Good morning, ladies and gentlemen. Thank you for waiting. I'm Margarita Chun from Mayar, and we would like to welcome everyone to Pampa Energía's fourth quarter 2022 results video conference. We inform you that this event is being recorded. All participants will be in listen-only mode during the presentation. After the company's remarks, there will be a Q&A session. Questions can only be submitted in writing through Zoom.
Should any participant need assistance, please send us a chat message. Before proceeding, please read the disclaimer that is located on the second page of our presentation. Let me mention that forward-looking statements are based on Pampa Energía's management beliefs and assumptions and information currently available to the company. They involve risks, uncertainties, and assumptions because they are related to future events that may or may not occur.
Investors should understand that general economic and industry conditions and other operating factors could also affect the future results of Pampa Energía and could cause results to differ materially from those expressed in such forward-looking statements. Now I'll turn the video conference over to Lida Wang, Investor Relations and Sustainability Officer of Pampa Energía. Please go ahead.
Thank you, Maggie. Hello, everyone. Thank you, Maggie. Hello, everyone, and thank you for joining our conference call. I will try to make it short and skip some parts already explained in the earnings release so we have plenty of time for Q&A with our CEO, Mr. Gustavo Mariani, and our CFO, Mr. Nicolás Mindlin, who are both here.
This quarter marks the end of 2022, and it's always helpful to look back and review what's been going on with Pampa in the last five years since we acquired Petrobras Argentina. The challenges posed in this period did not prevent us from growing and delivering grand milestones. Our core businesses, gas and power, grew significantly in the last five years.
In 2022, we raised our peak gas production to more than 11 million cubic meters per day and currently working to ramp it up to 16 million in 2023, thanks to the Plan Gas last tender. More than doubling our 2017 watermark and proudly becoming the company that grew the most its gas output since the pandemic. Power generation did not stay quiet either.
We became the largest independent power producer by investing in every tender for B2B, whether efficient thermal or green energy, adding more than 1.3 gigawatts in full capacity to reach 5.1 gigawatts by 2022. In 2023, 323 megawatts more are coming online as we are inaugurating PEPE 4, and we commissioned two weeks ago, Barragán with YPF, more than 12 years after the CCGT project started. Our way of managing help us to gain efficiencies and be savvy over CapEx.
We invested in equity assets that increase our EBITDA and made it resilient. We made good use of our robust cash flow by enhancing our power portfolio, strengthening our liquidity, substantially reducing our leverage, and returning value to shareholders with share buybacks. 2022 was a great year in Pampa's history. We look forward to delivering outstanding results to become a leading efficient energy producer.
Now let's focus on the quarter's figures, in which gas made it to the headlines again, as expected. The adjusted EBITDA amounted to $183 million, 7% less year-on-year, mainly because of lower PPA income as some contracts mature in Loma de la Lata in late 2021 and Barragán in April last year, as well as Loma de la Lata's gas turbine number 5 outage, higher payable in dollar terms, and lack regulated tariffs affecting Transener and TGS.
However, the off-peak gas exports to Chile, the higher spot power and reformings of standing results offset these decreases. 83% of our EBITDA was dollar-linked. Quarter-on-quarter, the drop is explained by seasonality in gas and power demand and prices. As you see in the right below, the gas prices helped oil and gas to lead the consolidated adjusted EBITDA, which took 56% of our EBITDA.
CapEx in Q4 was 13% higher year-on-year, which is mainly because YPF is really now completing activity surges in off-peak season to achieve Plan Gas commitments. However, this variation was partially offset by the advanced progress in PEPE 4 wind farm, which implies lesser CapEx divestments.
Moving on to power generation, as seen on slide 5, we posted an adjusted EBITDA of $86 million in Q4, down 19% year-on-year and 4% quarter-on-quarter, mainly due to the end of some PPAs, the outages at Loma de la Lata number 5 unit, and higher-based expenses offset by better spot prices, higher dispatch, and lower maintenance costs. Q4 dispatch rose 11% year-on-year, while the national power grid dropped 1%.
This is mainly due to the last year's overhauls at Loma de la Lata and Genelba, more gas for Central Piedra Buena, outstanding water input in Pichi Picún Leufú, and capacity factor at wind farms, partially offset by Loma de la Lata's number 5 unit outage and less liquids and Bolivian gas. Availability is essential to collect take-or-pay capacity payment, especially to our PPAs, contributing most of the EBITDA.
In Q4, we reached an outstanding rate close to 97%, just above the 95.5% recorded last year. Again, this is way above the grid's recorded 69% availability rate. It would have been higher if it wasn't for Loma de la Lata's number 5 outage. Regarding our expansion at Ensenada Barragán, the closing to combined cycle was commissioned just two weeks ago, substantially improving the power plant's efficiency, and therefore, its load factor.
In addition, CAMMESA granted clearance to the steam turbine up to 260 MW, priced with a 10-year PPA, with an offtake on CAMMESA. With the existing two gas turbines, the total installed capacity climbs to 827 MW, becoming one of the country's most efficient and biggest thermal plants. Moving on to wind farm expansions, we acquired Arauco, a 100 MW wind farm located in the province of La Rioja in mid-December, building a 20-year RenovAr PPA.
The total price was $170 million and does not have leverage the asset. The transition was an excellent opportunity to keep boosting our wind portfolio and invest in resilient assets. Regarding PEPE 4, the project is now 86% advanced. We completed the cable installation, transformer station, and testing. All the wind turbine components are right now in the facilities, and we have commissioned already 36 megawatts.
However, due to the climate condition and among other factors, we estimate to complete the COD by the end of Q2 this year. Also, last month, we announced a new project, PEPE 6, which kick off already. We aim to add 300 megawatts, investing more than $500 million. The first phase will add 95 megawatts by the third quarter of 2024 with investment of almost $190 million. Keep in mind that PEPE expansions are sold all under B2B PPAs.
On slide eight, let me briefly comment on the E&P figures. We post an adjusted EBITDA of $72 million in the quarter, 57% higher year-on-year because of the Plan Gas deliveries, gas export prices, and higher oil demand and prices, offset by lesser gas export volume and increased costs related to the growing activity and payroll.
However, quarter-on-quarter, EBITDA is down 39%. This is primarily due to the seasonality. Our lifting costs likely grew yearly, but was down quarter-on-quarter due to seasonality. Efficiency-wise, the lifting cost per BOE performed in the opposite way, recording $7 per BOE in the quarter, 3% down compared to last year. In Q4, our total production averaged almost 62,000 barrels per day. Summing in crude oil represented 9% of our output.
Still, it reached 22% of the segment's revenue, mostly because of export prices linked to Brent and export volumes, which tripled compared to last year. Last December, we successfully extended the Plan Gas contracts until December 2028. Furthermore, regarding the tender tapping the first stage of the new gas pipeline to be online on July 23, Pampa got awarded 4.8 million out of the 11 million cubic meters per day at a similar price previous tenders until 2028.
This is an excellent news as it contributes significant organic growth and long-term visibility to our gas business. Therefore, by this winter, we will more than double the maximum record registered in 2020, producing almost 16 million cubic meters per day by investing $1.1 billion cumulative between 2020 and 2023.
Besides the upcoming new capacity in the main pipeline, our shale gas campaign will support a significant ramp-up in production for the first time in our history. In Q4, we drilled two wells and completed five wells to Vaca Muerta at Sierra Chata, confirming its great potential for shale development.
Most of the $490 million CapEx in E&P is destined to drill and complete 24 wells to Vaca Muerta in Mangrullo and Sierra Chata blocks. Still, currently, tight gas is our main primary production source. As we engage in shale gas campaign to increase our share, this year, we will connect two horizontal wells in Mangrullo and keep drilling in Río Neuquén, that it is not operated by us.
Our gas production in Q4 was 6% up year-on-year, but 11% down quarter-on-quarter due to seasonality, averaging 9.5 million cubic meters per day and outpacing Y levels that only grew 2%. 72% of the quarter's production came from El Mangrullo, where we commissioned the second gas treatment plant last November with a capacity of 4.8 million cubic meters per day, replacing temporary facilities and covering subsequent winter ramp-up.
Therefore, El Mangrullo can produce up to 14 million cubic meters per day. The average gas price of the quarter was $3.9 per million BTU, 24% up year-on-year due to export prices, but 20% down quarter-on-quarter because of seasonality. Regarding the sales breakdown, Q4 is fairly distributed, with retail in off-peak and lesser exports year-on-year, but still represents 13% of our output with higher prices.
Exports will remain under until winter, even winter, since we obtained permits that will last until June of this year. in 2022, thanks to the outstanding work of our technical team and the shale gas productivity at Sierra Chata Block, we recorded a 14% increase in our proven reserves, amounting to 179 million BOE. Although we held the production record in 2022, the replacement ratio was two times, and the average life was kept at eight years.
The additions reflect the excellent results of shale gas pilots to Vaca Muerta formation that we did in Sierra Chata and El Mangrullo, tripling shale reserves certified last year. The petrochemical business EBITDA grew by 68% year-on-year, posting $15 million in Q4, primarily contributed by domestic reforming and polystyrene sales, plus a lower cost of virgin naphtha, offset by reduced margin and demand of styrene and rubber.
In Q4, 30% of the total sales volume was exported. As you can see left below, after we reorganized the production strategy in 2019, we could smoothly navigate the volatile commodity prices, producing at maximum capacity, close to historical records. In spite of intensive GMP CapEx, in Q4, we recorded a free cash flow of $101 million.
This is driven by the outstanding operating performance of all the three businesses. Working capital reduced as seasonality let CAMMESA pay at a higher frequency, offset by debt service and an income tax early paid of $15 million. The increased debt considers the dollar-linked that we raised in the local market. In addition, in Q4, we acquired the Arauco Wind Farm, that we previously talked about it, and we have to make a first installment of $128 million. This is extraordinary.
In summary, net of everything, we generated $15 million of net cash flow this quarter, achieving $700 million cash by the end of the year. Moving on to slide 14, we show the consolidated figures of our financial position, including our affiliates at ownership. Let's focus on the restricted group that reflects the bond parameter.
We posted a gross debt of $1.6 billion, similar to last quarter. 84% is dollar-denominated, bearing an average interest rate of 8.4%, taking advantage of the domestic liquidity, diversifying our leverage resources, we issue a five-year zero coupon dollar-linked for an additional $50 million, plus $100 million peso bond at Badlar + 2%. The net leverage and net debt kept going down, recording $913 million and 1.2 times multiple. The average life also decreased to 3.6 years.
Pampa does not face relevant debt maturities until 2027. This is thanks to the successful bond exchange made in August of last year. This concludes the presentation. Now, I will turn the word to Margarita, who will poll for questions in the chat. Thank you so much.
Thank you. The floor is now open for questions. If you have a question, please send us through Zoom chat. We will read and answer them in the order received. Also, please make sure your name and company are correctly displayed to introduce you to the audience. Should any participant need assistance, send us a chat message or raise your hand.
Please hold while we poll for questions. Thank you for waiting. The first question comes from Frank McGann from Bank of America. He has six questions. The first one is, how do you see gas production quarter by quarter in 2023 with the start off of the new pipeline?
Hi, Frank. Thank you for your question. This year, we've been producing during the summer less than we expected, basically, because of lack of infrastructure to evacuate the gas from the Neuquén Basin. Although we were expecting to be producing above 10 million cubic meters of natural gas per day, we are currently being able to sell less than 9.5. We think this will continue first quarter and second quarter of this year because I hear myself. Can you mute?
Yes.
Okay. This situation of lack of capacity from the Neuquén Basin will continue the remaining of the first quarter and the second quarter as well. Once the new pipeline is online by mid-winter, we expect to be able to jump our production to 16 million cubic meters of natural gas per day. That is our expected output during the third quarter. In the fourth quarter, during our spring, and with the new pipeline working, we expect our sales to be in the range of 12 million to 13 million cubic meters per day. A significant increase from this current summer. Okay.
Thank you, Gustavo. The second question from Frank McGann is, what is the latest you are hearing about the startup date for the Néstor Kirchner pipeline?
It's funny that we are talking about a pipeline of this size, such a huge infrastructure, such an infrastructure project, and then we are talking about days. Not weeks, not months, but days. To answer the question, the latest that we are hearing is that everybody's working to be on time on the schedule, so to have the pipeline ready by the end of June.
That is so far. I hope there is nothing unexpected that change that. Up to this moment, what we're hearing is that the pipeline might be on time. Something that I would like to take the opportunity of this question to highlight some numbers that I've been looking at this weekend, and they surprised me. As I said at the beginning, the capacity to produce gas from the Neuquén Basin is capped by infrastructure.
That is why we are selling less than we expected, while CAMMESA has been burning liquid fuels, and we are burning gas importing from Bolivia all through the summer. This weekend, I checked how much natural gas has been, how much liquids, that means fuel oil, gas oil, coal, and imported gas from Bolivia. In total, CAMMESA, I'm counting October, November, December, and January.
Those are real months. This situation will continue February, March, April, and then in May, we'll start the winter. These seven months, so far, CAMMESA has burned liquids in an equivalent to almost 11.6 million of cubic meters of natural gas per day. At what price? Liquids are much more expensive than local natural gas. CAMMESA has been burning these liquids at an average of $21.5 per million of BTU.
The summer price for natural gas is $3, and CAMMESA, it's burning fuels. I'm doing the average of gas from Bolivia, fuel oil, gas oil, and coal. That makes an average of $21.5 per million of BTU. What does this mean? 11.5 million cubic meters of natural gas per day at $21 per million of BTU for seven months, that amounts to $1.9 billion.
That is how much the country is spending to import all these fuels. And why we are doing this, because we lack the infrastructure capacity to have our own production coming from the Neuquén Basin. Once the new pipeline is ready, the country will be able to replace all this consumption of liquids with local natural gas. Thanks to the Plan Gas, Argentina is going to be able to buy it from producers at $3 per million of cubic meters per day.
Sorry. This quantity of gas at this price for seven months, it's $250 million. Instead of $1.9 billion, 250, with one other important difference. The $1.9 billion is currency, real dollars that the country is spending, while the 250 are Argentine dollars. So really it's paid in pesos at the official exchange rate. That is the huge gap, and that is the huge saving that the new pipeline will bring.
That means the total cost of the pipeline, I think, was around $1.8 billion. What I'm trying to summarize is that in less than one summer, the cost of the infrastructure of the new pipeline gets repaid for the country. That's how important this new pipeline means for the country, not only for us as producers, but also for the macro numbers of Argentina.
Thank you, Gustavo. The third question of Frank is about what is the upside to output in 2024, next year.
Well, so far for 2024, we don't have anything new. A new jump in production. Maybe if the second phase of the Gasoducto Néstor Kirchner pipeline gets auctioned and the construction is ongoing, then there's going to be a new round of Plan Gas in order to fulfill that second tranche. Let's hope that happens this year. Obviously, if that happens, we will participate as we have always been participating in the past rounds, and maybe we will be able to increase further our production.
But even though if the construction of the second tranche is not undertaken by the winter of 2024, our output will grow in 2024 despite that, just because the first tranche will be online. Not during the winter, because during the winter, we will be selling the near 16 million cubic meters of natural gas per day.
But during the summer months, during our spring, summer, and early fall, CAMMESA will be able to replace all its consumption liquids with local natural gas. And so we, and together with the rest of the industry, we'll be able to replace those liquids. If there is no infrastructure in wintertime, our production will be similar to 2023, but in the summer, our sales will be higher than the first and second quarter of 2023.
Thank you, Gustavo. The fourth question of Frank is about how are you seeing cost pressures with high inflation and a slow devaluation of the Argentine peso?
We have been seeing a peso appreciation this year, so we do see dollar inflation in our costs. There is not much that we can do against this movement of the macro environment. So we are seeing it, but there is not much that we can do on operations to prevent that from happening.
Yeah. Mostly productivity-wise. We can in terms of productivity efficiency. But unfortunately-
Let's-
But in order to retain talent, the payroll has to go. Let us consider that since 2018 to 2021, 2020, there has been a big decrease in dollars in terms of the salary. So it is logical to have a ramp-up.
Thank you, Gus and Lida. The fifth question of Frank is about TGS LNG project. If the TGS LNG project goes forward, what would be the upside for volumes, both over the medium and long term? What will this mean in terms of CapEx, both for upstream developments and possible participation with an equity stake in a project?
Frank, TGS is still working on the engineering of this project. Basically, it's too early to tell. It's too soon to speculate about CapEx plan, both for TGS and for Pampa regarding this project. Hopefully, by mid of this year, we will have more clarity. I hope that at some point of this year, we will be in a position to decide whether to move forward or not. Once we do so, I'd be happy to share these figures with you, but currently, it's too early to tell. It would be too speculative.
Thank you, Gus. The last question of Frank is about, with significant opportunities in coming years, will you be able to finance this with your existing cash flow? Is equity financing an option?
Okay. Thank you for the question, Frank. I'll go back. I think this was Lida's first slide in the presentation, and I want to go back here because I think this shows the tremendous free cash flow generation of our portfolio capacity of our portfolio of assets. As you can see here in the first two charts, in the past 5 years, we have increased our capacity to produce natural gas by 120%. That obviously meant a huge amount of CapEx. Also, in power generation, we grew our capacity by 44%, from 3.7 gigawatts to 5.4. Again, a huge amount of CapEx in order to do so. Then I go to the bottom of the slide.
While we did so, while we grew our production capacity by so much, we were also being able to do so while reducing our net indebtedness, as you can see in the middle of the bottom. We have reduced our net indebtedness by 25%. We have repurchased our own bonds. We have repurchased $330 million of nominal bonds. At the bottom right, in the past five years, we have reduced the number of ADRs outstanding from 83 million to 55 million.
We have reduced our stock outstanding by 34%. We have spent in share repurchases more than $600 million. So between share repurchases and debt repurchases, we have spent around $1 billion. This slide shows the cash flow generation capabilities of our portfolio. We have been increasing our production capacity tremendously, and we have also been able to repurchase our own stock and debt.
Going forward, going back to your question, I think, yes, there are a lot of opportunities that we can take advantage of, and our portfolio generates the needed cash flow to do so. But if we may decide to finance ourself, increasing indebtedness, as we will probably be doing this year, taking advantage of the cheap financing available in the local market, in the peso market, we might do so.
Regarding equity financing, if it is an option, yes, it's always an option, but at today's share price of our stock, we are more tended to repurchase our own stock to issue new stock. It's always a possibility, certainly not at these prices.
Thank you, Gus. Our next question comes from Bruno Montanari, from Morgan Stanley. He has three questions. The first one is: the balance of risk and opportunities in Argentina seems to be migrating more towards the oil side of the industry recently. Would Pampa be interested in being more active on the oil investments to increase production now that the gas subsite seems to be well mapped out? If yes, in which blocks could the company intensify developments?
Hi, Bruno, and thank you for your question. We are studying several alternatives. We do want to increase and to balance a little bit more our production towards oil. As you know, today we are probably 90% natural gas and 10% oil, so we want to have a more balanced portfolio. In order to do so, we are studying several alternatives, and discussing with our partners.
One possibility is increasing exploration and production in Rincón de Aranda, which is one block that we own, but we need to reach an agreement with our partner. There is a couple of other alternatives that we are studying, but nothing concrete that I can tell you at this moment.
Thank you, Gus. The second question of Bruno is: although an increase in lifting cost was expected, the company seems to have been able to offset some of the inflation impact on E&P cost. What are the trends for lifting costs going forward?
Well, as you well mentioned, the inflation in dollar terms put pressure here as well. But basically, I think what explains is the fact that we have been building new infrastructure, and we do still have spare capacity in that infrastructure that we have been building over the past few months. We are not still having a high utilization rate of this new infrastructure. I hope that as our production continues to grow, lifting costs will continue going down.
Thank you, Gus. The last question of Bruno is: can you comment on Pampa's strategy to deal with a potential material devaluation of the Argentine peso happening in a very short time frame? What will be the impact in terms of margin of E&P and power generation, and how would the company protect its cash balance and cash flows?
Firstly, most of our incomes are dollar-linked. I think the biggest impact on our cash flow will depend on the amounts that we are owed by CAMMESA and also regarding Plan Gas, but it should not be a big impact. Regarding our cash balance, we are mostly invested in dollar-linked assets or is in US dollars. I think we are already protected from that scenario.
Thank you. Thank you, Nico. The next question is from Matías Castagnino from BCP Securities. His question is regarding the remaining amount of the 2023 bond.
Yes. This maturity is a different new maturity than last year's. The current regulation applies. That means that we have access to official FX for 40%, and we have to refinance the other 60%. We can do this as early as 45 days before the maturity. This is not a big maturity, so it's very manageable for us. We are analyzing different alternatives that will depend, among other things, on market conditions at that time.
Thank you, Nico. Our next question comes from Rafael Nagano from Credit Suisse. Is there any additional value being discussed on the Petroecuador case? If so, could you share with us how much? Do you see any risk of reverting pay of the $37 million provision due to the injunction from Petroecuador, given you only received part of this amount so far?
No. The full amount of this award, including interest, is the $37 million. We already collected almost $21 million, and there are still $15 million pending. The protection action presented by Petroecuador has been rejected, so I see very little chance of that being reverted. Now we are following the necessary steps to collect the other $15 million pending.
Thank you, Nico. Our next question comes from Alejandra Aranda from Itaú, Banco Itaú. Her first question is already answered. It's about the plans of volumes in the upstream business in the first and second half of this year, and what to expect in terms of cost for this segment, the E&P segment.
Sorry. Alejandra, no? I think it's similar to the first question. In terms of volume, we are expecting first and second quarter, while there is no new infrastructure capacity to extract the gas from the Neuquén Basin to our volumes to remain below 10 million cubic meters of natural gas per day. Once a new pipeline is ready during the winter, our production should jump to around 16 million cubic meters of natural gas per day. By the end of the year, during our spring, going back probably to 13, hopefully 14, between 12 and 14 million cubic meters of natural gas per day. That's what we are expecting in terms of sales this year.
Thank you, Gus. The second question of Alejandra is regarding non-conventional renewable energy. How should we think about non-conventional renewable energy investments or acquisitions going forward? Do you have a target in terms of this generation source, that you would like to reach in the next few years?
No, we don't have a target, but we would like to grow as much as possible with profitable projects. We have shown that by last year, we acquired from our partner 50% of their stake. Their stake that was 50% of 100 megawatt wind farm, that was Parque Eólico Mario Cebreiro. We also are about to complete. Last year, we have been investing in PEPE 4, as Maggie is showing here, an 81-megawatt expansion.
Already 36 megawatts are online. So that adds to the 50. So we increased last year, 130 megawatts, our capacity. We also bought Parque Arauco at the end of the year, over 100 megawatts. So we increased our renewable capacity by 230 megawatts last year. We have launched a project that is comprised of a total of 300 megawatts. The first phase, we are doing 100.
That is already underway, and we hope that this new park will be ready by second quarter of 2024. We do not have a goal, but we would like to complete this 300-megawatt expansion within the next couple of years.
Thank you, Gus. The last question of Alejandra is regarding the LNG project. Could you comment on where TGS is regarding project study, and what do you need in terms of legislation and incentives to move forward with this project?
It is a very good question, Alejandra. TGS is working on the engineering of this project, which is quite complex and takes longer than we had originally expected. We are working with several international companies to help us on the engineering of the project. Regarding the law, yes, this, as has been mentioned in the media, this is a project where Argentina is going to compete in a market that is quite competitive.
Obviously, the spot market of LNG is not the same as long-term contracts. Long-term contracts are at a much cheaper price than would have been seen on the spot LNG market. We need to be able to build a project that is very competitive internationally-wise.
The project that we are envisioning is a rather small project, vis-à-vis the huge projects that you see in other parts of the world, so there is a problem of scales that makes it less competitive. It is important, both the fiscal incentives that we hope this new law will provide, as well as the certainty regarding the export permits that, given our history, is important going forward.
I think it is not going to be that relevant because, thanks to Vaca Muerta, Argentina knows that we have enough reserves for several centuries going forward. So it makes no sense, as it has happened in the past, to restrict export of natural gas. What is more important, I think, about the law is the need of fiscal incentives to make it competitive with other international LNG projects.
Thank you, Gus. Our next question comes from Christian Fera and Ezequiel Fernández from Balanz. They have three questions. The first one is: Can you explain a bit how are the process and new rules for gas exports into Chile? What type of authorizations you need to get? How much in advance you have to apply for these? How is determined to who has priority of gas exports among all Argentine E&Ps?
Thank you for the question, Christian and Ezequiel. Gas exports are quantified. You say are qualified.
Quotas. Are quotas.
Yeah, there are quotas based on a formula that relates to the volume that each producer has been able to win in the several rounds of the Plan Gas. So your success in the Plan Gas is what determines the export quotas. There is also a floor price at which you cannot export gas to Chile below that price. I am not sure, but I think currently it is around $7.50 or $8 per million BTU.
What else? The policy of Argentina is that, first Local gas is to consume in Argentina. What has been happening this summer and will also happen during the beginning of the winter, until the new pipeline is ready, and probably even after the new pipeline is ready, is that the production capacity of the Neuquén Basin exceeds the evacuation capacity of the Neuquén Basin towards Argentina.
That is why we will have capacity to add gas to Chile, not only as we are doing now during the summer and during the winter, while the new Néstor Kirchner pipeline is ready, but also, it may happen that even with the new pipeline, that will bring an increase in evacuation capacity from the Neuquén Basins of 11 million cubic meters of natural gas per day. It could be the case that the increase in production in the Neuquén Basin is even higher than that, so we might be able, as a country, to continue exporting gas to Chile throughout the winter. I think that answers the question.
Thank you, Gus. The second question of Balanz was regarding the LNG project. That was already answered. The third and last question is about the cash flow generation. What are you thinking about the cash uses?
Well, cash usage for this year, I think Lida has already talked about it, but we have this year one of our probably most aggressive CapEx plan in the past few years. We have a CapEx plan for power generation of around $250 million. That is comprised of maintenance CapEx and the buildup of our six wind farm, PEPE 6. We think we will be spending around $150 million, so around that figure this year.
That is how the $250 million for power generation is comprised. For E&P, we will be certainly doing the most aggressive CapEx plan over the past few years in order to be able to increase our production from 11 million cubic meters of natural gas per day to 16 million cubic meters of natural gas per day. That is something we are already working on and we need to achieve.
I think we will be able to achieve that figure once the new pipeline is online by early this winter. And how we are going to finance that through our own cash flow generation and as mentioned before, taking advantage of our financing capabilities in the local peso market.
Thank you, Gus. Our next question comes from Alejandra Andrade from JP Morgan. The first question regarding the 2023 bond was already answered. The second question is CapEx expectation given the increase in production. Is already
Yes
sort of answered. Thank you, Alejandra, for the question. The next one is from Ludovic Casse-Roche from Autonomy. How much dollars will add Barragán and PEPE 4's PPA in terms of EBITDA on a full-year basis?
Hi, Ludovic. Ensenada Barragán's PPA, annually will add $100 million more or less. And the PEPE 4, it's 81 megawatts of store capacity, will add around $22 million of EBITDA per year.
Just the $100 million that Barragán will add, that's full 100% of Barragán and
Full company.
full company. We own 50% of that.
Correct.
Thank you, Lida and Gus. The next question comes from Juan José Muñoz from BTG Pactual. Do you foresee any changes in Plan Gas once the new administration is elected?
Hi, Juan Jose. No, certainly not. I think every time there's been a change in administration, the market and all, there always has been fears of changing contracts. Fortunately, what we have been seeing in the last couple of changes in administration is that contract has been respected, both on electricity PPAs and on the Plan Gas.
I think we are seeing the benefits of that. I think in Plan Gas, the country has seen the benefit of that, of how competitive the auction has been, how aggressive producers were in terms of pricing. I think the government officials and politicians are understanding that there is a reward once there is trust that contracts will be respected.
I think it's important to highlight that at the beginning of this administration, the fear by the end of past administration, what was going to happen when Argentina files for default on the sovereign bonds? What is going to happen with the PPAs? Unfortunately, what happened was that despite the fact that Argentina defaulted on its sovereign debt, they have respected all this contract, I think that is a very good antecedent. How do you say antecedent?
Precedent.
Precedent, yeah.
Thank you, Gus. Our next question comes from Soledad Candelaria from Banco de Credito e Securities. I wanted to know if the administration of Barragán will be changed, the operation, maybe she means, to YPF from June 2023.
There is agreement that every four years we swap the administration of the plant. We have been talking about it. It's really not a big issue. We both know how to do so. We have an excellent relationship, we are analyzing how to do the engine administration, basically because it's not cost-effective to move all the systems from one company to the other.
We have to figure out what is the best way to do it. We will certainly reach the best solution available. That is my answer. The answer is yes, administration goes to YPF the next four years. In the same way that it has been the past four years, despite who has the administration, it's a share and teamwork. We are convinced it's going to be the same way the next four years.
Thank you, Gus. Our next question comes from Daniel Guardiola from BTG. Would like to know your thoughts of the possibility of distributing dividends.
Hi. Frankly, honestly, that's not something that we have been discussing lately, not this year, because of two reasons. One, the capital controls that make it expensive. We could have, because of the Decreto 277, which allow us an excess access to the official exchange rate, thanks to our increase in production. So we could have access to the dollars at the official exchange rate in order to pay dividends this year.
But I think we are going to use that extra access in order to do the liability management of the 2023s. Also this year, we have, as I mentioned earlier, a huge CapEx plan. So for the first time in the past few years, we are going to be free cash flow negative, and we are going to finance that in the local peso market.
Especially this year, because of all these reasons, it's not a good moment to think about dividends. As we always say, we have a huge or very profitable investment opportunities. We have not been asked by our shareholders to pay dividends. We are comfortable with continue with this policy.
Thank you, Gus. Our last question comes from Florencia Mashorda: which is the impact of recent adjustment to legacy remuneration in power generation?
The recent adjustment, I think you're referring to the one that dollarized the portion of the remuneration. Going forward, it's not going to be 100% peso denominated, but I think something like 30% dollar denominated. It's a small percentage. I don't recall whether it's 30%, 25% or
It's around 25%.
Yeah. A portion of the current remuneration is going to be defined in dollars. Taking into account what our projections of inflation and devaluation of the official exchange rate for the rest of the year, the impact is of around $50 million from what we have projected in our budget at the end of last year. It's positive. It's not huge. It's rather marginal.
Thank you, Gus. This concludes the question and answer section, so we'll turn to Lida for final remarks.
Thank you so much for joining our conference call. Gus, would you like to add something? Nico, would you like to add something that we didn't address? I think it was a great call. If you have any questions or anything that's left that's not been covered here, please contact us, and we will be happy to assist you. Have a nice day.