Transportadora de Gas del Sur SA Q3 FY2026 earnings call

• NGL Project Milestones: Received approval for inclusion in the RIGI regime (Régimen de Inversiones en la Industria), securing 30 years of tax and regulatory stability. Take-or-pay contracted capacity increased to 96%, with full capacity expected by year-end. Main EPC contracts are executed, and initial works have commenced.
• Financing Progress: Advanced negotiations underway for a syndicated loan of approximately $1.4 billion to partially finance the Midstream de Gas del Sur (MGS) investment. Subsidiaries are using bank financing for import advance payments.
• Perito Moreno Pipeline Expansion: ENREGE approved the allocation of the remaining 9 million cubic meters per day of transportation capacity. Completion is targeted for end of April 2027. A request was submitted to expand capacity by an additional 4.5 million cubic meters per day.
• Financial Results Context: All figures are expressed in constant Argentine pesos as of September 30, 2026, in compliance with IFRS standards for hyperinflationary economies.
• Cash Flow and CapEx: Total CapEx stood at approximately $360 million (note: transcript mentions ARS 526 billion CapEx later, likely referring to cumulative or different metric; earlier slide referenced $360m). Working capital decreased significantly due to collection of prepayments for firm transportation capacity. Non-regulated businesses contributed 56% of EBITDA generation.

The company reported a total net income of ARS 110 billion for Q3 2026, down from ARS 149 billion in the same period of 2025. The Natural Gas Transportation segment generated an EBITDA of ARS 118 billion, a decrease from ARS 141 billion in Q3 2025, primarily due to system reconfiguration effects and higher maintenance costs, though tariff increases offset significant inflationary pressures. The Liquids segment saw its EBITDA rise to ARS 83.6 billion from ARS 69.4 billion in Q3 2025, driven by higher international reference prices and lower variable costs, despite negative monetary effects from inflation and reduced sales volumes. The Midstream and Other Services segment recorded an EBITDA of ARS 67.7 billion, declining from ARS 81.6 billion in Q3 2025, largely due to negative monetary effects on revenues and higher operating expenses, although services in Vaca Muerta showed growth.

• NGL Project Financial Close: Management expects the closing of the project financing to occur by December 2026.
• Revenue Recovery Timeline: The company anticipates recovering revenue losses resulting from the new transportation configuration within a 4-to-5-year period, up to 2030, through the tariff revision process.
• Free Cash Flow Generation: The Perito Moreno expansion is expected to start generating positive free cash flow from May 1, 2027. The NGL project is expected to reach Commercial Operation Date (COD) in March 2030, with potential for slight anticipation depending on construction progress.
• Leverage Peak: Consolidated net leverage is estimated to peak at less than 2.5x during the 2027 CapEx overlap period.

• Inflationary Impact: Significant negative monetary effects on EBITDA across segments due to high domestic inflation (33.5%) outpacing foreign exchange rate increases, particularly affecting dollar-denominated revenues and costs.
• Operational Reconfiguration Risks: The Natural Gas Transportation system reconfiguration effective May 2026 caused an initial negative impact on revenues, which management notes will be only partially offset by future tariff adjustments.
• Construction and Execution Delays: While EPC contracts include delay clauses, there remains inherent risk in managing complex projects like the NGL facility and pipeline expansions, requiring buffer time estimation.
• Capital Intensity and Debt Load: High CapEx requirements ($400 million for NGL this year, $500 million for Perito Moreno) necessitate significant debt financing, increasing interest expenses and financial leverage risks.

Q: George Gasztowtt asked about the status of NGL project financing and when financial close is expected. / A: Alejandro Basso stated that the financing process is progressing smoothly and the company expects to achieve financial close by December 2026.

Q: George Gasztowtt inquired when the company expects to fully recover revenue losses caused by the new transportation configuration. / A: Management explained that recovery is part of the tariff revision process and expects to recoup lost revenues over a 4-to-5-year period leading up to 2030.

Q: Mateus Tostes asked about the details of the agreement with Pampa and its implication for CapEx. / A: Basso described a 15-year gathering pipeline agreement in Vaca Muerta that allows Pampa to shift flows, freeing up space for the NGL project. The deal involves a small connection between plants and carries a total CapEx of around $190 million.

Q: Andres from Balanz asked for the percentage of the quarterly inflation-linked tariff adjustment for the Transportation segment. / A: Alejandro Basso confirmed that the quarterly tariff adjustment was approximately 6%.

Q: Ramiro Guerrero from Bull Market asked if the NGL project financing would be recourse to TGS and what the peak consolidated net leverage would be during the 2027 CapEx overlap. / A: Basso confirmed the financing has recourse to TGS and consolidates into its net leverage. He estimated that net leverage would peak at less than 2.5x during this period.