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Pampa Energìa (NYSE:PAM)
Q2 2019 Earnings Call
Aug. 13, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning ladies and gentlemen and thank you for waiting. At this time, we would like to welcome everyone to Pampa Energìa 2nd Quarter 2019 results conference call. We would like to inform you that this event is being recorded and all participants will be in listen only mode during both companies' presentations. After the company's remarks are completed, there will be a question and answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please press * 0 to reach the operator.

Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Pampa Energìa's management and on information currently available to both companies. They involve risks and uncertainties and assumptions, because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Pampa Energìa and cause the results to differ material from those expressed in such forward looking statements.

Now I'll turn the conference over to Lida Wang, Investor Relations Officer of Pampa Energìa. Ms. Lida, you may begin your conference.

Lida Wang -- Investor Relations Officer

Good morning everyone and thank you for joining our conference call. I will briefly go through every business segment with you, the quarters, and the latest events since our last call in May. Our CEO, Mr. Gustavo Mariani, and our CFO, Mr. Gabriel Cohen, are here joining us for the Q&A session.

So, last April, Pampa adopted the U.S. dollar as functional currency, therefore inflections are recorded in U.S. dollar since January of this year. For the comparative period of 2018, according to our figures, are recorded in pesos adjusted by inflation as of December 31, 2018 and show in U.S. dollars at the closing effect. This comparison might be difficult to read as inflation outpaced devaluation by 20% as this slide shows. Therefore for a like to like basis, to analyze the performance organically we are comparing nominal figures reported last year in Q2 and convert them to dollars.

In the case of [inaudible] which are mostly peso link businesses, they continue to have functional currency in pesos, so they keep reporting in pesos adjusted by inflation, the years are shown in U.S. dollars converted at the June 2019 closing effect.

In order to analyze the performance organically and to be in line with the reporting, the comparative figures is in pesos adjusted by inflation until the end of June 2019 and shown in dollars at the closing effects. So how you read these clarifications we can talk.

On Slide 4, we wanted to make a quick stop by reviewing the quarters financial highlights. Earnings fell year over year by 3%, mainly because of lowered gas prices, reduced legacy powerplants valuation, and the impact of devaluation higher than inflation in our peso linked businesses. This negative effect was upset by commissioning of new capacity since June 2018, adding more than 400 megawatts to the grid, higher sales due to the pass through at power generation of gas, and one-time sales bill to the federal government regarding the Shanty Towns consumption and reimbursement of social carry benefits at Edenor.

On the other hand, quarter on quarter, revenues improved by 12% mainly because of higher gas production, new windfarms, and gas turbines online since last May. And this one time sale I mentioned before at Edenor.

Our EBITA also fell year on year by 11%, mainly explained by lower gas prices and expiration of pond gas at EMP, reduced legacy powerplant generation, and devaluation effect on our price inflation adjusted utilities, partially upset by Edenor's flat revenues recorded last May and lower peso holding expense due to the Zeba [inaudible].

Quarter on quarter, EBITA keeps improving, having increased by 22% mainly because of higher gas production, building of new windfarms PEPE-2 and PEPE-3, and an Edenor's lax sales. As we show on the right below, oil and gas share at one share of Pampa contributed EBITA, given the current price environment at EMP while in electricity, it's led by power generation takes the other two thirds of the EBITA. Also it is well to highlight that almost 60% of Pampa's consolidated EBITA is dollar linked, mainly from gas and power.

Moreover as shown in the chart left below, in the 2nd Quarter of this year our capex decreased 12% compared to the same period of last year. Mainly explained by lower expansion capex in oil and gas segment and because of Q2 2018 we commissioned Mario Cebreiro windfarm. Partially upset by [inaudible], policy to combine cycle, and [inaudible].

If we compare to the last quarter, capex increased 21%, mainly given by capex of the commissioning of PEPE windfarms, increased gas production in [inaudible] block.

As you can see on Slide 5, the adjusted EBITA in the 2nd Quarter of 2019 recorded $266 million 11% less compared to the EBITA of $300 million recorded in the same period of 2018. Mainly explained by decreases of 34% in oil and gas, 21% in holding and others and 6% in power generation, partially upset by increases of 10% in electricity distribution and to a lower extent to petrol chemicals.

Moving to power generation segment, during the 2nd Quarter of 2019 we post an adjusted EBITA $100 million, 6% lower then the Q2 2018, many given by our reduction in legacy [inaudible] after Resolution 1 effective from March 2019. By which capacity payments that we've often seen in April and May have been reduced around 40% in dollar for [inaudible] as they are the lowest dispatched units in our portfolio.

The impact on our highest load factor units from our legacy [inaudible] combined cycles is smaller but still 20% lower off-peak season during the off-peak season. This effect was partially upset mainly by the commissioning of Mario Cebreiro and PEPE windfarms or PPAs, as well as Genelba Plus gas turbines and to a lesser extent the increased dispatch of our thermal and renewable powerplants. Quarter on quarter, PEPE windfarms with business PPAs contributed to the slight increase in the EBITA.

Generation was slightly higher year on year because of the operation of the windfarms which runs senior in the dispatch priority because its viable cost is close to zero. And in addition that the gas turbines at Genelba Plus thermal powerplant are part of the Production to combined cycle project as well as higher dispatch at CPB because we managed to get cheap gas and therefore be competitive in the viable cost to get dispatched.

This effect were partially upset by lower load factors like weather [inaudible]. Caused by a higher viable cost from the partial recognition of the [inaudible] therefore placing them behind to be such priority in the grid. Plus lower water level in our dams mainly effecting the Mendoza hydropower plants that is also going through an overhaul.

Quarter on quarter power generation decreased mainly because of lower electricity demand in the grid because weather is milder, partially upset by commission of gas turbines at Genelba Plus windfarm.

EBITA rate in the 2nd Quarter of 2019 was 95.4% within full capacity of 4.8 gigawatts. That includes the operation of recently acquired Ensenada de Barragàn solar powerplant. Slightly lower than the 19.2% EBITA achieved in the same quarter of last year, but similar compared quarter on quarter.

Moving to news in the power generation, on June 26th we jointly awarded Ensenada de Barragàn solar powerplant. 567 megawatts located close to Buenos Ares TD with a PPA running until 2020, April. This powerplant also has an expansion project which is close to combined cycle, increasing 280 megawatts more it's capacity. With a PPA for 10 years after the project is finished which is estimated by Q1 2021. With a total estimate also estimated at $200 million.

The position price on all this is $282 million, of which $200 million was equally contributed by [inaudible] and the balance to $170 million nominally goes to Pampa as long as we finish the project by the end of 2021.

On top of that, the underlying assets carry an existing debt of $229 million, with two years of grace. So we can focus this powerplant cash flow proceeds first to complete the combined cycle works and then to repay the debt.

Regarding expansions we have in the pipeline, we are currently in the midst of closing to combined cycle of 383 megawatts at Genelba as you can see in the picture on Slide 7. We increased current gas turbine No. 3 capacity by 19 megawatts from June and also committed one the commercial commissions of the new turbine No. 4 for 188 megawatts. This has been done 12 days earlier than the committed date. They are billing as legacy capacity until the closing to combined cycle begins operation.

Additionally, we have been [inaudible] with of the rest of the construction work there which are ahead of the original schedule.

Moving on briefly on the distribution segment, which was reviewed by our CFO, Gabriel Cohen in the earnings call, I'll show you the slide 8. During the second quarter of 2019, yearly EBITA increased by 17% compared to the same period of 2018 amounting to $71 million in the quarter mainly because of the lack sales of $33 million to the federal government regarding the consumption of shantytowns and the reimbursement of social current benefits. Now that in the north license was transferred to the city and to the province of Buenos Ares these sales to the shantytowns and to the social tariffs are going to be borne by the local government.

[inaudible] was through as a consequent of the government for regulatory liabilities agreements signed last May. Which it upset certain legacy regulatory debts that it held since 2012. With a lawsuit filed back in 2013 and regular unpaid penalties between 2006 and 2015 of around 3 billion pesos by deploying additional capex in the next 5 years on top of the investments [inaudible].

Though this settlement recorded a one-time profit of $308 million, before tax we haven't considered this in our EBITA as it is a non-cash effect. But it does affect the income tax statement next year that added to the [inaudible] and our outflow for the next 5 years is estimated to be a total of 7.6 billion pesos.

Year on year, during Q2 2019, we experienced lower demand of electricity by 9% due to mild weather, downturn in the economic activity and high demand in elasticity. Moreover this quarter's EBITA was negatively affected by the effect variation higher than the own distribution cost update, it's known CPD which is over weighted in this very index that it's overlying the CPI and the PPI in addition to higher operating costs and energy losses. The energy losses reached 19.2% on the 2nd Quarter of 2019. 60 bases higher than the 18.6% in the same period of 2018. And 180 bases above last quarter identified in residential end users especially low-income users that do not have access to the gas distribution grid fortunately upset by lower volume of energy demand. We are targeting end users that still attribute by performing market discipline actions and installing customized precharge meters. Therefore we are increasing our customer base, but this has been upset by [inaudible] and large users due to the GDP recession.

Energy costs increased by 19% in real currency, in pesos. But decreased 14% in dollars year on year due to the level of substitutes in renewables but this still subtilized compared to the full cost of generation clearly is stemming at the half of it.

As you can see on Slide 9 during the Q2 2019, in the oil and gas segment we posted an adjusted EBITA of $53 million. 34% lower than the same quarter of 2018. Mainly because this is still reflecting the downward trend in gas sale prices, lower oil prices year on year, and the expiration of the second generation in July 2018. Partially upset by the 6% higher production of gas though intersegment sales to power generation for fuel sales to humans and lower expenses that our peso link.

On the other hand, quarter on quarter EBITA improved by 11% mainly explained by higher gas production due to developed pricing that [inaudible] demand started on June. Our overall production in Q2 2019 increased 6% year on year and 4% quarter on quarter, reaching to $48.5 thousand dollars before [inaudible] of which 90% is composed by natural gas.

On the oil side, production level year on year remained unchanged and [inaudible] per day. But quarter on quarter, oil production decreased 10% [inaudible] and exploratory blocks that were recently made. Oil discovery is in the process of facilities [inaudible] since the April of this year.

During Q2 2019 the crude oil sales price decreased year on year by $3.00. But increased quarter on quarter by $6.00 reaching $60.00 per barrel because the domestic price follows the trends and this international price rebounded by the end of 2018. And [inaudible] that 60% of our production is characterized to be sweet, and given the current clean field trend, narrows the [inaudible] prices.

Please turn to Slide 10 where we want to explain in deeper detail the situation we got. Regarding the gas production this quarter reach an average of 262 million cubic feet per day. A 6% increase year on year and 5% quarter on quarter, mainly explained by the production increase up in [inaudible] a block in which -- gas in [inaudible] capacity was expanded since the end of last year and we freely operate.

By June 2019, the production level reached 151 million cubic feet per day, 55% than June last year. This positive effect were partially upset by lower production in gas bearing blocks because of lack of visibility in sale prices. Which was affected by the excessive supply of gas [inaudible] by disruption of [inaudible] elements, specifically back up by the unconventional gas plants resolution 46. Kind of upset by the economic downturn and specifically during the winter season, [inaudible] as the main transportation pipeline.

This effect negatively impacted [inaudible] with lower dealing rate and natural decline. And a minor decrease at [inaudible]. In this case, [inaudible] is awaiting the completion of the well drilled during the Q2 2019. And [inaudible] the same production level year on year.

During the 2nd Quarter of 2019 our actual weighted average sales price for gas was $3.1 dollars per million BTU. 42% lower than year on year and similar to the last quarter. Mainly due to the 36% decline in end user sale price compared to the 2nd Quarter of 2018. The lower sale price to end users was mainly driven by the reduction on the reference price for gas fired powerplants, and the gas tenders on an interruptible basis conducted by [inaudible] which reflected the [inaudible] seasonality and excess supply in April and May. Also impacting negatively the commercialization in the industrial segment.

In June, gas prices rebounded as marking the beginning of the winter season. With a 37% increase in dollars as powerplants reference price and higher spot prices due to the seasonal demand. Mover over in Q2 2018 the price was 5.5 dollars per million BTU, that included [inaudible] gas, which is fired by the end of June 2018. And we presented $0.60 per unit.

The fuel cell procurement of our power generation helped to recover the gas production levels. And we are [inaudible] almost all level production there. Though it doesn't improve pricing it helps us to have a season uptake specifically during the week in the period from monetized some synergy between power and gas businesses.

As you can see on Slide 10, the average gas sale price that we recorded to the [inaudible] have been falling since almost 2018, falling to the lowest point in years, and hardly covering the margin of breaking a profit.

Winter season pick up prices, but as is evidential in the past, domestic production was not enough to cover the domestic [inaudible] you need to cover 22% of the deficit in the country consumed in June was gas imports from L&G in Bolivia, which much higher prices that goes paid to the domestic players.

Going on to the updates in this segment, the government announced deferrals of 22% of the residential gas bill issue in July/October to be covered later in 5 monthly installments for us from December [inaudible] residential uses is billed that are seasonal due to the higher winter consumption. The financial cost will be borne by the federal government as a substation. Our EMP social to residential segment having diminished a lot and therefore the impact of this measure is marginal Pampa.

One the other hand, in June we increased our [inaudible] amounting to approval of 16% equity interest and recording an additional profit of $22 million subject to changes as we are accepting LCPs for value.

Before I move on from oil and gas, I wanted to give you a quick update of our operations during the 2nd Quarter of 2019 for [inaudible]. We drill and site were completed. Our focus is the development of blocks in [inaudible]. During the Q2 2019, we drill one [inaudible] and two [inaudible].

Since the beginning of the last year, we began with shell gas as for other activity at [inaudible] reservoir. We built the site tracks for two [inaudible] wells, at the [inaudible] block. With each extension of 8.2 thousand feet. This is the first [inaudible] we operate, and they are estimated to be completed soon. In which [inaudible] 36 hydraulic fractures are estimated to be performed in each objective.

Additionally, we drill one well in Q2 in [inaudible] and we are drilling also one well to share our windows in [inaudible] block, an exploratory block operated by us with a 55% stake. We partnered here with Total.

As of today we are finishing the vertical section of that block -- of that well in the [inaudible] with a depth of approximately 9.2 thousand feet and we will continue with the drilling of [inaudible] targeting [inaudible].

In petrol chemicals, we posted an EBITA of $3 million during the 2nd Quarter of 2019. Higher than the year on year and quarter on quarter mainly because of the opportunities of fixed cost and lower peso link costs due to the deval plus lower cost of gas. These effects were partially upset by the downward trend on the international crisis and weaker demand. Export duties and higher cost of imported [inaudible].

In operating terms, the [inaudible] remain unchanged year on year, and into this quarter, totaling 95 thousand tons. But quarter on quarter, we increased 15%.

Finally, in our holdings and other segment presented an EBITA of $40 million in the 2nd Quarter of 2019. 21% lower than the same period of 2018, but similar to the last quarter. This is mainly due to the lower income fee collected for our holdings, in addition to a lower EBITA adjusted from our ownership from our affiliate CGS and [inaudible] because the [inaudible] outpaced the cost variation adjustments that they are being granted.

I'm going to only briefly review CGS as they have their call on the first day. CGS EBITA adjusted by our [inaudible] is of 25.5% contributed to Pampa $33 million in the quarter. For a total dollar profit of $29 million. 10% lower than last year's Q2 mainly due to the effect variations higher than the last granted PPI that covers cost variation for gas distribution business, the drop on the reference prices for NGL, lower gas production volumes and higher [inaudible] partially upset by lower cost of gas primarily [inaudible].

In relation to the expansion of plain gas transportation pipeline, on July 30 the government announced [inaudible] for a new pipeline from [inaudible] to the province of Buenos Ares. The first trench is from [inaudible] to the town called [inaudible] with initially capacity of 530 million cubic feet per day and then from [inaudible] to the city of [inaudible] with a capacity of 700 cubic feet per day. In order to allow the return on this investment, the first 17 years of the concession are going to be under a temporary special regime. So our moderation will be freely negotiated with large users, not residential. Among them, [inaudible] that already offer a quicker way of transportation of 350 million cubic feet per day for 15 years. The total license period is for 35, extendable for another 10. And the opening of the [inaudible] is scheduled for next September 12th. TGS is licensing the big terms of this participation.

As of our [inaudible] EBITA adjusted by our [inaudible] of 26.3% contributed $11 million in the 2nd Quarter for an implicit to of $42 million. 7% lower of the same period of 2018, mainly because of the lack cross variation was lower than the effect variation. Partially upset by lower operating costs mainly due to the higher award for quality of service and lower charges of penalties.

Regarding the power outage that occurred the morning of June 16 of this year, it was due to the competence of movable shortcomings within the grid including a specific technical problem in the transmission system under [inaudible] responsibility and is not related to the lack of investment and in payments. But in proper adjustment of the outer disconnect generation system called DAG, following the configuration change of certain lines in the [inaudible] corridor. The high voltage lines recovered immediately and within 8 hours I have 75% of the country was restored.

In mid-June, we suspended the buy back program in Pampa as quoted prices exceed the repurchase cap. So through those [inaudible] shares under this buyback program, which 79.8 million ordinary shares, [inaudible]. 2% of the capital stock. However, given the market's volatility and the gap between the value of the assets and the quoted price, plus our strong cash position, yesterday, the board of Pampa approved a new share buyback program for $60 million. [inaudible] the value of these assets will be naturalized soon the market [inaudible].

In the meantime, we consider repurchasing our own shares as one of the best investments and acuity actions for shareholders that we are undertaking.

So in terms of the net income attributable to the owners of the company, Pampa reported a conciliated gain of $394 million in the 2nd Quarter of this year, whereas in the same period, we recorded a loss of $72 million. Mainly explained by the sentiment of [inaudible] which is non-cash, and lower accrual of capex difference as are result of change in the reporting ability, as I explained at the beginning of this call.

Finally, moving to the Slide 14, we must highlight the low and well spread leverage of the company as well as the solid cash position held compared to other peers in the industry and in Argentina. We have always been very practical toward the cash [inaudible] management, specifically after witnessing so much volatility, high yield, and narrow window in the international financing market.

We continue redeeming the short [inaudible] highlighting that so far this year, Pampa redeemed at maturity or [inaudible] roughly a total of $225 million. The company related rough debts including affiliated ownership increased to $2.5 billion. Almost $500 million higher than the March 28, '19. Mainly because we issued a 10-year bond last month at 938 yield and we are adding [inaudible] powerplant debt at ownership. A powerplant that we acquired last year. All of that by debt cancelation.

Consolidated growth debt is 99% in dollars or linked in dollars varying on average interest rate of 7.2% and 75% is placed at the parent. Consolidated cash amounted to $863 million which is higher than the 704 recorded in March 2019. Mainly because of the [inaudible] and acquisition -- upset by the acquisition of [inaudible].

Closing Q2 2019 we are holding 70% of our cash in dollars, but as of last week more than 90% of [inaudible]. Therefore, net debt likely increase to $1.7 billion and the net debt to the last 12 months EBITA remained low at 1.7 times. We also show here this terminal key debt [inaudible] for our shareholders. So after [inaudible] roughly $225 million the principle maturities belonging to Pampa stand-alone that are less in 2019 from line to 2020 and '21 amounts to a total of $316 million. Which is by far exceeded by the $682 million cash position performer of the parent.

This [inaudible] at $82 million includes the$300 million receipt from the 10-year bond that we successfully placed at 938 last July as well as last week, with [inaudible] commenced on an agreement to settle all legacy receivables within [inaudible] but the balance was -- we collected $38 million. That will trigger a profit in the P&L next quarter of 3.8 -- 4 billion pesos before tax.

Also we continue to collect gas credits after the closing of the 2nd Quarter. We already collected so far $50 million in our cash.

...

So this concludes our presentation. Now I will turn the floor to the operator. If you would open the floor for questions. Thank you so much.

Questions and Answers:

Operator

Thank you. The floor is now open for questions. If you have a question, please press *1 on your touchtone phone at this or any time. If at any point your question is answered, you may remove yourself from the queue by pressing *2. Questions will be taken in the order that they are received. We do ask that when you pose your question that you pick up your handset to provide optimum sound quality.

Our first question comes from Bruno Montanari from Morgan Stanley. Please go ahead.

Bruno Montanari -- Morgan Stanley -- Analyst

Good morning. Thanks for taking my questions. First one, I wanted to understand, given the turmoil in Argentina after yesterday's events, I was wondering, what would be the company's options in case policy making in the country shuts down investment climate. In that hypothetical scenario, should we expect Pampa to retrace and control capital expenditures more aggressively? Look for acquisition opportunities in Argentina? Or eventually, thinking about going international to diversify the regional risk?

My second question is specifically about the mid-stream business. What would the company say -- what are the odds of the pipeline auction actually happening under the current environment? If you expect perhaps, AD late in the bidding process?

And third and last question is about the company's desired minimum liquidity. So what would be the minimum cash position that management is comfortable to navigate these more challenging waters now? Thank you very much.

Gustavo Mariani -- Chief Executive Officer

Hi, Bruno. Gustavo Mariani speaking. Next time we will let you do three question one at a time, so we don't have to write so much. Obviously, we are reassessing our plans, although I guess you will know, we have been saying for over a year already that this was a high probability scenario, no. And I think the way in our financial position, and the way we collect data, that view that we have for a long time.

But this scenario for a change of regime was highly probably and that's why we prepared with a lot of liquidity and lengthen our debt profile as much as we could. So going forward we -- I cannot give you a straight answer. I think going internationally, as you suggest, is out of the question. That is not something that we are envisioning. Obviously, capex plan are on revision on all of our lines of business. We do have some, especially in power generation, that are well under way. Like for example, the closing of the cycle of [inaudible] that we will continue at full speed until May or June of next year. Hopefully, sooner than that. Then we will have the combined cycle working. But we will be revising all the capex plans.

In regarding mining opportunities, there is nothing we are starting at the moment, but we will obviously analyze any opportunity that this environment may bring.

Regarding the mid-term project, the pipeline from [inaudible] to Buenos Ares that the government announced, the bidding date is September 13th. We have been advised in the government regarding this auction that it's such an important project that whomever -- that the necessary extrusion needs to confirm the willingness to go forward. So in this environment, yes, I do envision that there's going to be a delay in the building process. But I haven't heard anything from the authorities so far. I think it's very likely that it's going to be a delay.

Regarding the decision, I'll let Gabby answer.

Gabriel Cohan -- Chief Financial Officer

Hello. In respect to the new cash position, we say that it's a very comparable cash position is between $200 and $300 million. Under normal circumstances, as it was pointed out by Lida, as of today, our cash position is in line of $700 million. And as also Gustavo was pointing out, the last bond issuance was following our investment in [inaudible] and taking into consideration uncertainty of the election results.

So, as of today, we feel that we are much more than comfortable and ready to navigate that scenario and take into events in the future, take advantage of investment opportunities.

Bruno Montanari -- Morgan Stanley -- Analyst

Perfect, that's very clear. Thanks a lot for the insights.

Operator

Our next question comes from Frank McGann of Bank of America. Please go ahead.

Frank McGann -- Bank of America Merrill Lynch -- Analyst

Okay. Thank you very much. Just a question in terms of gas production and looking forward out of the next 6 to 12 months, how you see the market. If there are any opportunities, you have for increased gas production to supply demand for additional thermal plants or exports to Chili or how you see the outlook for demand for the gas that you produce.

Gustavo Mariani -- Chief Executive Officer

Well, country wise, I don't see a relevant change in the demand for natural gas in the next couple of years. Especially, the opportunity for the [inaudible] basin is -- once this pipeline that we have been talking about in the previous question, once that pipeline is completed, then the [inaudible] basin will be able to supply more gas to the metropolitan area of [inaudible] only during the winter season is when the excess demand over the production of the country.

In our special case, because we are a very important consumer of natural gas and because we are adding more power generation capacity that consumes natural gas, we are studying the possibility of increasing production. Working with what we consider -- it's a low price for -- of $3.00 that the current price that where are perceiving. So we are studying our portfolio and we have the possibility of increasing productions around 20% with projects that may still make a lot of sense even with a $3.00 scenario. But that is because these are type gas projects, basically in [inaudible] which Lida talk about [inaudible] during her presentation.

So that's what we are doing. We haven't made a decision yet whether we will go after this increase in capex in order to increase production. But it's something that is in the possibility of Pampa doing in the next year.

Frank McGann -- Bank of America Merrill Lynch -- Analyst

Okay. So that 20% is not approved yet internally, but it's something that's possible.

Gustavo Mariani -- Chief Executive Officer

Exactly.

Frank McGann -- Bank of America Merrill Lynch -- Analyst

Okay. Thank you very much.

Operator

Our next question comes from Daniel Guardiola from BTG. Please go ahead.

Daniel Guardiola -- BTG Pactual -- Analyst

Hi, good morning. I have a couple of questions here. My first question is on leverage. And I wanted to know if you could share with us what is the maximum leverage level at which you would feel comfortable to operate.

My second question is regarding, how can I say it? Your view on looking forward for 2020, I would like to know if you could share with us your view on which sectors could be more exposed to potential changes in the relation. Thanks.

Gabriel Cohan -- Chief Financial Officer

Yes, Daniel, Gabriel speaking. In terms of leverage, first of all, I think the most relevant aspect to answer is our projections in terms of gas generation. As of today, where we feel comfortable is up to 2.5 times less net to EBITA. And I would like to highlight to you that as of today, within our projections, our debt at the current level is repaid between for a maximum -- basically 4 times compared to what after the interest available for debt repayment. So those are basically the key aspects that we look forward.

The second question was?

Lida Wang -- Investor Relations Officer

What's the segment exposed to changes.

Gustavo Mariani -- Chief Executive Officer

Hi. Gustavo speaking. I would say that regarding EMP and as you know, basically gas prices -- I don't think that Argentina can -- will be able to sustain a $3.00 price. I think that in the near term that means a few years, most of our colleagues are reducing significantly in their investment programs in natural gas. So with the current market price I see it declining investment and declining productions. Especially because of the fact that unconventional references, especially in gas, declines at a very, very high rate. And conventional gas, it's already a high percentage of the total gas produced. So with low investments, I think in the next few years we will see a decline in production in natural gas and that might help it recover in price.

So, I don't see, due to the current scenario, I don't see regulatory changes that could significantly impact that segment going forward. It might have more impact in terms of Pampa's portfolio. And there has been a lot of talk about the last year, is about modification in the PPA, in the contracts of our power generation segment.

Still my answer there is saying that we have [inaudible] so while this will obviously return on the degree of the natural deuterations in Argentina. And I think the new administration will try to avoid laterally changing those contracts because it will have a huge impact not only in the electricity factor, but on the whole economy. The currency, the credibility of the country, and again, changing the [inaudible]. But definitely, if it happens, the change in the PPAs will have probably the most significant impact on Pampas EBITA.

On the [inaudible] capacity, it's easier and it's in the hands of the regulator to change the regime. Probably it changes back to pesos adjusted by inflation, as it was before. It's probably something that is more in line with the new country adjusting or with [inaudible] saying in the campaign, and the degree -- how that will impact Pampa will depend again on the market scenario and on the level of inflation and how often this new peso elimination will be successful.

And lastly, on our subsidiaries, which are already with peso eliminated tariffs. I personally, the fact that has been said during the campaign, I don't envision the new administration doing the same mistakes that the old administration did in terms of letting the tariff get so cheap or such an [inaudible] as it happened before. So, I'm still optimistic there.

Gabriel Cohan -- Chief Financial Officer

I think it's also important to highlight that despite comments by the press in [inaudible] in pesos for the end user, they're not in dollars. So clearly, in terms of the dollars, they need to pass through in terms of the equation and the cost. But the bill that every person receives is in pesos. It's not a dollar bill.

Operator

Once again, if you have a question, please press * and then 1. Our next question comes from John Wisk of HSBC. Please go ahead.

John Wisk -- HSBC -- Analyst

Hey, I'm just wondering if you could tell us what the current proportion of electricity sales is both in terms of volume and revenues that are sold to Comessa versus sold by lateral PPAs.

Lida Wang -- Investor Relations Officer

Hi. Good morning. Today, 95% of the concessions are from Comessa, and then there is [inaudible] that started last May that is the factor between business to business.

John Wisk -- HSBC -- Analyst

And do you see the proportion staying the same through the short to medium term?

Lida Wang -- Investor Relations Officer

Well, here's the thing, [inaudible] has been -- our clients near [inaudible] is the very first form of near capacity, those businesses are migrating little by little to renewables and to [inaudible]. [00:58:06] is backed up by a national law that says 8% of last year's consumption has to be met be renewables. By 2025 20% of the consumption of those large users must be met by renewables. But the supply is not enough for that.

So there's quite a lot of supply in the [inaudible]. That's why we built two windfarms there. But eventually this has to do with the supply. If we keep increasing our supply, there we can outnumber this 5%. But another thing is that what to do [inaudible] is still ongoing. But year on year, for Q2, sales dropped to half. The margin didn't drop, because the cost of gas and the cost of electricity to cover those contracts, it's getting cheaper year on year. The margin actually didn't change at all, the sales dropped by about half. So we foresee in the future that a lot of the [inaudible] will be great to the renewal B2B.

Gustavo Mariani -- Chief Executive Officer

One more thing to add in that respect, the market is still very regulated. So the only 2 viable alternatives to -- not to sell to [inaudible]. In both those segments, we are by far the leaders though, with 35 or 40% market share. So we have been always in the process as we can in going directly to big industries because we know it's a way to reduce exposure and risk. But still, it's a small percentage of our total portfolio, because that's the way regulation in Argentina is considered.

John Wisk -- HSBC -- Analyst

Okay, thanks a lot.

Operator

Our next question comes from Catherine Braganza from Insight. Please go ahead.

Catherine Braganza -- Insight Investment -- Analyst

Hi, I missed the amount of your cash balance that is actually in U.S. dollars. Would you mind repeating it, please?

Lida Wang -- Investor Relations Officer

Yes. For you only. Good morning. It's -- so far, as of the Q2 stand-alone basis, we closed at 373, but we issued a bond of 300 million, so you have to add that. You have to add 38 million that we collected from this settlement that's coming in for the oil credits, 48 million. Plus another $50 million that we collected after the quarters closing on gas. And you have to deduct 44 million of retentions in debt that we've been doing. We have a bond that's maturing in 2020. And we also canceled some bank facilities for $10 million including this 44. So it's 682 [inaudible]. How much in dollars? I'm sorry. How much I'm dollars is 90% in dollars.

Gustavo Mariani -- Chief Executive Officer

More than 90%.

Lida Wang -- Investor Relations Officer

More than 90%.

Catherine Braganza -- Insight Investment -- Analyst

And if I remember correctly, you pool all your cash at a central entity. Where is that entity? Is it onshore or offshore?

Gabriel Cohan -- Chief Financial Officer

First of all, can you repeat, things about Pampa Energìa, the parent company, the operating company, and we hold most of our cash position offshore.

Catherine Braganza -- Insight Investment -- Analyst

And can I ask how you move the cash around the group to pay the various needs? Is it through dividend payments through the groups or do you have a series of intercompany loans?

Gabriel Cohan -- Chief Financial Officer

Every company is managed independently. So within the group they only flow between subsidiaries to Pampa was the payments between TDS and [inaudible]. Then there is no intercompany movement between Pampa and the rest.

Catherine Braganza -- Insight Investment -- Analyst

Okay, so then when you do your cash pooling, how do you send your cash up to the central entity where you have your cash pooling?

Gabriel Cohan -- Chief Financial Officer

Pampa Energìa is a parent company of these operating companies, it's not a cash pooling.

Catherine Braganza -- Insight Investment -- Analyst

Okay, OK. Thank you.

Operator

Our next question comes from Richard Segal. Please go ahead.

Richard Segal -- Analyst

Good afternoon and thank you for the call. A couple quick questions, I was wondering what percentage of your revenues are dollarized or dollar weighed just to get an idea of your natural edge. And second I was wondering if you'd been able to have any discussions with the opposition or advisors for the opposition party to have a general idea of their philosophy about contract renewal and the possible risk of pacification of contracts which was discussed this afternoon.

Gustavo Mariani -- Chief Executive Officer

I'm sorry. Can you repeat the second question?

Richard Segal -- Analyst

Yes. There was a press release from fixed ratings this afternoon inviting the risk of the possibility of pacification of contracts. I was wondering if you've been able to have any discussions with anyone in Argentina about the likelihood and mention the damage you think that would cause. Because obviously it caused a lot of damage when it was imposed 10 and 15 years ago.

Gustavo Mariani -- Chief Executive Officer

Okay. Regarding our percentage of dollars in revenue, it's 100%. When we are talking about Pampa on a stand-alone basis, no. On the Pampa level, basically the power generation segment and the EMP business. So those two segments are fully dollarized. The power generation PPAs, the legacy capacity, the price of natural gas. Then you have the business of petrol chemicals which is also dollarized, but it's a business that does not add much to the bottom line.

On a consolidated level it's at 60% but it's a figure that's really not relevant. But our three main subsidiaries have a peso eliminated tariff adjusted by inflation every six months.

Regarding the specification of contracts, I haven't seen the news operating agency that you mentioned. And I don't know what it's referring to. [inaudible] during his campaign, has been saying several times that he will reverse the dollarization of the tariff and that he will revert tariff to pesos. I think that is just a campaign statement, because tariffs are already in pesos. So residential tariffs or electricity or natural gas, they already in pesos.

Whatever he was referring to changing the price of the [inaudible] that is currently dollar eliminate or the price of the million BTU in natural gas, honestly, I don't think that he will change the price of natural gas to pesos. I don't think he will do that with the price of oil, change it to pesos. And regarding the megawatt, in the case of the legacy capacity, it was peso eliminated a couple of years ago with an annual inflation adjustment. Which honestly, it was very painful because in the beginning of the year when the price was adjusted, we were doing OK, cash flow positive, but because of the high inflation environment we were struggling at the end of the year.

So regarding specification of contracts, honestly, what comes to mind is the PPA. And again, I think I already answered that question and I think it will depend on the degree of the deterioration of the market [inaudible] in the country.

You asked also whether we have spoken with the opposition, and we have some conversations with people that are part of the team. But still we don't know for sure who's going to be running the energy policy. You don't know who is going to be running the economic policy, so you can imagine that we have complete uncertainty who's going to be within Fernandes team on the energy policy side. So the answer is no. we don't have any close conversation in order to know what they are seriously thinking of doing or what their policy will be like.

Honestly, at this moment, I don't think they know. So, unfortunately, as is happening in Argentina, they concentrate on winning and once they win, they will bid up the teams and they will start thinking seriously what they will do.

Richard Segal -- Analyst

All right, thank you. Do you think they were as surprised with the results as everyone else, then? Do you think the results surprised Fernandes as much as everyone else?

Gustavo Mariani -- Chief Executive Officer

Yes, I think even in the polls that they did, they had a 7 to 8% difference. So a 50% difference was I believe even a surprise for Fernandes.

Richard Segal -- Analyst

All right, thank you.

Operator

This concludes the question and answer section. At this time, I would like to turn the floor back to Ms. Wang for any closing remarks.

Lida Wang -- Investor Relations Officer

Thank you so much for attending our call. I hope it was useful for you. Any questions you may have, Margarita, all the things, it's available for you. Thank you and have a good day.

...

Operator

Thank you. This concludes today's presentation. You may disconnect your line at this time.

Duration: 71 minutes

 

Call Participants:

Lida Wang -- Investor Relations Officer

Gustavo Mariani -- Chief Executive Officer

Gabriel Cohan -- Chief Financial Officer

Bruno Montanari -- Morgan Stanley -- Analyst

Frank McGann -- Bank of America Merrill Lynch -- Analyst

Daniel Guardiola -- BTG Pactual -- Analyst

John Wisk -- HSBC -- Analyst

Catherine Braganza -- Insight Investment -- Analyst

Richard Segal -- Analyst

 

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