Carlos Almagro: Hello. Good morning, everyone. I am Carlos Almagro, Head of Investor Relations. I would like to welcome everyone to TGS Q3 2026 Earnings Video Conference. TGS issued its earnings release yesterday. If you did not receive a copy of this 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.
Carlos Almagro: All figures included herein were prepared in accordance with International Financial Reporting Standards, IFRS, and are stated in constant Argentine pesos as of 30 September 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.
Alejandro Basso: Thank you, Carlos. Good morning, everyone, and thank you for joining us today to discuss TGS's 2026 Q4 earnings and highlights. To begin the call today, I would like to share some of the most recent corporate developments. Regarding the NGL project, I would also like to highlight that on 19 October, the Minister of Economy announced the approval of the project to be included in the RIGI, which we had submitted our request in early June. We expect the official approval to be published in the official gazette shortly. This approval represents an important milestone, as RIGI provides tax and foreign exchange benefits, as well as regulatory stability for 30 years. Moreover, this approval is a condition for our subsidiary, Midstream de Gas del Sur, to raise debt that could partially finance the investment.
Alejandro Basso: Furthermore, over the past few months, we have signed additional agreements with gas producers, increasing the project's take-or-pay contracted capacity to 96%. We expect to reach full capacity contracted before the end of the year. Initial works have already commenced, and the main EPC contracts have been executed. We are currently in advanced negotiations with a group of banks to obtain a syndicate loan of approximately $1.4 billion to partially finance MGS investment. In the meantime, both of our subsidiaries, MGS and PGS, are using bank financing to make imports advance payments. In terms of the expansion of the Perito Moreno pipeline and our final tranches, following the open season launch last February and the first allocation of 5 million cubic meters per day under a fully prepaid basis, ENRGE, formerly ENARGAS, finally approved the transportation capacity allocation of the remainder 9 million cubic meters per day last August.
Alejandro Basso: The works are currently underway, and its completion is expected by the end of April 2027. As of 30 September, total CapEx stood at approximately $360 million. In addition, on 8 October, we submitted a request to the Secretary of Energy to exercise our option to expand the Perito Moreno pipeline by an additional 4.5 million cubic meters per day out of the total 6 million cubic meters per day authorized by ENARSA. We expect to receive approval shortly. Moving to slide 4, I will briefly highlight the key financial results for Q3 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 30 September 2026, following the provisions established by the IFRS for financial reporting in hyperinflationary economies.
Alejandro Basso: As seen in the slide, we reported a total net income of ARS 110 billion during Q3 2026, compared to ARS 149 billion reported in the same quarter of 2025. The decrease in net income was mainly driven by a ARS 23.7 billion lower EBITDA in the natural gas transportation segment and the ARS 18 billion negative variation in financial results. In addition, the ARS 14 billion increase in liquids EBITDA was almost entirely offset by the decrease in midstream EBITDA. Moving on to slide 5, EBITDA for natural gas transportation business in Q3 2026 totaled ARS 118 billion, which is lower than the ARS 141 billion recorded in Q3 2025. It is worth noting that tariff increases generated higher revenues totaling ARS 58.4 billion, which more than offset the ARS 51.6 billion negative inflation effect.
Alejandro Basso: In addition, the revenues generated by firm transportation contracts and the provisions of intra-provincial transportation services decreased by almost ARS 21 billion, explained by the natural gas transportation system reconfiguration, which became effective starting as of May 2026, whose initially negative effect will be partially offset by future small monthly tariff adjustments. Finally, we incurred in higher PP&E maintenance expenses amounting to ARS 6.3 billion. On slide 6, you can see how EBITDA for the liquids segment increased ARS 83.6 billion during Q3 2026, compared to ARS 69.4 billion reported in the same quarter of 2025. The increase was mainly attributed to higher international reference prices as a consequence of the geopolitical conflict in the Middle East, which positively impacted EBITDA by almost ARS 41 billion. In addition, a 9% reduction of the average natural gas price from $3.4 to $3.1 per million BTU decreased the variable cost by ARS 6.5 billion.
Alejandro Basso: These positive effects were partially offset by a ARS 21 billion negative monetary effect driven by the annual inflation of 33.5%, which was significantly above the 13.5% increase of the foreign exchange rate over the same period, especially when considering that revenues and variable costs of this business segment are dollar denominated. In addition, volumes sold decreased by 3% from 302,000 tons in Q3 2025 to 293,000 tons this quarter, resulting in an approximately ARS 8 billion negative impact on EBITDA. Finally, lower ethane price generated lower revenues of almost ARS 3 billion. Turning to slide seven, EBITDA from midstream and other services decreased to ARS 67.7 billion compared to ARS 81.6 billion in Q3 2025. This 17% decrease is mainly explained by the negative monetary effect in revenues, which explain the EBITDA reduction for almost ARS 21 billion.
Alejandro Basso: Revenues generated by midstream services rendered in Vaca Muerta increased by ARS 13.8 billion. Transporting natural gas bill volume rose from an average of 32 million cubic meters per day in Q3 2025 to 35 million of cubic meters per day during this quarter. The natural gas conditioning volume also increased from an average of 29 to 31 million of cubic meters per day. In addition, lower midstream service activity, together with higher operating expenses, negatively impacted the EBITDA by approximately ARS 7.5 billion. As seen on slide eight, we recorded a negative variation in financial results amounting to ARS 18 billion. This was mainly due to ARS 17.8 billion decrease in income from financial assets, driven by lower yields generated by domestic financial investment, despite a higher level of invested funds.
Alejandro Basso: In addition, interest expenses increased by ARS 11.6 billion, which is mainly attributable to the $500 million bond issued in November 2025, and inflation exposure loss increased by ARS 4.4 billion. These negative variations were partially offset by a ARS 15.8 billion lower foreign exchange loss, mainly due to the difference in increases of the foreign exchange rate, which was just 1% this quarter, versus 13% increase in the same quarter of 2025. Finally, turning to the cash flow on slide nine, our cash position remained stable in real terms during Q3 2026 at ARS 2,329 thousand billion, which is equivalent to approximately Foreign exchange rate. Sorry. EBITDA generation in Q3 was ARS 269 billion, of which 56% was generated by non-regulated businesses, even after considering the full normalization of the natural gas transportation segment.
Alejandro Basso: This result highlights the increased relevance of the non-regulated activities within the company's overall results. CapEx amounted to ARS 526 billion, largely driven by investments in the NGL project and the pipeline expansion project. Working capital decreased by ARS 138 billion, primarily due to the collection of the second prepayment installment of approximately ARS 157 billion from customers that contracted 5 million cubic meters per day of incremental firm transportation capacity. We also paid ARS 64 billion in income taxes and ARS 39 billion in interest, and we incurred a new debt amounting to ARS 268 billion. This concludes our presentation. I will now turn it over to Carlos, who will open the floor for questions. Thank you.
Carlos Almagro: Thank you, Alejandro. The floor is now open for questions. If you have questions, please send us them through our Zoom chat. We will read and answer the question in the order in which they are received. Please make sure that it will 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. Well, first question is from George Gasztowtt from Latin Securities. Hi, George. His first question is regarding how is the project financing process progressing for the NGL project, and when do we expect to reach financial close?
Alejandro Basso: Okay. Thank you, George. Regarding the project financing process, it is going quite smoothly. We expect the closing by December this year.
Carlos Almagro: His second question is regarding when do we expect to fully recover the revenue loss as a result of the new transportation configuration?
Alejandro Basso: Okay. Well, the process to recover the revenues is under the tariff revision process, so we expect to recover the lost revenues in this 5-year period or 4-year period up to 2030.
Carlos Almagro: Okay. The third question is regarding the CapEx needed for the additional GPM expansion, how much is the CapEx? If this also be included under the reinvestment vehicle.
Alejandro Basso: Okay. The incremental CapEx is approximately $100 million. $70 million out of this $100 million is going to be invested under the RIGI benefits in the new sucursal dedicada we created. The remainder of $30 million in the final tranches in the transportation under the PCS license.
Carlos Almagro: Now we have question from Matheus Tostes from Citi. Hi, Matheus. His third question is regarding the financing of the NGL project that was answered previously. His second question is, what is the deal announced yesterday with Pampa? What does it imply in terms of CapEx?
Alejandro Basso: Okay. Hi, Matheus. Regarding the agreement with Pampa, it is based on the new gathering pipeline that we want to build for additional gathering natural gas in Vaca Muerta. So it is a 15-year agreement with the same condition that we have in the existing pipeline. Pampa is going to change their flow from the existing pipeline to the new one, so we are going to have additional space for the gas that is going to feed the NGL project in the existing pipeline. Also, it includes a small connection between our plants that links our plant in Tratayén with the new San Matías pipeline. Total CapEx is around $190 million.
Carlos Almagro: Well, his third question is regarding the acceleration of CapEx in Vaca Muerta due to the RIGI and higher oil prices in the upstream sector. If the project can handle this higher increasing volumes of production.
Alejandro Basso: Okay. Well, it is a challenge for us to manage all this quite rich gas that is coming from Vaca Muerta. We are working in some additional investment of around $60 million to be able to manage the transition between 2027 up to 2030, 2029. We have signed additional contracts with the gas producers to be able to render them additional services to be able to include all this new quality. We are going to add a new stabilization plant in Tratayén. Currently, we are building one, and we are going to add an additional stabilization plant to be able to manage these liquids and other debottlenecking facilities.
Carlos Almagro: Another question from Matheus is regarding how much do we expect to still recover an insurance claim from the flood event that we had last year? How much and when?
Alejandro Basso: Well, the process is going smoothly. We are expecting to fully recover our expenses by the first quarter of next year. Our total expenses were around $50 million.
Carlos Almagro: Now we have a question from Andres from Balanz. Hi, Andres, how are you? One of his first questions is, the 4.5 is additional to the 14? Yes, it is an additional. The other question of the CapEx was answered. Another question from Andres is, what was the quarterly inflation-linked tariff adjustment for the transportation segment in percentage terms?
Alejandro Basso: Hi, Andres. It was around 6%.
Carlos Almagro: Now we have a question from Lorena Rachel. How are you, Lorena? Her question is, if we can provide the detail of the increase in debt.
Alejandro Basso: Hi, Lorena. Well, the increase in debt is due to the finance of imports for the NGL project and maybe some residual on the Private Initiative, on the expansion of the Perito Moreno, the final withdrawals that we have. Yeah.
Carlos Almagro: Well, we have a question from Ramiro Guerrero from Bull Market. Some questions were answered, but then he asked, if it records to TGS, where should consolidated net leverage peak during 2027 CapEx overlap?
Alejandro Basso: Hi, Ramiro. The answer is yes. The financing is going to have recourse to TGS. We are going to have contingent warranties there, okay? And, well, it consolidates with TGS net leverage. We are estimating the peak to be less than 2.5 times.
Carlos Almagro: We have a question from Zach Van Everen from TPH Research. One of his questions is, with the expected growth out of the Vaca Muerta, how do we look at future NGL gas and gathering expansion over the next few years?
Alejandro Basso: Well, hi, Zach. We are definitely. Sorry. Hi, Zach. We are definitely analyzing expansions for the future in the NGL project. You know that the gas there is very, very rich, so we expect to be. We are working in analyzing expansions at this moment, okay? And these expansions could include our gathering system expansions also. Small ones, but it could include it.
Carlos Almagro: And another question regarding this topic is, does this increased contract on NGL project improve returns?
Alejandro Basso: They should.
Carlos Almagro: Now we have a question from Daniel Guardiola. Good morning, Daniel. How are you? His question is, what mechanism we have put in play to protect from potential delays in the construction phase?
Alejandro Basso: Well, we have clauses in our EPC contracts, obviously, and regarding the We have some buffer in the total project time estimation. Okay?
Carlos Almagro: Another question from Daniel, he saw a meaningful increase in our CapEx. He was wondering what portion was allocated to Perito Moreno and NGL, and going forward, how much CapEx do we expect to allocate to both projects in 2027? When do we expect TGS to start generating positive free cash flow, considering the high commitment you have?
Alejandro Basso: [Foreign language] CapEx?
Carlos Almagro: For
Alejandro Basso: For 2027. Hi, Daniel. For the Perito Moreno, we estimated $500 million for this year, and for the NGL project, $400 million. The second question regarding the generation of positive free cash flow, the Perito Moreno is going to start on 1 May 2027. For the NGL project, the expected COD is in March 2030. Hopefully, we can have some anticipation of that date, maybe some months, but it will depend on the project. Okay?
Carlos Almagro: Now we have a question from Guido Bizzozero from Allaria. Hi, Guido. His question is, are we expecting to have costs related to the initial Private Initiative and NGL project, or is everything related to those projects considered CapEx and capitalized?
Alejandro Basso: Hi, Guido. Well, regarding the IP, you know that we are in charge of the O&M of the Perito Moreno, so we have there the O&M expenses regarding this pipeline that we have already been operating since 2023. So we are going to have incremental expenses when the new plants are going to be put in services. They are going to be put in services in May next year. Regarding the NGL project, all the expenses are capitalized, so we are not going to have additional OpEx up to 2030, approximately.
Carlos Almagro: Now we have a question from Federico Cabelli from AdCap. Hi, Federico. He asked, the NGL project approved under the reimbursable investment over $3.2 billion, about the $3 billion previously announced. How will this CapEx be distributed over time through the next years?
Alejandro Basso: Hi, Federico. Well, regarding the $3.2 billion versus the $3 billion, the difference is the contribution, the capital contribution that TGS is going to do regarding the existing plants, the existing processing plants, which are something above $200 million. It is not cash, it is in kind contribution. The CapEx distribution of the $3 billion is $400 million this year, $1.1 billion the following two years, and the remainder in 2029 and some part of them in the beginning of 2030.
Carlos Almagro: Andres Cardona from Citi. Hi, Andrés. Well, his question regarding how is progressing the project finance was answered, and if we have other credit lines in negotiation.
Alejandro Basso: Well, we have import finance for PGS amounting up to $300 million. Then, regarding the MGS, we also have project finance for $120 million, then the project finance of $1.4 billion. Okay? The project finance includes the payments or the repayments of the import finance.
Carlos Almagro: Yeah, but it expires in 2029 or before. There are some other loans that could have some maturity before 2029, 2028. Well, we do not have more questions. This concludes the question and answer section. Now we will turn to Alejandro for final remarks.
Alejandro Basso: Okay. Thank you all for participating in this year's Q3 2026 conference call. We look forward to speaking with you again when we release our 2026 Q4 results. If you have any questions in the meantime, please do not hesitate to contact our investor relations department. Have a good day.
Operator: Goodbye.
