Relevant News on the Renewable Energy Sector

On July 11th, 2019, Decree No. 476 (the “Decree”) of the National Executive was published in the Official Gazette, with relevant news regarding the renewable energy regime.

The Decree has partially amended Decree No. 531/2016 (regulating) Laws No. 26,190 and No. 27,191. Most relevant aspects of the Decree are summarized below:

  1. Simplification of the process to obtain the Inclusion Certificate

The Secretary of Government of Energy—in its capacity as enforcement authority of the renewable energy regime—is empowered to: (i) analyze and approve the renewable projects that may apply for the Inclusion Certificate; and (ii) grant, to each of the approved projects, amounts requested as tax benefits, without the prior intervention of the Secretary of Treasury. In addition, the Decree eliminates the Ministry of Treasury’s intervention which is now no longer required.

  1. Execution of Power Purchase Agreements (“PPAs”) with public-owned entities

The Decree entitles CAMMESA (Wholesale Electric Market Management Company) to enter into PPAs with public-owned entities (either national, provincial and/or City of Buenos Aires’ owned). Prior the Decree, such entities were allowed to execute PPAs with CAMMESA insofar they participated in public tender procedures. The Decree now allows them to execute PPAs without participating in those procedures, to the extent that the following requirements are met: (i) the generation facility is owned by such public entities; (ii) those projects are able to access better financing conditions in comparison with the ones that the Federal or Provincial State could access to; and (iii) the investment projects have a relevant impact in local development.

Assignment, transfer or subcontracting of the PPAs are forbidden.

The agreed price under the PPA must be in line with those arising from public tendering called by the Secretary of Government of Energy, which implies that these agreements must be entered on a market condition basis.

As of this measure, public-owned entities are now eligible to enter into PPAs: (i) within the term market (approved by Resolution No. 281/17), and/or (ii) directly with CAMMESA, either directly (based on the Decree) or after being selected as such after a competitive procedure is carried out.

  1. Expectations for the Round 4 of the RenovAr Program

Senior officers of the Secretary of Government of Energy have announced that they are working in the design of the future Round 4 of the RenovAr Program, which is expected to be officially launched on November 2019.

Unlike the other rounds of the RenovAr Program, this new round is believed to require the bidders, in addition to their generation projects, the execution of works for the extension of the transmission capacity of some main lines of the Argentine electricity sector.

For further information, please do not hesitate to contact either Nicolás Eliaschev, Javier Constanzó or Juan Pablo Filippini.

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Vaca Muerta: The Contracting Process for the Construction of an Essential Natural Gas Pipeline has Begun

On July 10th, 2019, Decree No. 465 (the “Decree”), issued by President Macri, has been published in the Official Gazette. By means of the Decree, the Secretary of Government of Energy (the “SGE”) has been instructed to call a public national and international tender with the purpose of awarding a new natural gas transport license for a new facility. This new infrastructure project entails the design and construction of a natural gas pipeline that will connect the Neuquén’s Subzone with the cities of Salliqueló and San Nicolás, both located in the province of Buenos Aires.

Pursuant to the Decree, the new transport license shall include a special regime lasting 17 years as from commercial operation date. The main terms of this special regime are summarized below:

  1. The licensee’s remuneration shall be freely negotiated with the users of the gas pipeline;
  2. The licensee’s remuneration shall not impact in the natural gas residential end users’ rates;
  3. The terms and conditions of the tender to be called by the SGE shall provide a partial award of pipeline’s capacity. The remaining capacity shall be assigned through public tenders, in compliance with the applicable regulations.

Finally, the Decree provides that Law No. 24,076 -that rules natural gas’ transportation and distribution-, shall be the project’s legal framework, instead of the Law No. 17,319 -that recognizes the operating concessionaire’s right to transport its hydrocarbons-. However, as long as the special regime remains effective, Law No. 24,076, Title IX, Chapter I provisions to the extent they contradict the Decree, shall not be applicable.

For further information, please do not hesitate to contact either Nicolás Eliaschev, Javier Constanzó or Juan Pablo Filippini.

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20 Minute Insight

📺 👉🏼 Our partner Nicolás Eliaschev was interviewed by Jamie Dowswell, Programme Director of AIREC, about the outlook for Argentina's Renewable Energy Sector for this year.

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Regulatory Updates: New Terms and Conditions for Hydrocarbon Transport Concession's Public Tendering

On July 1st, 2019, Resolution No. 357 (the “Resolution”), issued by the Secretary of Government of Energy (the “SGE”), has been published in the Official Gazette, with important implications in regards to public tendering procedures which shall be carried out in order to grant concessions for hydrocarbon’s transportation. Tenders of this nature may rely on project’s submitted by private entities, as further described below.

Pursuant to Annex I of the Resolution, those tenders may comprise:

  1. Concessions for hydrocarbon’s transportation, which have been reverted from the former concessionaire to the pertaining governmental body or entity.
  2. Projects submitted by private entities, which shall contain minimum standards such as a general description of the project’s nature and aspects involved in its execution, land matters, etc.
  3. New hydrocarbon transportation projects required to satisfy demands of the users.

The Resolution also foresees that all public tenders launched by the SGE in order to grant a hydrocarbon transport concession shall contain a bid document containing main terms and conditions of such competitive procedure.

In addition the Resolution further stipulates requires that all projects submitted by any private entity to the relevant governmental authorities must clearly specify land matters-related issues involved in such project.

The Resolution also authorizes foreign corporations (not registered in Argentina’s registries of commerce as of the date on which the Resolution is issued) to submit proposals of this nature for purposes of being evaluated and subject to a public tendering thereafter. However, foreign entities are bound to register before the mentioned registries’, to the extent that their proposal is admitted and prior to the public tender being issued.

Furthermore, the Resolution indicates that the governmental authorities shall provide their ruling regarding project’s feasibility no later than thirty (30) business days from the project being submitted thereof.

Finally, the Resolution requires prior registration of the interested companies before the Hydrocarbon Transport Registry for their participation in the public tenders.

For further information, please do not hesitate to contact either Nicolás Eliaschev or Javier Constanzó.

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New works and expansion of existing infrastructure – Neuquén basin gas pipeline and PPP Power transmission

On March 8, 2019, two resolutions issued by the Secretary of Government of Energy (the “SGE”), containing relevant rules in connection with infrastructure works of the electricity and gas industries, were published in the Official Gazette:

(1) Resolution SGE No. 81/2019 (“Resolution 81”), related to the construction and further operation of the 500-kV high-voltage line, the future substations Río Diamante and Charlone, and complementary works, under a public-private partnership structure (“PPP”). By means of this Resolution 81, call for bids set out in 2018 have been relaunched; and

(2) Resolution SGE No. 82/2019 (“Resolution 82”), related to the construction of a new gas pipeline or the significant expansion of existing transport capacity for the transportation of natural gas produced in the Neuquén basin towards the metropolitan area of the province of Buenos Aires.

The most relevant aspects of both resolutions are summarized below:
 

  • Resolution SGE No. 81/2019 – PPP Power transmission works

    Resolution 81 calls for a two-stage national and international tender procedure for the construction and further of the 500-kV high-voltage line, the future substations Río Diamante and Charlone, and complementary works.

    Such works also comprise the electrical interconnection in 500-kV of the future substations Río Diamante, Charlone, and complementary works, as well as operation and maintenance of these facilities.

    The tender’s terms and conditions and its annexes are published on the website of the Undersecretary of Public-Private Partnership, together with the rest of the preliminary tender documents.

    The most important dates to keep in mind are:

    Date and time Activity
    May 10, 2019 Public consultation period due date
    May 27, 2019 Deadline for bids
    June 27, 2019 Publication of the Prequalification Ruling (Dictamen de Evaluación de Precalificación)
    July 2, 2019 Opening of envelope no. 2
    July 10, 2019 Publication of the Economic Offers’ Evaluation Ruling (Dictamen de Evaluación de las Ofertas Económicas)
    July 12, 2019 Resolution awarding PPP Contract
    August 14, 2019 Due date for PPP Contract execution

    •  

  • Resolution SGE No. 82/2019 – Vaca Muerta gas pipeline

    Resolution 82 calls for expressions of interest in connection with: (i) the construction of a new gas pipeline; or (ii) the development of a significant expansion of the current transport capacity.

    Expressions of interests aim to enhance transportation of natural gas produced in the Neuquén basin towards the metropolitan area of the province of Buenos Aires and the littoral area.

    Interested parties in participating in this procedure shall submit their expressions of interest no later than April 8, 2019.

    1. Scope

      With respect to the construction of a new transport system, a public tender procedure for the construction, operation and maintenance of the new infrastructure shall be called on a later stage.

      Capacity expansions of one or all existing transport systems shall be authorized in accordance with section 16 of law No. 24.076. Expansions which generate an additional capacity of 10 MMm3/d shall be considered as “significant expansions”.

      In all scenarios a technical description of the proposed project shall be issued. Such description must include the necessary works, design, nominal transport capacity to be added and construction and launch dates. Moreover, information to evaluate the potential demand associated to the project shall be issued.

    2. Rate structure

      Interest parties may propose a rate scheme applicable for the new facilities.

      For expansions, criteria set forth in Resolution No. 1483 issued by the Ente Nacional Regulador del Gas (ENARGAS) shall be applicable (incremental cost criteria).

    3. Access to the facilities by third parties

      Open access and no third-party discrimination shall be applicable. Moreover, long-term agreements with parties acting as gas traders may be executed, in the event that the proposed rate scheme requires so.

 
Desde TRSyM, estamos siguiendo este proceso con mucha atención y estamos a disposición para ampliar cualquiera de los puntos aquí tratados.

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RenovAr 2 Program: Extension of intermediate milestones and COD

On February 19, 2019, Resolution No. 52/19 (hereinafter, the “Resolution”), issued by the Secretary of Government of Energy, has been published in the Official Gazette, with significant relevance towards Power Purchase Agreements (“PPA”) awarded under RenovAr 2.

This Resolution states the goal to facilitate the construction and successful commercial operation date (“COD”) of all projects acting within RenovAr 2, and therefore allows for extension of dates committed under the PPA (intermediate milestones and COD) insofar certain conditions are met, as further detailed below.

In order to apply for an extension of intermediate milestones, pertaining filings before the relevant authorities must be performed no later than April 30, 2019. COD extension shall be requested 15 business days in advance as from the original date committed for such milestone.

Below you may find an outline of most relevant aspects set forth in the Resolution:
 
1) Extension of PPA intermediate milestones

Upon the issuance of this Resolution, owners of RenovAr 2 projects may require an extension of 180 days of each intermediate milestone under the PPA.

Said extension of time sets forth a mandatory prior increase of the PPA Compliance Bond in force at that time, on an amount equal to thirty percent (30%) of the guarantee’s original amount. Should prior increases have been performed, the guarantee may be reduced up to the original amount plus such thirty percent (30%).

The Resolution also foresees that if such intermediate milestone elapses (including 180 day-extension) the guarantee shall also be increased in a twenty percent (20%) per milestone, over the guaranteed amount at such time.

Filings in order to apply for these extensions must be performed no later than April 30, 2019, while the increase of the compliance bond shall be in place before the execution of the relevant addendum of the PPA.
 
2) Extension of COD

COD may also be extended pursuant to the terms of this Resolution, for a maximum term of three hundred and sixty-five (365) days further to the original date committed for such milestone. Two of the following three conditions shall be met in order to benefit from an extension in COD:

  1. Achieve thirty percent (30%) of Stated Local Content (“SLC”). This condition shall be considered as fulfilled for those projects that have already committed, at least, said percentage of SLC under their PPAs. Penalties equal to forty per cent (40%) of the monthly billing under the PPA shall be applied for each percentage point of deficiency in the compliance with the SLC. Additionally, a reduction of the PPA’s term and of the Incentive Factor, in accordance with the conditions settled below, shall apply.
  2. Reduction of the PPA tenor: accept a proportional reduction of the PPA tenor equal to six times the amount of days that COD is extended (e.g. if the new COD is 360 days after original COD was committed, PPA should be reduced in almost six years).
  3. Reduction of the Incentive Factor in accordance to the formula set out therein

If COD has yet not been achieved (as this date may be extended pursuant to the above), the PPA’s cure period of one hundred and eighty (180) days shall apply (notwithstanding the obligation of paying penalties under the PPA). In case the project does not achieve its COD within said cure period, an additional cure period of extra one hundred and eighty (180) days will be applicable in accordance to Resolution No. 285/18.

COD extension must be requested fifteen (15) business days in advance of the original COD before CAMMESA. For those projects which COD is on or before March 15 2019, the referred filing shall be performed no later than March 29, 2019.
 
3) Execution of pending PPAs

Finally, the Resolution foresees, for those RenovAr 2 projects that have not yet executed their PPAs, the possibility to do so. Two of the following three conditions must be selected:

  1. Achieve thirty percent (30%) of SLC. Penalties equal to fifty per cent (50%) of the monthly billing under the PPA shall applied for each percentage point of deficiency in the compliance with the SLC. Additionally, a reduction of the PPA’s term and of the Incentive Factor, in accordance with the conditions settled below, shall apply.
  2. Reduction of the PPA tenor: in six (6) years, resulting in a new tenor of fourteen (14) years.
  3. Elimination of the Incentive Factor in accordance to the form settled by the Resolution.

The PPA’s execution shall be done on or before April 30, 2019 and it shall be requested before CAMMESA ten (10) business days in advance.

For these PPAs, intermediate milestones shall be calculated since June 1, 2018, notwithstanding IPPs right to request for an extension of these dates as described above.

Finally, the Resolutions enables to change the Strategic Partner under the PPA. Said change shall be requested fifteen (15) days in advance to April 30, 2019.

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Relevant News in Renewable Energies: Implementation of Distributed Generation Law No. 27,424

On December 21, 2018, Resolution No. 314/2018 (the “Resolution”) issued by the Secretary of Government of Energy (the “SGE”), under the Ministry of Treasury, was published in the Official Gazette of the Republic of Argentina.

The Resolution contains implementation rules of the Distributed Generation Law No. 27,424 (the “Law”) and its pertaining Decree No. 986/2018 (the “Decree”, and jointly with the Law and the Resolution, the “Distributed Energy Framework”).

Most relevant matters of the Resolution are outlined below:
 
1) Categories of users-generators and connection to the grid

The following categories of users-generators are contained in the Resolution:

  1. Small users-generators (UGpe, for its Spanish acronym): users connected to the distribution in low voltage, with an equipment of a nameplate capacity no greater than 3 kV.
  2. Medium users-generators (UGme, for its Spanish acronym): users connected to the distribution grid in low/medium voltage, with an equipment of a nameplate capacity comprised between 3 kV and 300 kV.
  3. Major users-generators (UGma, for its Spanish acronym): users connected to the distribution grid in low/medium voltage, with an equipment of a nameplate capacity comprised between 300 kW and 2 MW.

The Resolution also establishes that the equipment of any of the users-generators described above shall not exceed the total aggregate of 2 MW per each MW for each supply point and that such users are allowed to connect to the grid up to a nameplate capacity equivalent to the one actually contracted with the relevant distribution company (authorization of the pertaining regulatory agency is mandatory for greater installed capacity).

For those purposes, the procedure in order to connect to the grid will be carried out by means of a public access digital procedure, to be implemented by the Undersecretary of Renewable Energy (the “URE”).

Equipment already connected as of the date on which the Resolution is issued, must also follow the connection procedure to verify whether such equipment complies with legal and technical requirements set forth in the Distribution Energy Framework.
 
2) Distributed Generation Agreement

The distributed generation agreement will be entered by and between any of the user-generators described above and the relevant distribution company and shall become effective as of the date on which it is executed with no expiration date (except for those events allowing for termination, as further described below). This agreement will be ancillary in respect of the agreement already in place with the distributor.

Assignment of the distributed generation agreement is allowed upon prior consent of the distribution company.

Rights and obligations with respect of the user-generator and distribution company, as applicable, are foreseen in the Resolution, inter alia:

  1. distribution company’s right to verify compliance with the requirements set forth in the Distributed Energy Framework and to disconnect users-generators from the grid in case technical conditions are not complied with;
  2. distribution company’s obligation to purchase the electricity generated and injected to the grid by the user-generator;

  3. users-generators’ right to supply energy into the grid with no additional charges whatsoever; and
  4. user-generator’s ability to assign accumulated credits derived from surplus energy; accumulated credits by injected energy and receive payments from such credits.

Finally, the Resolution enables the pertaining distributor to suspend the distributed generator agreement should the user-generator fail to comply with the requirements set forth in the Distributed Energy Framework and in turn, terminate such agreement upon a material breach. Prior remedy stage and defense by the user-generator before the regulatory agency is foreseen.
 
3) Qualified Installer

Qualified installers shall verify that distributed generation systems comply with the requirements set forth in the Distributed Energy Framework. Professionals from different levels of education may participate as qualified installers and in order to act in such capacity, degree validated by the Ministry of Education, Culture, Science and Technology is required together with enrollment in the relevant professional association.
 
4) Payment structure

Payments under the Distributed Energy Framework shall be in accordance with the requirements set forth below:

  • At the end of each billing period, users-generators shall receive an invoice detailing their consumption and energy injected into the grid, expressed in kilowatt-hour (kWh) with the corresponding prices of each unit expressed in argentine pesos/kWh.
  • Energy injected to the grid shall be measured, registered and paid by distribution companies, which shall be duly reflected in the corresponding invoice.
  • No additional charges from the distribution companies allowed.
  • Should the energy injected into the grid be greater than the one consumed by the user-generator, the user-generator shall have a credit which will be taken into account for future billing periods.
  • Credits in favor of users-generators shall not expire and remain in the corresponding account until they are compensated.
  • Assignment of such credits to accounts of other users of the same distribution company shall be carried out in accordance with the procedure set forth by the corresponding regulatory agency.

 
5) Promotional Benefits

Promotional benefits shall be granted to users-generators acting under those jurisdictions which adhere to the Distributed Energy Framework. Local promotional benefits may also apply.
 
6) Pending Matters

Matters related to (i) the Distributed Generation Development Trust (Fondo Fiduciario para el Desarrollo de Generación Distribuida); (ii) the public access digital platform; (iii) the promotional benefits; and (iv) the fiscal credit certificates set forth in section 28 of the Law remain pending of implementation and are subject to future regulation by the URE.
 
At TRS&M we are available to provide clarifications or further information of any matter addressed above.

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RenovAr 3 program - MiniRen

On November 15, 2018, Resolution No. 100/2018 (hereinafter, the “Resolution”) issued by the Secretary of Government of Energy (the “SGE”) has been published in the Official Gazette.

By means of this Resolution, the SGE has launched RenovAr 3 program – MiniRen, addressed to small-medium renewable projects that, if selected as awardees, will enter into a long-term power purchase agreement (“PPA”) with the Wholesale Electric Market Management Company (“CAMMESA” for its Spanish acronym). The tender’s terms and conditions are also attached as Annex thereto.

An outline of the tender terms is summarized below:

Schedule • Consultation period: 14/11/2018 – 18/02/2019
• Bid submission: 27/03/2019
• First-stage qualification: 7/05/2019
• Selection of winners: 17/05/2019
• Execution of PPA: 20/05/2019 – 8/11/2019
Required Capacity by Technology • Wind/Solar PV: 350 MW
• Biomass: 25 MW
• Biogas: 10 MW
• Landfill Biogas: 5 MW
• Small Hydro (PAH): 10 MW
Requirements by Technology
Wind S.P. Biomass Biogas L.G. PAH
Minimum Capacity (MW) 0.5 0.5 0.5 0.5 0.5 0.5
Maximum Capacity (MW) 10 10 10 10 10 10
Maximum COD (days) 730 730 1095 1095 1095 1095
Maximum Price (USD/MWh) 60 60 110 160 130 105
Qualified Bidders • Natural persons or legal entities (onshore or offshore)
• Consortiums (“UTE” for its Spanish acronym)
• Trusts
PPA – Payment Priority and Dispatch Priority • 20-year term PPA as from COD. Generators are entitled to terminate the PPA for convenience upon the tenth (10) year anniversary with no associated penalties.
• The PPAs shall have the same payment priority that those PPAs under RenovAr 1, 1.5 and 2.
• No dispatch priority will be granted for RenovAr 3 projects.
Payment Guarantees – FODER • FODER shall provide a short-term guarantee backing up CAMMESA’s obligation to make payments under the PPA. Tenor of this guarantee shall be of ninety (90) days. Adhesion to the FODER by means of the execution of a FODER Adhesion Agreement is required.
• A USD 35,000,000 bank guarantee provided by the National Bank of Argentina and BICE also foreseen.
• No world bank guarantee contemplated.
Integrity Policy • Bidders shall provide an Integrity Policy Program in accordance with Law No. 27,401 of Corporate Criminal Liability.
Other relevant matters • Both trusts and consortiums are authorized to act as bidders.
• For wind and solar photovoltaic technologies, hybrid projects are allowed.
• A Technical Connection and Commercial Agreement Letter shall be executed with the Distribution Agent and, if applies, the Provider of the Technical Transmission Function (“PAFTT”).
• Except for the Province of Buenos Aires, a maximum capacity of 20 MW per province is foreseen.

At TRS&M we are available to provide clarifications or further information of any matter addressed above.

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Thermal Generation and Fuel Procurement: New and Most Relevant Regulation

On November 7, Resolution No. 70/2018 (hereinafter, the “Resolution”) issued by the Secretary of Government of Energy (the “SGE”) has been published in the Official Gazette, with relevant impact towards thermal generators, auto-generators and co-generators, acting within the wholesale electricity market (the “WEM” and “WEM Agents”, as the case may be), whereas by means of this Resolution, Resolution No. 95/13 issued by the former Secretary of Energy (“SE”) has been partially derogated, and therefore, WEM Agents are now entitled to procure their own fuel, whether by their own means or by private third-party fuel supply agreements.

After the enactment of Resolution SE 95/13, WEM Agents were required to receive supply directly from Wholesale Electric Market Management Company (“CAMMESA”, for its Spanish acronym, which acts an independent system operator or ISO), and generators were expected to receive sums arising only under the provisions of Resolution SE No. 95/2013.

By this Resolution that has been recently issued -with abrogating effects regarding Resolution SE 95/13 on fuel-supply matters- WEM Agents may now purchase the fuel that is necessary for their operations in such capacity-.

Because of this Resolution, CAMMESA has ceased to be the sole fuel-supplier of the WEM.

This is significant as the policy adopted by this Resolution is that the SGE has reinstated a fuel-supply market in Argentina, which is aligned with the foundations and criteria originally set forth in Law No. 24,065.

Please find below a brief summary of the Resolution, its relevance and associated business opportunities:
 
1. Partial abrogation of Resolution SE 95/2013

As indicated before, the Resolution abrogates former Resolution SE 95/2013 on matters regarding CAMMESA acting as sole supplier of the necessary for the WEM Agents’ operation. The former section of Resolution SE 95/13 established that fuel supply, operation and management of the WEM and dispatch of electricity were carried out solely by CAMMESA.

As of the date hereof and by means of this Resolution, WEM Agents may now procure their fuel without resorting to CAMMESA. Associated costs for self or third-party fuel supply will be calculated pursuant to CAMMESA’s variable-fee scheme.

The Resolution further states that CAMMESA shall remain as independent system operator and in charge of supplying fuel to those WEM Agents that do not (or may not) opt-out from CAMMESA’s sole-supply mechanism.

Complementary regulation is expected in the short term by the SGE -or lower-ranked authority depending from the SGE, addressing matters such as technical issues and the opt-out mechanism.

2. Business opportunities

As it is publicly known, hydrocarbon unconventional reservoirs, as Vaca Muerta have generated a big interest for investment.

Vaca Muerta is far yet from achieving its full potential despite notorious advances occurred recently. Analysts estimate that the production of natural gas will be further significantly increased. Such boost would enlarge natural gas supply and in turn, provide a proper environment for new investment and further business opportunities.

Enabling power generators to freely-negotiate the terms and conditions for their fuel-supply, without intervention from CAMMESA, together with growing natural gas production, certainly will enhance efficiency and competitiveness of the electricity markets.
 
At TRS&M we are available to provide clarifications or further information of any matter addressed above.

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Renewable Energy: Regulation of Distributed Generation Law No. 27,424

On November 1, 2018, Decree No. 986/2018 (the “Decree”) was published in the Official Gazette of the Republic of Argentina.

The Decree contains the applicable regulation of Law No. 27,424, which approved the Distributed Renewable Energy Generation Incentive Scheme (the “Law”), passed by the National Congress on November 2017.

The Law sets forth policies and contractual conditions applicable to the distributed renewable energy generation by distribution network users (which in turn are enabled to connect their small-scale renewable energy projects to the electricity grid for purposes of supplying power remainders) and declared this activity as of national interest. Moreover, the Law is also based on open access rules, whereby the distribution companies regulated as public utilities must provide open access to the systems operated by them in this regard.

The Decree establishes that measures implemented under the Law shall be oriented towards achieving a total installed capacity of one thousand megawatts (1,000 MW) on the twelfth- year anniversary as from the date on which the Decree becomes effective (year 2030).

The most relevant aspects of the Decree are summarized below:

1) Enforcement Authority

  • The Secretary of Government of Energy, under the Ministry of Treasury, is designated as the enforcement authority of the Law and the Decree (the “Enforcement Authority”), with faculties to issue clarifying and complementary regulations.
  • The Enforcement Authority shall: (a) provide technical requirements which users-generators must fulfill in order to generate electric energy for self-consumption and to inject surpluses to the distribution network, and (b) define the categories of users-generators according to technical parameters.
  • Further regulation containing safety and technical requirements, to be carried out by the distribution companies in order to enable connection to their grid, is differed to a later stage.
  • The Enforcement Authority will approve the terms and conditions of the renewable energy contract to be entered by and between the user-generators and distribution companies. Pursuant to the Decree, the Enforcement Authority shall define the Distributed Renewable Energy Generation Contract main terms and conditions.

2) Scope

  • Categories of user-generators shall be defined by the Enforcement Authority, based on power of contracted load and capacity of generation to be installed.
  • The way upon the user-generators will connect to the grid, as well as procedural steps including a special authorization, are deferred to further complementary regulation.

3) Connection authorization

  • In order to obtain a connection authorization, users willing to install a distributed generation equipment connected to the distribution network shall comply with the procedure to be approved by the Enforcement Authority.
  • Such procedure shall include -inter alia- the following steps:

    • Analysis of connection feasibility based on the distribution network and the characteristics of distributed generation equipment to be installed.
    • Verification of the installations.
    • Execution of a distributed electric energy generation agreement.
    • Set-up of smart-grid equipment.
    • Connection to the distribution network.
  • When the technical and security evaluation is approved, the user-generator and the distributing companies shall execute a distributed electric energy generation agreement.
  • Once such agreement is executed and the connection is allowed, the Enforcement Authority shall issue a certificate of compliance with applicable requirements and the date of connection to the bidirectional measuring equipment.

4) Invoicing system

The Decree sets forth a net balance invoicing system, whereby costs of consumed energy and produced energy are compensated between each other.

Each distribution company shall comply with the following:

  • Distributing companies shall buy and pay to user-generators all energy that may be injected to the distribution network generated by renewable sources.
  • The “Injection Rate” shall be the purchase price of electric energy, including the transmission rate of the Wholesale Electricity Market (the “WEM”).
  • This compensation shall be valued in Argentine pesos and included in the pertaining invoice.
  • If there are any surpluses in favor of user-generators, a credit for future invoices will be generated. If such credit remains, user-generators may request the distribution companies to compensate the remaining amounts. Distribution companies shall pay the remaining amounts in no less than two fixed annual payments.
  • Credits may be assigned by users connected to the same grid and may be allocated for tax benefit purposes.

5) FODIS

  • The Law creates a government-trust fund known as the Distributed Renewable Energy Generation Fund (the “FODIS”, for its Spanish acronym), which is regulated by the Law, the Decree, rules dictated by the Enforcement Authority, the trust agreement and further regulation. FODIS’ most relevant aspect are summarized below:
    • FODIS’ parties: the Enforcement Authority shall act as FODIS’ trustor. A public financial entity shall act as trustee.
    • FODIS’ beneficiaries: final beneficiaries shall be the owners of renewable energy generation projects as approved by the FODIS (the “Beneficiaries”).
    • Purpose:

      • The FODIS is entitled to grant non-fiscal incentives.
      • The FODIS may also grant other benefits–e.g., through bonuses in the capital cost for the acquisition of distributed generation equipment–.
      • Beneficiaries’ may also benefit from benefits granted by the FODIS, in their capacity of equipment supplier’s or services providers.
      • Equity contributions are enabled, as well as financing facilities.
    • Funding: the FODIS will be funded by means of:

      • Resources from the national budget, determined from time to time by the Enforcement Authority. In this matter, the Law has allocated the sum of Argentine Pesos five hundred million (AR$ 500,000,000) for 2018.
      • Capital reimbursements; interests, fines, charges, expenditures, administrative costs and any amounts which the FODIS is entitled to receive; rights, guarantees or insurance which the FODIS receives from the Beneficiaries or third parties.
    • Other issues: financing facilities shall be in accordance with requirements that will be determined by the FODIS. Interest rate for repayment may also be subject to a reduced rate.

6) Promotional regime

  • The granting of incentives shall be available to user-generators of jurisdictions which adhere to the Law and only if general, technical and security requirements are fulfilled.
  • The Enforcement Authority shall set forth the conditions and procedures which shall be fulfilled for the granting of incentives.
  • The Enforcement Authority shall set forth the procedure by which the Beneficiaries may request the fiscal credit certificate.
  • The Enforcement Authority and the Federal Bureau of Public Income (the “AFIP”, for its Spanish acronym) shall regulate further conditions in this regard.
  • The fiscal credit certificate shall not be designated to set off obligations arising from liability caused by third parties’ debts or from the acting of taxpayers as withholding agents.
  • Credits and other incentives of the Law may be granted during the twelve (12) year period as of the entry into force of the Decree.

7) FANSIGED:

  • The Ministry of Production and Work (the “MPyT”, for its Spanish acronym) shall set forth the requirements and technical regulations related to the Systems, Equipment and Inputs National Manufacturing Incentives Scheme (the “FANSIGED”, for its Spanish acronym).
  • Activities of technical assistance for the investigation and development of new prototypes of the addition of improvements in products design shall be considered activities of investigation, design and development and, consequently, shall be benefited by the FANSIGED.
  • The MPyT shall set forth requirements and procedures which interested parties shall comply with in order to receive incentives.
  • Micro, Small and Medium enterprises which comply with requirements set forth in the Law and which wish to adhere to the FANSIGED shall obtain a PyME Certificate and shall submit documentation which shows proof of turnover and shareholding structure of the corresponding company.

8) Tax incentives

The following incentives are included in the FANSIGED:

  • Fiscal certificate for the investment on investigation and development, design, capital assets and certificates for manufacturing companies. The procedure to obtain such certificate shall be jointly determined by the MPyT and the AFIP.
  • Accelerated depreciation in Income Tax, for the acquisition of capital assets for the manufacturing of equipment and supplies destined for the distributed renewable energy generation, except for automobiles, in the conditions which shall be set forth by the MPyT and the Ministry of Treasury.
  • VAT early reimbursement for the acquisition of assets mentioned in the immediately preceding section, pursuant to a procedure to be determined by the MPyT and the Ministry of Finance.
  • Access to financing with preferential rates, in accordance with regulation which the MPyT shall set forth.
  • Access to the Suppliers Developers Program, in accordance with regulation which the MPyT shall set forth.

9) Penalties

The Decree also sets forth that failure to comply with terms related to information and authorization requests, as well as to measuring systems installation and connection by user-generations, shall be penalized and shall result in a compensation in favor of the user-generator based on the penalties set forth by each regulatory authority.
 
Further steps regarding implementation of applicable procedures as well as other requirements mentioned above are due and expected to occur briefly.

At TRSyM we are available to provide clarifications or further information of any matter addressed above.

by trsym