Transportadora de Gas del Sur S.A. ADS 2026 Q2 Earnings Call

Morning. Good morning, everyone. I'm Carlos Balmaseda, Head of Investor Relations. I would like to welcome everyone to TGS second quarter 2026 earnings video conference. TGS issued its earnings release yesterday. If you didn't receive a copy of the release, please contact us at inversores@tgs.com.ar. Before we begin the call, I would like to inform you that this event is being recorded and all participants are in listen only mode. Following the company remarks, we will host a Q&A session. All questions will need to be submitted in writing through the Q&A chat box. I would also like to remind you that forward-looking statements made during today's video conference do not account for future economic circumstances, industry conditions, or company performance and financial results. These statements are subject to a number of risks and uncertainties.

All figures included herein, we are prepared in accordance with International Accounting Reporting Standards, IFRS, and are stated in constant Argentine pesos as of June 30th, 2026, unless otherwise noted. Joining us today from TGS in Buenos Aires is Alejandro Basso, Chief Financial Officer. I will now turn the video conference over to Mr. Basso. Alejandro, please begin. Thank you, Carlos.

Good morning, everyone, and thank you for joining us today to discuss TGS's 2026 second quarter earnings and highlights. To begin the call today, I'd like to share some of the most recent corporate developments. First of all, the most relevant news is the FID for the NGL project, announced a few weeks ago, with key commercial agreements representing more than 90% of the project's total capacity already executed as of today. This is a $3 billion CapEx project, and the construction is expected to take about 45 months period, with the COD expected in March 2030. In addition, we have also requested that this project be approved under the Regime. The project consists of a new gathering pipeline in Vaca Muerta, a processing plant to be built in Chos Malal, and a 475 kilometers polyduct, a fractionation plant in Silver, and storage facilities in Puerto Madryn.

In terms of the Natural Gas Transportation expansion, which is currently under construction and following the open season launch last February, and after the allocation of 5 million units per day under a fully prepaid basis in the first round, last June, we received bids for over 100 million units per day capacity in order to allocate the remaining capacity of 9 million units per day. We submitted our capacity allocation to our regulators some weeks ago and are waiting for its approval. It is important to highlight that last May, the Perito Moreno pipeline expansion was approved by the Ministry of Economy to be included in the Regime, which will result in tax benefits for the project. Finally, in June, S&P upgraded the long-term local and foreign currency debt ratings from B-minus to B, following the revision for Argentina's transfer and convertibility risk assessment.

Similarly, in July, Moody's upgraded the rating of our notes from B2 to B1 as a consequence of the Argentina sovereign rating upgrade. Moving to slide four, I will briefly highlight the key financial results for the second quarter of 2026. Please keep in mind that all figures presented for this quarter and comparisons made with the previous quarter are expressed in constant Argentine pesos as of June 30th, 2026, following the provisions established by the IFRS for the financial reporting in hyperinflationary economies. As seen in the slide, we reported a total net income of ARS 133 billion during the second quarter of 2026, compared to ARS 53.8 billion reported in the same quarter of 2025.

This relevant net income increase is mainly explained by the ARS 60.2 billion positive variation in our financial results, as well as the important liquids EBITDA growth of ARS 48.4 billion, and to a lesser extent, the ARS 12.3 billion increase related to the natural gas transportation EBITDA. Moving on to slide five. EBITDA for natural gas and oil business in the second quarter of 2026 totaled ARS 132 billion, which is above the almost ARS 120 billion recorded in the second quarter of 2025. It is worth noting that tariff increases generating higher revenues by ARS 60.2 billion, which was more than the ARS 48.6 billion negative effect of inflation. In addition, two negative events in the second quarter of 2025 also explain partially the higher EBITDA in the second quarter of 2026 of ARS 19.2 billion.

The first event was related to a trade receivable write-off of ARS 11.2 billion, and the second one was the climate event occurred in March 2025, which damaged some natural gas transportation assets and generated a positive EBITDA variation of ARS 8 billion. Finally, the revenues generated by transportation contracts decreased by ARS 9.3 billion following the natural gas transportation system reconfiguration, which became effective starting as of May 2026. Whose initial negative effect will be partially offset by future small monthly tariff adjustments. On slide six, you can see how EBITDA for the liquids segment increased to ARS 82.3 billion during the second quarter of 2026, compared to a low ARS 33.9 billion reported in the same quarter of 2025.

The increase in EBITDA was mainly attributed to higher volume sales, which rose from 211,000 metric tons to 330,000 metric tons, and was mainly explained by the low volume sales in the 2025 quarter due to the processing plant shutdown caused by the flooding suffered on March 7th, 2025. The plant started to operate by mid-April with low level of production and increased its production to reach normal levels in the beginning of May. The higher volume sales generated a higher EBITDA of ARS 46.7 billion. Moreover, high international reference prices as a consequence of the geopolitical conflict in the Middle East raised EBITDA by ARS 23.2 billion. These positive effects were partially offset by the same take-or-pay annual compensation collected in the second quarter of 2025 of ARS 8.5 billion, together with the negative monetary effect of ARS 7.4 billion.

The lower retained price, which generated lower revenues of ARS 5.8 billion and a higher average natural gas price, which increased to ARS 3.4 per million BTU from ARS 3.3 and generated higher costs by ARS 2.5 billion. Turning to slide seven, EBITDA from midstream and other services decreased slightly to ARS 64.1 billion, compared to ARS 69.3 billion in the second quarter of 2025. Revenues generated by midstream services rendered in Vaca Muerta increased by ARS 13.2 billion. Transported natural gas billed volume rose from an average of 30 million cubic meters per day in the second quarter of 2025 to 35 million cubic meters per day during this quarter. The natural gas conditioning volume also increased from an average of 27 to 30 million cubic meters per day.

This higher revenue was more than offset by the negative monetary effect of ARS 10.5 billion as inflation was higher than the foreign exchange rate increase, along with higher operating expenses of ARS 5.6 billion. As seen on slide eight, we recorded a positive variation in the financial results amounting to ARS 60.2 billion. This was mainly due to ARS 130.1 billion increase in income from financial assets, given the higher yields recorded for the domestic financial investment and to a lesser extent, to a higher level of financial investments. This positive effect was partially offset by a ARS 46.7 billion higher foreign exchange loss, ARS 15.2 billion in higher interest expenses, most of which are mainly attributed to the $500 million bond issued in November of 2025, as well as the ARS 7.6 billion higher inflation exposure loss.

Turning to the cash flow on slide nine, our cash position increased by ARS 274 billion in real terms during the second quarter of 2026 to ARS 2,206 billion, equivalent to approximately $1.5 billion at the official exchange rates. EBITDA generation in the second quarter was ARS 278.4 billion, of which 53% was generated by non-regulated businesses, even after considering the full normalization of the Natural Gas Transportation segment. These results highlight the increased relevance of the non-regulated activities within the company's overall results. CapEx amounted to ARS 165 billion, largely driven by investments in the pipeline expansion project. Working capital decreased by ARS 186 billion, primarily due to the collection of the first prepayment installment of approximately ARS 140 billion from customers that contracted 5 million cubic meters per day of incremental firm transportation capacity.

We also paid ARS 31.3 billion in income taxes and ARS 30.8 billion in interest. We incurred new debts amounting to ARS 20.8 billion. This concludes our presentation. I will now turn it over to Carlos, who will open the floor for questions.

Thank you. Thank you, Ale.

The floor is now open for questions. If you have questions, please send them through our Zoom chat. We will read and answer the questions in the order in which they are received. Please make sure to state your name and company so we can introduce you to the audience. Should any participant need assistance, please send us a message in the chat box. Please hold while we poll for questions. Thank you. Well, the first question's from Bruno Montanari from Morgan Stanley. Hello. How are you, Bruno? The first question is regarding the GPM expansion. How much CapEx is still left to execute in the coming quarters?