Foundations Law: Renegotiation of Public Contracts

  • Scope: Public works and concession contracts entered prior to the new administration taking office may be subject to renegotiation and/or termination.
  • Procedure: The procedure may be initiated by the National Government or by request of the contractor. The renegotiation and/or termination must be approved by the National Executive Power, with the prior intervention of the Office of the Attorney General (“Procuración del Tesoro de la Nación”).
  • General provisions: the Ministry of Economy shall establish the financial or economic guidelines to determine the renegotiation or termination of the contracts within thirty (30) business days after the release of Decree 713.
  • Renegotiation provisions:

    • The contractor shall waive to any claim arising from, or in connection with, consequential damages, loss of profit, unproductive expenses and possible economic damages of a similar nature, derived from the decrease in the rate of execution or suspension of the work or service due to an emergency situation. The contractor shall also waive any administrative and/or judicial claim in connection thereof.
    • The contractor shall receive no compensation for the loss of profits for the works, goods or services which may be carved-out by the contract amendment.
    • The renegotiation agreement shall establish the terms of payment of the amounts due to the contractor, if applicable.
    • The rights and obligations of the parties arising from the renegotiation agreement shall guarantee the economic and financial balance of the contract.

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For additional information, please contact Nicolás Eliaschev and/or Javier Constanzó.

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Foundations Law: Regulation of Public Work Concessions, Infrastructure and Services

  • Tenor of the concession: Concessions may be for a fixed or variable tenor, based on the required investment, operation and maintenance costs, debt services, among other factors.
  • Enforcement Authority: Ministry of Economy.
  • Public Services: Public service concessions or licenses will continue to be ruled by their regulatory frameworks, notwithstanding the application of this regime mutatis mutandis.
  • Selection process: Concessions shall be awarded following a call for bids, locally and/or internationally.
  • Budget earmarks: Budget earmarks are required, if government funds are required for the concession.
  • Amendments to the Concession Contract – economic and financial balance: Unilateral modifications to the Concession Contract made by the grantor related to the execution of the project must be compensated to the concessionaire to maintain the economic and financial balance of the concession. Likewise, the renegotiation is allowed, having to prove, by means of technical reports, the convenience for the public interest and the due legal, economic and financial analysis of the execution of the contract to be renegotiated. The renegotiation shall be carried out within twelve (12) months from the date of economic and financial imbalance and may be extended by agreement of the parties.
  • Unilateral termination of the contract: The unilateral termination of the contract for reasons of public interest must be declared by the National Executive Power, with the prior intervention of the Ministry of Economy.
  • Dispute settlement: Disputes shall be resolved, primarily, through a technical panel. Arbitration is allowed as well.

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For additional information, please contact Nicolás Eliaschev and/or Javier Constanzó.

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Foundations Law: Private Initiative Regime

  • Scope: The newly enacted Private Initiative Regime shall apply to public work contracts, public works, services and infrastructure concessions and PPP contracts.
  • Enforcement authority: Ministry of Economy.
  • Submission of Private Initiatives: Initiatives may be submitted (a) following a call for bids for projects considered to be of public interest; or (b) with no call for bids, in which case the promoter of the private initiative (the “Promoter”) shall provide substantiated reasons for the private initiative to be deemed as of public interest.
  • Private Initiatives Information: The private initiatives shall detail the following information:
    • Technical and financial background of the Promoter.
    • Description of the project.
    • Location, area of interest and related benefits.
    • Estimated demand and associated annual growth rate.
    • Analysis of the relevant legal aspects considering, among other factors, its area characteristics, implementation zone, and areas of interest.
    • If applicable, a description of the works to be performed and/or services to be provided, with their technical analysis.
    • Analysis of the technical, economic, and financial feasibility.
    • Estimated CAPEX and OPEX.
    • Analysis of the economic conditions associated to the contract, such as fees and tenor of the concession.
    • Financing.
    • Description of the most material risk factors related to the Private Initiative.
    • Environmental impact studies.

    The Privative Initiative shall be backstopped by a guarantee, in the form of an insurance bond or letter of credit, in a guaranteed amount equal to 0.5% of the estimated investment; provided, however, that this guarantee may not be required if the Promoter accredits that the guaranteed amount has been incurred in the preparation of the private initiative.

  • Filing of the Private Initiative – Public Interest Declaration: The Enforcement Authority is enabled to request additional information or documentation, and shall have a term of sixty (60) days, extendable for the same term according to the complexity of the project, to prepare a non-binding report on the public interest and the eligibility of the proposal, considering its technical, economic and financial feasibility. If the Enforcement Authority considers that the proposal is as of public interest, it will submit the non-binding report to the National Executive Power, who will decide whether to grant such qualification or not, within a term of ninety (90) days, extendable for the same term according to the complexity of the project. If the initiative is rejected, the project Promoter will not be entitled to any compensation.
  • Call for Bids: the call for bids shall be done within sixty (60) days following the declaration of public interest.
  • Promoter’s Rights:
    • The Promoter’s bid shall have priority with respect to other offers if the difference between each offer’s price is no greater than ten percent (10%). Tied parties shall have the right to improve their offers if the offered price’s difference is between ten (10%) and fifteen percent (15%).
    • If the Promoter is not selected as the preferred bidder, the Promoter shall have the right to be reimbursed for the direct costs and expenses from the preferred bidder (such reimbursement will not exceed 1% of the bid, increasable to 3%).
    • Assignment of rights to the private initiative is allowed for the benefit of the Promoter.
  • Abrogation of Decree 966/2005: the prior Private Initiative Regime approved by Decree 966/2005 is abrogated.

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For additional information, please contact Nicolás Eliaschev and/or Javier Constanzó.

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Changes in the Electrical Power Transmission Grid Expansions Regulation

On January 31, 2024, the National Electricity Regulatory Entity (in Spanish “Ente Nacional Regulador de la Electricidad”, hereinafter “ENRE”) published Resolution 65/2024 (“Resolution 65”), introducing changes to the regulation applicable to electrical power transmission and distribution grid expansions and connection requests, with the end-goal of simplifying each of the below processes.

To that end, Resolution 65:

  1. Eases the process for approving minor scale electrical power transmission or distribution grid expansion works.
  2. Approves a new methodology to assess requests aimed at constructing or expanding electrical power transmission or distribution grid expansions, other than those set forth in (a) above.
  3. Approves a new methodology to assess connection applications to the existing electrical power grid; and
  4. Creates two registries for expansion and connection requests to the electrical power grid.

 

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Daiana Perrone and/or Victoria Barrueco.

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Omnibus Reform Bill: Modifications to Hydrocarbons and Natural Gas Regulatory Framework

On December 27, 2023, Argentine President Javier Milei sent to the Congress an omnibus bill (the “Omnibus Bill”). Matters pertaining to hydrocarbons and natural gas are addressed below:

I. Amendments to Law 17,319 on Hydrocarbons

  1. Scope and objectives: The Bill includes the hydrocarbon processing activity as part of the law’s scope, empowering the Executive Branch to grant authorizations for its development. Also, the main objective of the national policy is modified to maximize the income obtained from resources’ exploitation and satisfaction of the hydrocarbon needs of the country.
  2. Free trade: The Executive Branch would no longer have the power to fix prices of the domestic market in any of the production stages (by way of eliminating the so-called domestic barrel). In the case of state-owned companies, these may only trade at arms-length prices. In relation to foreign market permit holders, concessionaires, refiners and/or marketers, these may freely export hydrocarbons and/or their derivatives, and the Executive Branch will regulate its conditions, with the end-goal of promoting free international trade.
  3. Exploration activities: The Bill removes the exclusivity of the superficial examination in areas reserved to state-owned companies and revokes the section that did not allow to begin with such works without prior approval. On the other hand, Section 21 modifies the payment of royalties for hydrocarbons extracted during exploration (previously set on 15%), which will now be agreed in the bidding process.
  4. Investment regime: Concessionaires would no longer be required to ensure that their investments ensure the maximum production of hydrocarbons, and that they are compatible with the adequate and economic exploitation of the field and the observance of criteria that guarantee the adequate conservation of reserves.
  5. Exploitation by foreign legal entities: the Bill overturns the Section that did not allow foreign legal entities to bid for permits and concessions.
  6. Royalties: The exploitation concessionaire would pay a monthly payment to the grantor, to be determined in bidding awarding process. Furthermore, the enforcement authority will have the power to reduce the royalty up to five percent (5%) taking into account the productivity, conditions, and location of the wells. Per the bill, royalties will be the sole income of the provinces (owner of the resources).
  7. Unconventional exploitation: The exploitation concessionaire, within the area of concession, may require the subdivision of the area and the conversion from conventional to unconventional. In addition, the Bill eliminates the five (5) year time-bard applicable to the pilot planning stage, and the possibility to request for ten (10) year extensions.
  8. Replacement of the transport concession: References related to hydrocarbon processing are incorporated to Article 4 regarding transportation. Likewise, the regime of transportation concessions is replaced for an authorization regime.

II. Amendments to Law 24,076 on Natural Gas

  1. Exports and imports: While natural gas imports continue to be authorized without prior approval, exports must be regulated by the Executive Branch.
  2. License Renewal: The Bill extends the term for license renewal, from ten (10) to twenty (20) years.
  3. Transportation, distribution, and stocking: The acquisition, construction, operation and maintenance of new gas storage facilities is allowed.

 

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Pablo Arrascaeta, Daiana Perrone, Florencia Martínez Trobbiani, Milagros Piñeiro, Rocío Valdez, and/or Victoria Barrueco.

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President Javier Milei Omnibus Reform Bill

On December 27, 2023, Argentine President Javier Milei sent to the Congress an omnibus reform proposing far-reaching changes with respect to the matters described below.

  • Creation of an Incentive Regime for Large Investments: The bill creates the so-called "Incentive Regime for Large Investments", through which the holders and/or operators of large investments in new projects or expansions of existing ones of certain sectors (including agribusiness, infrastructure, forestry, mining, oil and gas, energy, and technology) that adhere to such regime will be entitled to tax grants, customs and FX benefits, among others, and long-term stability in such matters.
  • Introduction of changes in Public Works Concession regulation: Relevant amendments to the public works concession regime of Law No. 17,520 are contemplated, providing broad provisions with respect to the incorporation of sole purpose investment vehicles (SPVs), financing parties protection, arbitration resolution mechanisms, covenants of the State, and the possibility of presenting infrastructure projects by initiative of the private sector.
  • Amendments to the Electric Energy Regulatory Framework: The National Executive Power is empowered until December 31, 2025 to reform the electricity regulatory framework (Laws No. 15,336 and 24,065). Such changes shall conform the following guidelines: the right to freely negotiate export/imports electricity agreements; promote competition and the expansion of electricity markets; ensure that electricity transactions are based on economic rules; provide for transparency on price and rate calculation mechanisms; and foster the expansion of the transmission infrastructure.
  • Energy transition and reduction of GHG emissions : Within the framework of compliance with the Greenhouse Gas ("GHG") emissions targets committed by Argentine under the Paris Treaty, the National Executive Power is empowered with the right to assign GHG emission rights to each economic sector, set annual limits compatible with international commitments, monitor and penalize non-compliance with emission targets, and establish an emission rights market for the trading of surpluses of those who comply with their targets. The National State will provide private companies, the public sector and other organizations with the appropriate conditions and instruments to achieve these goals and access climate financing facilities.

 

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Daiana Perrone, Milagros Piñeiro, Pablo Arrascaeta, Florencia Martínez Trobbiani, Rocío Valdez and/or Victoria Barrueco.

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Tax break for Renewable Power Generation Projects

The Secretary of Energy has enacted Resolution 714/2023 (the “Resolution 714”), dated September 1, 2023, that foresees a tax break for Renewable Power Generation Projects.

Resolution 714 provides that the Impuesto País will not be applicable with respect to the import of assets for renewable power generation projects that either (a) have an import financing facility or (b) do not have an import financing facility in place but submit a request before the customs authority.

Furthermore, the tax break will only be applicable to the projects set forth in Annex I thereto.

Finally, Resolution 741 will be applicable to the extent that the relevant assets are not subject to other tax relief (in which case, the latter shall apply).

 

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Rocío Valdez and/or Victoria Barrueco.

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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:

  1. A ratification of the commitment by the Republic of Argentina towards fighting climate change and the promoting renewables.
  2. 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:

  1. Renewables
  2. 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:

  1. Address, telephone, email, and contact person.
  2. Brief description of the interested party. Background in similar projects if any.
  3. Description of the preliminary project, including technology, capacity, location, interconnection point, biomass fuel (if applicable) and any other relevant information.
  4. Indicative cost and compensation.

 

For further information, please contact either Nicolás Eliaschev, Tomás Villaflor or Luciana Tapia Rattaro.

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COVID-19: Extension of the Limitations to the Interruption of Telecommunication Services

On May 1st and 4th, 2020, Decree No. 426/2020 (the “Decree”) and Resolution No. 367/2020 (the “Resolution”), respectively, were published in the Official Gazette. Both rules further supplement Decree No. 311/2020, which bans providers from ceasing to supply services  comprising fixed or mobile telephony, Internet and cable television to certain users (listed therein), in case of delay or lack of payments up to three (3) consecutive or alternate bills with due dates as from March 1st, 2020.

Below is a summary of the regulations’ most relevant aspects.

1. Decree No. 426/2020

The Decree extends until May 31st, 2020, the obligation placed upon the providers of telecommunication services to offer limited services capable of guaranteeing  connectivity to users who fail to pay top-up fees to access consumption, and the resulting impossibility to shut-off the service due to such cause.

2. Resolution No. 367/2020

The Resolution has been issued by the National Communications Agency (“ENACOM”, for its Spanish acronym), with the purpose of supplementing certain provisions included in Decree No. 311/2020 and Resolution No. 173/2020, issued by the Ministry of Productive Development, with regards to telecommunication services’ providers.

The Resolution imposes the following additional obligations over those companies:

  1. The obligation to provide, within a maximum term of three (3) days, the following data: 1) List of all users whose service is registered prior to March 26th, 2020, that may be subject to shut-off caused by lack of payment, or keep ongoing shut-off notices; and whose invoices were due as of March 1st, 2020; and 2) List of all the users with pre-paid services who have required a top-up on February and/or March, 2020. This information has to be entered as a Sworn Affidavit in accordance with Appendix No. 1 of the Resolution, available at the following link.
  2. The prohibition to suspend or shut-off services due to lack of payment from users not included in the lists prepared by the Coordination Unit created via Resolution No. 173/2020.
  3. The obligation to report to the ENACOM within the first (15) days as of the Resolution, all prices established for the limited services comprised by article 1 of Decree No. 311/2020 and the terms and conditions and/or forms of the financial facilities offered to users and their information process. Those financial facilities should at least prescribe the possibility for the service to be paid in three (3) monthly installments, to which no interest will accrue, nor penalty will be applicable.
  4. The obligation to publicly disclose these regulatory provisions not only through providers’ web pages, but also via the social networks used and/or advertisement.

Failure to comply with these will result in penalties being imposed under Law No. 26,522 and 27,078, as applicable.

For further information, please contact Nicolás Eliaschev and/or Javier Constanzó.

In the following link, you can access the Firm’s statement on COVID-19.

For information concerning COVID-19 legal implications, please refer here.

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Renewables and Distributed Generation: Between Promises and Reality During COVID-19 Times

As the worldwide oil prices volatility show, the energy industry has not been left unaffected by the global crisis caused by COVID-19 pandemic.

During these hard times, it is worthwhile to wonder about the present and the future of the Argentinian electricity sector and the potential to turn the crisis into an opportunity.

In the attached report, we argue that price volatility of energy commodities and the current and future presence of health and environmental disruptive threats, advice to keep betting for diversification of the electricity mix as the best path to ensure security and continuity for long-term power supply.

Under this context, the report summarizes the main aspects of laws and regulations targeting renewable distributed generation which have shown strong consensus in the country as we further claim that fostering renewable distributed generation such as our current policy does, seems convenient under existing circumstances.

The report also includes preliminary remarks regarding the following issues:

1. Short-term relevant needs of the electricity sector

  1. Preservation of payment cash flow and short and mid-term economic and financial sustainability of all industry players.
  2. Termination of emergency under Law 27,741 during the legal period provided thereof and operation of the electricity sector under the rules of Law 24,065.
  1. Short-term focus for renewables
  1. Possibility of extending commercial operation dates and intermediate milestones in power purchase agreements corresponding to projects under structuring and/or advanced construction affected by the health crisis and measures adopted consequently either in Argentina or abroad.
  2. Assessing on a-case-to-case basis opt-outs and/or voluntary renegotiation of power purchase agreements for projects with no activity prior to March 12, 2020 (date under which the health crisis was declared), using uniform and non-discriminatory approaches.
  1. Long-term decisions
  1. Definition of transmission infrastructure expansion structure and planning for deployment for additional capacity of renewables for complying with the goal of 20% of consumption for 2025.
  2. Technical and financial evaluation of expanding such consumption target beyond 2025.
  3. Continuity of the electricity mix diversification, evaluating the role of efficient thermal, nuclear and hydropower technologies.
  4. Assessment of new technologies to strengthen the system and supplement the development of Distributed Generation, including power storage, smart metering, demand management and electric mobility.
  5. Assessment of opportunities to boost regional integration and cooperation for spot and long-term exchanges of natural gas destined to power generation and, power itself, with nearby countries.

Download Report

In the following link, you can access the Firm’s statement on COVID-19.

For information concerning COVID-19 legal implications, please refer here.

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