News in the Upstream Sector: Subsidies to Oil Companies, Biofuel Producers and Provinces

On September 16th, 2019, Resolution No. 552/2019 issued by the Secretary of Governmental Energy (in Spanish, Secretaría de Gobierno de Energía and hereinafter, the “Resolution” and “SGE”, as applicable), under the Ministry of Treasury (in Spanish, Ministerio de Hacienda), was published in the Official Gazette. In summary, the Resolution has approved budgetary transferences in favor of: (i) oil producers, (ii) provinces which act as oil-concession grantors, and (iii) biofuel producers. As further explained below, the bill will be footed by the National Treasury throughout specific budgetary allocations in the 2019 budget law.

The Resolution is enacted in the context of Decree No. 566/2019 (as complemented by Decree No. 601/2019) which enforced fuel price caps by fixing crude prices for the local market until November 13, 2019 (90-day freeze), and by setting the Brent price of US$ 59/bl and currency exchange rate of AR$ 46.69 pesos per US$.

Most relevant aspects of the Resolution are singled out below:

  1. Amounts of the subsidies

Oil producers are entitled to receive subsidies in an amount of 116.10 pesos (approximately US$ 2.06 at the current exchange rate) per barrel delivered to the local market in the month of September pursuant to the following break-down: (i) 88% will be destined to the oil companies, whereas (ii) the remainder 12% to the oil-producing provinces acting as concession grantor.

With regards to biofuel producers which act as beneficiaries under regimes set forth in Laws No. 26,093 and 26,334, these will receive subsidies in an amount equal to 6% of the price established by the SGE for the month of August, to be applied for their local production corresponding to the month of September.

  1. Request by the companies and waivers to be performed

In order to benefit from the Resolution, oil producers as well as the provinces acting as grantors, are requested to waive any and all claims that that these may have regarding Decrees No. 566/19 and 601/19, whether administrative, judiciary and/or an arbitral proceeding, in Argentina or abroad.

Furthermore, such companies must also submit an affidavit providing specific indemnity provisions in favor of the Republic of Argentina against any and all local or foreign administrative, judiciary or arbitral proceedings that may be initiated by those companies, their shareholders, controlling entities and/or affiliates, regarding Decrees No. 566/19 and 601/19.

Waivers of that nature are also mandatory for biofuel producers.

  1. Enforcement authority and budgetary allocations

The Undersecretary of Hydrocarbons and Fuel of the SGE is entrusted with all actions that may be necessary in order to implement the Resolution, and also establishes that the amounts corresponding to the subsidies foreseen in the Resolution will be footed by Treasury funds of the SGE pursuant to the 2019 budget law.

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

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Natural gas exports on a firm basis to Chile

On August 21st, 2019, Disposition No. 168/2019 issued by the Under-Secretary of Hydrocarbons (the “Disposition” and the “Undersecretary”), which depends of the Ministry of Treasury, has been published in the Official Gazette. The Disposition has:

  1. Approved the terms and conditions applicable for gas exports on a firm basis to Chile (the “Regime”);
  2. Established that the Regime will be applicable for exports comprised within September 15th, 2019-March 15th, 2020 (the “Exports Period”);
  3. Determined a maximum capacity of ten million cubic meters (10,000,000 m3/d) for daily exports under the Regime; and
  4. Foreseen the Republic of Chile as destination of natural gas exports under the Regime, framed within the Economic Complementation Agreement executed between Argentina and Chile.

The Disposition has been issued within the framework of: (i) Resolution No. 104/2018 (“Resolution 104”) issued by the former Ministry of Energy, which foreseen the so-called “Authorization Procedure for Natural Gas Exports”, and (ii) Resolution No. 417/2019 (“Resolution 417”) issued by the Secretary of Governmental Energy (the “SGE”).

Resolution 417 defined the export methods available and in turn further delegated in the Undersecretary the implementation of the Energy Substitution Mechanism applicable to natural gas exports on a firm basis.

Since the issuance of the Disposition, applicants willing to export gas under the Regime shall comply with the provisions set forth in Resolutions 104 and 417, and the Disposition, which most relevant aspects are outlined below.

Moreover, the Disposition also contains the necessary guidelines for the Energy Substitution Mechanisms applicable to exports under the Regime.

Finally, the Disposition establishes September 6th, 2019 as deadline for submission of applications.

  1. Scope

As indicated before, the Disposition approves the natural gas exports on a firm basis procedure, for the Exports Period, to the Republic of Chile.

  1. Available volumes to export scheduled by exploitation zone
Zones Available Volume Export Pipeline
Northwest 1 MMm3/d Norandino and Atacama
Central - west 6,5 MMm3/d GasAndes and Pacífico
South 2,5 MMm3/d Methanex
  1. Applicable procedure

The authorization for gas export will be granted by the Undersecretary which shall analyze whether the applicants comply with the requirements established in the Disposition and Resolutions No. 104 and 417. For those purposes, applicants must verify all requirements mandated in the aforementioned regulations and the procedure established in the annex attached to the Disposition.

Should the applicant already have a prior authorization for the Exports Period but not on a firm basis, such authorization may be converted into a firm one, either partially or totally.

The application must be submitted through an online platform named “Plataforma de Trámites a Distancia” (TAD) and comply with the following requirements:

(i) File a summary of the envisaged operation which includes: (a) the source and destination of the exported gas; (b) daily and total, maximum and scheduled volume quantities; (c) projected price in the node on which the gas is delivered into the transportation grid and adjustment formula, if applicable; (d) tenor of the exports; (e) export nodes on which the gas will be exported outside Argentina into Chile; (f) price of gas at such locations; (g) final destination of the exported gas;

(ii) Indicate whether the exported gas will be allocated to residential, industrial or electricity generation purposes; and

(iii) File an affidavit of both the selling and gas off-taker regarding the use of gas exported.

  1. Application deadline

The deadline to submit any application for exports under the Regime expires on September 6th, 2019, 16:00 hours (Buenos Aires time).

  1. Assessment and award

Applications will be analyzed by the Undersecretary. For those purposes, the Undersecretary will consider the provisions foreseen in Resolution No. 104 (supply and gas demand; gas production; transportation) and such assessment will be carried out in accordance with Sub-Annex B of the Disposition.

Said Sub-Annex B establishes that the award of export volumes will be divided by zone, in accordance with a performance index for each applicant and its application, integrated with (i) historic production performance; (ii) historic export performance; (iii) current performance and, (iv) tenor of the required exports.

This performance index will act as ordinating factor upon which the applicants will be organized decreasingly in accordance with their obtained score (“Initial Share”).

Further, each one will be assigned with the minimum between the Initial Share and the maximum daily required capacity, except that such minimum volume falls below the minimum value applied (CMO), which determines no volume assignation.

If further to such allocation, there is still remaining volume to be assigned, the surplus will be distributed in decreasing order.

  1. Energy Substitution Mechanism

If the Wholesale Electricity Market (“WEM”) demands a larger amount of imported natural gas, GNL, carbon, fuel oil and/or gasoil, and such incremental amount is borne by the Federal State, the Energy Substitution Mechanism provided in the Disposition shall apply, which considers the following:

  • Exporters must bear incremental amounts faced by the Federal State as described above.
  • Such compensation fee will be determined by CAMMESA once the period of application has elapsed.
  • The maximum value of such compensation nominated in US Dollars per million BTU (USD/MMBTU) will be established by the SGE.
  1. Other relevant aspects
  • The authorization cannot be assigned nor transferred by the applicant.
  • If the assigned volumes cannot be achieved, the exporter must inform such circumstance to the Under-Secretary which shall thereafter inform former applicants not awarded with an authorization of this nature for purposes of reallocation.
  • If such obligation is not upheld by the exporter, the Regime stipulates a penalization in an amount equal to those volumes not subject to export. Failure to pay this penalty prevents the penalized party to request further authorizations during a 24-month term.

At TRS&M we are available to provide clarifications or further information of any matter addressed above. If you need any assistance, please do not hesitate to contact either Nicolás Eliaschev or Javier Constanzó.

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Public Tender for the Construction of the Gas Del Centro Natural Gas Transportation System

By means of Resolution No. 437/19 (the “Resolution”), the Secretary of Government of Energy (the “SGE”) has called for a public bidding procedure for purposes of awarding a new natural gas transport license (the “License”). This new infrastructure project entails the design and construction of a natural gas pipeline that will: (i) connect a facility located in the Neuquén’s Subzone with another facility located in the city of Salliqueló, Province of Buenos Aires; and (ii) interconnect the Salliqueló’s facility with TGN’s gas transportation system in a spot near the city of San Nicolás, Province of Buenos Aires. This new transportation system has been officially named as Transporte Gas del Centro (the “Project”).

The Resolution also approved the definitive version of the bidding terms and conditions (the “Terms and Conditions”) and its annexes. Finally, the Resolution scheduled the submission of bids date on September 12th, 2019.

Below are the Terms and Conditions’ most important aspects:

(a) Required Works

The Project includes:

(1) Phase 1: construction of 570 km of a 36 inch pipeline with an initial capacity of 15 MMm3/day of natural gas (9.300 kcal/m3) and a future minimum capacity of 40 MMm3/day, which will connect a gas facility located near Tratayén, Neuquén, with a facility located near to the city of Saliquelló, Buenos Aires (“Phase 1”); and

(2) Phase 2: construction of 470 km of a 30 inch pipeline with a minimum capacity of 20 MMm3/day of natural gas (9,300 kcal/m3) which will connect the facility located near city of Saliquello, Buenos Aires with a gas pipeline located near the city of San Nicolás de los Arroyos, Buenos Aires (the “Phase 2”).

(b) Schedule (main milestones and occurrence expected time pursuant to the Terms and Conditions)

Milestone Expected Date
Consultation Period Until August 29th
Publishing by the SGE of circular letters (amendment and clarification) Until September 5th
Bids’ Submission September 12th
Offers’ Opening September 12th
Offers Assessment September 26th
Bids’ Qualification October 3rd
Economic Offer’s Opening October 8th
Award Date October 21st
Execution of the License November 20th

Additionally, the following milestones, regarding the execution of the works, are scheduled (terms shall begin on the License’s execution date):

Milestone Phase 1 Phase 2
Presentation of the final project 2 months 42 months
Financial Close 6 months N/A
Partial Operation 18 months N/A
Commercial Operation 24 months 60 months

(c) Economic Offer: CAMMESA’s Transportation Agreement

Bidders must bid a monthly fee regarding the CAMMESA’s Transportation Agreement (as this term is defined below) for the contracted Phase 1’s transport capacity corresponding to 10 MMm3/day. The bidder proposing the lower amount shall be awarded.

Jointly with the execution of the License, the awardee shall execute the Offer Letter attached as Annex IV of the Terms and Conditions (“CAMMESA’s Transportation Agreement”).

(d) Financing provided by ANSES’ Guarantee

Fund Pursuant to the Terms and Conditions, the awardee is entitled to apply for a financing facility from ANSES’ Guarantee Fund. Main terms of the financing conditions are summarized below:

(1) Validity Term of the Financing Commitment¸ the first one to occur between:

  • Fourteen (14) months since the execution of the Commitment Letter by and between the ANSES and the SGE; or
  • Ten (10) months since the awarding date.

(2) Type of Titles: Securities issued under the Argentine Offer Public Regime.

(3) Maximum Amount: US Dollars four hundred million (USD 400,000,000).

(4) Securities’ Maturity: fourteen (14) years.

(5) Interest Rate: Linked to (i) sovereign yields for similar maturity terms; and (ii) Project’s risk.

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

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Natural Gas Exports: Regulatory Updates

On July 26, 2019, Resolution No. 417/19 (the “Resolution”), issued by the Secretary of Government of Energy of the Ministry of Treasury has been published in the Official Gazette with important implications regarding natural gas exports. This Resolution approves a new procedure that must be complied with by those interested in exporting natural gas.

The Resolution revokes prior Resolution No. 104/18 issued by the former Ministry of Energy on August 22, 2018.

This Resolution also entrusts the Undersecretary of Hydrocarbons and Fuels to: (i) enact the applicable framework that shall rule mechanisms for energy substitution for natural gas exports on a firm basis - notwithstanding Resolution’s applicability until such mechanisms are enacted-, and (ii) the elaboration and further approval of the mechanisms applicable for natural gas exports which shall apply upon shortage of natural gas in the local market.

The Resolution’s most relevant aspects are outlined below:

  1. Type of authorizations: The Resolution foresees four (4) kinds of authorizations:
  • Firm or uninterruptible: natural gas purchase agreements which contemplate delivery and reception of gas by the contracting parties that are mandatory and cannot be carved-out except for force majeure events;
  • Interruptible: natural gas purchase agreements which do not contain mandatory delivery and/or reception provisions which bind the contracting parties;
  • Operational exchanges: agreements executed for purposes of attending operational requirements (back-up fuel) and/or emergency scenarios and others of similar nature, to the extent the enforcement authority requires the exporting party to reimport equal amounts of natural gas (or equivalent electricity quantities) within twelve (12) months as of the first event of exportation;
  • Assistance agreements: for providing support to neighboring countries under critical situations and/or declared states of emergency. The exporter shall not be required to import equivalent volumes of the exported natural gas nor its equivalent in power. These exports are excluded from the procedure provided in the Resolution.
  1. Simplification of the procedure to request the authorization: The export filing request shall be made digitally through an online remote platform.
  1. Unconventional natural gas: The volume of exported natural gas produced by a project benefited from the Government’s Incentive Program will be offset from the project’s total production, prior to the determination of the project’s Included Production volumes. Former Resolution No. 104/18 provided that exported gas could not be employed within the Government’s Incentive Program approved for unconventional gas.

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

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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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