TGS

Business Context and Reporting Period

Company: Transportadora de Gas del Sur S.A. (TGS)

Reporting Period: Second Quarter ended June 30, 2025 (2Q2025)

Business Overview: TGS is Argentina's leading natural gas transporter, moving approximately 60% of the country's consumption via 5,700 miles of pipelines. The company also operates as a major natural gas processor and midstream provider in the Vaca Muerta formation. Financial results are presented in millions of constant Argentine pesos (Ps.) under IFRS.

Key Financial Metrics

Note: 2Q2024 Operating Profit calculated by adding the reported decrease of Ps. 54,360 million to the 2Q2025 figure.

Material Changes vs. Prior Period

• Revenue Decline: Total revenues decreased by Ps. 21,650 million (5.9%) year-over-year.
  • Liquids Segment: Revenues dropped Ps. 25,216 million due to lower volumes (15% decrease) and IAS 29 restatement effects following the Cerri Complex operational interruption.
  • Transportation Segment: Revenues fell Ps. 12,982 million, primarily due to IAS 29 restatement impacts, partially offset by tariff increases.
  • Midstream Segment: Revenues increased by Ps. 16,548 million, driven by higher Vaca Muerta services and exchange rate effects.
• Profitability Pressure: Operating profit declined by Ps. 54,360 million. Key drivers included:
  • Higher net costs of sales and expenses (Ps. 17,445 million increase), driven by depreciation (Ps. 8,941 million), labor costs (Ps. 6,302 million), and an impairment of financial assets (Ps. 8,383 million).
  • Other operating results recorded a loss of Ps. 17,960 million, largely due to Ps. 18,636 million in losses from the March 2025 climate event at the Cerri Complex.
• Financial Results: Negative variation of Ps. 76,660 million, attributed to lower financial asset results and higher negative exchange rate differences.

Outlook, Management Commentary, and Risks

• Operational Recovery: Full operations at the Cerri Complex were restored in early May 2025 following the March 7, 2025, flooding event. Production levels returned to optimal status by May 8.
• Strategic Expansion: TGS was the sole bidder for the Perito Moreno Gas Pipeline (GPM) expansion tender launched by ENARSA. The award is expected on October 13, 2025, with an 18-month construction timeline to add 14 MMm³/d capacity.
• Regulatory Changes:
  • Tariff Adjustment: A new monthly tariff update mechanism (Resolution No. 241/2025) replaced the semiannual scheme, based on a composite of CPI and WPI.
  • License Extension: The company received a 20-year license extension effective December 28, 2027.
• Dividends: A cash dividend of Ps. 202,704 million (Ps. 269.28 per share) was approved and paid in the quarter.
• Risks: Forward-looking statements highlight risks related to inflation, foreign exchange rates, regulatory changes, and the potential impact of market price caps on asset values.

Key Facts for Investor Verification

• Cash Position: Verify the shift from net debt of Ps. 249,669 million (Dec 2024) to a net cash position of Ps. 2,303 million (June 2025) and the sustainability of this liquidity given the large dividend payout.
• Climate Event Impact: Assess the full financial impact of the March 2025 Cerri Complex flooding, including the Ps. 18,636 million loss recognized and the timeline for full volume recovery in the Liquids segment.
• Regulatory Tariff Mechanism: Monitor the implementation of the new monthly tariff adjustment mechanism and its effect on future revenue stability in the Transportation segment.
• GPM Tender Outcome: Confirm the official award of the Perito Moreno Gas Pipeline expansion contract in October 2025 and the associated capital expenditure requirements.
• Impairment Details: Review the specifics of the Ps. 8,383 million impairment of financial assets related to a single customer in the Natural Gas Transportation segment.