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Pampa Energia S.A. (PAM -1.05%)
Q3 2020 Earnings Call
Nov 12, 2020, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Margarita Chun -- Head of Investor Relations
We would like to welcome everyone to Pampa Energia's Third Quarter 2020 Results Conference. [Operator Instructions]
Let me mention that forward-looking statements are based on the beliefs and assumptions of Pampa Energia's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they are related 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 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, Investor Relations and Sustainability Officer of Pampa Energia. Lida, you may begin the video conference.
Lida Wang -- Investor Relations Officer & Sustainability
Thank you, Margarita. Hello everyone and thank you for joining our conference call. I hope you all are safe and well. For 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, Mr. Gustavo Mariani and CFO, Gabriel Cohen, are both here and joining us for the Q&A.
Before we begin, let me remind you that Pampa's figures follow US 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. You also can see in this slide which businesses are included when we talk about Pampa consolidated and Pampa restricted group, a definition we use for governance purposes.
Compared to last quarter, Q3 has not been so hectic as the lockdown is easing up and the economy rebounded, steadily 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 coming along as the country is entering into a more flexible quarantine state. 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 billing at 15-year PPA.
We caught up on certain 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 payment delays from CAMMESA experienced in the quarter. And finally, few weeks ago, the government announced a new gas incentive scheme to foster investments for domestic production although initial regulation has not been released yet. Beforehand, we believe this should be accretive to our upstream product 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 Genelba's new PPA and because of the strong devaluation in Q3 last year affecting our utility businesses partially offset dollar fuel soft supply as connected to over most of grid fuel consumption, lower prices and volumes of oil and gas sold and lesser spot prices and dispatch. In Q3 2020, around 45% of our sales were dollar-linked but roughly 50% in EBITDA -- 70% in EBITDA term, 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, tariffs freeze, builders and lesser legacy power generation partially offset by Genelba PPA, lower E&P opex and royalties related to activity downturn and dilution of the personnel oriented costs because of depreciation. Quarter-on-quarter, EBITDA almost doubled, thanks to the Genelba CCGT, PPA, the peak 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 takes 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 lockdown restrictions, tariff freeze and higher bad debt impacting Edenor capex.
On Slide 7. During Q3, the lockdown effects diluted over the Argentine power grid, thanks to the winter season. The average demand reached 15 gigawatt, 2% to 3% lower than previous years, but better than other sectors of energy industry or GDP. Industries are still the most impacted by quarantine, especially nonessential. While these costs were hit because of collapse of SME consumption but partially offset by residential demand due to the stay at home order and colder 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 first quarter of 2020 we posted an EBITDA of $132 million. Very similar to the adjusted EBITDA of Q3 last year, mainly given by Genelba CCGT contribution, higher B2B renewal sales as well as lower costs related to lower energy purchases and the deval impact on our peso-denominated expenses. These effects were partially offset mainly by the reduction and specification of spot prices as from February 2020 without any inflation adjustment. Quarter-on-quarter peak pricing for spot energy and higher dispatch in Q3 2020 contributed to the 39% increase in EBITDA.
While spot energy comprises 59% 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 is not happening. Generation in Q3 timing was 3% lower year-on-year, in line with the lower electricity demand in the national grid. Our three combine cycles at Loma and Genelba as well as our wind farms achieved high levels of load factor but the thermal units that solely depend on gas such as Piedra Buena in northwestern unit were mostly not required in addition to lower generation of our hydro unit. Because of the winter and hence reduced gas supply for power generation, our efficient dual fuel units of Parque Pilar and Ingeniero White were highly requested.
Quarter-on-quarter, power generation rose by 16% mainly because of the seasonality. Despite the demand contraction witnessed in the country, the power generation business model relies on capacity payments. So lower dispatch does not much impact on the revenue mix. As long as the availability is outstanding, especially for PPA based energy. The availability rate in Q3 2020 reached 98.6% with an install capacity of 5 gigawatt 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 Ensenada Barragan thermal power plant as you can see on Slide 8. This is 280-megawatt CCGT project at the south of Greater Win Osiris which is critical infrastructure for Argentina group. 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 pipelines and preparing all remaining equipment. 250 people are right now at the site working at the strictest protocols in place to minimize situation of COVID.
Natural gas consumption rebounded as expected because of the winter but domestic production is steadily depleting due to investment landscape that began about a year and half 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, paid with our currency, way more expensive than local gas etc. As domestic production increase import reliance shrunk until 2020. In Q3, the production fell 10% year-on-year covering demand deficit liquid fuels as LNG and Bolivia gas orders peaked 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, while increased liquid consumption, all in detriment of reserve subsidies and GDP. However, implementation of plant gas four should be soon and reverse this trend.
So moving on to the results of E&P. As you can see on the Slide 10, in Q3 2020 we posted an adjusted EBITDA $36 million or 31% lower than the Q3 2019 mainly because of lower prices and while to a less extent production volumes partially offset by lesser cost and volume. In terms of operating efficiency, we recorded $23 million of lifting costs, 44% improvement compared to Q3 last year, mainly driven by the evaluation efficiency and lower activity at less competitive loss given the current market prices. Measured by unit, we reached our less than cost of $5.5 per BOE produced contributed by the outstanding productivity at El Mangrullo block. Should we become more active as we did this quarter, lifting cost may go higher but most of the savings are efficiencies gained to this segment. Despite the tough environment, our oil and gas production decreased only 6% year-on-year, but increased 10% 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 4.2 thousand barrels per day mainly due to the decline in demand and prices because of the lockdowns resulting in activity standby, partially offset by conventional production from Chirete block which last month was granted to Pampa, Hila a 25-year exploitation concession in Los Blancos sale. In Q3 2020 core oil prices decreased by 18% year-on-year, reaching to $40 per barrel, bouncing back from fall caused by COVID. Despite domestic demand collapse due to the lockdown, Pampa was able to explore almost 75% of its production at a discounted price on rent. 53% of our oil production is Escalante heavy oil which is sweet, and given the current clean fuels trend, it's pricing premium. However last September, local markets started to recover and we resumed sales.
Regarding gas as we can see in Slide 11, Q3 2020 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% international decrease on production. Compared to last quarter volumes sold recovered 4% of our production raise to attend winter demand despite challenging price. Lower pricing impacted 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 2020, El Mangrullo reach 174 million cubic feet per day of gas production, 14% higher than Q3 2019 and contributed close to 70% of our overall gas. Ranked the four largest gas producing blocks have been generating. Moreover, 6% of our production was at shale gas from the completion of two horizontal wells as El Mangrullo last year as we are not connecting more wells shale production will keep [Indecipherable].
Doing Q3 2020, our average price of gas was $2.5 per million BTU, 25% less than Q3 2019 explained by the sharp reduction on the CAMMESA's winter reference price for gas-fired power plants also affecting the industrial and spot prices. Though CAMMESA prices during Q3 2020 we're around 2.5% reflecting the high demand due 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 cost, impacting the investment price. Also, as you can see right below our production year today, it is skewed toward CAMMESA for placing an increase for vertical integration as we've been procuring owned gas or Genelba Plus CCGT dispatch rising from the last call 14% sales share to 22% sales 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 2020, in line with the sector.
Moving on the bottom line of the P&L. Pampa reported a 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 credit liability realization agreements and lower operating in oil and gas or operating margin in oil and gas, partially offset by higher profit in our equity input.
Finally, we are on the Slide 13. Our balance sheet brings us some degrees of freedom during this challenging environment. And this is why we show the layers of the company from restricted to consolidated figures, but for covenant purposes, lets focus on the restricted group that is primarily Pampa's parent company. We continue optimizing every aspect of our indebtedness, highlighting that during Q3 2020 Pampa engaged in all faced incremental borrowing of $64 million including deval effects. We also repurchased bonds for $34 million face value. Therefore the restricted group gross debt recorded $1.6 billion in September, similar to last year, the gross debt in is 87% denominating in US 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 buyback and deterioration of the working capital as DSOs reached to 92 days combined with higher billing.
Offset by positive operating cash flow and net adds for borrowing. The restricted group's net debt remained similar to last quarter, below $1.3 billion and net leverage ratio stayed at 2.8%. After Q3, we paid a maturity to $23 million of peso debt in addition to $8 million of fair value bond buyback and strong share buyback. It is worth highlighting that the cumulative maturities from now until 22 included amount to $249 million, of which 92% is denominated in pesos. Pampa consolidated with affiliates recorded and a net debt of $1.5 billion, 2 times net leverage ratio similar to last year, after Q3 Edenor paid the last amortization of $40 million, Barragan redeemed $130 million of debt securities and amended its amortization schedule which once approved will ease its maturity profile next two years. Regarding share buybacks, next month we are holding a shareholders' meeting to cancel treasury shares up to 6.4 million ADRs. As of today, we hold 5.6 million ADRs in treasury less 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, so we can pass for our Q&A. Please pass it through the platform. This is the gain that we have from COVID.
Questions and Answers:
Margarita Chun -- Head of Investor Relations
[Operator Instructions]
The first question is coming from Ricardo Rezende from JP Morgan. On the bought back shares and debt during Q3 and that continues on the current quarter. What should we think about capital allocation in the final quarter?
Gustavo Mariani -- President, co-Chief Executive Officer, and Generation & New Business Director
Hi, 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.
[Technical Issues] continue producing free cash flow as we have 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 conservative and we feel comfortable about that. We plan 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 in the near future.
Anything more?
Margarita Chun -- Head of Investor Relations
Our next question comes from Mari Remi [Phonetic]. 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 details?
Gustavo Mariani -- President, co-Chief Executive Officer, and Generation & New Business Director
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 when it 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 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 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, basically going back to last year production levels. So around 7.5 million cubic meters of natural gas per day in average and the plan will also contemplate an incentive for winter gas but 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 El Mangrullo block which is our most efficient basin -- area that we have in the basin and probably some wells as well in Sierra Chata Sierra which are the two -- those two are operated by Pampa and an increase of production also in Rio Neuquen which is operated by YPF and where we have one-third 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?
Margarita Chun -- Head of Investor Relations
Okay. Our next question comes from Paulo Bilezikjian [Phonetic]. Why was our stock and not just that, given the result?
Gabriel Cohen -- Corporate Finance Director
Hello. Gabriel Cohen speaking. As we -- Gustavo has mentioned before and it's a recurrent question in previous calls, we are buying both bonds and equity and distributing 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.
Margarita Chun -- Head of Investor Relations
Our next comes from Bruno Montanari from Morgan Stanley. The first question is about, it is encouraging to see positive cash flows but at the expense of very low capex including zero in upstream. I was wondering how long this low capex environment is sustainable without affecting the integrity of the reservoirs in upstream.
Gabriel Cohen -- Corporate Finance Director
I'm not an expert in reservoirs and unfortunately Ricardo Torres is not here. Maybe Lida can 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 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 resume with that as soon as probably December. And that will also include maintenance of the reservoir. Lida do you have anything else to add?
Lida Wang -- Investor Relations Officer & Sustainability
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 -- $35 million. Should we have [Technical Issues] 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 in order to maintain the production that we achieved this year, we expect to -- instead of diverting $35 million next year to $100 million. The second question?
Margarita Chun -- Head of Investor Relations
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 its level? What is the more normalized leasing cost levels for the company?
Lida Wang -- Investor Relations Officer & Sustainability
It's a very good question. I don't think it's going to go lower than what we saw. 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 year. Salaries, wages only increased by inflation or little this and that and devaluation was paid this year. So next year we could expect inflation in dollars for example.
Margarita Chun -- Head of Investor Relations
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? Gabi would you like to answer the questions?
Gabriel Cohen -- Corporate Finance Director
Yes, hello. In respect of our break down, it's essentially three-quarters dollar or dollar liquated and one-quarter is direct in pesos.
Margarita Chun -- Head of Investor Relations
Thank you. Our second question from Daniel is about the Plan Gas that was mostly explained by Lida. But the additional question he's asking is, will this plan cover 100% of our production or only 70% as initially mentioned?
Gustavo Mariani -- President, co-Chief Executive Officer, and Generation & New Business Director
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 -- like I 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.
Margarita Chun -- Head of Investor Relations
Thank you. Our next final question from Daniel Guardiola is related to the risk to the PPA. What is the current situation? And what color can you share with us from your conversations with the government?
Gustavo Mariani -- President, co-Chief Executive Officer, and Generation & New Business Director
Regarding PPAs, there are no conversations at all with the government regarding PPAs. 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 will 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.
Margarita Chun -- Head of Investor Relations
Thank you, Gus. Our next question is the follow-up question of Daniel. Are you considering to divest asset or de-risk exposure from gas generating?
Gustavo Mariani -- President, co-Chief Executive Officer, and Generation & New Business Director
No, not at all. We are not studying any divestiture in -- divestment in an innovation.
Margarita Chun -- Head of Investor Relations
The last question from Daniel Abiola is about the existing transportation capacity from Neuquen to Buenos Aires. Started to fully satisfy gas demand. Any stuff on the much expected highlight?
Gustavo Mariani -- President, co-Chief Executive Officer, and Generation & New Business Director
Sorry can you repeat the question?
Margarita Chun -- Head of Investor Relations
Yes. So the question is about the current transportation capacity from Neuquen to Buenos Aires and the transportation expansion that is under evaluation for results?
Gustavo Mariani -- President, co-Chief Executive Officer, and Generation & New Business Director
Okay. The transportation capacity from Neuquen to Buenos Aires was almost at full capacity on the previous winter, the winter of 2019. The evacuation capacity of the Neuquina Basin was at full. As Lida explained during her speech, this year because the industry has not been drilling or connecting new wells, production has fallen significantly. And from the Neuquina Basin, it has fallen close to 50 million cubic meters of natural gas per day in the winter of 2020 vis-a-vis the winter of 2019. So that is -- there is spare capacity in the pipeline from Neuquen 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 Neuquen Basin to Buenos Aires, unfortunately in the current financial conditions, that is a project -- it's 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.
Margarita Chun -- Head of Investor Relations
Thank you, Gustavo. 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 Plan Gas for drilling capex and production in the oil and gas platform next year? What are -- that is the first question.
Lida Wang -- Investor Relations Officer & Sustainability
Yeah. So again, next year, if nothing happens, it's basically what we've been doing this year. If nothing happens is 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, around $100 million just to maintain the production and going a little bit higher than this year.
Margarita Chun -- Head of Investor Relations
Thank you, Lida. And the second question from Alejandro Demichelis. It's about the electricity tariffs. What are the expectations for electricity tariff increases for next year and payments from CAMMESA?
Gustavo Mariani -- President, co-Chief Executive Officer, and Generation & New Business Director
We expect that -- 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 one 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 nor 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.
Margarita Chun -- Head of Investor Relations
Thank you, Gustavo. There are another question from Mathias Saracino. It's about the cash disclosure in US dollar. Argentine peso already answered. There was another question from Mariel Fabro [Phonetic] 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 Matias Wesenack from AR Partners. More color of the EMP business which was also answered. And from Alejandra Andrade from JPMorgan about the capex from E&P business and the cash disclosure in US dollar, but already answered. So, let's move to the question of Mariel Fabro. [Phonetic] Does the restricted group liquidity include the repurchase Pampa bonds?
Lida Wang -- Investor Relations Officer & Sustainability
Hi, Mariel. The restricted group liquidity does not include the repurchase Pampa bonds. Pampa bonds are offset for debt, OK? 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.
Margarita Chun -- Head of Investor Relations
Thank you, Lida. Our next question was from Andres Cardona from Citibank. And when do you expect final resolution for Plan Gas we are also waiting for it? And has something changed since Mr. Fernandez did the announcement and [Indecipherable]?
Lida Wang -- Investor Relations Officer & Sustainability
Hi, Andres. So there has been seen some changes since last week. So last week they say, it was three years plus one. And now we gather to know that it's going to be finally four years GSA, Gas Supply Agreement. 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 is $3.7 million [Phonetic]. They didn't changed that $3.7 million for Neuquina. But pretty much it. It's basically -- and then they said about -- something about access to official tax, but that's -- we need more clarification from the CV right?
Regarding the fiscal credits tax credits that in case that we are not pay -- we can use them. We also need more clarification and final clearance from the Argentine IRs. So basically in summary instead of three years plus one, its four. Offshore which is not our case, but offshore instead of three plus five, it's four plus four. Price has been ratified $3.7 million nominal and there's -- we need to do a capex commitment.
Margarita Chun -- Head of Investor Relations
Thank you, Lida. Our next question comes from Ann Mule. Good morning. 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.
Gabriel Cohen -- Corporate Finance Director
Yes. Hello. 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 the rates and we may also cancel and we borrow. So we feel quite confident about our -- basically all our cash position that's our short-term debt. So now 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?
Margarita Chun -- Head of Investor Relations
Yeah. There seems to be some positive developments on the committee from -- with the government in recent days. How do you see FX restrictions going forward?
Gabriel Cohen -- Corporate Finance Director
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 points that there will be more relief. But I think it will depend clearly on how the economy develops and IMF and basically it's -- 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.
Margarita Chun -- Head of Investor Relations
Thank you, Gabriel. Our next question comes from Alejandra Andrade. Could you give us more color on the evolution of the negotiations with the government regarding the tariffs?
Gabriel Cohen -- Corporate Finance Director
Sorry, I was muted. They are -- I cannot say that there are negotiations. Well there 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 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 discussions 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 for power generation. I already answered the PPAs. There are no talks, discussion or anything about the PPAs. And regarding the spot price, the virtue 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 availability and that is very bad 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 at power generators.
Margarita Chun -- Head of Investor Relations
Thank you, Gabriel. Thank you, Gus. Please hold while we poll for questions. Our next question comes from Andres Cardona from CitiBank. What is your view on spot prices for gas, on the Plan Gas is completed?
Gustavo Mariani -- President, co-Chief Executive Officer, and Generation & New Business Director
Okay. I think that the spot prices -- spot prices meaning, what we -- 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 converge toward the price of the auction of the Plan Gas. That is -- so I think, it will be in the $3.50 per million BTU areas, that is our expectation.
Margarita Chun -- Head of Investor Relations
Thank you. Our next question comes from -- please wait for a second -- our next question is coming from Alejandro Gargollo [Phonetic]. Hello. My name is Alejandro Gargollo, I would like to know, if you are going to distribute dividend?
Lida Wang -- Investor Relations Officer & Sustainability
Hi, Alejandro. How are you? 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.
Margarita Chun -- Head of Investor Relations
Thank you, Lida. Our next question comes from Andres Engler. Does the company plan to take that from the Argentine market? Very good, Andres.
Gabriel Cohen -- Corporate Finance Director
Hello. Yes. As we pointed out before, yes, it's within our plans. And the market is quite equal both on bank side and on the local capital market side. So clearly it's our first funding alternative.
Margarita Chun -- Head of Investor Relations
Thank you, Gabriel. [Operator Instructions] So this concludes the question-and-answer session. I'll turn to Lida for final remark.
Lida Wang -- Investor Relations Officer & Sustainability
Okay. Thank you so much. Okay. 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 cut our call. Any question that has not been answered, please just contact us. For the interest of time we wanted to make it one hour. But anything you may need just contact us, we are always more than available for you. I hope you have a good day and have a nice weekend.
Margarita Chun -- Head of Investor Relations
[Operator Closing Remarks]
Duration: 60 minutes
Call participants:
Margarita Chun -- Head of Investor Relations
Lida Wang -- Investor Relations Officer & Sustainability
Gustavo Mariani -- President, co-Chief Executive Officer, and Generation & New Business Director
Gabriel Cohen -- Corporate Finance Director
