Pampa Energia SA (PAM) 2020 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for waiting. I'm Margarita Chun from IR, and we would like to welcome everyone to Pampa Energía's Fourth Quarter 2020 Results Video Conference. We inform you that this event is being recorded.

(Operator Instructions)

Let me mention that forward-looking statements are based on Pampa Energía's management beliefs and assumptions and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and 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 video conference over to Lida Wang, our Investor Relations and Sustainability Officer of Pampa Energía. Lida, you may begin the conference.

Thank you, Margarita. Hello, everyone, and thank you for joining our conference call. I hope you all are safe and well. In the interest of time, I will summarize the latest events and financial figures reviewing the year and the quarter, focusing on Power and E&P. Our CEO, Gustavo Mariani, is here; and our CFO, Mr. Cohen is here to join us for Q&A.

In the 15 years of company here, 2020 was a year to remember. Our resiliency helped us to navigate the complex quarters operating an essential business smoothly amid the pandemic. We kept growing our asset base, achieving another important milestone by commissioning San Nicolás (inaudible) CCGT, the most important expansion project in Pampa's history. Genelba is highly demanded due to its efficiency and location, and demonstrates a (inaudible) of availability since the beginning of operations.

Our power generation goal has continually been growing on a sustainable basis, seeking maximum efficiency through renewal energy and highly productive thermal units. In the last 5 years, Pampa has more than doubled its install capacity, leading the Argentine power market as the largest IPP. We expect to contribute 280 megawatts from the CCGT expansion at (inaudible) within a year. I will comment more later.

Also, we managed to keep producing (inaudible) of gas without significantly curtailing our output, positioning ourselves as the first largest unconventional producer in Neuquina Basin, the most prospective basin and reservoir in Argentina. This is worth highlighting, especially when the gas market could not grant any visibility and building the lowest prices in years until just a few months ago. The quality of our fields and the steadiness of our team contributed to the success.

After many years of difficulties, petrochemicals is thriving and back to the production levels of 4 years ago. Despite the country's recession, we are exploring weaker volumes of SBR to Brazil and witness a demand surge for styrene and octane basis linked with the industry recovery and the easing of the lockdown.

In a year like 2020, it was also a time to reorganize our portfolio of assets. After 15 years of controlling the country's largest electricity distributor, on December 28, we announced the sale of our controlling stakes in Edenor, pampa's most relevant strategic divestment decision made over the last few years. In light of lesser synergy opportunities and weakening margins, we exited to continue focusing on developing our core businesses: power generation; and natural gas production. Also reporting becomes leaner as Edenor is deconsolidated and classified as discontinued business. Therefore, Pampa, under IFRS, is equivalent to the restricted group as defined by Pampa's own covenants equal to the parent company and control and operated subsidiaries. We are waiting the regulator's clearance to complete the transaction.

So before moving to the quarter's results, I wanted to comment on Pampa's fine annual figures briefly. These figures include Edenor as discontinued operation, but it is operationally a part of Pampa until close. In 2020, revenues decreased by 22% to $2.6 billion, mainly due to the carry freeze and devaluation effect over utility (inaudible), mainly affecting Edenor. Also, we recorded lower gas sales because CAMMESA is back in charge of the grid fuel procurement, prices and volumes drop for oil and gas sold and legacy prices were reduced.

All of them partially offset by our new capacity power unit contribution, Geneva, Barragán and PEPE wind farms. Roughly 45% of our sales were dollar linked, but almost 70% of our EBITDA was dollar linked, roughly coming from power generation and gas. The EBITDA amounted to $750 million in 2020, 18% lower year-on-year, for the reasons as pointed before. However, we experienced cost efficiency gains that helped the EBITDA not fall far. Power generation keeps leading the EBITDA share, driven by the increasing number of units with PPA. As we show on the right below include -- excluding Edenor, and electricity take 70% of the consolidated adjusted EBITDA, while oil and gas exposure takes 30%, driven by gas and TGS.

Moreover, in 2020, our CapEx decreased significantly compared to 2019, especially -- particularly because of the pandemic restrictions reducing to extension works. More importantly, Genelba expansion was almost already fuel expensed in 2020 and the drilling and completion activities at E&P were placed on a standby due to the uncertain environment. The expansion investments at Barragán partially offset this drop in CapEx. Most of the 2020 CapEx was to properly maintain our assets, specifically the rendering of quality service by our regulated utilities. Like 2021, we expect E&P activity to strongly rebound, thanks to the Plan Gas GSA and entering the last stages of the closing to CCGT at Barragán.

Moving to the quarter's figures. Revenues decreased 28% year-on-year to $599 million, mainly due to the tariff freeze, lower fuel (inaudible) supply and dropping prices of volumes of oil, gas and legacy prices, partially offset by Genelba's new PPA. In Q4 '20, roughly 50% of our sales were dollar linked, but 90% in EBITDA terms was dollar, again, mainly coming from our core businesses, PPA power capacity followed by E&P.

Adjusted EBITDA maintained stable by only reducing 6% year-on-year, amounting to $168 million for the quarter, mainly explained by lower prices in dollars and a lesser volume of oil, gas and legacy tariff freeze, partially offset by Genelba's PPA decreasing OpEx and increasing production efficiencies. Should we only consider continuing businesses, this means excluding Edenor, the EBITDA grew 8% year-on-year, mainly explained by the Power PPA. Quarter-on-quarter, you see here, decreased the EBITDA, 28%, mainly due to the seasonality and the valuation effect offset by petrochemicals subside.

Moreover, a (inaudible) in the fourth quarter of this year, our CapEx decreased significantly compared to the last year, mainly due to the impact of the pandemic and completion of the expansion projects.

Despite the lockdown and economic crisis, 2020 power demand ended up almost uneffected, thanks to the gravel recovery of the lockdown and power exports made by CAMMESA, a highlight for the group, growing national generation by 2% year-on-year. 2021 may continue to (inaudible) as the (inaudible) increases, as seen, this recovered capacity utilization and life is back to normal. On January 25, the group recorded a new power demand recordhigh. The last time was 3 years ago in 2018.

Moving to the power generation segment. As seen on Slide 8, during the fourth quarter of 2020, we posted a net EBITDA of $121 million, 14% higher than Q4 of '19, mainly driven by Genelba Plus CCGT's contribution, higher B2B renewal sales as well as the devaluation of impact on our peso nominated expenses. These effects were partially offset mainly by the change to peso and freeze of legacy prices. Quarter-on-quarter, the end of the winter season, lower spot prices and dispatch in Q4 '20, decreasing the EBITDA by 8%, while spot energy comprises 69% of our capacity. It only represented 23 of our power generation EBITDA in the quarter, and will keep shrinking until the regulator grants an inflation adjustment.

Generation in Q4 was 16% higher year-on-year and 10% up quarter-on-quarter, which has still exceeded the national grid's growth with 7%, driven by export (inaudible) as explained before, fulfilled by -- with our CCGTs at Genelba and Loma, as they went senior in the dispatch. To the lesser extent, our efficient dual fuel unit, Parque Pilar and Ingeniero White, were also requested. However, lesser efficient thermal units, such as Piedra Buena and Güemes, they held the dispatch in the quarter.

Keep in mind that the power generation business model relies on capacity payments. So lower dispatch does not impact the revenue-making as long as the (inaudible) are standing, especially for PPA based energy. The (inaudible) in Q4 reached 94%, with an install capacity of 5 GWh was operated by pampa, slightly decreased year-on-year and quarter-on-quarter performance, mainly due to the major overhauls at (inaudible) and Barragán as well as force and availability as one of our gas turbines in Güemes.

Regarding our remaining expansion in the pipeline, our crucial project is closing to combined cycle at Ensenada Barragán Thermal Power Plant, as you can see on Slide 9. This is a 280-megawatt CCGT project in the south of greater Buenos Aires critical infrastructure for Argentina's week. The project, it is almost 30% advanced. We've been doing pivotal works at the cooling tower and starting with a new treatment facility -- with the treatment facility. We also continue with a twin building installing the main pipelines and all the remaining equipment inside the building. 800 people are right now at the site, working with strictest credibles to minimize the circulation of COVID.

Keep in mind that Pampa operates Barragán, and this is the fourth CCGT project for us. Once closed, install capacity of this plant will amount to 847 megawatts contributed to the grid, one of the most efficient thermal units.

In 2020, the national gas production was fairly effected by the weak investment landscape that began about 2 years ago. The graph we see in this slide shows the evolution of production and the tendency on gas imports and liquid fuels fulfilled demand, which is more inefficient. They will have currency and way more expensive than local gas and other issues.

After the massive production increase, imports reliance shrank, but that was until 2020. The production is still 7% year-on-year in 2020, but the demand remains stable. Therefore, the demand asset was covered with imported gas and liquid fuels. We expect this negative trend on production to reverse as Plan Gas is in place since January of this year.

So more into the results of E&P we can see on Slide 11. In Q4 2020, we posted an adjusted EBITDA of $19 million, similar to Q4 2019, maybe because of lower gas volumes and prices, partially offset by lesser cost related to the activity down term and efficiency. We recorded $24 million of lifting costs, 40% improvement compared to the same period of last year, driven by the valuation and higher productivity at competitive blocks, such as the Mangrullo. By BOE produced, we reached $6 of lifting cost, 24% less than the Q4 '19, but higher quarter-on quarter because of seasonality.

Despite the harsh environment, our oil and gas production decreased only 8% year-on-year and 7% quarter-on-quarter in Q4 '20, reaching 44,000 barrels BOE per day, of which 90% was gas. The quarter-on-quarter reduction is mainly explained by seasonality. The variations are in line with the country's changes.

On the oil side, we represented -- which represented 27% of the revenue segment of the quarter, volumes sold marginally decreased year-on-year to 4,700 barrels per day, mainly impacted by the lockdown, although improving significantly since December. This was partially offset by the conventional production from Los Blancos, a productive loss formally part of Chirete, where we discovered oil after 34 years in the northwest -- northeastern basin.

During Q4, oil prices decreased 18% year-on -year, reaching $41 per barrel, bouncing back from the sharp fall at the beginning of the lockdown. Domestic demand gradually recovered since September, but still lower than pre-quarantine levels, placing 60% of our production in the local market and the remaining is exported.

Regarding gas, as we can see on Slide 12, the Q4 reached an average of 239 million cubic feet per day of volumes sold, 21% lower year-on-year, mainly due to the lower exports to Chile and weak industrial demand, which is still recovering since the lockdown. These effects were partially offset by higher volumes of the CAMMESA and our new CCGT at Genelba. Compared to the last quarter, volumes sold decreased 10% due to the seasonality.

Lower pricing impacted negatively on the breakeven equation. Therefore, the activity collapsed and higher depletion to place. Therefore, production was lower at our gas bearing blocks, but was partially offset by increasing at El Mangrullo block with outstanding productivity, wholly owned and operated by us. In Q4, El Mangrullo reached 160 million cubic feet per day of production, 6% higher than the last year and contributing close to 70% of our overall gas, ranked the fourth largest gas-producing block in Neuquina Basin.

During the fourth quarter of 2020, our average price was $21 per million BTU, 17% than last year, explained by lower exports, resumed just in December due to the highest demand of CAMMESA to fulfill power exports, also affected CAMMESA's reductions on the referenced price that also impacted in industrial and spot prices. Though, CAMMESA tenders, during Q4 2020, were around $2.2 million in the Neuquina Basin, reflecting the off-peak season. Since 2021, we are selling about 70% of our gas under the Plan Gas GSA to CAMMESA and distCo.

As you can see on right below, 2020 production is skewed towards CAMMESA, but placing an increasing share for vertical integration with Genelba Plus CCGT, rising from last call, 22% to 26% sharing right now. However, as of 2021, we assigned that gas to CAMMESA as a part of the Plan Gas. By the end of 2020, the government launched a long-weighted Plan Gas tender, setting a turning point for the business. This 4-year gas supply agreement, GSA, seeks to revert the declining trend on natural and -- on gas production in Argentina.

Pampa was the third largest awardee in Neuquina Basin, growing 15%, annual production and 28% in winter year-on-year, the year's peak period. Under this new scheme, we are committed to producing at least 254 million cubic feet per day of base production, of which 70% will be destined to Plan Gas price at $3.60 per million BTU average year. And we will additionally deliver additional gas of 66 million cubic feet per day, priced at $4.7 per million BTU during the winter. The surplus from base production will be sold to the spot market.

Thus, we will continue focusing on the development of Plan Gas with an aggregate investment of more than $250 million over the 4 years of the plan, which allows us to expect an increasing profitability and cash flow generation. Before the Plan Gas tender and given the uncertainties in the gas prices, we reassessed our activities with no drilling and completion in Q4 '20, and we registered the lowest activity in 2020, in line with the sector's move. However, I mentioned before, since the tender award in Plan Gas GSA, our production is estimated to grow 28% during the peak period compared to 2020, the highest increase among the leading gas players.

In 2020, despite the challenging context, we recorded a 1.4 positive reserve-replacement ratio for the third consecutive year and an average life of almost 9 years. The proven reserves reached 142 million BOE , 5% higher than last year, and 90% of that is gas, mainly explained by the better production performance and well recovery factor at El Mangrullo, and to a lesser extent, this new oil-bearing block Los Blancos. We also succeeded in certifying shale reserves from (inaudible) formation, 2.5x the volume recorded in 2020 -- 2019.

Finally, moving on to Slide 15. Our sound balance sheet grants us some degrees of freedom compared to other industry peers during this challenging environment. In this slide, we show all the company's layers, but let's focus on the restricted group for covenant purposes. As of year-end, the restricted group gross debt recorded $1.6 billion, similar to last September, 88% denominated in dollars, which was 86% in September 2020, bearing an increased interest rate of 7.5%. Average life decreased slightly to 8.4 years. The cash amounted to $466 million, which is 33% higher than the reported in September 2020, mainly due to positive operating cash flow and positive working capital as DSOs, days sales outstanding, improved and stabilized at 80 days, partially offset by peso debt payment and buybacks.

The restricted group's net debt decreased 9% compared to last quarter, amounting to $1.1 billion, and the net leverage ratio improved from 2.8x to 2.4x. it is worth highlighting that the accumulative maturities for now until 2022 almost amounted to the equivalent of $203 million, of which 92% is in pesos. Pampa consolidated with affiliates recorded a net debt of $1.4 billion, $90 million less than last September, mainly due to the cash increase and deconsolidation of Edenor.

Net leverage ratio was maintained at 2x, just like the last quarter. Regarding the share buybacks, the shareholders meeting of last December approved to cancel 5.6 million treasury ADRs in the process of registration before the Argentine public registry of organizations. As of today, our outstanding capital amounts to 56.8 million ADRs. The board also approved a new program up to $30 million with a price cap of $16 ADR.

So this concludes the presentation. Now I will turn to Margarita. She will organize the floor for questions. Thank you so much.

Thank you, Lida. (Operator Instructions)

Our first question comes from Guilherme Levy from Morgan Stanley. The first question is about the E&P business. What should we think in terms of cost in the next quarters as natural gas production starts to pick up in context of the new Plan Gas?

And following that, the second question is also related to the E&P business. What we should expect in terms of prices for the industrial segment going forward, since it was not among the segments contemplated in the Plan Gas?

About costs, I think it's going to be stable at $0.70 lifting cost per million BTU. It's not going to change that much. All the efficiencies are gained. But as we are also gaining a lot of production -- increasing production, the per million BTU might be stabilize or decreasing a little bit to $0.70 per million BTU. The second question will be answered by my boss.

Guilherme, Gustavo Mariani speaking here. Regarding prices for the industrial segment, you know that they are coming from a very depressed level. So for the industrial segments, prices are going up in a significant way this year going forward. So that reality has to be digested by that segment, which is not something easy. So our commercial guys are having a tough time.

But I think that going forward, all the segments are going towards the average price of the Plan Gas. So adjusted by the fact that the industrial segment has a very good credit. It based on time. So we expect a slightly less price for the industrial segment than the average of the Plan Gas. So something around $3.30, $3.40 going forward. Maybe that's not going to be the number initially, but as time passes, I think that, that is where prices should be going.

Thank you, Gustavo. Our second question comes from Daniel Guardiola from BTG Pactual. He has 2 questions regarding E&P and 2 questions regarding power generation. The first question about the E&P is, can you share with us what is the expected EBITDA for 2021? And also break it down by unit. I'm especially interested in the upstream EBITDA for 2021, now that Plan Gas IV is in place, and gas production is expected to reactivate in 2021.

And considering the underinvestments seen in 2020 in the upstream segment, how challenging it will be to grow gas production in 2021 in order to own our Plan Gas IV? What is the expected upstream CapEx in 2021?

We don't give guidance, though, but Plan Gas numbers are all public. The budget that the board approved for (inaudible) EBITDA, it's $200 million of EBITDA. This contains the fact that 70% of our production will be testing under this GSA. Basically is that, the production is already reactivated. It's already -- we are around 7 million per day of production right now, and it's expected to pick up in May. In May, we are -- we have to deliver -- we start delivering the additional winter season and peaking at June.

This is one question. The second on CapEx. The second question you said underestimating in 2020? Yes. Yes, it was. But now in 2021, that's another chapter. And the Board approved $150 million, 1-5-0, for E&P only, but might go higher than that, basically because we are -- we might be doing another side project that's related to gas E&P, but everything inside the discipline of the cash flow. Gus?

No. Just I think the $150 million was what we approved -- were approved at the end of last year. Probably the figure this year is going to be higher in the area of $180 million, taking into account the Round 2 of the Plan Gas, which -- where we were aggressive, and we committed more volume of gas for this winter and for the next 4 winters. So that's why CapEx are going up. But keep in mind, when you see Pampa going forward, that most of the investment -- or all the investment infrastructure in order to comply with the increased volume that we have committed for the planned gas will be done this year. So this is the year of the highest CapEx because of what we are spending in infrastructure. And following the following years in order to maintain this level of production. There will be almost nothing in infrastructure and just wells in order to maintain production and avoid -- to compensate the decline in production of the wells. So this is going to be the highest year of CapEx in order to comply with commitments in the gas plan -- Plan Gas project?

Thank you, Gustavo. We have one follow-up question from Daniel Guardiola, it's regarding the power generation business. So the question is about the -- what portion of the total power generation segment revenue came from PPA? And regarding the potential specification of the PPA, how it could affect Pampa in comparisons with the legacy spot that was already specified?

So what portion of the total power generation segment revenues came from PPA? It's basically more than 70%. 70%, it's from PPAs, and the rest decreasing, it's the legacy. And the second question, I don't have it. (foreign language)

Okay. Regarding the -- I don't see the question, but I think it was regarding the potential specification of the PPAs. So answering what would be the impact for Pampa that is impossible because that's something that has not happened. And if it wouldn't happen, going forward, it will depend on the -- on how this peso contracts will be adjusted going forward. And so the pace of the adjustment vis-à-vis the devaluation of the local currency. So it's very hard to give you an answer on how that would impact.

But regarding this point, I would make -- I would like to -- sorry, if I repeat myself because I've been saying this for correcting 2 years already. And we don't believe that within a situation -- a macro situation under control. This is something that is going to happen. It didn't happen in 2020, which was the first year of this new administration that was the year of the pandemic. And even in that situation, the government took the decision to respect the contract.

And that is because not respecting those contracts have terrible consequences in the medium term, tremendous negative consequences. This could -- would happen. As you know, since 2003, the only way that Argentina attracted a huge infrastructure investment as power generation sector required for energy in general is through long-term dollar contracts. And this government is doing that same thing right now. For example, with the Plan Gas.

So again, unless there is a huge disruption of the macro variables, meaning basically a huge devaluation, which is something that we are not envisioning at all this year. Actually, we were much more concerned during 2020 of the macro variables, and we think that going forward, this year because of several reasons that we -- I don't want like I don't want to talk too much, but we can go through that later. The macro situation is much more under control than last year. So we are not ambitioning distorted year in terms of macro environment.

So we don't see PPAs being unilaterally you may not really touch this year. I also want to give you a couple of more information. There are quite a few PPAs, which are maturing beginning this year and next year. So about 1-gigawatt of PPAs is maturing within the next 12 or 18 months. And in our case, by the end of the year, we are 200 megawatts of our own capacity that it's under resolution 220 of PPAs is maturing.

And also another figure that I think is important for those who are concerned about this. If you would reduce PPAs by, let's say, 20% in prices, something that would be -- would have a tremendous impact on the sector and many of our colleagues will be in significant financial distress and even state-owned colleagues will be under that situation. Reducing 20% the PPAs would only impact around 3% in the total cost of generation in the country. So when you look at the numbers, and I'm sure that the reason why the government didn't do it last year after having talked during the electoral campaign and even analyze this issue was because they came to the conclusion that it has tremendous consequences and doesn't make sense. So that's been our for a long time already, and we are -- as time passes, we are more and more concerned of that. We are more and more convinced of that, sorry, not concerned.

Thank you, Gustavo. Our next question comes from Ezequiel Fernández from Balanz. He has 3 questions. I'll read one by other. The first one is, any update on how the conversation with government is going regarding an increase in the remuneration for legacy power units?

Legacy capacity. Well, so we -- as we said, very few times, our power generation people gather as a larger IPP with other IPPs with authorities. We presented the case. We showed them that there's many legacy capacity that is very important for -- it's critical for their function in Argentina and some regions. They need urgently some kind of adjustment. And we already exposed, they already know they do this, but so far, nothing formal yet, but they understand, they know it. The second question was to the closing of Ensenada Barragán require any additional equity contribution? Gabby?

Yes. No. We are not expecting any capital contribution for Barragán. Barragán is advancing, to some extent, on schedule. It will be concluded by first semester of 2022. And we remind that it's a low leverage company. And once performing well, so there should be any programs even for additional leverage capacity, but no equity commitment is expected to be funded additional or already done.

We have one more question from Ezequiel. How much was your total CapEx in Q4 without considering Edenor?

Ezequiel, this is in the presentation. So without Edenor -- well, with Edenor, it's $100 million in the Q4. Now without Edenor, that's on page 6, okay? Without Edenor, it's only $60 million, all right? This is without Edenor, but also including the affiliates at our own mission.

Thank you, Lida. Our next question comes from Alejandro Demichelis from Nau Securities. Could you please indicate how you're seeing the payment cycle from CAMMESA and also for gas sales under Plan Gas?

So the payment cycle right now from CAMMESA is around 80 days. That's the collection base. That's the average that we are witnessing right now, that's been for 3 months already. The peak was 3 months ago. It was like we peaked to 90 days. And now it's 80 that means the rule is 42. So anything exceeding from that, that's delays. Now remember that we -- in the record of the history of CAMMESA DSO, we reach 110. So 90 is quite ugh. Plan Gas.

Well, Plan Gas, the regulation about the GSA stipulates to get paid right in the few next few days, the final invoice should be approved for January transaction. Once that happens, we should be collecting very anytime soon, but it's not due yet. Very important thing that I didn't mention, and this is very important because he highlights the commitment, I will say, something that I haven't seen. Plan Gas stipulated that if there's any fall situation or there's a delay payment from the government, the money that you invoice can be used for as a tax credit. And that was totally implemented in the Argentine RS a few days ago, and it can be used for paying any tax obligations, such as income tax, VAT. So you can use -- and it's already online on the platform.

Thank you, Lida.

(Operator Instructions)

Our next question comes from Constantinos Favalias. He -- what estimation could we expect of excess volumes above Plan Gas IV? Yes, that is the first question.

Okay. I think he refers to the fact that we are producing more in the winter and where are we thinking about placing that excess gas that we will produce in the winter? Is it correct? Lida, you are more used to these questions. What is he referring to?

No Plan Gas. So basically, he says what happens with the gas, it's not under the GSA that you have to produce. So we will sell it under the spot market. That's a destination of the excess volume.

I would say so, for Plan Gas, we have committed roughly 5 million...

Sorry, sorry about that, I was muted. The explanation of the Plan Gas IV for Pampa, we have committed roughly flat production of 5 million cubic meters of natural gas per day that will be sold to CAMMESA and distribution companies throughout the year. In excess of that, we will -- we have committed because that was part of the Plan Gas. You were obliged to commit for an addition of 30%. So in our case, this is around 2.1 million cubic meters of natural gas per day. That we will be selling base to the industry and around the prices that I already referred.

We -- during the summer times and not the winter season, we are also -- we have also presented an export contract. That is waiting for government approval, but we are optimistic that we will soon obtain governmental approval for that contract in order to plays an important portion of the gas that we will produce in excess during the winter. So this is almost 2 million of cubic meters per day. That will take our total production to 9 million cubic meters starting in July or August of this year. So that answers the questions.

Okay. Thank you, Gustavo. There is a follow-up question on E&P business. Do you see industrial user gas prices converging to Plan Gas prices in 2021?

I think I've already talked about it. I see a conversion. It probably will take some time. And also, keep in mind that because the industry pays with sooner than CAMMESA and the distribution companies, the exposure is left. So the industry will have a discount vis-à-vis the prices of the Plan Gas because of sooner collection, and it's also good to automize your collection risk. So I think there's going to be a small discount. That is going to narrow in the next few years. That is my expectation.

Thank you, Gustavo. Our next question, a follow-up of Constantinos. Do you see, in the power generation, any organic growth?

No, we don't have any plans right now to continue expanding. We are analyzing some small projects, but conditions are not there yet for us to commit with a new investment.

Thank you, Gustavo. Our next question comes from Alejandra Andrade of JPMorgan. Can you also discuss -- somebody is not muted, wait a second. Can you also discuss any updates on a potential exchange for the 2023?

Yes. Well, in that respect, the only thing that we can say is that our expectation is to address that transaction before 2023. That's the only thing that we can say. And if you look at our past transactions of the group, as a policy, we try to be ready all the time on the market and look at market conditions and trying to go whenever we feel comfortable about successful execution.

Thank you, Gabby. Our -- there is a follow-up question of Alejandra. Can you give us an update of the CapEx guidance for 2021?

We don't give guidance, but we do have a budget approved again for power generation. This year is just maintenance. The restricted group, it's $40 million of CapEx. We don't have any projects -- expansion projects in the restricted group. We have that's outside, funded, and that's a JV with YPF, 50-50.

What else? E&P, the budget approved, it's $150 million for this year, but the 4-year program is $250 million, though it looks like it's going to be over now because we have site projects that link with the gas that we might execute. And then petchem and holding is just $10 million. So the restricted group, 2021, it's around $200 million.

Thank you, Lida. Our next question comes from Andres Cardona from Citibank. When looking at your existing portfolio, is there any assets that you consider noncore? And are you actively looking at M&A opportunities, any sector in particular in which you are seeing opportunities?

No. Andres, at this moment, there's no asset within our portfolio that we consider noncore that we are actively looking to the vest. Regarding M&A opportunities, it's part of our history. So we are all the time monitor in the market and very active studying opportunities. We've been looking at opportunities on the power generation segment. That would be, I would say, the only one that was with high probability of occurrence. But it was at one point, it's not anymore. So at this point, there are no -- nothing significant or relevant in terms of M&A transaction that we are looking for.

Thank you. Our next question comes from Rahul Bhatt. He has 2 questions. By when do you expect Edenor sale to complete? And do you have any funding needs for 2020?

No, this year, basically, based on our base case, we are free cash flow positive. Unless there is any new transaction or any new development, we expect to some extent, to reduce some debt this year. As a base case, you should have a guideline that we have approximately $200 million of free cash flow per year after CapEx and interest payment.

Yes. You asked on Edenor sale. It's -- it can be any minute because we just need not limit to, but limited to. But we just need the regulator's approval. The shareholders of Pampa already approved in February of this year. So that's it.

Thank you, Lida.

(Operator Instructions)

Thank you. So this concludes the question-and-answer section. We will turn to Lida for final remarks.

A couple of comments that I would like to make. One is regarding Plan Gas to complete what has been answered Plan Gas, from my perspective, it's the best incentive program that has been designed so far. I don't know why it was called Plan Gas IV originally, but it's the third one since 2012. But from my perspective, it has it has several benefits like that the price of that resulted from a competitive bidding process and not from the decision of a government official.

It's a program that won't generate the distortions that the resolution for 6 generated in terms of market imbalances of supply and demand. In terms of secure discuss this has been greatly improved because of the fiscal certificates. So as Lida explained, in case there is a delay in the payment, that allow us to use this fiscal certificate and use it to cancel taxes. So in a way, it's like we have a certainty of collection for the part of the incentive that comes from the Secretary of Energy.

The only thing that I criticize that is unfortunate, but I think it's quite reasonable given the special year that we had in 2020 because of the pandemic, is that the program was announced or that the bidding process came too late in the year. So unfortunately, most of our colleagues were not very aggressive in terms of being able to provide gas, especially for the winter period. That's when most when Argentina is in the special needs of natural gas, and Argentina is important at much more expensive prices and using international reserves, which is good to keep them to keep them at home.

So the only critique that I have for the Plan Gas is that it wouldn't be better if we would have come early last year, and the industry, I'm sure, would have reacted more aggressively. But it's -- again, it's great news for Pampa. It's -- we are turning the page on our E&P segment that has been suffering for the past 2 years. And with this program, we are turning the page. We are very optimistic about the impact it would have on Pampa's figure going forward this year and going forward.

And we still believe that we have even more capacity to increase our production during the winter beginning in 2022, if there are new rounds -- if there is a round 3 at some point late this year or early next year. So it's excellent news for Pampa. And I also -- it's very good news for the country. As we always say, it's much more better to produce locally and that improves the fiscal figures of Argentina because it pays less than the imports, and it also saves international reserves, which is also macroeconomically very important.

So Plan Gas is -- it's a game changer for Pampa and also excellent news for the ties. And the other thing that I wanted to highlight was about the -- I don't think there were any questions about that, about the repurchase of shares that we have been doing and I think just to put it in perspective, we started to repurchase our own shares thin in the late 2018. Since then, we have repurchased more than 30% of our own capital.

So in terms of ADR, we went from 83 million ADRs to a total outstanding year if 56 million currently. So that is more than a 30% reduction. And we've been able to do so because of our strong cash flow generation that Gabby has just mentioned. And we were able to do so while in the meantime, doing huge expansion project as Genelba been very aggressive on the Plan Gas as we are doing this year. And on the side of the debt, we did that also taking advantage of market drops and repurchasing around 12% or 15% of our own debt at very depressed levels. And in terms of net indebtedness throughout this period, it has also been going down. So -- you can say the...

Just to highlight what Gustavo is saying, if we consider a normalized free cash flow of about $200 million, our net debt to free cash flow is around slightly above 5x, and we'll consider that very healthy for us.

That is what I wanted to highlight, these 2 issues that I think were not cover enough during the Q&A. Any more questions or no more questions?

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