Argentina's largest natural gas transporter will have to face another year of frozen rates, which is eroding its profits.
Transportadora de Gas del Sur SA will not get an increase from federal regulators in 2021, despite two years of fixed prices, CFO Alejandro Basso said during a call to discuss the company's results.
The Argentine government has prevented energy companies from raising prices as the country faces inflation of more than 40 percent. This policy has forced TGS to reduce the value of its assets and caused a loss of earnings of 2,240 million pesos (US$24 million) in the first quarter.
The company's New York-listed shares have plunged nearly 80 percent since the beginning of 2018.
TGS wanted to increase its rates by 59 percent, arguing before regulators that prolonging the freeze was unfeasible. But the company expects the petition to fall on deaf ears, instead pinning its hopes on an increase in April 2022, Basso said. Meanwhile, revenues will continue to fall.
The government is reluctant to raise utility rates before the midterm elections, now rescheduled for November. But natural gas distributors are likely to get a raise soon, similar to the one recently granted to electricity distributors.
TGS derives more revenue from the sale of natural gas liquids such as ethane and propane than from its pipeline services. So while being left out of this round of energy price hikes is not good news, the company is in a position to hold out until better days come, said Konstantinos Papalias, an energy analyst at Puente in Buenos Aires.
TGS supplies around 60 percent of Argentina's natural gas through the longest gas pipeline network in the country, with more than 7,500 kilometres. Pampa Energía SA owns a quarter of the company.
by Jonathan Gilbert, Bloomberg