the impact going to be in the downstream segment?

Well, we divested downstream segment. So next month -- next quarter is just only 1 month. It's not our -- it's not in our core business, in our business, in our portfolio anymore. So I don't have a take on that.

Well, at this time, we're showing no further questions. We'll go ahead and conclude today's question-and-answer session. I would now like to turn the conference call back over to Mr. Lida Wang for any closing remarks. Ma'am?

Well, thank you so much for joining us. It was a quite shorter call. I hope you enjoyed it. Any questions you might have, please, you can call me, call Margarita, call anyone in Pampa, I mean, our team. We are more than happy to help you. And have a nice day.

And you also, ma'am. And we thank you for your time also. Again, the conference call has now concluded. At this time, you may disconnect your lines. Thank you again, everyone. Take care, and have a great day.