MSU S.A.'s USD 13,857,742 Series VII Notes
Legal counsel to Banco de la Provincia de Buenos Aires, Balanz Capital Valores S.A.U., INTL CIBSA S.A. and Banco de Galicia y Buenos Aires S.A.U. acting as placement agents in MSU S.A.’s issuance of series VII notes for U$S 13,857,742 under the global program of notes for an amount of up to U$S 50,000,000. The Series VII Notes were issued on March 10, 2020 at a 9% fixed rate and due fifteen months from the date of issuance.
News in the Energy Sector: New Remuneration Structure for Legacy Power Generators, Co-generators and Self-generators
Resolution No. 31 issued by the Secretary of Energy (“Resolution 31”) and published in the Official Gazette on February 27, 2020: (i) has repealed former Resolution No. 1/2019 issued by the former Secretary of Renewable Resources and Electricity Market; and (ii) approved a new remuneration structure for legacy power generators, self-generators and co-generators of the Wholesale Electricity Market (“WEM”). The new regime applies to legacy facilities which do not sell their energy under a power purchase agreement (“PPA”).
The purported aim of Resolution 31 is to adjust the remuneration criteria for generators to ensure the sustainability of the WEM under economically reasonable and efficient conditions. To this regard, the resolution states that energy generation costs must be passed through to final users.
The rationale that Resolution 31 invokes as grounds to its issuance is the abrupt change in the exchange rates which negatively impacted the remuneration structure that was stipulated by the former Resolution No. 1/2019.
The most relevant aspects of the Resolution 31 are outlined below:
- Scope of Resolution 31
A new remuneration mechanism for conventional and renewable generation, cogeneration and self-generation, operating without a PPA, has been approved, effective as of February 1, 2020.
- Remuneration in Argentine pesos
The new remuneration structure, unlike the repealed Resolution 1, provides that the amounts paid to the WEM agents identified above will be nominated and paid in Argentine pesos.
Former Resolution 1 determined that the remuneration of such was calculated in US dollars and the payment was in Argentine pesos, using for its conversion the exchange rate published by the Central Bank of Argentina "Reference Exchange Rate Communication 'A' 3500 (Wholesale)", of the day before the due date of the economic transactions.
- Remuneration adjustment mechanism
Remuneration shall be adjusted on a monthly basis according to a formula based on the Index of Consumer Prices (IPC) and the Index of Internal Wholesale Prices (IPIM), both published by INDEC (the Argentine Statistic Agency).
For further information, please do not hesitate to contact either Nicolás Eliaschev and/or Javier Constanzó.
The Superintendence of Corporations reinstates control regime of foreign companies
On February 21, 2020, the Superintendence of Corporations of the City of Buenos Aires (“IGJ”) issued General Resolution 02/2020 (“RG IGJ 02/2020”) which expanded the registration and information requirements in connection with the companies incorporated overseas.
RG IGJ 02/2020 repeals General Resolution IGJ 06/2018, reinstating the articles of the General Resolution IGJ 07/2015 (“RG IGJ 07/2015”) included under provisions of Title III, Book III regarding companies incorporated abroad. In that regard, the resolution restores the obligation to prove that the main economic activity of the company is carried out outside of the Argentine Republic through the submitting of documentation signed by a company officer, for all companies that intend to register in the Argentine Republic under Articles 118 or 123 of the General Companies Law No. 19,550 (“LGS”).
In turn, as provided in article 218 of the RG IGJ 07/2015, the prohibition of the registration of an offshore company from jurisdictions of that nature is also restored.
In addition, the RG IGJ 02/2020 incorporates the obligation of foreign companies registered in Argentina to submit the Annual Information Regime (“AIR”), within 120 calendar days after the closing date of the financial statements of the corresponding branch or representation office.
Finally, the RG IGJ 02/2020 establishes that the legal representatives of the companies incorporated abroad must keep until the cancellation of their registration as representatives plus an additional term as from such cancellation equal to that of the statute of limitation applicable to claims for non-contractual liability (i.e., three years), a guarantee in accordance with the provisions of subsections 2 and 3 of article 76 of the RG IGJ 07/2015. The amount of such guarantee for each legal representative will be five times the minimum capital required for corporations, which would correspond to AR$500,000. Legal representatives in office at the time of issuance of the RG IGJ 02/2020, must file the aforementioned guarantee with the next immediate filing of the AIR of the company.
For further information, please contact Juan Pablo Bove, Federico Otero, Julián Razumny, Pablo Tarantino or Agustín Griffi.
Argentine Central Bank relaxes requirements to make advance payments of imports of goods
Pursuant to Communication “A” 6903, dated February 14, 2020, the Argentine Central Bank revised the requirements to make advance payments of imports of goods. The new regulatory framework relaxes the requirements for importers with delays registered in the SEPAIMPO Information System.
Pursuant to current regulation, clients who register delays in the SEPAIMPO do not have access to the foreign exchange market to make new advance payments of imports.
Pursuant to the new regulation passed today, from March 2020, clients with registered delays will have access to the foreign exchange market to make new advance payments, subject to the following:
- The client does not register delays with respect to advance payments made as of 02.09.19.
- Prior Central Bank´s approval shall be required when the client registers, for transactions prior to 02.09.19, a judgement in the last 5 years or an open proceeding for violations of Article 1(c) of Law 19,359 with respect to import transactions.
- In the event that the client is not an individual and has been incorporated up to 365 calendar days prior to the date of access to the exchange market, prior approval of the Argentine Central Bank will be required to process new payments when the amount pending regularization for advance payments of imports is more than the equivalent of US$ 5 million (five million US dollars), including the amount for which access to the exchange market is requested. In the case that the client is a joint venture, the date of incorporation of the oldest company will be taken into account.
For more information, do not hesitate to contact Marcelo R. Tavarone, Federico Salim, Julieta De Ruggiero or Francisco Molina Portela.
Province of Chubut’s Series XLII Treasury Notes class 1, class 2 and class 3 Issuance for AR$ 402,850,000
Legal counsel to Banco del Chubut S.A., as arranger, placement and financial agent, and to Puente Hnos. S.A. as placement agent, in the issuance of Province of Chubut’s Series XLII Treasury Notes class 1, class 2 and class 3, under the Province of Chubut’s Treasury Notes Issuance Programme. The transaction settled on February 6, 2020 and the payments due under the Treasury Notes Series XLII are secured by certain rights of the Province of Chubut to receive amounts under the federal tax co-participation regime. Class 1 was issued for AR$ 350,850,000 due on March 11, 2020. Class 2 was issued for AR$ 16,000,000 due on April 8, 2020. Class 3 was issued for AR$ 36,000,000 due on May 6, 2020. The Treasury Notes Series XLII Class 1, Class 2 and Class 3 were issued at a 40% fixed rate.
Extension of regulations applicable to “Payment Service Providers” (PSPs)
On January 30, 2020, the Argentine Central Bank issued Communication “A” 6885 providing for regulations applicable to the activity of Payment Service Providers (PSPs). Below you will find a brief description of the most important features.
Communication “A” 6885 has excluded from the PSP legal framework the payment schemes that are governed by the rules of the Argentine Securities and exchange Commission (CNV) (among them, agents, markets and clearing houses’ operations) as well as such activities which main purpose is to retain and/or receive and make payments to the public sector.
Communication “A” 6885 also prohibits entities governed by the CNV (markets, clearing houses and agents) to operate as PSPs.
PSPs must be registered with the “Registry of Payment Service Providers that offer payment accounts” within 30 days since March 1, 2020. Since registration date, the PSP falls within the supervision of the Argentine Central Bank and will be liable, together with its authorities, under Sections 41 and 42 of the Financial Entities Law 21,526.
In order to register, a PSP must provide, among other information, the operational and commercial description of its payment structure and the identification of any person who holds at least 20% of share capital and/or votes of the entity or who, by other means, exercises final control, directly or indirectly, of the PSP (final beneficiaries).
Regarding customers cash management, Communication “A” 6885 made no changes, and the obligation to have the cash deposited in a local bank account (except for the sums invested in money market funds) remains.
Finally, Communication “A” 6885 creates obligations in connection with financial transparency. PSPs must indicate in all advertising that they are not financial entities and that the cash deposited (as it is not a deposit in a financial entity), does not fall within the argentine deposit guarantee system.
For further information, please do not hesitate to contact either Marcelo R. Tavarone, Federico Salim, Julieta De Ruggiero, Juan Pablo Bove, Federico Otero, Julián Razumny, Agustín Griffi, or Pablo Tarantino.
Recent deals in renewables. Where do we go from here?
An update of recent developments and an outlook on what to watch-out for in the coming weeks and months in the Argentine energy landscape
- Introduction
Renewables expanded significantly in the past years. Currently total capacity for renewables is 2725 MW, with more than an additional of 1500 MW (est.) under construction or commissioning. Once projects under construction reach COD, Argentina will be on track to meet its renewable energy consumption target for 2020 set out by the law at 12% (target for 2021, stands at 16%, for 2023, at 18% and 2025, 20%).
As of December 10th, 2019, a new Administration was sworn-in and certain questions arose regarding policies to be adopted under the new Government.
In an interview, our Partner Nicolás Eliaschev stressed the bipartisan nature of renewable energy policies and recalled that Law 27,191 which sets out renewable energy policy was sponsored by the Administration in place at the moment (Cristina Fernández de Kirchner) and then implemented by the Macri Administration. Eliaschev argued that the new Government had the opportunity to continue along this path.
- Recent positive developments and transactions
Although it may be too early to jump into definitive conclusions, the first signs are encouraging, and the current Administration seems to be committed to continuity in this policy area. Among the positive news for the sector, we point out the closing or signing of relevant project finance transactions where we had the honor to represent the lenders:
- On December 19th, 2019, KfW Ipex Bank disbursed the first instalment of a facility granted for the development and construction of the wind power projects Chubut Norte III and Chubut Norte IV (respectively owned by SPVs controlled by GENNEIA and PAE), totaling 140.88 MW of combined generation capacity. The deal was signed in July 2019. Our Firm acted as Argentine counsel for KfW Ipex, with a team led by partners Marcelo R. Tavarone and Nicolás Eliaschev.
- On January 14th, 2020, Luz del León (an SPV controlled by YPF Luz) signed a US$150 million project finance facility with BNP Paribas Fortis SA/NV and United States International Development Finance Corporation (DFC) to finance the development and construction of the Cañadón León wind power project for a total 120 MW of generation capacity, located in the Province of Santa Cruz, Argentina. The transaction is the first non-recourse project financing to build a windfarm that will supply electricity under two types of PPAs: a 20-year PPA with CAMMESA under the RenovAr regime, and a 15-year corporate PPA under the MATER regime, both under Argentina’s renewable energy legal framework. The transaction is also the first non-recourse project financing to be signed after the new Administration led by President Alberto Fernández was sworn in. Our Firm acted as Argentine counsel for BNPP and DFC, with a team led by partners Nicolás Eliaschev and Julieta De Ruggiero.
Another positive development is the continuity of Round 3 of the RenovAr Program. On August 2nd, 2019, the prior Administration awarded PPA for projects totaling 260 MW of capacity and the deadline for PPA execution was set for January 24th, 2020.
- On December 4th, 2019, our Firm, with a team led by partners Nicolás Eliaschev and Juan Pablo Bove, assisted a successful bidder in the execution of nine PPA totaling 112.5 MW, corresponding to nine wind power projects.
- On January 24th, 2020, our Firm, with a team led by partners Nicolás Eliaschev and Julián Razumny, assisted a successful bidder in the execution of three PPA totaling 30 MW, corresponding to three solar PV power projects. These PPA where among the first executed under the new Administration.
- Challenges
- Delayed projects
Due to various reasons ranging from financial turbulence experienced by the country to more project-specific issues, certain projects, particularly some of those awarded under the RenovAr 2 round, have either fallen behind schedule or have never started construction. The new Administration has committed to review the existing situation on a project-by-project basis and although it has yet to announce a decision, a variety of possibilities may be considered ranging from term extensions, waivers regarding delays or PPA termination.
The outcome of this review will help to assess the real nature of the existing project pipeline. Some projects facing distress may be revived and others that never started might be terminated.
- Transmission
Once the pipeline is settled as per the above, the picture of transmission availability will become clearer. As of today, should the whole project pipeline be built, transmission would be scarce. If some projects are cancelled, transmission capacity would be freed-up and new projects targeting the corporate PPA market might be developed.
From a long-term perspective, new transmission infrastructure is required, and the new Administration has publicly announced it as a priority. The question on how such goal will be achieved remains open, with a menu that includes PPP models, a BOT contract approach and public works.
- Sovereign risk
Currently, the country has initiated the first stages of its foreign debt restructuring, involving both the IMF and private bondholders.
If the issue is overcome in an acceptable way for all the interested parties and Argentina achieves a successful, amicable and fiscally sound arrangement, country risk will be bound to lower, opening opportunities to finance energy infrastructure.
Should that not be the case, infrastructure financing will be probably more challenging and done piecemeal.
- And what about Vaca Muerta?
The Government has repeatedly and strongly stated that fully tapping into Vaca Muerta’s potential is a top political priority and has committed to foster and protect hydrocarbon investments. However, currently some uncertainty is being faced due to intervention in fuel prices and the sovereign matters described above.
The Administration has announced that it will send a bill to Congress specifically designed to ring-fence Vaca Muerta from political risk and provide strong guarantees for long-term investments. Although initial drafts that have been made available show positive signs, an official bill is yet to be released and we will thus revisit the matter as soon as such information is officially known.
Another issue to watch-out for is the status of the public tender summoned by the prior Administration for the construction of a natural gas pipeline designed to allow Vaca Muerta to pump further volumes of natural gas and ramp up production. Under the current schedule set out by the prior Government, bids were due on March 31st, 2020. Next steps on this process are yet to be announced.
For further information, please do not hesitate to contact either Nicolás Eliaschev, Marcelo R. Tavarone, Juan Pablo Bove, Julieta De Ruggiero and/or Julián Razumny.
YPF Energía Eléctrica obtains US$ 150,000,000 in a project finance facility from BNPP and DFC for the development of a greenfield wind power project
Legal counsel to BNP Paribas Fortis SA/NV and United States International Development Finance Corporation (DFC) in a facility worth US$ 150,000,000 under a non-recourse project finance structure to Luz del León S.A., a special purpose vehicle controlled by YPF Energía Eléctrica S.A, to finance the development and construction of the Cañadón León wind power project for a total 120 MW of generation capacity, located in the Department of Puerto Deseado, Province of Santa Cruz, Argentina.
The transaction is the first non-recourse project financing that will supply electricity under two PPAs: a 20-year PPA with CAMMESA under the RenovAr regime, and a 15-year corporate PPA under the MATER regime, both regimes under Argentina’s renewable energy legal framework. The BNPP part of the facility is guaranteed by Euler Hermes Aktiengesellschaft (German export credit agency).
The security package for the loan includes (i) a first-priority share pledge over 100% of Luz del León shares; (ii) a first-priority pledge over certain windfarm equipment; and (iii) a security trust for the assignment of all borrower’s receivables under certain project documents.
Amendments to the Regime for the Promotion of Knowledge Economy in Argentina
On January 20th, 2020, the Argentine Ministry of Productive Development issued Resolution N° 30/2020 ( “Resolution 30”), that amended the Regime for the Promotion of Knowledge Economy created by Federal Law N° 27,506 (the “Law for the Promotion of Knowledge Economy”). Said regime, effective for a period of ten years starting on January 1st, 2020, substituted the pre-existing Software Industry Promotion Regime, effective until December 31st, 2019.
Resolution 30 appointed the Secretary of Industry, Knowledge Economy and External Commercial Management (under the authority of the Ministry of Productive Development), as enforcement authority of the Law for the Promotion of Knowledge Economy.
Additionally, Resolution 30 suspended the existing deadlines for the analysis and processing of requests to be accepted under the Regime for the Promotion of Knowledge Economy, under which the beneficiaries of the pre-existing Software Industry Promotion Regime could be provisionally accepted on the Registry of Knowledge Economy until full and final compliance no later than June 30th, 2020, with the requisites set forth in the new regulation.
The date of issuance of the regulation reestablishing the suspended process, as well as its content, is yet to be defined.
For more information, do not hesitate to contact Gastón A. Miani, Juan Pablo Bove, Federico Otero, Julián Razumny, Agustín Griffi, or Pablo Tarantino.
The Argentine Central Bank lifts certain restrictions for the distribution of profits and dividends to Shareholders
On January 16, 2020 the Argentine Central Bank issued Communication “A” 6869 (the “Communication”). The Communication relaxed the rules for the purchase and transfer of foreign currency for the distribution of profits and dividends in foreign currency to non-Argentine shareholders.
Pursuant to the Communication, non-Argentine shareholders may access the local foreign exchange market (the “FX Market”) for the distribution of dividends and profits without prior approval of the Argentine Central Bank, provided that:
- Profits and dividends shall be evidenced in audited financial statements;
- The aggregate amount paid to non—Argentine shareholders shall not exceed the equivalent in Pesos approved by the relevant shareholders´ meeting;
- The aggregate amount of distributions paid through the FX Market as of January 17, 2020 shall not exceed 30% of the value of the new foreign direct investment contributions made as of such date in the Argentine company that have been repatriated and converted to Pesos through the FX Market.
- The payment may not be made before 30 calendar days from the repatriation and conversion to Pesos of the last capital contribution made to the company, as requested in section 3 above.
- The client shall provide evidence that the equity contribution has been capitalized. Alternatively, the client shall provide evidence of the filing of the request for capitalization with Public Registry of Commerce (which shall be obtained within 365 calendar days from the filing).
- If applicable, the relevant direct investment shall have been registered with the Argentine Central Bank under the Foreign Assets and Liabilities Reporting Regimen (“Relevamiento de activos y pasivos externos”).
For more information, do not hesitate to contact Marcelo R. Tavarone, Federico M. Salim, Julieta De Ruggiero or Francisco Molina Portela.