Transportadora de Gas del Sur ("tgs", "the Company", “us”, “our”, or “we”) is the leader in Argentina in the transportation of natural gas, transporting approximately 60% of the gas consumed in the country, through more than 5,700 miles of gas pipelines, with a firm-contracted capacity of 2.9 Bcf/d. We are one of the main natural gas processors. In addition, our infrastructure investments in Vaca Muerta formation is a milestone with the aim of becoming one of the main Midstreamers at Vaca Muerta.
Our shares are traded on NYSE (New York Stock Exchange) and BYMA (Bolsas y Mercados Argentinos S.A.).
Our controlling company is Compañía de Inversiones de Energía S.A. ("CIESA"), which owns 51% of the total share capital. CIESA’s shareholders are: (i) Pampa Energía S.A. with 50%, (ii) Grupo Investor Petroquímica S.L. (member of the GIP group, led by the Sielecki family) and PCT L.L.C. hold the remaining 50%.
For further information, see our website www.tgs.com.ar
Stock Information
BYMA Symbol: TGSU2
NYSE Symbol: TGS (1 ADS = 5 ordinary shares)
Shareholding structure as of June 30, 2021
tgs holds 794,495,283 issued shares and 752,761,058 outstanding shares.
Buenos Aires, Argentina, August 4, 2021
During the 2Q2021, total comprehensive income amounted to Ps. 3,391 million, or Ps. 4.50 per share (Ps. 22.52 per ADS), compared to total comprehensive income of Ps. 2,612 million, or Ps. 3.43 per share (Ps. 17.14 per ADS) for the second quarter ended on June 30, 2020 (2Q2020).
Operating profit for 2Q2021 amounted to Ps. 6,204 million, a decrease of Ps. 566 million compared to 2Q2020. This variation was mainly due to:
ØLower revenues from the Natural Gas Transportation segment of Ps. 2,376 million due to lack of tariffs adjustment since April 2019;
ØOperating costs and administrative and commercialization expenses, excluding depreciation, increased by Ps. 2,186 million compared to 2Q2020; and
ØDepreciation increased by Ps. 94 million,
ØHigher revenues from the Production and Commercialization of Natural Gas Liquids (Liquids) and Other Services segments amounting Ps. 3,955 million and Ps. 192 million, respectively, partially offset the decreases mentioned above.
Financial results recorded a positive variation of Ps. 3,671 million.
The income tax expense rose by Ps. 2,308 million.
2Q 2021 EARNINGS RELEASE
2Q2021 highlights and subsequent events
ØOn June 2, 2021, the National Gas Regulatory Body ("ENARGAS") issued Resolution No. 149/2021 (the "Resolution 149") approving a Transitional Tariff Regime (the "Transitional Regime") for tgs effective as of that date. The Transitional Regime: (i) does not grant a transitory tariff increase for the Company, but rather states that current tariff charts in place since April 1, 2019 remain unchanged; (ii) states that from its effective date - and until the Final Renegotiation Agreement is in force - ENARGAS may adjust tgs' tariffs starting April 1, 2022; (iii) it does not establish a mandatory investment plan for tgs and, (iv) it prohibits the distribution of dividends, any early cancellation of financial and commercial debts contracted with shareholders, as well as the acquisition of other companies or granting of loans.
ØIn July 2021, in order to protect the interests of its shareholders, tgs filed administrative claims to the Executive Branch, the National Ministry of Economy and ENARGAS challenging and requesting the nullity of the different regulations provided in the Transitional Regime.
ØDuring June 2021, the Company purchased its own notes for a nominal value of US$ 2,030,000.
COVID-19 and the measures adopted
On July 9, 2021, the Executive Branch issued the Presidential Decree No. 455/2021, which extended the Presidential Decree No. 287/2021 that was published on May 1, 2021. Such decree establishes an "epidemiological traffic light" that allows provincial authorities to define pertinent sanitary restrictions to preserve the sanitary situation in their provinces.
These measures will remain in effect until August 6, 2021, implying that tgs will have to readjust its operations again to continue to provide its services and execute essential works to operate the facilities.
Considering our current financial position and measures taken previously, we estimate that we will have sufficient resources to meet the current working capital needs, finance capital expenditures and pay off short-term financial debt obligations without incurring in any additional debt.
Despite the aforementioned measures, the extent and duration of these developments remain uncertain and could impact the operating results, cash flow and financial condition, but will depend on the severity of the health emergency and the success of the government’s measures adopted thus far as well as any future ones.
Analysis of the results
Total revenues added to Ps. 17,875 million in 2Q2021, a Ps. 1,771 million increase compared to Ps. 16,104 million in 2Q2020.
Transportadora de Gas del Sur S.A. 3
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
2Q 2021 EARNINGS RELEASE
The breakdown of operating costs, administrative and commercialization expenses, excluding depreciation, for 2Q2021 and 2Q2020 is shown below:
Operating costs and administrative and selling expenses, excluding depreciation, increased by approximately Ps. 2,186 million in 2Q2021 compared to 2Q2020. This variation is mainly explained by higher: (i) natural gas costs (higher prices denominated in US dollars, partially offset by the inflation restatement effect in accordance with IAS 29 - "Financial Reporting in Hyperinflationary Economies" ("IAS 29")), (ii) operating costs, and (iii) taxes, fees and contributions (due to higher export taxes, partially offset by lower turnover tax). These effects were partially offset by the positive effect of lower doubtful accounts provisions.
Financial results are presented in gross terms considering the effects of change in the currency purchasing power ("Gain on monetary position") in a single separate line. In 2Q2021, financial results recorded a positive variation of Ps. 3,671 million compared to 2Q2020. This variation is mainly due to: (i) lower negative exchange difference (as a result of the lower net liability position in foreign currency during 2Q2021 and lower devaluation of the Argentine peso against the US dollar), (ii) higher RECPAM due to the effect of the increase in the Consumer Price Index (“CPI”), (iii) lower interest expense generated by liabilities in nominal terms, (iv) higher interest generated by assets, and (v) lower losses from derivative financial instruments. These effects were partially offset by the loss recorded from the repurchase of notes.
The income tax charge rose by Ps. 2,308 million, mainly as a result of the increase in the applicable rate following the amendments introduced by Law No. 27,630, enacted in June 2021, which provides a progressive increase in the applicable rate to 35% in the case of taxable income above Ps. 50 million.
Transportadora de Gas del Sur S.A. 4
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
2Q 2021 EARNINGS RELEASE
Analysis of operating profit by business segment
Natural Gas Transportation
Operating profit before depreciation of the Natural Gas Transportation segment decreased by Ps. 2,436 million.
Natural gas transportation revenues accounted for approximately 28% and 46% of total revenues in 2Q2021 and 2Q2020, respectively.
Revenues from this segment derive mainly from firm natural gas transportation contracts, which represented approximately 84% and 83%, respectively, of the total revenues of this segment in 2Q2021 and 2Q2020.
Transportadora de Gas del Sur S.A. 5
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
2Q 2021 EARNINGS RELEASE
Operational information
This business segment, subject to ENARGAS regulation, received its last tariff adjustement on April 1st, 2019, following Resolution No. 192/2019 (2).
The decrease in operating profit was mainly related to lower revenues given the lack of a tariff adjustment to compensate for the negative variation associated with the inflation restatement effect under IAS 29.
Liquids Production and Commercialization
Liquids Production and Commercialization revenues accounted for approximately 62% and 44% of total revenues in 2Q2021 and 2Q2020, respectively. During 2Q2021, production reached 280,852 short tons (12,578 short tons below 2Q2020).
Operating profit before depreciation in this business segment in 2Q2021 was Ps. 1,831 million above 2Q2020, reaching Ps. 4,411 million (compared to Ps. 2,580 million in 2Q2020). This variation stems from an increase in revenues of Ps. 3,955 million, which was partially offset by: (i) an increase in natural gas processing costs (mainly due to the effect of the higher U.S. dollar-denominated price) of Ps. 1,660 million, (ii) higher operating expenses of Ps. 323 million, and (iii) higher export withholding tax charge of Ps. 136 million. These effects were partially offset by the recovery in the allowance for doubtful accounts of Ps. 55 million (compared to a charge of Ps. 41 million in 2Q2020).
(2) For further information, see “2Q2021 highlights and subsequent events” in this Report.
Transportadora de Gas del Sur S.A. 6
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
2Q 2021 EARNINGS RELEASE
Liquids revenues were Ps. 11,108 million in 2Q2021, Ps. 3,955 million higher than 2Q2020. This was mainly due to higher international reference prices for natural gasoline and LPG amounting to Ps. 3,816 million, combined with the increase in the nominal variation of the exchange rate in U.S. dollar-denominated revenues of Ps. 1,525 million, the increase in ethane volumes sold of Ps. 1,194 million and higher subsidies of Ps. 480 million.
These effects were partially offset by the impact of the IAS 29 restatement of Ps. 1,939 million,
and the lower volume of natural gasoline and LPG exports of Ps. 1,657 million.
Total volumes dispatched recorded an increase of 6%, or 18,929 short tons, compared to 2Q2020, mainly due to higher quantities of ethane and LPG in the domestic market, which were partially offset by a decrease in the exported quantities.
The breakdown of volumes dispatched by market and product and revenues by market is included below:
Other Services and Telecommunications
This business segment mainly includes services such as midstream and telecommunications, representing approximately 9% of our total revenues in 2Q2021 and 2Q2020.
Operating profit before depreciation increased by Ps. 132 million (or 15%) mainly as a result of the increase in revenues in 2Q2021, which was partially offset by an increase decrease in operating costs by Ps. 63 million.
The increase in revenues was mainly due to: (i) the nominal effect of the exchange rate on U.S. dollar-denominated sales of Ps. 289 million, (ii) more natural gas transportation and conditioning services at Vaca Muerta area amounting to Ps. 198 million, and (iii) more natural gas compression services of Ps. 107 million. These effects were partially offset by the impact of the restatement according to IAS 29 of Ps. 409 million, less steam generation services of Ps. 25 million, and operation and maintenance of Ps. 19 million.
Transportadora de Gas del Sur S.A. 7
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
2Q 2021 EARNINGS RELEASE
Financial position analysis
Net debt
As of June 30, 2021, our net debt amounted to Ps. 18,949 million compared to Ps. 29,201 million as of December 31, 2020 (in both cases, net of the repurchased notes). Our total net financial debt is denominated in US dollars for both dates (which is shown in pesos in the table below).
The table below shows a reconciliation of our net debt:
Liquidity and capital resources
The net variation in cash and cash equivalents for 2Q2021 and 2Q2020 was as follows:
Below is a reconciliation of the free cash flows for the 2Q2021 and 2Q2020:
Transportadora de Gas del Sur S.A. 8
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
2Q 2021 EARNINGS RELEASE
During 2Q2021, cash flow generated by the operating activities amounted to Ps. 3,529 million, Ps. 5,694 million below 2Q2020, mainly due to the increase in working capital, higher income tax payments and lower collections received from derivative financial instruments.
Cash flow (used in) / generated by investing activities amounted to Ps. 3,303 million in 2Q2021, compared to a cash flow of Ps. 2,226 million in 2Q2020, mainly due to the payment for the acquisition of financial assets not considered cash equivalents made during 2Q2021. In addition, payments for PPE acquisition decreased by Ps. 193 million.
Finally, cash flow used for financing activities decreased by Ps. 132 million. During 2Q2020, Ps. 456 million in treasury shares were repurchased (no repurchases were made in 2Q2021). Similarly, Ps. 324 million of notes were repurchased in 2Q2021.
2Q2021 earnings conference call
We invite you to participate in the conference call to discuss this 2Q2021 announcement on Thursday August 5, 2021 at 10:00 a.m. Eastern Time / 11:00 a.m. Buenos Aires time. To participate in the conference call, please dial +1-877-407-9210 from USA, and for international calls dial +1-201-689-8049, preferably 5 minutes before starting time. To view the webcast, go to www.tgs.com.ar.
This press release includes forward-looking statements within the meaning of Section 27 A of the Securities Act of 1933, as amended. Forward-looking statements are based on management’s current views and assumptions and involve known and unknown risks. Although the Company has made reasonable efforts to ensure that the information and assumptions on which these statements and projections are based are current, reasonable and complete, a variety of factors could cause actual results to differ materially from the projections, anticipated results or other expectations contained in this release. Neither the Company nor its management can guarantee that anticipated future results will be achieved. Investors should refer to the Company’s filings with the U.S. Securities and Exchange Commission for a description of important factors that may affect actual results.
Rounding: Certain figures included in this press release have been rounded for ease of presentation. Percentage figures included in this press release have not, in all cases, been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this press release may vary from those obtained by performing the same calculations using the figures in our Financial Statements. Certain numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them due to rounding.
Transportadora de Gas del Sur S.A. 9
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
2Q 2021 EARNINGS RELEASE
Transportadora de Gas del Sur S.A. 10
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
2Q 2021 EARNINGS RELEASE
Transportadora de Gas del Sur S.A. 11
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
2Q 2021 EARNINGS RELEASE
Transportadora de Gas del Sur S.A. 12
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
2Q 2021 EARNINGS RELEASE
Transportadora de Gas del Sur S.A. 13
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Transportadora de Gas del Sur S.A.
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By:
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/s/Alejandro M. Basso
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Name:
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Alejandro M. Basso
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Title:
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Vice President of Administration, Finance and Services
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By:
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/s/Hernán Diego Flores Gómez
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Name:
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Hernán Diego Flores Gómez
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Title:
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Legal Affairs Vice president
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Date: August 4, 2021