Mar 11, 2022
Guido Slavutzky
Good morning, ladies and gentlemen, and thank you for waiting. I'm Guido Slavutzky from IR and we would like to welcome everyone to Pampa Energia's Fourth Quarter 2021 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 remarks, there will be a Q&A session. [Operator Instructions] Before proceeding, let me read the disclaimer that is recorded on the second page of our presentation.
Let me mention that forward-looking statements are based on Pampa Energia'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 Energia and could cause results to differ materially from those expressed in such forward-looking statements. Now I'll turn the video conference over to Margarita Chun from IR.
Please go ahead.
Margarita Chun
Thank you, Guido. Hello, everyone, and thank you for joining our conference call.
We are pleased to share the latest events, as well as the 2021 and fourth quarter results. Our CEO, Mr.
Gustavo Mariani and CFO, Mr. Nicolas Mindlin are both here and joining us for Q&A.
Let's start with the latest events. In E&P, we are very proud of what we have been able to achieve in 2021 and very enthusiastic with the prospect for this year.
Plan Gas provided the long-term incentives and visibility needed in this industry and we reacted accordingly. In December 2021, we increased our natural gas production by 38% year-on-year.
This is more than double the nationwide rise of 16% in production. And we are maintaining our production above 9 million cubic meters per day, despite the off-peak season because we are excluding almost 3 million cubic meters per day to Chile on a firm basis until April.
And also we are responding to the demand hike in the local industrial and spot markets. Therefore, despite the commitment for 2022 -- despite the commitment for 2022 is 9.3 million cubic meters per day, we will be achieving on average almost 10 million cubic meters per day for 2022.
During 2021, Pampa was the largest natural gas exporter in the country, with a market share of 35% in gas on this pipeline that connects Argentina to Chile. Our team is working at full speed for the upcoming winter and we will be adding 2 million cubic meters per day more awarded in the last round of Plan Gas.
The total 11 cubic meters per day of winter production is the minimum volume we are committed to and this is 56% more than the 2020's winter. On the other hand, a month ago, the government announced the long-waited project to build a new pipeline connecting Neuquina basin to the provinces on Buenos Aires and Santa Fe in order to sort out the current transportation bottleneck.
Our affiliate TGS is uniquely positioned to become the operator of the first tranche of the new pipeline, given its know-how, expertise and infrastructure in the area. The government has already launched the auction to secure the provision of the pipes and is eager to have the first tranche operational before 2023 winter.
As you can see on the chart, this pipeline's initial transportation capacity will add roughly 10 million cubic meters per day by winter 2023, but once fully online, the total increase will be roughly 40 million cubic meters per day by 2024 winter. As this project progresses, the government should be announcing the four round of Plan Gas in order to secure the gas needed to fill up the new pipeline and reduce imports.
The new auction for gas should be launched sooner rather than later as producers will not only get ready to drill and complete new wells, but also build a necessary surface infrastructure to treat and transport the new production to the gathering network. The construction of these facilities will require as much time as the construction for the pipeline itself.
The fulfillment of this important project is crucial for the country as it will significantly impact its external account figures, but it is definitely a game changer for Pampa, as it dramatically revalues its natural gas reserves in the Neuquina Basin and opens the possibility for doubling our production levels in the coming years. Now let's briefly review the annual figures.
2021 was a great year, growing the investment in our core businesses despite the COVID restrictions and the macroeconomic context. The adjusted EBITDA amounted to $905 million in 2021, 30% more than 2020.
As we show on the right below, electricity takes 53% of the consolidated adjusted EBITDA, while oil and gas takes 47%, driven by gas and TGS.As you can see on Slide 5, in 2021, revenues increased by 38% to $2 billion, mainly driven by natural gas volume and prices improvement and the impact of the full-year PPA of the new combined cycle at Genelba, which was commissioned in mid-2020. All of them were partially offset by the PPA maturity at Loma diluted power spot prices and tariff freeze at our affiliates, TGS and Transener since mid-2019.
Keep in mind that all these figures exclude and/or a discontinued operation, roughly 85% of our sales were dollar-linked. In 2021, our CapEx increased significantly compared to 2020, mainly driven by the increased activity to achieve the production growth of natural gas and ongoing expansion at Barragan and PEPE III.
Now let's move on to the quarter figures. The revenues increased by 46% year-on-year to $557 million, mainly driven by commodities price hike, Plan Gas, legacy energy additional remuneration and Energia Plus better volume and price.
All of them were partially offset by PPA maturities at Loma and Piquirenda, as well as tariff freeze in utility businesses. Roughly 85% of our sales were dollar led.
The adjusted EBITDA amounted to $199 million, 8% up year-on-year, but 24% down quarter-on-quarter due to seasonality of natural gas prices and Lomas PPA maturity, offset by spot extra energy remuneration and 53% of the quarter's consolidated adjusted EBITDA came from electricity. CapEx in Q4 was more than double last year's figure and 55% more quarter-on-quarter, mainly due to increased activity to comply with Plan Gas commitments and power expansion at Barragan and PEPE III.
Move on, give me a second please. Moving on to power generation, let me mute the participants.
Give me one second please. Moving on to power generation.
As seen on Slide 7, we posted an adjusted EBITDA of $105 million in Q4, 13% down year-on-year and 16% down quarter-on-quarter, mainly due to one-off Loma's PPA maturity, offset by the additional spot remuneration and higher thermal B2B margins. Compared to Q3, the seasonality on the legacy remuneration also affected lower adjusted EBITDA.
Spot Energy is 59% of our capacity, but only represented 21% of our power generation EBITDA. The additional remuneration ended last month and we are waiting for the update for this year.
Keep in mind that power demand is going up again, breaking its record once more this January with more than 28 gigawatts. So if these essential units continue being underpaid, it will be challenging to maintain them properly.
Moving on to Pampa's operating figures. Power generation in Q4 was 6% up year-on-year, surpassing us more nationwide generation growth of only 1%.
We recorded higher thermal dispatch at almost all our units, responding to the growing demand, except for CCGT and Loma and the new CCGT at Genelba due to their maintenance and also the lower dispatch with alternative fuels because the grid exported less electricity. It was also offset by lower renewable generation due to lower water input and wind sources.
The power generation business model relies on capacity payment, like a take or pay. So availability is what matters most.
In Q4, our availability continued high at 95.5%, similar year-on-year and quarter-on-quarter. Tampa's availability was once again significantly above the system average of 79%.
Regarding our thermal expansion, the closing to CCGT at Ensenada Barragan is roughly 75% advanced. We continue working on all fronts water intake structure, its treatment plan and cooling tower.
We are also commissioning the boilers and the control system. Around 1,500 people are working daily on this project.
Despite all the efforts, the complexity and the impact of COVID have postponed the expected COD to the third quarter of 2022. In renewable expansion, we keep strengthening our position in the renewable B2B market by expanding our wind farm PEPE III.
We are adding 81 megawatt by mid-2023 and the investment is close to $130 million. This is the fourth wind project for Pampa and once it is online, our total wind capacity will amount to 287 megawatt.
In order to finance part of this project, in January, we issued our first green bond in the local market denominated in pesos, but for the equivalent of roughly $30 million due in 18 months. We are advancing with the civil works for the path, transform and foundations, as well as working on the purchase orders and other permits.
We will assemble the anchor cages by mid-2022 and achieve COD in two stages, the first 50 megawatt by February 2023 and the remaining by May 2023.Moving on to E&P. We posted an adjusted EBITDA of $46 million in Q4, which is 2.5x last year's figure, driven by a 32% growth in volume sold, recovery of industrial demand and export to Chile and also driven by a 47% increase in price.
Quarter-on-quarter, it decreased by 56%, mainly due to the seasonal price of Plan Gas. Our total lifting cost increased by 71% year-on-year and 32% quarter-on-quarter, explained by the increased activity to keep a high level of production of gas to export more to Chile and prepare for the 2022 winter commitment.
The significant and rapid increase in production require the use of temporary facilities, increasing the lifting cost per unit to $7.8 per boe, roughly 30% more than last year and Q3.Our total production averaged more than 58,000 barrel of oil equivalent per day being 91% gas. On the oil side, which represented 22% of the segment's revenue in the quarter, volume sold was similar year-on-year, being 4,700 barrels per day, mainly explained by local demand, offset by lower exports.
Quarter-on-quarter, it was 21% lower due to lower trading and stocks recorded in Q4 '21 exported in January 2022.Oil price was 42% up compared to last year, but remained similar quarter-on-quarter. Regarding gas, as shown on Slide 11, our volumes sold averaged 9 million cubic meters per day in the quarter, 32% up year-on-year and similar quarter-on-quarter.
Our production performance was again led by El Mangrullo, achieving another record high in December and representing 70% of the quarter's production of gas. This block is wholly owned and operated by us with outstanding productivity, boosted by its increased treatment capacity that we will talk about later.
It was also followed by regional gas growth, which almost doubled year-on-year, thanks to the activities of drilling and completion of wells. Our average gas price of the quarter was $3.1 per million Btu, 47% up year-on-year, but 30% down quarter-on-quarter due to seasonal price.
Export prices were high, while local prices out of the GSA were also similar to Plan Gas pricing levels. As you can see right below 2021 sales are more diversified, similar to the country's breakdown.
Gas retailers are also part of the Plan Gas and have the priority during winter, increasing their share in to 40%. Also we are growing our B2B share and taking opportunities in the Chilean market.
Regarding our operations, in 2021, we completed the shale well at Sierra Chata, targeting the VacaMuerta formation. It reached the maximum production rate of almost 800,000 cubic meters per day with 36 fracking stages, becoming one of the most productive gas wells in VacaMuerta.
Also as mentioned in the previous call, we keep expanding the gas treatment plant at El Mangrullo. By 2022 winter, it will grow from 6.4 million to almost 9 million cubic meters per day of capacity.
And since the third quarter of 2022, it will be above 13.5 million cubic meters per day. So we are more than doubling its capacity compared to the end of 2021.In 2021 thanks to the outstanding work of our technical team and the productivity at El Mangrullo, we recorded a 1.8% positive reserve replacement ratio, showing an average life of 8.4 years.
The proven reserves reached 157 million boe, 11% higher than 2020 and 90% -- 92% gas, mainly explained by the better production performance and well recovery factor at El Mangrullo, followed by Rio Neuquen and Sierra Chata. We also succeeded in certifying shale reserves from the VacaMuerta formation, 40% more than 2020's volume.
Moving on to the Petrochemicals business. We posted an adjusted EBITDA of $9 million in Q4, similar year-on-year.
The higher raw material cost impact was offset by the significant rise in commodity prices and local demand recovery. Quarter-on-quarter, the EBITDA grew slightly, driven by better prices and the off-peak period for natural gas cost.
Sales volume remained similar year-on-year, but 12% down quarter-on-quarter mainly because in Q3, there was an additional dispatch of stocks as in Q2 a seasonal maintenance at the reforming transit place. In Q4, 41% of the total sales volume were exports.
About cash and debt, although we raised our CapEx to accommodate Plan Gas commitments, we must highlight another quarter with solid cash flow generation, driven by the outstanding operating performance from our core businesses and less interest payment due to lower debt. During Q4, the free cash flow resulted in $47 million.
In comparison, last year's quarter was $84 million, mainly because of the minimum CapEx and Lomas PPA still in place, but offset by higher interest payment. Also this quarter -- also this quarter, Q4 2021, working capital and others were positive, mostly explained by improved collection from CAMMESA.
Delays almost half to roughly 20 days compared to the end of 2020.In addition, we repaid a net of $9 million of principal debt and collected dividends and other proceeds for $29 million in Ecuador operation. So in total, we generated $66 million net cash in the quarter, achieving $573 million of cash position by the end of 2021.
Moving on to Slide 15. This slide shows consolidated figures, including our affiliates at ownership, but let's focus on the restricted group that reflects the bond perimeters.
During the quarter, we paid minor debt maturities, but if you consider the whole year during 2021, we reduced more than $190 million of debt. By the end of 2021, we posted a gross debt of $1.4 billion.
The dollar debt bears an average interest rate of 7.8%. The average life as of 2021 is 4.4 years.
Thanks to the operating cash flow, cash increased 23% year-on-year to $573 million. Therefore, net debt decreased by $282 million year-on-year to $866 million.
The net leverage ratio improved from 2.4x in 2020 to 1.3x in 2021. In the next 12 months, the Company faces less than $20 million of maturity.
Therefore, we expect to keep strengthening our balance sheet. Also, it is worth highlighting that our international bonds are rated above the sovereign ratings.
So this concludes our presentation. Now I'll turn the word to Guido, who will open the floor for questions.
Thank you.
Operator
Thank you. [Operator Instructions]
Margarita Chun
Our first question is from Florencia Mayorga from MetLife. She would like to know any news on the Energia S.A., the legacy power plants remuneration scheme.
Gustavo Mariani
Hello. Good morning, everybody.
Thank you, Maggie and Guido for an excellent presentation. The first question about Energia S.A., there's been conversations between the authorities in the last few weeks and the chamber of power generators.
And what the authorities have indicated is that, we will receive an adjustment for the legacy capacity. This time it will be in two installments, so the first one impacting the February transaction and the second tranche of the adjustment impacting in June.
But unfortunately we'll not be covering -- fully covering the inflation we suffered last year. So it will be running below that below that number.
But if you take into account the change in the way that some power plants, the one that are less dispatch, there's been an adjustment in that for those power plants in October or November of last year, if I'm not wrong. So taking that into account, what we are -- the numbers that we are doing is that it will more or less have a similar remuneration to the one that we received during 2021.
We are hope being that the resolution will be published any time. So we should have confirmation about this in the next few weeks.
Margarita Chun
Thank you, Gus. Our next question -- give me a second.
Our next question comes from Andres Cardona, Citibank. He would like to know the guidance for EBITDA and CapEx for 2022.
Keep in mind that Pampa does not give a guidance, but we do give the latest estimation we have.
Gustavo Mariani
Okay. Maggie, I start, you can complete my answers at intend.
Thank you, Andres, for the question. What we are expecting for this year in terms of EBITDA and CapEx, let me start -- let me go business-by-business.
For the petrochemical business, we have had a terrific year in 2021. So our projections are not as good as 2021, but still a very good year in average term.
Given what is happening in the world with commodities, it's extremely difficult to have a figure. There's a lot of volatility from -- on the cost side and also on the prices of the products that we produce.
But we are optimistic that we will have a very good year, not as good as 2021, but a very good year. On power generation on the electricity and let me separate it.
Energia S.A., as I just said, we expect more or less the same pricing last year, but we will have now more capacity because of the Loma de la Lata PPA that has matured. Actually in terms on the PPAs, we will be getting less than last year because of the full impact of the maturity of 200 megawatts, that is 180 or 170 from Loma de la Lata and 30 megawatts from [indiscernible].
So those two PPAs after 10 years have matured last year and now they are considered key asset. So that will lower our revenues.
What will compensate partially this is Energia plus that we -- there we sell energy to the industry and we expect a better pricing there. And -- so that will partially compensate the loss of the PPA.
And the other news on the power generation front is that unfortunately, the COD, the moment that the Barragan expansion, the closing of the CCGT of Central Termica Barragan that we were expecting for the second quarter of this year. Now within that because of the impact of COVID and especially of COVID, but also complexity of that expansion that it will be online on the fourth quarter, as Maggie said and I think Maggie said third quarter of 2022.
I think it's going to be early fourth quarter of 2022.So there is a delay also on the of course starting to generate revenues from Ensenada Barragan. From -- on the oil and gas business, oil, we expect more or less the same quantity, but better pricing, especially slightly better pricing because the [indiscernible] has not moved yet.
We see what will happen on that during the year. But there is a small portion of our production that we export.
And on that portion, we will be receiving a better pricing. On the gas side pricing will be slightly better than last year, basically because of the portion that we sell to the industries, we will be able to get better pricing and also because of the exports that we are doing this year to Chile, but we'll be -- we will have in 2022 at least a 20% increase in quantity compared to 2021.
If after the winter, we are able to explore -- to continue exporting to Chile or there's high local demand as it happened this summer, our growth in production compared to 2021 will be even higher than 20%. In terms of CapEx, we had CapEx of -- our CapEx are going up obviously because of the increased production that we are expecting on the E&P and the expansion we are doing on power generation.
So total comparables businesses E&P and power generation, we are going from 250 roughly that we invested in 2021 to around $400 million in 2022. That is the breakdown of that $400 million, again for both E&P and power generation.
It's around $120 million is what we consider maintenance CapEx. So the regular CapEx that we need to do to maintain the same level of production and $280 million will be the CapEx that we do in order to increase production, both increase our natural gas production and also for the expansion of the wind farm that will be online early next year.
Margarita Chun
Okay. Thank you, Gus.
Our next question comes Florencia Mayorga from MetLife, as well as Maria Moyano from AdCap. What's going to happen with the 2023 bond?
What's your alternatives and perspective?
Nicolas Mindlin
Okay. So regarding the bond, we are analyzing alternatives, taking into account current central bank regulations regarding corporate debt repayments that these regulations are in place until December 2022.
So we still have a lot of time until our maturity on July 2023 and we are going to wait for better market conditions and also to have more clarity on regulations through the study, which is the best alternative.
Margarita Chun
Thank you so much, Nicol. Our next question comes from two people as well, one is from Maria Moyano from AdCap and the other person is from Frank McGann.
Let me mute Nicole. Can we mute Nicole?
So, okay, that's good. So the question comes from Frank McGann from Bank of America and Maria Moyano from AdCap and it is about Russia.
Can you take advantage of future prices of gas given the conflict in Russia and Ukraine? And also in case of Frank, he added some observers are speculating that the current Russia crisis will limit gas export for the long-term with substantially drive up the demand for LNG.
This could in turn raise gas prices substantially for an extended period of time. Do you see upside to natural gas prices in the local market as a result of this change?
Sure. The question comes from Maria AdCap, Frank McGann from Bank of America.
Can you take advantage of the future prices of gas given the conflict Russia and Ukraine. And also, Frank would like to know, given this crisis of Russia, maybe long-term prices for LNG is going to be increased.
Do you see this upside for natural gas in the local market as well?
Gustavo Mariani
Okay. Thank you both for the question.
Thank you, Maggie, for repeating it. If we can take advantage of the price of LNG in the short term, the short answer is no, we cannot benefit from that in a straightforward way.
The plant gas was a conceptualization of the market. So we have a fixed price at which we'll be selling our production.
And there is a take or pay and deliver pay obligation from both sides. So on that front, there is no way to take advantage of what has happened on the LNG market these days.
But in a indirect way, I think it helps -- if anyone still has a doubt whether the new pipeline is needed or how much is needed and what a huge impact it will have in the country. I think that after this winter, nobody will have any doubt.
This is the price at which Argentina will be importing LNG this year, will be extremely several times higher than what Argentina Spain local producers. But we are also facing the risk that is not as much LNG available as we will need during this winter and that will be a significant problem.
Let's hope that it doesn't get that bad. I was thinking that -- yesterday, we had a Board meeting where one of the Directors has asked me a question that the figures surprised me, let me share that with you.
He asked me how many -- given the current price of LNG and given our growth in production compared to 2020, we have grown 60% or we will be growing 60% of our production going from less than EUR7 million to EUR11 million this winter. How much that production saves dollars to the country?
And we did the math roughly and the figure really surprised me. So let me walk you through the numbers.
This roughly slightly above 4 million cubic meters of natural gas per day that we will be producing this winter vis-a-vis 2020 for five months at $4.5 that is the price that we will be collecting is roughly $100 million in revenues. And those are -- we don't receive dollars, we collect pesos at the official exchange rate.
But let's say to simplify $100 million that we will be collecting. If Argentina has to pay LNG the same amount of LNG for five months, so 4 million cubic meters of LNG per day for five months.
At the current future price of the LNG, which is 10x, it's around $45 instead of 450 that we are collecting, that is $1 billion in Argentina -- that Argentina saves because of the increased production of Pampa. So that gives you an order of magnitude of how important it is to get this new pipeline build.
It's a game changer, is very important for the macro of Argentina and it's a game changer for Pampa in its capacity to significantly even double our production going forward. It will take a few years, but it is possible.
Sorry, I went too far and I forgot the second part of the question.
Margarita Chun
The local -- thank you, Gus. Our next question comes from -- comes from Frank McGann of Bank of America and Rodolfo from 91.
They would like to know more about E&P perspective. Frank McGann, if you could maximize the potential of your assets in E&P, what is the maximum oil and gas production that could be achieved?
Rodolfo, how should we think about CapEx required to double gas production in the coming years? How will the CapEx funded?
And over what time frame will this production growth be achieved?
Gustavo Mariani
Okay. And we'll certainly ask you to repeat the question several times.
Okay. Let me -- we have been -- well, the investment we have been doing last year, we are doing on E&P.
By May of this year, so in a couple of months from now, we will be finishing our new TPF, that is temporary production facility and an upgrade of an early production facility that we built last year in order to increase production. With these two new facilities, we will have the ability to go from the current level of production of 9 million cubic meters per day to 11 cubic meters per day.
That is our commitment in the Plan Gas starting in May of this year. But we are also working and that is part of the -- included in the CapEx that I mentioned earlier, we are working on a new PTC in El Mangrullo for almost 5 million cubic meters of natural gas per day.
So starting in September of this year, we would have facilities ready to produce 16 million -- 16 or 16.5 million cubic meters of natural gas per day. And that is all included in the CapEx I already mentioned.
In order to go from 11% to 16.5%, we need to increase CapEx in drilling and completion. And that is something that we have not yet planned because -- basically because although we are very optimistic that the new pipeline will be ready by next winter, still the government has not launched the fourth round of the Plan Gas in order to secure gas for that new pipeline.
We think that, that should happen in the next few months because us and the rest of the industry needs to be ready to increase those 11 million cubic meters of gas that the new pipeline we'll be transporting in the first phase. So if you ask me, are you able for next year to think about another 60% increase in production from the current levels from the 11 to 16 or to 17?
Is it possible for Pampa? Yes.
Going farther than that, we have the reserves. One peculiarity about Pampa that is also very important to keep in mind is that we have the fortune of having tight gas reserves.
We have shale gas reserves as well, but tight gas reserves are more competitive. And so we will be mostly developing those reserves in order to go to EUR16 million.
We will also be having to -- would not be fully a 100% type gas reserve, but also some shale, but it will be mostly tight gas reserve and that is in terms of competitivity vis-a-vis our colleagues that in order to grow, we need to produce from shale gas is a very good competitive advantage that Tampa has. I'm sure I missed several -- did I answer?
Okay.
Margarita Chun
Yes, you covered all. And let's move on to the next question.
It's from Guilherme Levy from Morgan Stanley. He will like to know more feasibility, the feasibility of the construction of the new pipeline.
The government's target is to have the pipeline online before winter 2023, but it sounds optimistic. What would you say are the rates related to the construction as well?
Gustavo Mariani
I think -- I understand that it sounds optimistic, but it's feasible. And I understand that weaving our Argentina's background in this kind of infrastructure projects that it's reasonable to have doubt whether it will be done.
But from the financing perspective, it was obvious last year that the repayment of this pipeline is so quick. And that is with last year, prices of imports of LNG imports, Bolivia and liquid fuels.
With this year, prices -- the repayment of the new pipeline is less than one year, so just a few months. So financing shouldn't be a problem.
And on the other hand, the first tranche is only the $1.1 billion compared that to the cost of the interest that we will have this year and it's a fraction. So it's not a matter of -- financing is not the issue.
The issue is short period of time that we have until next winter and the complex situation of the world. But the authorities are very eager and committed to have the pipeline ready by next winter, by the end of this month, they should be opening the offers of the pipes itself.
So if those offers are competitive in terms of timing, so that means that the first pipes, the first tubes will be ready to install by September or October of this year. It is possible being very aggressive that the construction gets done from September to May or June of next year.
It's very tight. Yes, it's feasible, yes.
The first tranche that is from Tratayen to Salliquelo -- for next winter will be just a pipe without any compression. So that's why it's only an increase of 11 million cubic meters of natural gas.
Once it has compression that and that compression will be stalled in a few months later, it will go to 22 million cubic meters. So very challenging especially from the construction point of view, but it's too odd.
That was a question?
Margarita Chun
Yes. Thank you so much.
Our next question comes from Frank McGann from Bank of America and Marina Mertens from [indiscernible]. Their question is regarding, first, the capital allocation for 2022 that Gustavo already covered.
And if there is any chance to add more projects in the power generation business?
Gustavo Mariani
We don't have more power generation projects in the pipeline. We would like to continue increasing on the renewable side and keep building wind farms, but we haven't found a project with attractive yield, especially given the constraint on transportation capacity that renewables and especially wind farms are suffering these days.
So the country needs to expand its transportation capacity in order to make available significant increase in wind farms.
Margarita Chun
Thank you, Gus. Our next question comes from several people.
They are Lucas Caldi from PPI, Konstantinos Papalias from Puente and Ezequiel Fernandez. They would like to know more about the increase in the lifting cost in the E&P business.
Gustavo Mariani
The increased cost in the lifting is basically explained by what Margarita said during her presentation. And related to this early production facilities or temporary production facilities that last year, we -- those are facilities that are being mounted in a very short period of time and we rented those facilities.
So that is more expensive. We are now thinking to make those facilities rather than temporary, make them permanent.
So probably acquiring those facilities and so that going forward, those -- those facilities -- so that the cost of the lifting costs should go down again probably early 2023.And especially after we finish our PTC, the one that I mentioned that will be ready in September. So -- so making a long story short, the growth in the lifting is because of the high level of activity of the huge growth in production in a very short period of time, as we said many times, we have grown 60% in the last two years our production and doing that so quickly has -- it's -- that is the reason why we have increased costs.
Going forward, I think we will be able to lower that especially once the PTC of El Mangrullo is operation.
Margarita Chun
Thank you, Gus. Our next question comes from Ezequiel Fernandez regarding the export prices to Chile.
Considering the alternative LNG prices going above $40 per million Btu, do you see any increase in your potential prices for the upcoming exports?
Gustavo Mariani
Yes, but I'm not a specialist, we should have one guy of the commercial team answering that question to you. Chile does not buy on the spot market.
Chile has long-term contract. So probably one portion of its need -- of the gas need is exposed to the spot market, but most of the gas it needs it's linked to long-term contracts they already have.
So that is the price that we are competing with. So obviously, give us some leverage on the negotiation, but not to the full extent of the pricings that we are seeing on the spot market.
Margarita Chun
Thank you, Gus. Our next question comes from BTG, Daniel Guardiola and Francisco Gomez.
They would like to know the DSO of CAMMESA based on funding of netting. Let me tell you that right now, we have the 42 days rule after billing CAMMESA should pay.
Otherwise, they pay the interest. And on top of that, the delay is roughly 18 days.
But this is because CAMMESA has been able to export electricity to Brazil and we expect it's going to increase slightly, that would be the normal DSO. So roughly above -- roughly 70 to 75 days is going to be more normal than today's total 62 days.
And there is one more question from Lilyanna Yang. She will like to know if there is any update on hydrocarbon law?
So far, no, but I don't know if Gus would like to add some more comments. No, we have cover.
Please wait while we pull for more questions. Otherwise, we will be finishing in just a few minutes.
So our final question comes from Ezequiel Fernandez. He would like to know what IRR we are targeting for MAT ER renewable projects?
Gustavo Mariani
So I cannot give you exact numbers, but we are targeting low double digit, but unfortunately, the projects that we've been seeing are in the single-digit environment. So that makes them an attractive from our perspective, that's...
Margarita Chun
Okay. Thank you.
Thank you so much. So this concludes with our Q&A session.
I'll turn the word to Guido for the final remarks.
Guido Slavutzky
Okay. Thank you for taking your time today joining us.
Take care and should you have any questions, do not hesitate to contact us. We will always available for you.
Before leaving, there will be an option to give your feedback about today's video conference or general suggestions. So have a good day.
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