Secretary of Energy Launches Tender for Renewable Energy Projects
The Secretary of Energy has opened a new tender seeking companies to build new power generation facilities totaling 620 MW.
By Resolution No. 36/2023 (“Resolution 36”), issued by the Secretary of Energy on February 2, 2023, the main rules applicable to such tender (“RenMDI”) have been approved.
RenMDI follows Resolution No. 330/2022 of the Secretary of Energy (“Resolution 330”), that called for expressions of interest (“MDI”, for its Spanish acronym, Manifestaciones de Interés) in connection with infrastructure projects that would allow the incorporation of renewable generation and/or energy storage facilities interconnected to medium-voltage transmission and/or distribution facilities. For additional information regarding Resolution 330, please visit this article published on our website.
Under the MDI, according to Resolution 36, 491 proposals were received, totaling 14,400 MW.
Moreover, RenMDI intends to continue increasing the share of renewable energy in Argentina, as mandated by Law No. 26,190 (as amended by Law No. 27,191), and implemented through successive renewable tendering processes.
Below are the key takeaways of Resolution 36.
I. Executive summary
- RenMDI calls for interested parties to submit offers in order to enter a PPA with the Wholesale Market Administrator Company (“CAMMESA”), who will act as offtaker on behalf of the Distributors and Large Users of the Wholesale Electricity Market (“WEM”).
- Such PPA will have a tenor of 15 years as of commercial operation date (“COD”) and will be hard currency-denominated, payable in pesos at a customary exchange rate.
- RenMDI includes two lines: (i) Line 1 of renewable generation to replace forced generation, for biomass, solar photovoltaic, solar photovoltaic with storage and wind with storage (“Line 1”); and (ii) Line 2 of renewable generation to diversify the power matrix, for biogas, landfill biogas, Small Hydroelectric Developments (PAH) and biomass technologies (“Line 2”).
- The goal is to contract 500 MW for Line 1 and 120 MW for Line 2, thus totaling 620 MW.
- No payment guarantees and/or other type of guarantees from FODER are foreseen (as defined in section V).
II. Deadlines
Bidders may submit any requests for additional information or clarifications until February 24, 2023. In turn, March 1 is the date for CAMMESA to respond to any such requests.
March 15, 2023 is the deadline for bid submissions.
Selection of winners is scheduled for May 24, 2023 and the PPAs are expected to be entered no later than September 20, 2023.
III. Bidding Terms and Conditions - Most relevant Terms
Resolution 36 approves the Request for Proposals as Annex thereto (the “RfQ”), that foresees the terms and conditions to be complied by any bidder under the RenMDI.
Under the RfQ, as said before, two separate lines (please see above) are foreseen, with different technologies foreseen in each case.
Biomass projects submitted and not awarded under Line 1 will be added to the biomass projects submitted exclusively for Line 2.
Finally, bidders must submit, together with their bid, a bidding guarantee in accordance with the terms of the BTC.
IV. Terms of the PPA
The successful bidders will enter into a power purchase agreement with CAMMESA (“PPA”).
The PPA will have a term of 15 years following COD.
The price of the PPA will be fixed in U.S. dollars per Megawatt/hour and seasonality will be remunerated to encourage generation in periods of high demand.
V. Additional Matters – Differences with Prior Tenders
Power generation facilities awarded under the RenMDI will not have dispatch priority with respect to other renewable generation, self-generation or cogeneration facilities operating in the WEM in case of curtailment, except for those cases specifically provided in the RfQ.
Expansions of existing facilities (a) (A) under RenovAr 1, 1.5, 2 and 3, (B) Resolution No. 202/2016 of the former Ministry of Energy and Mining, and Resolutions No. 220/2007, 712/2000 and 108/2011 of the former Secretary of Energy, or (b) that have obtained dispatch priority in the corporate renewable term market, will not be eligible under the RenMDI.
In addition, and unlike other previous tenders, no payment guarantees by the Fund for the Development of Renewable Energies (“FODER”, for its Spanish acronym, Fondo para el Desarrollo de Energías Renovables) is foreseen for RenMDI projects.
For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Daiana Perrone, María Eugenia Muñoz, Pablo Arrascaeta, Florencia Martínez, Luciana Tapia Rattaro and/or Rocío Valdez.
Creation of the National Housing Labeling Program (PRONEV)
Resolution No. 5/2023, enacted by the Secretariat of Energy on 9 January 2023, (the “Resolution”) established the creation of the National Housing Labeling Program (“PRONEV”, for its Spanish acronym, Programa Nacional de Etiquetado de Viviendas) and the National Informatic Application of Housing Labeling (the "Application") (Aplicativo Informático Nacional de Etiquetado de Vivienda).
Relevant aspects of the Resolution
PRONEV goal is to implement an energy efficiency labeling system to classify the housing’s degree of efficiency, upon their global primary energy requirement. The Application, on the other hand, will issue an Energy Efficiency Label (Etiqueta de Eficiencia Energética) showing the technical information of the houses, once such information is loaded.
The Resolution will allow the government to measure the energy requirement of homes and living places throughout the national territory and set a baseline for the development of new programs for improving energy performances and reducing energy consumption in homes.
In this sense, the National Directorate of Electricity Generation of the Undersecretariat of Electricity is empowered to issue all necessary acts for the execution of PRONEV.
Finally, the Resolution invites the Provinces and the City of Buenos Aires to enter into agreements with the federal government to promote the PRONEV and the Application and to provide basic standards to be considered in their local Building Codes.
For additional information, please contact Nicolás Eliaschev, Pablo Arrascaeta, María Eugenia Muñoz and/or Rocío Valdez.
Creation of the Environmental Crime Analysis and Prevention Unit and the Environmental Crime Assessment Board
Resolution No. 19/2023, issued by the Ministry of National Security on 16 January 2023 (the "Resolution"), set up the Environmental Crime Analysis and Prevention Unit (Unidad de Análisis y Prevención de Delitos Ambientales) and the Environmental Crime Assessment Board (Mesa de Evaluación de Delitos Ambientales) aimed at generating mechanisms for the prevention and fight against environmental crimes.
Relevant aspects of the Resolution
A. The Environmental Crime Analysis and Prevention Unit (the “Unit”)
The Unit -created within the scope of the Undersecretariat for Criminal Investigation and Judicial Cooperation-, is entitled to:
- assist in the detection and prevention of environmental crimes that may take place within the national territory, whether they affect the flora, fauna, soil, air, water and/or maritime spaces subject to national jurisdiction;
- collect and systematize information on environmental crimes committed in the national territory, from both non individualized sources and the Federal Police and Security Forces;
- develop indicators and prepare periodic reports as an input for the work of the Board (as such term is defined in section B below) and upon the request of other areas of the Ministry of Security;
- prepare a location map to detect "hot zones" and propose measures aimed at preventing environmental crimes;
- coordinate the exchange of information between the Federal Police and Security Forces for the generation of early warnings regarding the commission of environmental crimes;
- provide technical-administrative support for the operation of the Board and the supporting documentation related to the tasks accomplished in the field related hereto, and manage the appointment of representatives of the Federal Police and Security Forces that participate in the Board; and
- Analyze legal cases regarding environmental crimes to improve the procedures followed by the Federal Police and Security Forces.
The Resolution authorizes the Secretary of Security and Criminal Policy to appoint the head of the Unit, who will oversee the Board. Likewise, it provides that the Unit will convene the Board to hold periodic meetings to fulfil its goals.
B. Creation of the Environmental Crime Assessment Board (the “Board”)
The Board -created within the scope of the Undersecretariat for Criminal Investigation and Judicial Cooperation- is meant to detecting and preventing environmental crimes -as well as other close related crimes that concur with the main crime foreseen and punishable by the Penal Code of the Argentine Nation (Código Penal de la Nación Argentina)-, for a comprehensive approach to the investigation.
The Board will be composed of representatives of the Unit, the National Criminal Investigation Directorate, the Federal Crime Investigation Directorate, the National Criminal Intelligence Directorate, the environmental divisions of the Argentine Federal Police, Argentine National Gendarmerie, Naval Prefecture Argentina and Airport Security Police, and all other personnel from federal, national or provincial entities and/or civil society organizations competent in environmental matters.
For additional information, please contact Nicolás Eliaschev, Pablo Arrascaeta, María Eugenia Muñoz and/or Rocío Valdez.
Regulation of Distributed Generation Law of the Province of Buenos Aires
On January 11, 2022, Decree No. 2371/2022, complementary of Law No. 15,325 of the Province of Buenos Aires (the “Decree”), was published in the Official Gazette of the Province of Buenos Aires. Following the publication of the Decree, User-Generators of the Province of Buenos Aires, authorized to generate energy from renewable sources for self-consumption, may register in the Registry of Users-Generators of Renewable Energy of the Province of Buenos Aires (the “RUGER”, for its Spanish acronym, Registro de Usuarios-Generadores de Energía Renovable de la provincia de Buenos Aires) and benefit from tax exemptions related to Stamp Tax and Gross Income of such Province.
I. Legal Background
Law No. 27,424, passed by the National Congress on November 30, 2017, approved the federal regime that promotes distributed generation of renewable energy integrated into the public electricity grid (for additional information on Law No. 27,424, please see https://www.trsym.com/renewable-energy-regulation-of-distributed-generation-law-no-27424/?lang=en). Article 40 invites the provinces and the City of Buenos Aires to adhere to such law and pass any specific regulation.
Within such framework, Law No. 15,325, passed by the Congress of the Province of Buenos Aires on April 21, 2022, adhered to Law No. 27,424.
Law No. 15,325 declares of provincial interest distributed generation renewable energy generation, for self-consumption and eventual injection of energy surplus into the provincial grid.
Furthermore, by Law No. 15,325, the Province of Buenos Aires adheres to the promotional, tax, fiscal and financing benefits scheme set forth by Law No. 27,424.
II. Relevant aspects of the Decree
The most relevant aspects of the Decree are described below:
a. Enforcement authority
The Decree designates the Ministry of Infrastructure and Public Services (or any legal successor thereto) as the enforcement authority of Law No. 15,325. The enforcement authority will determine the technical, legal, economic, contractual, rate terms, and all other necessary matters that are necessary to allow the application of the distributed energy generation scheme in the Province of Buenos Aires.
Likewise, the enforcement authority is entrusted to enter into agreements with the Bank of the Province of Buenos Aires (Banco de la Provincia de Buenos Aires) to offer special promotional credit lines.
b. Definition of User-Generator
“User-Generator” is defined as the user of the public electricity distribution service of provincial or municipal distributors that installs renewable generation equipment for self-use, that may inject any surplus thereof to the grid, and meets the technical requirements determined by the enforcement authority. Large Users or self-generators of the Wholesale Electricity Market (WEM) are not included, as they are ruled by Law No. 27,424.
c. Creation of RUGER and issuance of a tax exemption certificate
The Decree creates the RUGER. The RUGER will be implemented for the registration of User-Generators, as determined by the enforcement authority, through the organization of a data base that enables access to the provincial tax exemptions established by Law No. 15,325 and special credit lines, as well as any other benefit or tax incentive that may be foreseen in the future.
For the purposes of processing the provincial tax exemptions set forth in article 4 of Law No. 15,325, the RUGER will issue a User-Generator certificate. In addition, the RUGER will notify ARBA of any certificate that is issued and receives from User-Generators, under the concession area of federal jurisdiction. Such certificate must contain surname and name, or company name, tax id (CUIT), NIS, address, code of the activity included in that benefit (according to the corresponding Nomenclator of Activities of the Tax on Gross Income, of NAIIB 18 approved by ARBA) or their equivalents codes under the Nomenclator of Economic Activities of the Federal Collection System (NAES) of the Arbitration Commission of the Multilateral Agreement (Comisión Arbitral del Convenio Multilateral), details of the respective exemption and term for which it is granted.
d. Taxes for which the exemption is granted and term
User-Generators registered under the RUGER are exempted from the following taxes for a period of twelve (12) years:
- Stamp tax: only applies to the power purchase agreements entered into by the distributor and the User-Generator, as long as the latter is registered in the RUGER, and such inscription is detailed in that agreement; and
- Tax on Gross Income: with respect to the injection of surplus renewable energy into the distribution network by the User-Generator.
For additional information, please contact Nicolás Eliaschev, Javier Constanzó and/or Rocío Valdez.
New resolution of the Ministry of Environment and Sustainable Development
On November 14, 2022, Resolution 503/2022 of the Ministry of Environment and Sustainable Development (hereinafter, "Resolution 503" and "the Ministry", respectively) was published. This Resolution established the guidelines and minimum contents of the plans for the reconversion of the productive processes that use mercury.
I.- Legal Background
Prior to the entry into force of the Resolution, the regulation in Argentina was governed by: (i) the Minamata Convention on Mercury (the "Convention") and (ii) Resolution No. 299/2021.
The Convention regulates the use of mercury in production processes and the manufacture of mercury-added products and its exceptions and exemptions. In terms of exemptions, Argentina has two registered exemptions, for the production process of chlor-alkali and the manufacture of mercury thermometers.
Resolution No. 299/2021 established the guidelines for the management of elemental mercury, and its mixtures and compounds, as well as mercury-added products. This resolution established the procedure for requesting exemptions for the production process of chlor-alkali or the manufacture of mercury thermometers exclusively. It also established the need to submit a productive process reconversion plan as one of the requirements to obtain the exemption.
II.- Resolution No. 503/2022
Scope:
The Resolution seeks to establish the guidelines for the reconversion plans and to comply with the environmentally rational management of mercury, under the obligations arising from the Convention. Accordingly, it defines the " Reconversion Plan" as the schedule of activities to be carried out in an industrial establishment that uses mercury in its production or manufacturing process, aimed at the replacement and implementation of mercury-free technology.
For the drafting and filing of the Reconversion Plan, the following information must be included, at least:
- (a) Location of the facility.
- (b) Identification of the personnel involved and responsible for the conversion tasks.
- (c) Technical report and description of the technology currently used.
- (d) Technical report and description of the technology to be used for the reconversion.
- (e) Description of waste management, including storage, transportation, final disposal, treatment, labeling, and disposal.
- (f) Evaluation of environmental, social, and economic impacts.
- (g) Work schedule with a framework of all the stages of the proposed reclamation and the monitoring for its compliance, including the safety measures and contingency plans for the execution of the activities.
Enforcement Authority:
The Enforcement Authority of the Resolution is the Secretariat of Environmental Control and Monitoring of the Ministry of Environment and Sustainable Development. As enforcement authority, it may carry out inspections of industrial establishments and request the information and documentation it deems necessary to ensure compliance with the Resolution.
The National Directorate of Hazardous Substances and Waste is the competent authority to evaluate, approve and monitor compliance with the plans for the reconversion of production processes that use mercury.
Approval:
The Reconversion Plan must be submitted to the National Directorate of Hazardous Substances and Waste for approval. The Reconversion Plan will be approved together with the requested exemption according to Resolution MAyDS No. 299/21. Upon approval of the Reconversion Plan, a Certificate of Compliance of the Reconversion Plan under the Minamata Convention on Mercury will be issued, in accordance with the Resolution's Sec. 4.
The Resolution establishes as a prior condition for the approval of the Reclamation Plan that: (i) the Annual Environmental Certificate must be in force and (ii) the provisions of Law No. 24,051 and its Regulatory Decree 831 of April 23, 1993, and complementary regulations must be complied with.
Non-compliance:
In case of non-compliance with the obligations assumed in the Reconversion Plan, and once the term of the notice of compliance has expired, the approval of the reconversion plan will automatically expire thus generating the loss of the exemption regime and all the benefits obtained by the owner of the establishment due to its compliance with this regime.
The Resolution became effective as from 11/14/2022.
For further information or questions on these issues, please contact Dolores Reyes, Pablo Arrascaeta, and/or Marcos Moreno Hueyo.
Modifications to the Environmental Management System (EMS) regulations for agents of the Wholesale Electricity Market
On November 7, 2022, Resolution 558/2022 of the Ente Nacional Regulador de la Electricidad (hereinafter, "Resolution 558" and "ENRE", respectively) was published. The aim of this Resolution is to create new obligations related to environmental management for generating agents, self-generators, co-generators, transporters of electricity in high voltage, by trunk distribution, international interconnection, and distributors of electricity under federal jurisdiction of the Wholesale Electricity Market ("MEM"), all of them, hereinafter, the "Agents".
Resolution 558 also repealed numerous resolutions that established obligations related to environmental management and the submission of information.
i. The new obligations established by Resolution 558
Under Resolution 558, Agents must prepare, implement, and certify an Environmental Management System ("EMS") for the facilities under their responsibility. Likewise, the Agents' Environmental Plans must comply with the guidelines and requirements established in the resolution.
Failure to comply with the obligations set forth in Resolution 558 shall subject the Agents to the sanctions and penalties set forth in the respective Concession Agreements or in Article 77 of Law No. 24,065 (such as fines, disqualification, suspension, etc.), as applicable.
ii. Incorporation of alternative mechanisms for compliance with certain obligations derived from Resolution 558
Resolution 558 also establishes two alternative procedures, depending on the type of Agent involved, for compliance with certain obligations
Firstly, Resolution 558 provides an alternative procedure for the following agents (i) responsible for photovoltaic solar parks or solar thermoelectric power plants, whose facilities have an Environmental Complexity Level (hereinafter, "ECL") lower than 14.5 points; (ii) Agents responsible for wind farms, whose facilities have an ECL lower than 14.5 points; (iii) Agents responsible for thermal power plants with an installed capacity of less than or equal to 2 MW, consisting of a unit or combination of generation units equipped with internal combustion engines or gas turbines, which consume any type of fuel and whose facilities have an ECL of less than 14.5 points; (iv) Agents responsible for thermal power plants larger than 2 MW and less than or equal to 50 MW of installed power.
Secondly, Resolution 558 creates an alternative procedure for Agents responsible for hydroelectric exploitation of public watercourses when the normal power to be granted exceeds 500 kV.
iii. Additional remarks
As an additional aspect, Resolution 558 delegates to the head of the Public and Environmental Safety Area ("ASPA") of the ENRE the necessary powers for the effective implementation of this resolution.
For further information, please contact either Nicolás Eliaschev, María Eugenia Muñoz, Pablo Arrascaeta y/o Luciana Tapia Rattaro.
EOI request for renewable energy and storage infrastructure projects
On May 9th, 2022, Resolution 330/2022 (“Resolution 330”) was published in the Official Gazette. This resolution launched an EOI request for development of certain energy projects which include renewables and, for the first-time at the utility scale level, storage.
1. Context and importance
The goal stated by Resolution 330 is to contribute to improve sustainability and reliability in the electricity sector within the Paris Agreement and local renewable portfolio standards which further implies:
- A ratification of the commitment by the Republic of Argentina towards fighting climate change and the promoting renewables.
- The first-time that storage is considered as a technology solution at the utility scale level. While preliminary and too early in the process this has game-changing potential.
2. EOI scope
The EOI includes two main types of projects:
- Renewables
- Battery installation and/or other storage systems in renewable power plants and/or at transmission interconnection points or distribution networks that improve operational management and reduce forced generation.
The EOI does not require an interested party to be an existing player in the Argentine power market to submit a proposal.
3. Formalities
The EOI presentation must be filed digitally by June 30th, 2022. The presentation must be sent to an email to be timely informed by CAMMESA (the Argentinean ISO).
Also, the EOI must include the following information:
- Address, telephone, email, and contact person.
- Brief description of the interested party. Background in similar projects if any.
- Description of the preliminary project, including technology, capacity, location, interconnection point, biomass fuel (if applicable) and any other relevant information.
- Indicative cost and compensation.
For further information, please contact either Nicolás Eliaschev, Tomás Villaflor or Luciana Tapia Rattaro.
Expansion of Natural Gas Transport Capacity
On February 14th, 2022, Decree No. 76/2022 (“Decree 76”) was published in the Official Gazzette. The aim of the Decree is to regulate the “Transport.Ar National Production” Program (“Transport.Ar Program”) for the construction and expansion of several natural gas pipelines established by the Secretary of Energy through Resolution No. 67/2022 (“Resolution 67”).
Pursuant to its provisions, Decree 76:
- Entrusts the state-owned company Integración Energética Argentina S.A. (“IEASA”) to build and operate and new pipeline which would enable to expand of transport capacity from the Vaca Muerta reservoir.
- Regulates the Transport.Ar Program established by Resolution 67.
- Incorporates a trust fund -Argentine Gas Development Fund (“FONDESGAS”, for its acronym in Spanish)- to manage investments and raise debt to fund the works.
1. IEASA transport concession
Decree 76 grants a hydrocarbon transport concession to IEASA concerning a new natural gas pipeline to be built which would enable to significantly expand transport capacity from the Vaca Muerta reservoir (the “Pipeline”).
The concession is granted for a period of thirty-five (35) years, which may be extended according to current regulations.
Additionally, the rates related to the transport capacity agreed regarding the Pipeline will be determined by Gas Regulatory Authority (“ENARGAS” for its acronym in Spanish).
However, to achieve the construction of the gas pipeline expansion, the Decree also allows IEASA to execute any contract related to the transport capacity with producers or users. The rates of those contracts will not be regulated by ENARGAS.
2. Transport Capacity Priority
The Decree 76 awards priority for the resulting expanded transport capacity to the partially state-owned company Yacimientos Petrolíferos Fiscales S.A. (“YPF”).
Nonetheless, regarding the non-contracted transport capacity, IEASA must provide access to third parties.
3. Incorporation of FONDESGAS
To manage investments under the Transport.Ar Program, the Decree 76 creates the Argentine Gas Development Fund (FONDESGAS). The fund is entitled to issue debt instruments and participation certificates to fund the Pipeline construction.
For further information, please contact either Marcelo Tavarone, Nicolás Eliaschev, Tomás Villaflor or Luciana Tapia Rattaro.
Recent Developments in Renewables and Natural Gas in Argentina
In the past few months, certain regulations have been adopted by the Secretary of Energy (“SE”) dealing with renewables and natural gas transport.
Below is a brief summary of such resolutions.
1. New conditions for termination and amendment of PPA under the RenovAr Program
On December 27th, 2021, the SE issued the Resolution No. 1260/2021 (the “Resolution 1260”), which provide opportunities for projects companies to terminate or amend power purchase agreements executed under the RenovAr Program (“PPA”).
The goal of Resolution 1260 is, on one hand, to facilitate exit for projects which have not been built, in order to regain transmission capacity. This should enable additional transmission capacity to be freed-up for the corporate PPA market.
On the other hand, Resolution 1260 allows project companies to request an extension of three hundred and sixty-five days to reach the commercial operation date (“COD”), subject to the fulfilment of certain requirements (such as a reduction of both supply period and price).
2. Amendments to regulations in the Renewable Energy Term Market (Corporate PPA Market)
On January 21st, 2022, the SE issued Resolution No. 14/2022 (“Resolution 14”) which amends certain regulations applicable to the Renewable Energy Term Market established by Resolution No. 281/2017 as amended.
Essentially, Resolution 14:
- Simplifies the tie-break mechanism for dispatch priority awarding by removing tie-break for commercial operation term, dispatch factor, tax benefits and toss. Resolution 14 adds the submission of a Magnification Factor successively until tie-break is reached as only requirement and proceeding.
- Establishes restrictions for those projects which do not comply with the payment of dispatch priority maintenance charges or with terms proposed for COD.
This regulation is regarded as a way of further accelerating development in the corporate PPA market which currently has projects under commercial operation for nearly 900 MW and projects approved during 2021 for an additional 467 MW and a strong interest of large consumers in expanding electricity procurement needs from renewables.
3. Expansion of the Natural Gas Transport System
On February 9th, 2022, the SE enacted Resolution No. 67/2022 (“Resolution 67”), which creates the “Transport.Ar National Production” program (“Transport.Ar Program”) for the construction and expansion of several natural gas pipelines, including new facilities as well as upgrades of existing facilities.
Resolution 67 entrusts the state-owned company Integración Energética Argentina S.A. (“IEASA”) with the construction and expansion of the pipelines indicated therein, which may be executed by IEASA itself or awarded to other companies.
Strong priority is given to the construction of a new pipeline which would enable to significantly expand transport capacity from the Vaca Muerta reservoir.
Further details regarding construction and funding of this infrastructure are pending and expected to be known soon.
For further information, please contact either Nicolás Eliaschev or Tomás Villaflor.
Amendments to Resolution No. 285/2018 of the former Ministry of Energy and Mining: COD Extension and reduction of penalties for RenovAr projects
On August 3rd, 2021, the Secretary of Energy issued Resolution No. 742/2021 (“Resolution 742”), which partially amended Resolution No. 285/2018 of the former Ministry of Energy and Mining (“Resolution 285”).
1. Main outlines of Resolution 285
Resolution 285, now modified by Resolution 742, allowed generators under RenovAr 1, 1.5 and 2 to defer Commercial Operation Date (“COD”) under their Power Purchase Agreement (“PPA”) for up to 180 days.
In addition, Resolution 285 also allowed generators to pay penalties for late COD in 12 or 48 monthly installments.
2. Context in which Resolutions 285 and 742 are enacted
Resolution 742 continues the path lay out by Resolution 285 as it is issued to allow the execution and operation of projects under RenovAr 1, 1.5, 2, 3, and Resolution No. 202/2016 of the former Ministry of Energy and Mining which have suffered delays in achieving COD.
Accordingly, Resolution 742 purported purpose is to enhance further investment in the renewable sector by providing certain relief to the projects comprised in said resolution.
Furthermore, both resolutions are issued under the scope of the Laws No. 26,191 and 27,191. Such laws aim to increase to twenty percent (20%) by 2025 the total domestic demand of renewable energy, by mandating that a portion of the country’s electricity consumption must be sourced from renewable energy.
3. Resolution 742 key takeaways
Key takeaways of Resolution 742 are:
- Option to extend the additional term provided by Resolution 285 to achieve COD in 360 days.
- Right to adhere to the terms of Resolution 285 (as amended by Resolution 742) at generator’s option.
- Reduction of penalties fines based on the progress of the project’s works or, in the case of projects that have already achieved COD, with a delay greater than 180 days, such reduction is of 70%.
- CAP to the penalties which may be offset from the PPA, amount which shall not exceed 40% of the monthly revenues.
Below is a comparison between the most significant aspects of Resolution 285 and Resolution 742.
Also, we detail certain maters introduced by the Resolution 742 which were not foreseen in Resolution 285.
Finally, we single out certain aspects of Resolution 742 which should be further clarified.
| Issue | Resolution 285 | Resolution 742 |
|---|---|---|
| Payment of penalties | Penalties payable in 12 or up to 48 equal, consecutive, monthly installments. In the latter, an annual interest rate of 1.7% is applied. | Penalties still can be paid in 12 or up to 48 equal, consecutive, monthly installments. However, in the latter, Resolution 742 caps the monthly penalty in an amount no greater than 40% of the monthly revenue under the PPA. The unpaid balance will be offset until the total is completed, under this methodology. The purpose of this clause is to ensure generation plants maintenance and to avoid a penalty deduction greater than the monthly remuneration. |
| Extension of COD | COD extension up to 180 days. | COD extension up to 360 days, if the following criteria is met: (i) evidences that the Project has been executed in a percentage equal or greater to seventy percent (70%) an increase of the Contract Performance Guarantee; or (ii) the compliance bond has been increased or is increased in 30%. |
| Additional changes | Resolution 285 provided that for the application of a daily penalty a rate of US$1,388/MW. Nonetheless, this fine could be reduced evidencing certain progress of the project. | Article 3 bis is incorporated, which establishes: (a) Projects that have achieved COD: Those that (x) reached COD, (y) with a delay of more than 180 days, and (z) that have not requested the application of Resolution 285, may postpone COD in 360 days. In this case, a reduction of penalties in 70% is foreseen. (b) Projects that have not reached COD: Those that (x) have not reached COD, (y) did not requested the application of Resolution 285, and (z) adhere to Resolution 742; must replace the compliance bond with a bank guarantee, payable upon demand, which shall also contemplate any prior increase which may be due. In this case, it is provided that, during the additional 360 days extension period of COD, the daily fine will be equivalent to the daily fine established in Clause 13.2. (a) or 13.1, accordingly. Such fine may be reduced based on the progress of the project. |
4. Other relevant matters
Generators adhering to Resolution 742 are required to waive any prior or future administrative, judicial, administrative, or arbitral claims against the National Government, the Secretary of Energy or CAMMESA in the Argentine Republic, whether in Argentina or abroad.
If adhering to Resolution 742, generators shall manifest so in writing to CAMMESA and submit such waiver within 30 business days.
5. Matters which should be further clarified
The following matters are singled out which, from our perspective, are not entirely clear and should be further clarified.
Resolution 742 does not state whether the eventual reduction of the penalties fines up to 70% is for the entire fine accrued, or for the balance not yet accrued or unpaid.
Resolution 742 does not indicate whether the replacement of the compliance bond for a bank guarantee is for the projects covered by article 3 bis, second paragraph solely (projects without COD, which have not yet adhered to Resolution 285) or for all projects comprehended by Resolution 742.
Finally, in relation to the compliance bond increase, required by articles 3 a) (ii) and 3 b) to admit the extension of the COD, is not specified whether such increase should be for the original guarantee or for the replaced guarantee (bank guarantee).
For further information, please contact either Nicolás Eliaschev, Javier Constanzó, or Daiana Perrone.