Gas rate increase a 'game changer' for Argentina's TGS

Tuesday, April 5, 2016

A measure by the Argentine government allowing natural gas transporters to raise rates will translate into an average tariff hike of 200% in peso terms for pipeline operator TGS.

That's according to a Raymond James research note that called the measure a "game changer" for TGS, and for the transportation segment as a whole.

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The increase, along with an integral tariff revision expected from the government next year, "should allow the transportation segment to start being profitable again after several years of being stuck at breakeven point," the note said.

Argentina's second largest gas transporter, TGN, said Monday that it had posted operating losses for five straight years due to price controls under former Argentine presidents Néstor Kirchner and his wife Cristina Fernández.

The new government of pro-business President Mauricio Macri has implemented rate increases throughout the natural gas supply chain in recent days, as part of an effort to shrink the fiscal deficit and stimulate production from gas-rich basins such as Neuquén, and Austral.