Pampa Energía remains confident, warns of difficult 2020

Bnamericas Published: Wednesday, May 13, 2020
Pampa Energía remains confident, warns of difficult 2020

Pampa Energía will not significantly reduce its investment plans amid the COVID-19 pandemic.

Due to the high efficiency of its power plants, dispatch has been less affected than overall demand in Argentina, which has fallen by about 15%. Meanwhile, Pampa’s generation has only dropped by 5% since the lockdown began in the country in March, as its plants have high dispatch priority.

According to CEO Gustavo Mariani, there is a risk that the government could unilaterally change the conditions of dispatch contracts or PPAs, and that wholesale market administrator Cammesa could halt or delay payments to generators as power distributors lose revenue and stop paying Cammesa in turn.

Also read: What to expect from Argentina power regulation in the next 4 years 

“Remain financially strong: that is our goal and our strategy towards that possible outcome,” Mariani told investors during the company’s Q1 results call. The executive added that many power sector companies were likely to face “significant trouble ahead,” but Pampa’s stronger financial conditions have made the company more resilient.

“I think they will try to avoid that [conversion of of PPAs to pesos], but the risk of it happening obviously increases if the macroeconomic conditions of Argentina weaken significantly,” added Mariani.

The company will spend around US$145mn in 2020, half of it to maintain its operations and the other half for expansion plans, which are focused on finishing the expansion at its Genelba generation complex. The company will leave all other expansion plans, both in upstream and electric power, on the backburner for the time being.

The company added that, in order to revive its natural gas investment plans, it would seek a better long-term outlook and an average price above US$3.5/MMBTU. While Q1 prices have been below US$3/MMBTU, auctions for delivery in May and June have seen average prices drop below US$2/MMBTU, leading most gas expansion activity in the country to be postponed.

Revenues were down 12% when compared with 1Q19 to US$721mn, while Ebitda grew 5% in the same period. While the company spent US$147mn in 1Q19, in the first quarter of 2020 it spent only US$63mn, in line with the company’s plans to significantly reduce investments until it has a more optimistic long-term outlook.

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