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Pampa Energia S.A. (NYSE:PAM)
Q2 2020 Earnings Call
Aug 12, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Margarita Chun -- Investor Relations

Hello everybody. Good morning, ladies and gentlemen, and thank you for waiting. I'm Margarita Chun from IR. We would like to welcome everyone to Pampa Energia Second Quarter 2020 Results Video Conference. [Operator Instructions]

Before proceeding, please read the disclaimer that is located in the second page of our presentation. Let me mention the forward-looking statements are based on the beliefs and assumptions of Pampa Energia management and on 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 that general economic conditions, industry conditions and other operating factors could also affect the future results of Pampa Energia and could cause results to defer materially from those expressed in such forward-looking statements.

Now, I will turn the video conference over to Lida Wang, our Investor Relations and Sustainability Officer of Pampa Energia. Lida, you may begin the video conference.

Lida Wang -- Investor Relations and Sustainability Officer

Thank you, Margarita. Hello everyone and thank you for joining our conference call. I hope you all and -- you and your loved ones are safe and sound 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 the core businesses of Pampa, power and E&P, as TGS and Edenor already held their calls earlier this week. As you can see, our CEO, Gustavo Mariani and CFO, Mr. Gabriel Cohen are both here and joining us for Q&A.

Before we begin, let me remind you that Pampa's figures follow US dollar and -- as functional currency. In 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. Al you can see in this slide, what businesses are included when we talk about of Pampa consolidated, as well as Pampa restricted group, a definition we use for covenant purposes.

As you know, Argentina has been affected by COVID-19 pandemic and Federal Government setup, a mandatory lockdown from March 20. Restrictions have been softened across the country, but certain places such as Buenos Aires metro area has been extended from time-to-time, so activity still limited and therefore, affects the economy.

Most of Pampa's businesses were deemed essential, and we are running our operations with all the necessary safety and health protocols such as minimum personnel in place, new workflows to keep social distancing, minimizing exposure such as lengthened working shifts as well as off-duty time, and so on. Very important is that no wages have been adjusted, nor personnel subject to furlough. Almost 40% of our personnel is working remotely right now. And as we said in the last call, we revisited our capex and opex budget, reducing primarily in E&P until improved environment.

We also are proud to see Genelba second CCGT operating and an outstanding power generation performance through this though quarter.

E&P faced the lowest prices in the last five years as a result of the fall in demand, which tested our endurance, but also went through satisfactorily. The fact that we haven't given in much production during Q2 facilitated the ground for winter season, as demand rebounded and production rose to above 250 million cubic feet per day.

Finally, it is worth noting our proactivity toward financial management, preventing us to be in a hurdle during macro instability. The agreement with sovereign bondholders constitutes a great step for Argentina, we remain prudent. We witnessed an improvement in collection rates across all businesses, helping our working capital.

So, let's start commenting the quarter's key takeaways. As shown in Slide 5, revenues fell year-on-year 40% to $544 million, mainly because of collapse of gas prices, the lesser fuel self-procured as this year CAMMESA took over the grid's fuel consumption, tariff freeze for over a year impacting our regulated businesses, partially offset by new power generation units priced under PPAs. In Q2 '20, around 40% of our sales were dollar-linked, but roughly 75% in EBITDA terms. This is including Edenor, TGS our stake, Transener our stake, but the dollar-linked is mainly coming from our core businesses, power capacity followed by E&P.

Adjusted EBITDA decreased year-on-year by 56% to $120 million for the quarter, mainly explained by lower E&P price and volume; tariff freeze at utilities; and lesser legacy and Plus margin at power generation, partially offset by new capacity, lower E&P opex and royalties related to activity downturn; the positive effects from Edenor's Liabilities Regularization Agreement in Q2 last year; and the dilution of peso-nominated costs because of FX depreciation. Quarter-on-quarter, EBITDA decreased by 46% because of the lockdown impact over prices combined with off-peak seasonality, therefore lower spot prices for power and gas. As we show on the right below, power generation takes 70% of the consolidated adjusted EBITDA, while E&P takes 5%, purely led by gas, and the rest driven by TGS and Transener at our equity stake and marginally by petrochemicals.

Moreover, as shown in the chart left below, in the second quarter of this year, our capex decreased significantly compared to last year, mainly because Genelba Plus's expansion project was nearly finished, E&P halted drilling and completion due to the uncertain pricing environment, lower capex at Edenor because of deval and tariff freeze plus PEPEs were completed last year in Q2.

In this Slide 6, we want to briefly show you the impact of the lockdown in the Argentine power grid during Q2. The average demand reached 13 gigawatts from -- 6% lower than last year. But if we compare it with a pre-crisis year, that is 2018, the drop was 13%, although smooth if we compare it to other sectors of energy industry or to GDP, which estimated -- it is to have fallen by 21% year-on-year. This is according to the macro consensus. Industries are the most impacted by quarantine, especially those considered non-essential, while distcos are hit because of collapse in the SMEs consumption, but partially offset by residential demand due to the stay-at-home order and colder autumn. As we go into the winter, demand recovers surpassing 2019.

Moving to power generation segment as seen on Slide 7, during the second quarter of 2020, we posted an adjusted EBITDA of $95 million, similar to the Q2 2019, mainly driven by the reduction and pesification of spot prices as from February 2020, in addition to lower margin and volume sold in Energia Plus. The latter and legacy lack of inflation adjustment plus FX deval are the negative effects of the COVID-19 in power generation. As from July this market in Energia Plus is improving but still far away from the pre-pandemic levels.

These effects were partially offset by our stake in Ensenada Barragan power plant, PEPE 2 and 3 windfarms and private PPA -- with private PPAs and Genelba Plus capacity increase, as well as lower costs related to the lower energy purchases and the deval impact on our peso-nominated costs. Quarter-on-quarter, off-peak pricing for spot energy and lower power dispatch in Q2 '20 contributed to the 16% decrease in EBITDA. While spot energy comprises 65% of our capacity in megawatts, only represented 48% [Phonetic] of our power generation EBITDA in the quarter, and will keep shrinking thanks to the commissioning of the second CCGT at Genelba as seen in the P&L in Q3, and further once Ensenada expansion is online.

In Q2, generation was 7% lower year-on-year, in line with the lower electricity demand at the national grid because of the lockdown. As the demand is lower, the marginal unit [Technical Issues] cheaper, but also renewables are disrupting the ranking -- the dispatch ranking, therefore, the combined cycles are the last units to fulfill the demand. Our two combined cycles at Loma and Genelba were fully dispatched, as well as our non-conventional energy, but the remaining thermal units in open cycles were mostly not required. Quarter-on-quarter, power generation decreased 25% mainly because of the lockdown and seasonality.

Despite the demand and contraction witnessed in the country, the power generation business model relies on capacity payment. So lower dispatch does not much impact on the revenue making as long as availability is outstanding, especially for PPA-based energy. The availability rate in the second quarter of 2020 reached 98.6% with installed capacity of 4.8 gigawatts operated by Pampa, 330 basis higher than the same quarter of last year, mainly because last year Piedra Buena and Plus unit at Guemes faced outages.

As I mentioned earlier, we are proud to have achieved one of the most important milestones at Pampa's 15-year history, with the commissioning of the second CCGT at Genelba on July 2. CAMMESA granted clearance to the second steam turbine for 199 megawatts, completed the expansions for a total of 400 megawatts, priced under a 15-year PPA executed with CAMMESA.

Despite the pandemic and the delays incurred until it was deemed essential, Pampa executed COVID-free protocols with contractors, thus achieving the COD on time and disbursing roughly $320 million. This is 9% lower than the budget, mainly because FX diluted peso capex. Now, Genelba is the largest and one of the most efficient thermal plants in the country, as you can see on Slide 8 from the picture of the existing CCGT and the new one nearby, with a total installed capacity of 1.2 gigawatts located in the gate of Buenos Aires metro area.

The remaining expansion in the pipeline is Ensenada Barragan thermal power plant, as you can see on Slide 9. This is a 280-megawatt CCGT project at the south of Greater Buenos Aires, which is critical infrastructure for Argentina's grid. During May and June, we placed a purchase order for the cooling tower and kept digging to set the foundation base. However, works were halted for most of July and until July 20, we got an essential waiver, so resumed operations focusing on the construction of critical path to achieve COD by Q1 2022, therefore to our billing a PPA for 10 years with CAMMESA.

The lockdown negatively impacted the domestic gas demand, but to a way lesser than crude oil and lesser than the GDP, dropping year-on-year 8% in Q2, mainly driven by the lower industrial consumption because of the non-essentials shutdown and the economic downturn, lesser gas fired by CAMMESA because of lower power demand, plus less gas for cars and less gas for exports. This was partially offset by the higher retail consumption because of the colder weather.

Moreover, during second quarter, the lockdown coincided with the gas off-peak season, which bottoms at the fall and spring in Argentina, dropping even sharper the gas demand and therefore, bringing down traded prices. Gas consumption is rising right now as we are in winter season, but we are still below previous years watermark. However, CAMMESA demand is unfulfilled right now and is covering it with imported gas and liquid fuels.

So moving on to the results on E&P, as you can see on Slide 11, during Q2 2020, this segment posted an adjusted EBITDA of $6 million, 88% lower than Q2 2019, mainly because of COVID-19 impact to lower prices, partially offset by lesser costs related to the activity downturn, lesser royalties and a deval dilution on peso costs.

Despite the tough environment, our overall production in Q2 2020 decreased 10% year-on-year, but only 5% quarter-on-quarter, reaching around 44,000 barrels of oil equivalent sold per day, of which 91% is composed by natural gas.

On the oil side, which represents only 14% of the segment's revenue in the quarter, volume sold decreased 17% year-on-year and 23% quarter-on-quarter, reaching 4,100 [Phonetic] barrels per day, mainly due to the collapse in the demand and prices affected by the lockdown and lack of storage capacity, resulting in drilling activities on standby. During Q2 2020, the crude oil sales price decreased year-on-year 65% and quarter-on-quarter 58%, reaching $21 per barrel. Although in mid-May, the Government set barril criollo at $45 per barrel in the domestic market, but the demand collapsed. So consequently, we exported at a discounted price on Brent of a total 2.3 barrels per day of Escalante and for the first time, we exported Medanito. 59% of our oil production is Escalante heavy oil, which is sweet and given the current clean fuels trend is pricing premium to Medanito light oil.

Regarding the gas production, on Slide 12 we can see Q2 reached an average of 253 million cubic feet per day of volume sold, 10% lower year-on-year, but stable quarter-on-quarter despite the price collapse due to the lockdown and the lack of long-term contractualization. Lower prices impacts on the breakeven equation, therefore producers respond with a lesser drilling rate and natural decline takes place. And because of that, production was lower in Rincon del Mangrullo and Rio Neuquen, and a minor decrease at Sierra Chata and Aguarague blocks, which were partially offset by increases at El Mangrullo and this is a block in which evacuation infrastructure was expanded given the outstanding productivity and upside potential, and also keep in mind that it is fully owned by us, holding operatorship as well.

In Q2 '20, El Mangrullo reached 153 million cubic feet per day of gas production. This is 5% higher than Q2 2019 and contributed close to 65% of our overall gas, ranked the fourth highest gas producing block at Neuquina Basin. It is also remarkable that 7% of the Q2 production corresponded to shale gas from the completion of two horizontal wells at El Mangrullo block last year.

During second quarter of 2020, our average price for gas was $2 per million BTU, 37% lower year-on-year and 15% quarter-on-quarter mainly driven by the sharp price reduction on CAMMESA tenders in April and May. The lockdown led to a drop in demand, especially for large users and lesser thermal power; supply overhang forced producers to adjust prices to prevent curtailments and keep billing. CAMMESA outcome also affected industrial segment and spot prices, but since June increase close to reference price of $2.7 per MBTU reflecting the demand recovery due to winter season and lockdown easing, but prices are still in the lowest point in years and barely covering the replacement cost, impacting the investment horizon.

Also as you can see on right below, our production year-to-date is skewed toward CAMMESA and our own Energia plus units, leaving 15% to other segments. Since the commissioning of Genelba Plus CCGT, we've been procuring our own gas, raising the intersegment exposure from 14% to almost 25%. The lower domestic prices were partially offset by exports to Chile, which GSA ended on mid-May. Since then, we are fully selling domestically, but we waiting for the Secretary of Energy's clearance to continue exporting to Chile.

Regarding our activities due to COVID-19, mandatory lockdown and uncertainties in gas prices, we have been reassessing our activities from March of this year, but continuing with the operation of our oil and gas fields with the minimum, but essential requirements. Therefore, no drilling and completion was registered in Q2 2020, in line with the sector. Currently we have 11 wells drilled, but pending completion, of which eight are located at El Mangrullo awaiting for better pricing horizon.

Moving on the bottom line in the P&L, in terms of net income attributable to the owners of the company, Pampa reported a consolidated profit of $4 million in the second quarter this year whereas in the same period of last year, $400 million was reported, mainly due to one-off non-cash profit in Edenor of last year of $308 million in addition to lower operating margins in oil and gas and regulated businesses, lesser inflation exposure gain because of lesser passive net monetary position allocated to the electricity distribution and income tax.

Finally, moving to the Slide 14, our proactivity toward the cash and liability management paid off. In this slide we show all 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 continued optimizing every aspect of our indebtedness, highlighting that during Q2 2020, Pampa paid at maturity $23 million in addition to $45 million buyback at face value, partially offset by new short-term peso bonds for a total of $26 million as well as net borrowing in pesos of $20 million. Therefore, the restricted group gross debt in Q2 '20 recorded $1.6 billion. This is very similar to March previously [Phonetic]. The gross debt is 89% denominated in U.S. dollar, which was 92% in the quarter-on-quarter mainly availing average interest rate of 7.7%. Average life remained around 5.3 years.

The cash amounted to $393 million, which is slightly higher than the $373 million in March 2020, mainly due to positive working capital as a result of the lower billing and faster collection, so we have DSO improvement. Collection of plan gas 2017. So the restricted group net debt remained similar to last quarter below $1.2 billion and net debt to LTM EBITDA stayed at 2.6 times. After Q2, we issued Peso bonds for $87 [Phonetic] million plus domestic net borrowing of $10 [Phonetic] million. Pampa also repurchased bonds for $27 [Phonetic] million face value and redeemed Peso bond series 4 for $17 [Phonetic] million.

Therefore, we are fully shifting -- we have already shift all our banking debt to local currency. It is worth highlighting that the cumulative maturities from now until 2022 amount to $186 [Phonetic] million, of which 90% is in local currency. In terms of consolidated including affiliates at ownership, Pampa recorded a net debt of $1.5 billion. This is 2 times EBITDA and $105 million lesser than last March due to reduced net leverage at Edenor and affiliate.

Finally, we have a share buyback program with a price cap of $15 per ADR and outstanding $38 million. As of this day, we hold $2.2 million ADRs in treasury. So Pampa's outstanding capital amounts to $61.7 million. So this concludes our presentation. I hope you [Indecipherable]. Now, I will turn to Margarita. We will open the floor for questions. We will gather them in the platform. Please write there and we will read it out loud to everybody. Thank you.

Questions and Answers:

Margarita Chun -- Investor Relations

Thank you. The floor is now open for questions. If you have questions, please send it to us through the platform or also you can email us. Make sure your name and your company are recorded, so we can properly read it out and to the audience. Should any participant need assistance, please send us a message or raise your hand.

Lida Wang -- Investor Relations and Sustainability Officer

We start here, we have questions from Ezequiel Fernandez from Balanz. He send us, when are you planning or we are planning to go back to drilling in the unconventional wells?

Well, right now we have a stock of 11 wells and we could, but we need more [Indecipherable].

How many unconventional wells are you targeting for the remainder of 2020? In which blocks Pampa will be focusing?

As we said in the script, right now with the prices that we are seeing among which is the most competitive but we'll see for the remaining of the year what's going to happen with the pricing, if it is worth it to keep drilling as we already have a stock.

Gustavo Mariani -- Executive Vice President and Chief Executive Officer

Lida, hi. Gustavo here. I'm through the phone because of technical problems. So I apologize to the audience for not being able to be on the video call. I don't know whether it's myself getting old and not getting along with the technology or the Murphy Law in this case. Anyway, I wanted to join for the Q&A and I have Lida and Gabby [Phonetic] with some of the questions.

Regarding this one of how many unconventional wells. As you know, there is the plan -- the new plan, gas, what is called the plan gas four that is being discussed with the authorities, not yet formally announced. Last week, there was a formal meeting that the Minister of Production announced to the producers that we will be soon the invitation. The idea of the authorities is to do the auction in September and started with this program in October. So whether it will drill new unconventional wells or not will depend on how we do on the disruption, but mainly we are not foreseeing unconventional wells this year and most probably it's that we will fulfill the new Plus [Indecipherable] production requirement through our tight gas reserves, not shale gas and that addition is for 2021, maybe for 2022, it's going to be a different case. Sorry Linda, you can continue with the rest of the question.

Lida Wang -- Investor Relations and Sustainability Officer

All right. There is another question from Ezequiel saying is the current remuneration for legacy thermal power units enough to sustain. plant availability at high levels or are we at the limit already? Gus?

Gustavo Mariani -- Executive Vice President and Chief Executive Officer

Well, I wouldn't say that we are at the limit already. At least in our case, we're still making margin. But as you know, this legacy pricing was supposed to get inflation adjustment monthly right from the beginning and then, it was because of the COVID crisis. The Secretary of Energy issued a Resolution postponing the adjustment. We hope that as the COVID crisis eases, they will restart with the inflation adjustment of the pricing scheme. And as I said, I wouldn't say that we are really at the limit. That's our case, but maybe some of our colleagues, which have all the equipment are probably already in that position, so not our case. But I wouldn't -- but I don't think that the average of the sector is far from there.

Lida Wang -- Investor Relations and Sustainability Officer

Okay, another question from Ezequiel, he is asking any news on asset disposals or M&A, a lot of people asking this, so as Ezequiel.

Gustavo Mariani -- Executive Vice President and Chief Executive Officer

No, not. Currently, we are not working on any asset disposal.

Lida Wang -- Investor Relations and Sustainability Officer

And M&A?

Gustavo Mariani -- Executive Vice President and Chief Executive Officer

We are studying the things. So there are several things in the pipeline as always, having there study, but nothing concrete.

Lida Wang -- Investor Relations and Sustainability Officer

Okay. And there is another question that from Ezequiel, the last one he says our price -- our gas price was $2 and quite low. Peers in the sector reported something around $2.5. Why we are lower than the peers?

Gustavo Mariani -- Executive Vice President and Chief Executive Officer

Lida, You will answer this question better than me, but I would say that my first guess regarding our peers is that they're probably enjoying some of the -- some of them the benefits of Resolution 46, which we do not. So probably that makes the explanation of the difference. I don't know, you might have another...

Lida Wang -- Investor Relations and Sustainability Officer

We are audited, right? But basically, we -- our -- as we've shown in the presentation and you can see, I think in Slide 11, our sales are skewed to CAMMESA and our reserves also and that prices like it's been reduced significantly because of the tenders. So -- and we don't have any exposure to distribution, very little, less than 5% to retailers. Retailers right now are the most -- the highest price income. So right now, as I said, the spot market, it follows CAMMESA. So in CAMMESA, it is reducing. So that's reason why this is the price that we have. Going forward, June, it's -- already I was saying, June, it's like more about buying -- bounding to the reference price of $2.7 and July as well. August, it's -- well, August, the tender was a little bit lesser, but still above $2, so we are expecting an improvement hopefully.

Okay. This is the questions from Ezequiel. Then, we have a question from Anne. When are the capacity and generation payments on Genelba's second steam turbine coming online now and how much incremental EBITDA do you estimate the plant will have?

Gabriel Cohen -- Chief Financial Officer

Lida, did you know the answer? Better than any of us.

Lida Wang -- Investor Relations and Sustainability Officer

Yeah. The capacity payments on Genelba is $20,000 per megawatt per month. This is in the earnings report. The EBITDA estimated to add, it's like roughly $8 million per month. That is $24 million, $25 million next quarter. So this quarter in Q2, we didn't book anything, will be booked next quarter. And that's it. Then nothing, the initial payment and that's it.

Then the second question from Anne. She is asking there are reports of what [Technical Issues] of Ensenada. Will Pampa be interested in this stake?

Gustavo Mariani -- Executive Vice President and Chief Executive Officer

I would say it's that if YPF decides to move forward on that, we will certainly look at it, but so far, there is nothing concrete.

Lida Wang -- Investor Relations and Sustainability Officer

What are the options of Transener considering that for 2021, $100 million bond maturity, local markets, are there..

Actually, Anne, it's $90 million outstanding. So, it's lesser than $100 million, because we reported.

Gabriel Cohen -- Chief Financial Officer

Yes, hello, Gabriel speaking. Well, clearly as all the other companies to do a [Indecipherable] will be an option or to just fund through own cash generation and depending on the outlook on future cash flow generation. But on one side, it's not a significant amount. On the other side, depending on the outlook moving forward, there is something that will be required to take an action -- specific action.

Lida Wang -- Investor Relations and Sustainability Officer

Okay. Another question from Anne. What is the outlook, estimate for capex for the remainder of 2020 in each of Pampa's main divisions?

The estimate for the remainder of 2020, actually for the year, we have E&P $65 million of forecast of capex like half maintenance, half non-recurring. This is very little because, at the beginning, we always said the budget of 2020 was $130 million, more than $130 million and this was like half. And then for power generation, this one is not much. Basically, it's $3 million from Genelba commission, which is already done, while another $40 million for the year, OK, in the maintenance. So far as of -- year-to-date as of June, we already completed half of it. So we are like in line.

Margarita Chun -- Investor Relations

Our next question comes from...

Gabriel Cohen -- Chief Financial Officer

I just wanted to try. So very minor capex going forward because we just completed Genelba. So there are no capex other than maintenance capex, which are rather small this year, around $45 million. So in the remaining of the year, less than half of it. And on E&P, it will depend on the Plan Gas, but still a small amount.

Margarita Chun -- Investor Relations

Perfect. The next question comes from Matias Castagnino from BCP. What do we know about the new potential in gas prices, timing, etc.? Is Pampa joining this potential program or not? And what would be the breakeven price to develop reserves? That is the first question we have.

Gustavo Mariani -- Executive Vice President and Chief Executive Officer

Okay. I mentioned a few things. About the timing, as I said, nothing has been published yet, but we do expect that is what the Minister explained to us last week that in the next few days we will be receiving the invitation to participate in the auction with all the terms and that auction should take place during September and the new plan gas starts accruing in October. The goal of the plan gas is not a huge increase of production, it's rather -- and basically because of the constraints of evacuation capacity from the Neuquina Basin. So they are going to auction a flat production throughout the year and three-month peak for the winter. It will have a cap on around $3.40 that will be increased 10% per year. So those already [Phonetic] has been the -- what has been also published in the media, the main deep issues of the plan gas. Regarding breakeven price, it depends on your own portfolio of assets. So it's company -- we have the assets that you need to develop. So each company will have its own price and it's going to be a competitive auction in which, yes, we are looking to participate.

Margarita Chun -- Investor Relations

Thank you. The next question of Matias is what is the impact of the EBITDA due to the legacy remuneration specification?

Gustavo Mariani -- Executive Vice President and Chief Executive Officer

Lida, I think you already covered this, but I don't know if you want to add something.

Lida Wang -- Investor Relations and Sustainability Officer

So basically, given the trend on the FX, official FX, the inflation trend, we are forecasting around $45 million, $50 million hit because of the lack of adjustment and the FX evolution over the legacy contribution and this is matching our contribution from Genelba for this year. So it's kind of like we have estimated that one effect will offset with the other.

Margarita Chun -- Investor Relations

[Speech Overlap] question from PS [Phonetic] is regarding Edenor. What would happen if Edenor needs financial aid. Is Pampa going to transfer cash to Edenor?

Gabriel Cohen -- Chief Financial Officer

[Foreign Speech] Yes, hello. No, we are not expecting any support from the current Edenor. There was since we got it in, there were never any intercompany flows, not even any dividend collections from [Indecipherable].

Margarita Chun -- Investor Relations

Our next question comes from Bruno Montanari from Morgan Stanley. He is interested about the the cost controls. How we are dealing with in each businesses regarding the cost. What will be expected for the cost and capex in the near future?

Gustavo Mariani -- Executive Vice President and Chief Executive Officer

Sorry. Maggie, can you repeat it please and it was for me?

Margarita Chun -- Investor Relations

Yes, yes, of course. The question comes from Bruno Montanari from Morgan Stanley. He wants to know about the cost control regarding each business and how we are going to deal with the cost and capex for the near future?

Gustavo Mariani -- Executive Vice President and Chief Executive Officer

Bruno, as I said, what we can we all -- obviously, we are always revising and especially in this situation going over and over through our opex to see which one of them -- there is no clear line. I don't know, Maggie or somebody. Sorry, somebody has the microphone on. Can you mute it Maggie or not?

Margarita Chun -- Investor Relations

Yes, I'm going to find the person.

Gustavo Mariani -- Executive Vice President and Chief Executive Officer

Okay, so as I was saying, we don't -- there is not much that we can do to reduce cost. Obviously, we are revising all of them that is very marginal and on second decimal in terms of the numbers of Pampa. Where it's relevant for Pampa, it's capex and in this situation and thanks for the planning, we are in a very low capex environment. Thanks because we have already completed the Genelba expansion, and we are awaiting the new terms of the plan gas before deciding new investments there.

Margarita Chun -- Investor Relations

Our next question comes from Alejandro Demichelis. Sorry, before I continue, if there is somebody with a microphone on, please turn it off, so that we can listen to the answers clearly. Our next question comes from Alejandro Demichelis from NAU Securities. He has two questions. The first one is how do we see the evolution of electricity tariffs on power prices and the payment from CAMMESA?

Lida Wang -- Investor Relations and Sustainability Officer

Gus, do you want to answer that?

Margarita Chun -- Investor Relations

I think he is muted also.

Lida Wang -- Investor Relations and Sustainability Officer

He's muted. So how do you see the evolution of electricity tariffs? We honestly -- this is in the midst of the pandemic. I don't think electricity tariffs will be raised right now and actually the government then place an extension of the tariff freeze. I don't know if you remember, there was an emergency act passed last year and that act took 180 days, no tariff increases, telephone, mobile anything [Indecipherable]. That ended on June and they extended for another 180 days. So, should be -- the freeze of tariffs will be done by December. Our prices, honestly the legacy, it is what it is, it will be keep diluting [Phonetic] if we don't get any inflation adjustment and honestly this is in the same line as the previous answer. I don't see this happening in the midst of the pandemic.

So, it is true and we addressed it in the call. Working capital is performing better. I think everybody, all the peers talk about this. We are seeing better collections from the retailers, Edenor, its collecting more, gas distribution companies also collecting more. So they are passing through this kind of behavior to CAMMESA or to gas producers as well and CAMMESA is being faster as well. So in this quarter we had more positive working capital because of that. This last quarter when we had this call, days of sales outstanding was -- the watermark was 86 days, more or less and now we are 10 days earlier. So this 10 days are one-third of the average billing. It's like $20 million better if we -- this is for the whole year, right, for 12 months. The other question from Alejandro, what was it?

Margarita Chun -- Investor Relations

The other question, the second one from Alejandro is very similar to the question of Ricardo Rezende from JP Morgan. And it's about the -- our investment in the upstream of gas volume evolving in the near future, if we are joining the new potential Plan Gas, especially second half of the 2020 -- second half of this year and for next year?

Lida Wang -- Investor Relations and Sustainability Officer

I was on self mute. Well, again that's -- we thought we was addressing this. If we have it, it's a -- it will be a great signaling and great push for the sector that really needs it. One of the question is that from Daniel Guardiola was asking what prices do we need -- what prices are the breakeven. These are the prices that makes it breakeven. We almost have a breakeven EBITDA. I will say that this is the bottom and this is very low. Anything that helps, anything that contributes, it will make this -- the sector more perspective. So, of course, we don't have nothing in paper, but it's been dialog. And -- but we are working on it, so already addressed by Gustavo.

Margarita Chun -- Investor Relations

Thank you. Now, we are pulling for more questions, please wait for a few minutes.

Lida Wang -- Investor Relations and Sustainability Officer

Again, question-and-answer session. Daniel is also asking what is the minimum capex you can deploy before significantly damaging the operation?

Well, this is the minimal capex truly and not drilling anything. Well, the first quarter of the year, we drilled almost nothing. And -- because first quarter was -- we were thinking about the second quarter to be preparing for winter season, which is our hot season, but then lockdown, COVID-19. So nothing, we did nothing. So -- and basically, well this year, we have the drive of last year's activity. Last year was a supply year for E&P, active in the drilling and completion. We were -- last year, we were doing shale drillings. Even we were doing shale drillings. And because of the capex that we are diverse in this year so far, I was saying $65 million is the forecast for the year, $60 million, $65 million. Next year, we estimated that if nothing happens, that will mean a decline in production. So this is already very low.

There is another question again from Daniel. Okay. Okay.

Margarita Chun -- Investor Relations

This is -- it's about the regulated utilities. If we are seeing no tariff adjustment in the second half of this year, what do we think about the tariff adjustment for next year?

Lida Wang -- Investor Relations and Sustainability Officer

Yeah. Also, we already said this. We are in the midst of the pandemic, and there is a decree preventing on that. So we don't expect any tariff increases in our regulated businesses, although we are dialog -- there is dialog to think about what's going to happen after the pandemic of course.

Margarita Chun -- Investor Relations

Hello, we are pulling for questions. Please wait for a few minutes.

Lida Wang -- Investor Relations and Sustainability Officer

There is another question from [Indecipherable]. He is asking about the current payment delays -- days from CAMMESA.

I was saying right now, we are around 75 days. This is 10 days better than the last call. That was the high watermark. This is probably CAMMESA part and parcel with gas production with everybody, all the clients now, gas transportation, electricity transportation, everybody is getting paid from CAMMESA around these days, 75 days of sales outstanding. So it's a pending improvement.

There is another question from Daniel.

Margarita Chun -- Investor Relations

Actually, it's from Andres Cardona from Citi. He is asking, are you considering to have better market. Some of your peers seems to be getting very low interest rate, local market both in local currency and dollar-linked instruments. If that is the case, what will be the use of proceeds?

Gabriel Cohen -- Chief Financial Officer

Yes. Hello.

Margarita Chun -- Investor Relations

Now, we can listen to you.

Gabriel Cohen -- Chief Financial Officer

Yes, I was on mute. Well, in respect of transactions on our peers that have access to the local market, the international market, we clearly have seen that are very failed [Phonetic] transactions for the corporates, but we understand that they have access essentially to do liability management, because they were required to do so. As you know, our debt profile, our first maturity is on 2023, by July 2023. So we have -- we don't have any requirement to access the local markets now. And even if we would want to do something on the 2023, it would not too much. We would concentrate a lot on the 2027. So essentially, we feel very comfortable. We have our debt profile and our cash flow generation. So we don't think these are requirements so far with the current business strategy that we have.

On the other side, we have strengthened our liquidity onshore by accessing the local capital markets on -- in shorter term, as you have -- that was in the press. We accessed about $90 million in the local market for 13 months. So that's what we did.

Lida Wang -- Investor Relations and Sustainability Officer

There is another question. [Indecipherable] from Daniel. Daniel Guardiola, just correct me again. He is also asking the same what portion of the EBITDA generation of the power generation units come from units with PPAs and how much from legacy.

So just to give our famous chart is that 65% of megawatts is legacy, but only 40% -- less than 40% are actually [Indecipherable]. It's legacy EBITDA and the opposite. 35% of our megawatts, it's operated PPAs, Mario Cebreiro, Ingeniero, everything that you know, but they constitute 62% of our EBITDA and this will -- this has distortion. This inequality will grow even wider as we have Genelba right now coming online in Q3 and when Ensenada Barragan comes online.

He asks, Daniel also as well, do you foresee any material risk the government may modify PPAs with CAMMESA.

I think we addressed it varioius times before. It's something that it's always a risk. But right now, we haven't talk or see anything. Actually, we've been paid. Actually, there is an improvement on payment day.

Gabriel Cohen -- Chief Financial Officer

And besides, I think we would like also to stress something on what we said is that those contracts already have been affected considering that the owner or the official exchange rate. So in terms of your equity that we have deployed to the capital, you don't have access to talks to -- you don't have really access to exchange rate to cover your original cost of capital, OK?

Lida Wang -- Investor Relations and Sustainability Officer

Lily Yang also asking from Plan Gas. We already addressed it. Thank you Lily for your questions. People are asking for new bonds issuance. I think Gabriel already answered it. Thank you for your question also in that sense. Someone from the audience asking how -- regarding the hydrocarbons production, how we expect demand will change during Q2 -- the second half of the year, sorry? Is it growing?

Yes, right now, it's growing because we are in winter, but Q4 we see results because it's off-peak season. And historically, as you can see the charts, it's always goes down, but it's a seasonality. That is not unknown. So -- but Q3, it's the hot season of Argentina. As you can see that the year-on-year decrease, it's not much compared, I don't know, GDP or other sectors like [Indecipherable] and so on.

I think this is -- can you please comment on TGS results and new project in Bajada de Anelo by Lily Yang from HSBC?

It's a small project. Actually, it's really good because it makes more use of the gathering pipeline that we've built with -- it was built of great interest and transported by TGS. This is a huge pressure. I don't know if you remember, TGS [Technical Issues] two years. It was finished last year. We started operating and actually started to build and it contributed a part, but not huge but important part to Q2's EBITDA at TGS and basically, it's part of the ecosystem that back Margarita that TGS is trying to build, right? And this is a treatment plant that it will be in the north part -- in the north tranche of this gathering pipeline. It's a two-year contract. TGS will be able to operate and treat this gas that the people from Shell and YPF lifts from that variant.

Whatelse? I think that's it.

Margarita Chun -- Investor Relations

I think there is one more question from Chris Dechiario. Have there been any further discussion with the authorities about changes to the US-denominated PPAs in light of current [Technical Issues] US monetary policy?

Lida Wang -- Investor Relations and Sustainability Officer

I mean, I think Gabriel already addressed it.

Margarita Chun -- Investor Relations

I think so.

Lida Wang -- Investor Relations and Sustainability Officer

So I think that's it, right? There is no more -- there is a poll after this presentation. Thank you so much for joining us. Margarita and I, we appreciate, we are here, any question you may have, you can reach us both through every contact line that we have. Please stay safe and well. See you next quarter.

Gustavo Mariani -- Executive Vice President and Chief Executive Officer

Thank you to everyone.

Gabriel Cohen -- Chief Financial Officer

We are available for any further questions through Lida, Margarita and the team.

Margarita Chun -- Investor Relations

Thank you, Gabriel, and thanks for your participation. This concludes today's presentation. Thank you for joining. You may disconnect at this time. Goodbye.

Duration: 63 minutes

Call participants:

Margarita Chun -- Investor Relations

Lida Wang -- Investor Relations and Sustainability Officer

Gustavo Mariani -- Executive Vice President and Chief Executive Officer

Gabriel Cohen -- Chief Financial Officer

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