Pampa Energia SA (PAM) 2020 Q3 法說會逐字稿

(Operator Instructions)

Before proceeding, please read the disclaimer that is located in the second page of

Let me mention that forward-looking statements are based on the beliefs and assumptions of Pampa Energia's management and the information currently available to the company. 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 the general economic conditions, industry conditions. And other operating factors could also affect the future results of Pampa Energia 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 Energia. Lida, you may begin the video conference.

Thank you, Margarita. Hello, everyone, and thank you for joining our conference call. I hope you all are safe and well. For the interest of time, I will make a brief summary of the quarter's key figures, the impact of COVID-19 and the latest events since our last call.

We will focus on Power and E&P as TGS and Edenor already held their calls earlier this week. Our CEO, Gustavo Mariani; and CFO, Gabriel Cohen, are both here and joining us for Q&A.

Before we begin, let me remind you that Pampa's figures follow U.S. dollar as functional currency. In the case of peso-linked subsidiaries such as our utilities, their figures are adjusted by inflation and shown in dollars at the end of each reporting period FX.

So you also can see in this slide which businesses are included when we talk about of Pampa consolidated and Pampa restricted group, a definition we use for covenant purposes.

Compared to last quarter, Q3 has not been selected as the lockdown (inaudible) and the economy rebounded, readily improving, but still not back to pre-COVID-19 levels.

During Q3, the Argentine economy is estimated to have fallen by around 11% year-on-year, better than 19% recorded in Q2. We expect the normalization to keep coming along as the country is entering into a more flexible quarantine phase. Pampa achieved robust figures this quarter as a result of higher pricing due to winter peak season, solid operational performance across all our businesses, and the contribution from our new CCGT at Genelba, which is building a 15-year PPA. Because of uncertain environment at upstream, combination of expansionary investment cycle at power generation, OpEx discipline and higher sales, our operating cash flow boosted during Q3 2020, helping to keep buybacks and offset the payment delays from CAMMESA experienced in the quarter.

And finally, a few weeks ago, the government announced a new gas incentive scheme to foster investments for domestic production, although the initial -- the official regulation has not been released yet.

Beforehand, we believe this should be accreted to our upstream business. So let's start commenting the quarter's key takeaways. As shown on Slide 5, revenues increased 5% year-on-year to $689 million, mainly contributed by Ganelba's new PPA and because of the strong real devaluation in Q3 last year, affecting our utility businesses.

Partially offset by lower fuel self-supply as CAMMESA took over most of the grid fuel consumption, lower prices and volumes of oil and gas sold at lesser spot prices and dispatch.

In Q3 20, around 45% of our sales were dollar linked, but roughly 60% in EBITDA -- 70% in EBITDA terms mainly coming from our core businesses, PPA, power capacity, followed by E&P.

Adjusted EBITDA maintained stable by only reducing 3% year-on-year, amounting to $234 million for the quarter, mainly explained by lower E&P price and volume, (inaudible) free and utilities and lesser legacy of power generation, partially offset by Genelba PPA, lower E&P OpEx and royalties related to activity downturn and the [solution] of the cost because of depreciation.

Quarter-on-quarter EBITDA almost doubled, thanks to the Genelba's CCGT PPA. The big season having higher spot prices for power and gas and increased sales at Edenor. As we show on right below, electricity takes 71% of the consolidated adjusted EBITDA, mostly led by power generation, while oil and gas exposure hit 29%, driven by gas and TGS.

Moreover, as shown in the chart left below, in the third quarter of this year, our CapEx decreased significantly compared to last year mainly because of drilling and completion activities at E&P are on standby due to the uncertain pricing environment compared to the shale activities in Q3 last year. And also because we finished Genelba Plus expansion project. Edenor's CapEx increased year-on-year due to the steep real devaluation in Q3 2019, partially offset by the lot on restrictions, tariff freeze, and higher bad debt impacting Edenor's CapEx.

On Slide 7, during Q3, the lockdown effect diluted over the Argentine power grid thanks to the winter season. The average demand reached 15 gigawatts, 2% to 3% lower than previous years, but better than other sectors of the Energia industry or GDP. Industries are still the most impacted by quarantine, especially nonessential. While (inaudible) were hit because of the collapse of the SME's consumption, but partially offset by residential demand due to the stay-at-home order and colder water weather. As we are entering spring, electricity demand is expected to give in.

Moving to power generation segment as seen on Slide 7. During the third quarter of 2020, we posted an EBITDA of $132 million, very similar to the adjusted EBITDA of Q3 last year, mainly given by Genelba Plus CCGT contribution, higher B2B renewal sales as well as lower costs related to lower energy purchases and the deval impact on our peso-nominated expenses. These effects were partially offset mainly by the reduction anticipation of spot prices as from February 2020 without any inflation adjustment.

Quarter-on-quarter, peak pricing for spot energy and higher dispatch in Q3 '20 contributed to the 49% increase in EBITDA. While spot energy comprises 59% of our capacity operated, only 18% of our power generation EBITDA represented by spot market in the quarter and will keep shrinking once Ensenada Barragan expansion is online and inflation keeps not happening.

Generation in Q3 '20 was 3% lower year-on-year in line with the lower electricity demand in the national grid. Our free combined cycles at Loma and Genelba as well as our wind farms achieved high levels of low factor, but the thermal units that solely depend on gas, such as Piedra Buena, the northwestern units were mostly not required in addition to the lower generation of our hydro units. Because of the winter and hence, reduced gas supply for power generation, our efficient dual fuel units of particular and Ingeniero White were highly requested.

Quarter-on-quarter, power generation raised by 16%, mainly because of the seasonality. Despite the demand contraction weakness in the country, the power generation business model relies on capacity payments. So lower dispatch does not much impact on the revenue making as long as the availability is outstanding, especially for PPA-based energy. The availability rate in Q3 2020 reached 98.6% with a full capacity of 5 gigawatts operated by Pampa, very similar to year-on-year and quarter-on-quarter performance.

Regarding our remaining expansions in the pipeline, our key project now is the closing to CCGT at Genelba, Ensenada Barragan thermal power plant, as you can see on Slide 8. This is a 280-megawatt CCGT project at the South of greater Buenos Aires, which is critical infrastructure for Argentina's grid.

We've already placed the purchase order for the cooling tower. So currently, we are working on cementing its foundation base. We are also finishing the turbines building, installing the main pipe lines and prepaying all remaining equipment. 250 people are right now at the site, working at the strictest protocols in place to minimize circulation of COVID.

National gas consumption rebounded as expected because of the winter. But domestic production is severally depleting due to weak investment landscape that began about 1.5 years ago. The graph we see in the slide shows the evolution of production and the dependency on gas imports and liquids to fulfill the demand, which are more inefficient and paid with our currency, way more expensive than local gas, et cetera.

As domestic production increase, import reliance shrank until 2020. In Q3, the production fell 10% year-on-year covering demand deficit liquid fuels as LNG and Bolivian gas were taken at maximum capacity. Should this situation prevail, depletion will come along, and the country will need to restore the LNG facility that was dismissed in 2018 plus increase liquids product consumption, all in detriment of reserves, subsidies and GDP.

However, the implementation of (inaudible) should be soon and reverse this trend. So moving on to the results of E&P. As you can see on Slide 10. In Q3 2020, we posted an adjusted EBITDA of $36 million, 31% lower than the Q3 2019, mainly because of lower prices and to a less extent, the production volume, partially offset by lesser cost and royalty. In terms of operating efficiency, we recorded $23 million of listing costs, 44% improvement compared to Q3 last year, mainly driven by the valuation, efficiency and lower activity at less competitive loss given the current market prices. Measured by unit, we reached a lifting cost of $5.50 per BOE produced, contributed by the outstanding productivity at

Should we become more active as we did this quarter, lifting costs may go higher, but most of the savings are efficiencies gains -- gain to this segment. Despite the tough environment, our oil and gas production decreased only 6% year-on-year, but increased 7% quarter-on-quarter in Q3 2020, reaching 47,000 barrels of oil equivalent per day, of which, 91% is composed by natural gas. The quarter-on-quarter rebound is explained by seasonality. On the oil side, which represented almost 20% of our segment revenue in the quarter, volumes sold decreased 11% year-on-year to 4,200 barrels per day, mainly due to the decline in demand and prices because of the lockdown, resulting in activity standby, partially offset by conventional production from Chirete, which last month was granted to Pampa (inaudible), a 25-year exploitation concession (inaudible).

During Q3 2020, crude oil prices decreased by 18% year-on-year, reaching to $40 per barrel, bouncing back for the fall caused by COVID-19 in Q2. Despite domestic demand collapse due to the lockdown, Pampa was able to pore almost 75% of its production at discounted price on rent. 53% of our oil production is Escalante heavy oil, which is sweet and given the current green fuels trend is pricing premium. However, last September, local market started to recover, and we resumed sales. Regarding gas, as we can see on Slide 11, Q3 '20 reached an average of 264 million cubic feet per day of volumes sold, 15% lower year-on- year. Mainly due to lower trading and to a lesser extent, 5% in annual decrease on production. Compared to last quarter, volumes fall recovered 4% as a production raised to attend the winter demand despite challenging prices.

Lower pricing impacts negatively on the breakeven equation, thus producers respond with a lesser drilling rate and higher depletion takes place. And because of that, production was lower at our gas bearing blocks, but were partially offset by increases at El Mangrullo block with outstanding productivity, fully owned and operated by us.

In Q3 '20 El Mangrullo reached 174 million cubic feet per day of gas production, 14% higher than Q3 '19 and contributed close to 70% of our overall gas, ranked the 4 largest gas-producing block at

Moreover, 6% of our production was Shell gas from the completion of 2 horizontal wells at El Mangrullo Block last year. As we are not connecting more wells, shale production will keep deluded.

During Q3, 2020, our average price of gas was $2.50 per million BTO, 25% less than Q3 2019, explained by the shale reduction on CAMMESA's winter reference price for gas, fire at power plants, also affecting the industrial and spot prices. Though CAMMESA prices during Q3 '20 were around 2.5%, reflecting the high demand due to the winter season. Since October with the spring season, prices are roughly $2 less, back again to the lowest in years and barely covering the replacement costs, impacting that investment rise. Also, as you can see right below our production year-to-date is skewed towards CAMMESA by placing an increase of -- for vertical integration as we've been procuring own gas for Genelba Plus CCGT dispatch rising from the last call's 14% sell share to 22% sell share.

The exports to Chile ended on mid-May, and we were -- we are awaiting Secretary of Energy clearance to resume. Due to primarily uncertainties in gas prices, we reassess our activities with no drilling and completion registered in Q3 '20, in line with the sector.

Moving on the bottom line of the P&L, Pampa reported a consolidated gain of $78 million in the third quarter of 2020, whereas in the same period of 2019, $116 million was reported mainly explained by Edenor and power legacy's credit liability realization agreements and lower operating in oil and gas -- operating margin in oil and gas, partially offset by higher profits in our equity income.

Finally, we are on the Slide 13, our sound balance sheet grants us some degrees of freedom during this challenging environment. In this slide, we show the layers of the company from restricted group to consolidated figures. But for covenant purposes, let's focus on the restricted group. That is primarily Pampa parent company.

We continue optimizing every aspect of (inaudible), highlighting that during Q3 2020, Pampa engaged in all peso incremental borrowings of $64 million, including devalue effect. We also repurchased bonds for $34 million exchange value. Therefore, the restricted group gross debt recorded $1.6 billion in September, similar to last year. The gross debt is 87% denominating in U.S. dollars, which was 89% in June 2020, bearing an average interest rate of 7.7%. Average life decreased from 5.3 years to 4.9 years. The cash amounted to $352 million, which is 11% lower than the $393 million in June 2020, mainly due to buybacks and deterioration of the working capital as DSO reached to 92 days combined with higher billings, offset by positive operating cash flow and net peso borrowing. The restricted group's net debt remained similar to last quarter, below $1.3 billion and net leverage ratio stayed at 2.8x.

After Q3, we paid a maturity $23 million of peso debt in addition to $8 million of pay value bond buyback and some share buybacks. It is worth highlighting that the maturities from now until '22 included amount to $249 million, of which, 92% is denominated in pesos. Pampa consolidated with affiliates recorded a net debt of $1.5 billion, 2x net leverage ratio similar to last year. After Q3, Edenor paid the last amortization of $13 million, Barragan redeemed $130 million of debt securities and amended its amortization schedule, which once approved will ease its maturity profile for the next 2 years.

Regarding share drivers. Next month, we are holding our shareholders meeting to ask to cancel treasury shares up to 6.4 million ADRs. As of today, we hold 5.6 million ADRs in treasury, thus our outstanding capital amounts to 58. 2 million ADRs. Also, the Board approved a new program for up to $30 million, which -- with a price cap of $12 per ADR. So this concludes my presentation. We are going back to Margarita. The -- so we can pass all our Q&A. Please cast it through the platform. This is the gain that we have from COVID. We can do it everything on line (inaudible).

(Operator Instructions)

(foreign language)

The first question is coming from Ricardo Rezende from JPMorgan.

Pampa bought back shares and debt during Q3, and that continues on the current quarter. What should we think about capital allocation in the current quarter?

Ricardo. Going forward, we plan to continue with share repurchases as long as the share price drops below the limit that we said in the last repurchase program that was $12 per ADR. So that's the basic part of the answer.

On the micro term, as long as Pampa continues producing free cash flow as it has been doing, and we plan to continue doing. And we don't see other opportunities to deploy cash and our debt levels are in order and conservative, and we feel comfortable about that. We like to continue with the share repurchases and eventually with bond buybacks, always depending on the market price and the situation, monitoring the cash flow generation of the company as we see the in the near future.

Our next question comes from Mary (inaudible). The first question is about the Plan Gas. Could you give us more color on Plan Gas and the role of Pampa that we play, maybe the timing, prices and detail?

I think as Lida explained, the details have not been officially published. So we are waiting for those details. There's been several conversations with the industry with the government officials that give us an idea of what will be published. So what is in the media is more or less the same that we know, price around $3.50 for the production. In order to participate, you need to at least commit to produce as much gas as you were producing in the first semester or in the first quarter of this year.

We expect it to come out any time now. I think now it's a matter of weeks before it is published. As you know, the President announced the program about a month ago. So we think now they have also mentioned that it should be -- we will start to collect the new price in December. So that -- in the auction will be done in the following weeks before December. So that's why we expect to be imminent the publishing of the new Plan Gas. And what it means for Pampa is basically going back to last year production levels, so around 7.5 million cubic meters of natural gas per day in average. The plan will also contemplate an incentive for winter gas that we are evaluating, but we don't know whether we will use that opportunity or not.

So what we are thinking now is basically to go back to the production of last year, that is slightly higher than what the plan will require from us. And basically developing in El Mangrullo block, tight gas at the Mangrullo block, which is our most efficient basin area that we have in the Neuquina Basin and probably some wells as well in Sierra Chata, which are the 2 -- those 2 are operated by Pampa and an increase of production also in Rincon del, which is operated by YPF and where we have 1/3 YPF and Petrobras being our partners. But most of our increase in production will come from the El Mangrullo and Sierra Chata.

Anything else to add?

Okay. Our next question comes from Pablo

Gabriel Cohen speaking. As we -- Gustavo was mentioning before and it's a recurrent question in previous calls, we are buying both bonds and equity, and that's creating both at some extent, it becomes judgmental. And basically, what we are highlighting is that we are still generating positive cash flows. and that's why we keep doing both things.

Our next comes from Bruno Montanari from Morgan Stanley.

The first question is about, is -- it is encouraging to see positive cash flows, but at the expense of very low CapEx including 0 in upstream. I was wondering how long this low CapEx environment is sustainable without affecting the integrity of the in upstream?

I'm not an expert in reservoirs. And unfortunately, (inaudible) is not here. Maybe Lida can us give more light. I don't think this can be maintained for a long time, despite the integrity of the reservoir. We don't require much CapEx in order to take good care of the integrity of the reservoir. CapEx has been extremely low because we have not been drilling or completing any wells, which we hope we will resume very soon, actually if Plan Gas is published, we will assume with that as soon as probably December. And that will also include maintenance of the reservoir.

Lida, I don't know if anything else to add?

Yes. So basically, we are -- this year in only maintenance. The maturity of the reservoir are reserved, but nothing like drilling and completing. This year the maintenance CapEx is around $30 million -- $30 million, EUR 35 million. Should we have (inaudible) involved, which is not what is expected with the Plan Gas. It should be the same for next year. But if Plan Gas happens, the CapEx rebounds significantly. We -- in order to maintain the production that we achieved this year. We expect to -- instead of diverse -- diversing $35 million this year -- next year to $100 million. The second question?

Yes. The second question from Bruno is about the option costs, which have declined substantially. Should we expect them to increase back to more normal levels as the company increase at it level? What is the more normalized leasing cost levels for the company?

It's a very good question. I don't think it's going to go lower than what we saw. What we -- the lowest was Q2 and Q2 was quite paralyzed, but we still deliver, we still produced. We didn't give a much, in Q3, of course, because of the winter, we recover, but I don't see much more efficiency to be gained. Especially because this year has been a very strange here. Salaries, wages only increased by inflation or little this and that and the valuation was paid this year. So next year, we could expect inflation in dollar, for example.

Our next question comes from Daniel Guardiola from BTG. The first question is about the cash. What portion of your total cash is denominated in pesos and in dollars?

Gabby, would you like to answer the questions?

Yes. In respect of our Breton, it's essentially 3/4 dollar or dollar liquated and 1/4 its direct in pesos.

Our second quarter from Daniel, it's about the Plan Gas that was mostly explained by Lida. But the additional question he's asking is, will this plan cover 100% of their production or only 70% as initially mentioned?

The government is going to auction 70 million -- a block of 70 million cubic meters of natural gas per day, which will be both by CAMMESA and by the distribution companies. But the producer has -- is obliged to produce another. So the industry as a whole or those who participate in the auction and supply and the contracts of the 70 million block are obliged to produce another 30 million in order to, I was said, in order to supply basically the industry, which is the free market portion of the business of the market. So those who participate in the auction will be producing in total, 100 million cubic meters of natural gas per day. 70% of that will be under contract with CAMMESA and the distribution companies. And 30%, we will have to sell it to the industry.

Our next final question from Daniel Guardiola is related to the risk to the PPAs. What is the current situation? And what colors can you share with us from your conversation with the government?

Regarding PPAs? There are no conversations at all with the government regarding the PPAs. And so I think that is a short answer to the question. Again, we as we have always been saying, I think that government understands how important it is to maintain the rules, keep those contracts without any renegotiation, which is something that we share as well. Doing that, we have significant impact in the medium and long term. So the government understands that and tries to avoid any -- even any discussion with the industry regarding the PPAs. Obviously, that is as long as the macroeconomic situation, remains under in a controlled situation. If macro conditions deteriorate significantly, so we will be in another ballgame. But as long as, obviously, for Argentine standards, things are under control. We do not expect any change on the PPAs.

Our next question is the follow-up question of (inaudible) it's about, are you considering to divest asset or derisk your exposure from (inaudible) some gas in Neuquina Basin?

No, no, no, no. We are not starting any divestiture in -- divestment in the Neuquina Basin.

The last question from Daniel Guardiola is about the existing transportation capacity from fulfill started to fully satisfy gas demand. And in that on the March expected ] gas pipeline?

Sorry, can you repeat the question?

Yes. Yes. So the question is about the current transportation capacity from Neuquina to Bueno Aires and the transportation expansion that is under evaluation for

Okay. The transportation capacity from Neuquina to Bueno Aires was almost at full capacity on the previous winter, the winter of 2019. The evacuation capacity of the Nequina Basin was at full. As Lida explained during her speed this year because the industry has not been drilling or connecting new wells production has fallen significantly. And from the Nequina Basin, it has fallen close to [50] million cubic meters of natural gas per day in the winter of 2020 vis-à-vis the winter 2019. So that is -- there is spare capacity in the pipeline from Nequina to Buenos Aires, which the government is aiming to fulfill with this new Plan Gas. I'm not that optimistic that it will be fully fulfilled in 2021, but probably in the following years, hopefully, the capacity will be fulfilled. Regarding the pipeline from -- the new pipeline from the literal pipeline or the new pipeline from the Nequina Basin to Buenos Aires. Unfortunately, in the current financial conditions, that is a project that is a $2 billion project that is unthinkable at this moment. So first, Argentina need to focus in tackling the economic situation, normalize and put the yields on the sovereign bonds on reasonable levels before a project of that magnitude is feasible in the country. So I think that, unfortunately, we will have to wait until that happens.

Our next question comes from Alejandro Demichelis and it's about the E&P business that already -- it was already explained by Lida. Could you please indicate for (inaudible) for drilling CapEx and production in the oil and gas platform next year? What are -- that is the first question.

Yes. So it's -- again, next year, if nothing happens, it's basically what we've been doing this year. It's basically $35 million of Capex. It's maintenance of infrastructure -- facilities infrastructure. If not -- if Plan Gas happens, and we expect to do -- we expect so, it's -- instead of $35 million, we have around $100 million just to maintain the production and going a little bit higher than this year.

And the second question from Alejandro Demichelis is about the electricity tariffs. What are the expectations for electricity tariff increases for next year and payments from CAMMESA?

We expect that you know that for -- in the case of the PPAs, they are dollar based. And in the case of all energy -- spot energy. It's under what we call Resolution 31 that when it was published in February of this year, it was published with a monthly inflation adjustment, which unfortunately it didn't last not even 1 month. So before the first month, it was concurrent with the explosion of the COVID crisis in Argentina and the lockdown and a tremendous moment for the world economy and for Argentina as the economy is even more. So it was not put in place. And the Secretary of Energy, instructed CAMMESA to suspend the application of the monthly increase until a new notice.

In the past, we will live in a high inflation environment. Probably, we will be this year in the neighborhood up 35% to 40% inflation. So the industry is beginning to suffer that adjustment in our cost. So the industry will soon begin to the industry needs to -- the inflation adjustment to be put in place very soon. So otherwise, the availability of the system deteriorates. And at the end, that is most costly for the system than doing the proper maintenance. So we expect that next year, they will resume with inflation adjustment in some way. I cannot give you no assurance on the magnitude or in the timing. But I think that it is needed. The industry is needing that already. And if you can -- hopefully, soon.

There are another question from Matias Castagnino is about cash disclosure in U.S. dollar (inaudible) and peso was already answered. There was another question from (inaudible) about the bond buyback and share buyback already answered. Another question from Andres Cardona regarding the tariff increases, which was also answered. And there was another question from Matthias Wesenack from AR Partners, more color of the E&P business, which was also answered. And from Alejandra from JPMorgan about the CapEx from E&P business and the cash disclosure in U.S. dollar, but already answered. So let's move to the question of does the restricted group liquidity include the repurchase Pampa bonds?

The restricted group liquidity does not include the repurchase Pampa bonds. Pampa bonds are offset for debt, okay? So if you see our financial statements and our debt profile, for example, in the 23 bonds, we are really reducing by the share of face value that we already bought back.

Our next question was from Andres Cardona from Citibank. When do you expect final resolution for Plan Gas, we are also waiting for it. Has something changed since Mr. Fernandez did the announcement and

So there have been some changes since last week. So last week, they say it was 3 years plus 1. And now we gather to know that it's going to be finally 4 years GSA, gas supply agreements. Compared to the last draft, they also add some kind of like commitments -- CapEx commitment and that will be reviewed from time to time by a committee composed by their different stakeholders. And the price it's [3.7] They didn't changed that, 3.7 nominal for Nequina Basin. But pretty much it. It's basically -- and then they said about -- something about access to official effects, but that's -- we need more clarification from the CV, right? Regarding the fiscal credits, tax credits that in case that we are not here we can use them. We also need more clarification and final clearance from the Argentine IRS. So basically, in summary, instead of 3 years plus 1, it's 4. Offshore, which is not our case, but offshore instead of 3 plus 5, it's 4 plus 4. Price has been ratified 3.7 nominal and there's -- we need to do a CapEx commitment.

Our next question comes from [Ann Mule]. Could you comment on how you will address short-term debt, either repaid or refinanced in local markets? And follow-up on this. That is the first question.

Yes. Well, as you know, most of our short-term debt is basically nominated, the local market is quite liquid. So we feel pretty confident that we can either refinance either with banks or with the local capital markets or we can also manage our liquidity depending on how we see rates, and we may also cancel and we borrow. So we feel quite confident about our -- basically all our cash position back our short-term debt. So our bonds are quite in the medium and long term. So that's first part of the question, and I think there is something else, right?

Yes. There seems to be some positive developments on the policy front with the government in recent days. How do you see FX restrictions going forward?

Well, it's just a personal opinion, but I would expect that as long as macroeconomic variables start to recover and get some equilibrium, I would expect at some point to be relief in those restrictions. Although, I don't see in the short term, any relevant lifting of all those restrictions. I think we will be still living and running our business with those restrictions. Maybe we would expect at some point that there will be more relief. But I think it will depend clearly on how the economy develops and IMF. And basically, it's the whole environment. Yes, clearly the reserves, but that's what I was thinking about in macro stability. Clearly, we need to recover reserves and we -- basically, we need is that the country needs to start going again at some pace. I think that's the basic signal that we need in order to expect a relief in those restrictions.

Our next question comes from Alejandra Aranda. Could you give us more color on the evolution of the negotiations with the government regarding the tariff?

Sorry. Sorry, I was muted. They are -- I cannot say that there are negotiations. What has been -- regarding electricity tariff that consumers pay, the government has been, in the last few weeks through several speakers, some of them from the Ministry of Economy, some of them somebody like the Secretary of Energy himself mentioned that the pricing of tariff is about to end at the end of the year.

I think that is completely in line with the fiscal needs of the country. They perfectly understand that maintaining the freeze of tariff means higher fiscal deficit through to subsidies to the industry or to the consumer. And that is something that, especially in order to agree with the IMF, they need to tackle.

So they are not discussion with the industry, but they are aware that they need to move forward in order to tackle the macroeconomic issues of Argentina. And regarding the prices -- of for power generation. I already answered the PPAs. There are no talks, discussion or anything about the PPAs.

And regarding the spot price. It's the verge of, in some cases, and some old equipment of being below the breakeven point. So that in the medium-term means that the equipment is not properly maintained, will be not properly maintained, will begin to suffer in terms of the availability, and that is very much for the system. So I think that the officials, the Secretary of Energy and CAMMESA are aware of that. And I hope that together with the decreasing of consumer tariff, we will have some relief as power generators.

(Operator Instructions) Our next question comes from Andres Cardona from Citi Bank. What is your view on spot prices for gas once Plan Gas is complete?

Okay. I think that the spot prices, meaning what the producer sells to the industry I think they will converge. Today, they are much lower in line what CAMMESA is paying for gas. But I think that everything will come -- every price of gas in Argentina will, in a way, comes towards the price of the auction of the Plan Gas. That is -- so I think it will be in the $3.50 per million BTU area. That is our expectation.

Our next come from (inaudible). I would like to know if you're going to distribute dividend?

We do not have a policy of distribution of dividends that we do. But so far, for many years, we haven't distributed any dividends, but we are buying back our shares. So it's a form of dividend.

Our next question comes from Andres [Engler]. Does the company plan to take that from the Argentine market?

Yes, as we pointed out before. Yes, with it's -- it's within our plans. And the market is quite liquid, both on bank side and on the local capital market side. So clearly, it's our first funding alternative.

(Operator Instructions)

So this concludes the question-and-answer section. I'll turn to Lida for final remark.

Okay. Okay. Thank you so much. Everybody. Thank you so much for joining our call. Sorry for a little bit of intervenes. We change providers. Now it's Zoom. But I hope it was helpful. We are going to pass our call. Any question that has not been answered, please just contact us. For the interest of time, we wanted to make it 1 hour. But anything you mean I just count at us, we are always more than available for you. I hope you have a good day and have a nice weekend.

So this concludes this presentation. Thank you for joining. You may disconnect at this time. Goodbye.