Julián Razumny joins TRS&M as partner of the Mergers and Acquisitions and General Corporate Department

Tavarone, Rovelli, Salim & Miani continues with the expansion and growth of its Mergers and Acquisitions and General Corporate Department through the addition of Julián Razumny as partner. The firm reaffirms its commitment to expand and once again invests in what has been its main distinctive feature: a young and talented team of lawyers led by partners highly committed to both clients and their team.

Julián specializes in corporate and financial law, areas in which he has more than 12 years of experience. He has a J.D. degree from the School of Law of the University of Buenos Aires and holds a post-graduate course in economy and finance for lawyers from the Pompeu Fabra University of Barcelona.

Prior to joining Tavarone, Rovelli, Salim & Miani, Julián excelled in renowned Argentine firms, advising in general corporate matters, M&A, debt restructuring processes with both local and foreign creditors, strategic negotiations and complex contracts negotiation and drafting. During the latest years, he has served as Corporate Legal Manager in Celulosa Argentina S.A., as well as advisor to its Board of Directors.

He has also attended and organized numerous seminars, conferences, workshops and congresses in Argentina and has been distinguished in 2017 by Legal 500 in their “GC Powerlist: Argentina” as one of the most influential in-house corporate lawyers.

In joining Tavarone, Rovelli, Salim & Miani, Julián will contribute, together with partners Juan Pablo Bove and Federico Otero, to the development and expansion of its M&A and Corporate team, area in which the firm has experienced a remarkable growth, increasing its participation in M&A deals, as well as expanding even more the client base to which the firm renders legal advice.

Tavarone, Rovelli, Salim & Miani is proud to have Julián among its members, who will strengthen the firm and will contribute to maintain it as one of the most active in our legal market.

by trsym

Public-Private Partnership Agreements. Indicative terms – Power transmission works

The Secretariat of Public-Private Partnership (the “SPPP”) has just outlined the tender terms for the first-high voltage power transmission lines (the “Executive Summary” and the “Project”, respectively), under the new public-private partnership scheme (“PPP”).

The Project comprises the construction and further operation and maintenance of: (1) the 500 kV high voltage line, between ET Río Diamante and the future ET Coronel Charlone; and (2) the future ET Coronel Charlone, along with the 132 kV connections in Laboulaye, Rufino, General Villegas, General Pico Sur and Realicó, and complementary works (hereinafter, referred as the “Main Works”).

The non-binding Executive Summary also foresees the provision of the O&M Services, during the O&M Period (as both terms are defined below).

The Project is designed under the PPP scheme, pursuant to Law No. 27.328 and its regulatory Decree No. 118/2017, which provides an alternative contracting structure to the Public Works and Public Works Concession frameworks (ruled by Laws No. 13,064 and 17,520, respectively).

The awarded bidders will execute a PPP Agreement (the “PPP Agreement”), with the Secretariat of Energy Politics Coordination, currently under the Federal Ministry of Energy (the “Contracting Entity” and the “ME”, respectively), for the execution of the Main Works and the performance of the O&M Services (as defined below).

Transmission projects must be up and running within thirty-three (33) months from the signing of the PPP Agreement (the “Construction Period”), while O&M Services will be provided for up to 15 years (the “O&M Period”) as from commercial operation date.

Please find below a summary of the most relevant aspects of the Project, as per indicated in the non-binding Executive Summary.

Main Works and O&M Services comprised by the Project

As indicated before, the Project involves the expansion of the current high-voltage transmission grid, by means of the execution of the Main Works -which shall be executed within the Construction Period-. The Construction Period is capped at a maximum of thirty-three (33) months from the execution of the PPP Agreement.

Following the Construction Period, the PPP Contractor shall provide the O&M Services within the O&M Period –capped at maximum fifteen (15) years-, comprised by the provision of O&M Services of the Main Works, pursuant to the terms and conditions set forth in the PPP Agreement, electricity regulatory framework, The Procedures and applicable regulations.

Applicable regulatory framework

The PPP Agreement will be governed and construed by (1) Law No. 27,328 and its regulatory Decree No. 118/2017, (2) Law No. 27,431, which approved the national budget for the current 2018 year, and (3) specific regulations of the electricity regulatory framework, such as (a) Laws No. 15,336 and 24,065; (b) their respective regulatory decrees (i.e Decrees No. 1398/1992 and 186/1995), and (c) “The Procedures”, which is a compilation of many resolutions that rule the electric market’s operation (comprised by Resolution No. 61/1992 of the former Secretariat of Electric Energy, as further complemented and amended).

The obligatory and direct application of specific electricity regulations, turns out to be innovative, in comparison with similar projects under the same PPP scheme.

Project’s structure

The PPP Contractor shall (1) execute the Main Works, within the Construction Period, and (2) provide the O&M Services, within the O&M Period. Repayment of investments incurred both during construction –CAPEX- and operation (OPEX) of the Project will be split and subject to different provisions, in order to mitigate the typical risks to which the PPP Contractor is exposed during those stages.

PPP Contractor’s payment

Main Works Payment

When placing its bid, the PPP Contractor will have to choose within two different payment arrangements concerning the Main Works’ execution, whether by (1) Investment Payment Titles Fee and Remaining Compensation, or (2) by a Monthly Compensation.

Such structure is new and differs from those previously adopted for other Argentine PPP Projects, whereas the repayment of PPP Contractor’s CAPEX was linked to long term recoverable TPIs (for its Spanish acronym: Título de Pago por Inversión) or TPDs (for its Spanish acronym, Título de Pago por Disponibilidad) exclusively.

TPI Compensation and residual Compensation

Under the first option, the PPP Contractor will receive a part of the TPIs total amount –which will not exceed the maximum of 80%- as from the fourth (4) year of the PPP Agreement’s term, through TPIs, nominated in US dollars, unconditional and irrevocable, according to the actual Main Works’ progress. These TPIs are linked to the Construction Period phase only.

The remaining 20% of the required total amount will be due and payable as from the Project’s commercial operation date –after the end of the Construction Period-, on a monthly basis, and within the O&M Period, through the residual Compensation (the “Residual Compensation”).

Under this structure:

  • The bidder shall indicate the TPI required percentage –equal or lower than 80% of the required total amount-.
  • Each TPI –that, as mentioned, will be nominated in US Dollars and fixed, unconditional, irrevocable and transferable- will involve thirty (30) biannual payments in US Dollars, being TPI’s first payment date at the thirty-ninth (39) month as from the date on which the PPP Agreement is executed. Non-timely TPIs (either by delays on its issuance or in its payment) will accrue interests.
  • TPIs will be issued by the Electric Transmission Individual Trust (please, see below), by instruction of the Contracting Entity, which shall also be responsible for TPIs payment.
  • In connection with the Residual Compensation, it will also be due under the same terms of the Monthly Compensation (See below).

Payment under Monthly Compensation scheme

Under the second option, the PPP Contractor will receive the total required amount through a monthly compensation (the “Monthly Compensation”), as from the Main Works’ commercial operation date and during the O&M Period.

Such Monthly Compensation will be invoiced by the PPP Contractor to the Contracting Entity, and will be payable by the Electric Transmission Individual Trust in one hundred and eighty (180) US Dollars equal and monthly installments.

Electric Transmission PPP Individual Trust

The Parties to the PPP Trust (the “Electric Transmission PPP Individual Trust”), will be (i) the Republic of Argentina, through the ME, as trustor; (ii) the Governmental Bank for Investment and Foreign Trade (in Spanish: Banco de Inversión y Comercio Exterior S.A., hereinafter, the “BICE”, for its Spanish acronym), as trustee; (iii) Banco de Valores S.A., as administrative agent of the trust; and (iii) PPP Contractor, as beneficiary.

The Electric Transmission PPP Individual Trust will operate as a single trust for the Project, for the administration of the allocated funds to the Project, and will be the obligor in respect to all payments due and payable to the PPP Contractor.

The Electric Transmission PPP Individual Trust will be funded by (1) contributions made by the Wholesale Electric Market Management Company (In Spansh: Compañía Administradora del Mercado Mayorista Eléctrico S.A, hereinafter “CAMMESA” for its Spanish Acronym), by means of Resolution of the former Secretariat of Electric Energy No. 1085/2017- and, (2) contingent contributions of the Federal State. The trust’s reserve account must be funded, at all times, in an amount equal or greater than the yearly PPP Contractor’s required amount. Such eventual contribution will be included in every year’s national budget law.

Bidding process and bidder’s selection

The selection process will be implemented through a national and international tender process, of multiple stages, on which bidders shall: (1) make their technical bid and comply with all the requirements set forth in the bidding terms and conditions (i.e. having experience on constructing high voltage lines in Argentina and abroad); and (2) indicate its selected payment option, as well as the required amount for the Main Works and O&M Services.

The awardee shall be the bidder which indicates the lower total required amount.

Incumbent transmission companies are entitled to place bids within the bidding process, as part of their non-regulated activity.

Required guarantees

The following guarantees are mandatory and therefore required by the Executive Summary (1) a bid bond (the “Bid Bond”), (2) the financial close bond (the “Financial Close Bond”, further to the PPP Agreement’s execution), and (3) the Main Works Bond (the “Main Works Bond”, further to the PP Agreement’s execution), which all of them shall be payable on demand by the issuer.

The term for the Financial Close Bond will be of six (6) months, extendable at the PPP Contractor’s request for additional two consecutive periods of three (3) months each, financial close is achieved. Financial Close shall occur no later than twelve (12) months as from the date on which the PPP Agreement is executed.

It is not required to provide an O&M guarantee during the O&M Period.

PPP Contractor’s constitution - SPV

Before the PPP Agreement is executed, the awarded bidder shall establish a sole purpose vehicle, in the form of a corporation (Sociedad Anónima), which will act as PPP independent transmission company, under the terms of Annex 16 of The Procedures.

Other relevant matters:

  • Risks related to the execution of the Project will be allocated pursuant to a risk matrix, to be agreed by both parties.
  • The early termination of the PPP Agreement for any reason will in no event affect the repayment of unamortized investments incurred by the PPP Contractor.
  • PPP Contractor will be in charge of obtaining all necessary permits and constituting the required power line easements, pursuant to Law No. 19,552.
  • The PPP Agreement will provide for an initial stage for dispute resolution in relation for matters of a technical or financial nature, or related to the interpretation of the PPP Contract, by a dispute board. The PPP Agreement will also establish a further stage of arbitration, whether locally or abroad, which foreign venue may be set forth in accordance with the PPP Contractor’s controlling parties.

At TRS&M, we are following these matters with great interest and are available to discuss any query regarding the above.

by trsym

Julián Martin joins Tavarone, Rovelli, Salim & Miani

Julián Martin & Asoc. ​a​nd​ ​Tavarone, Rovelli, Salim & Miani​​ (TRS&M) are pleased to announce that, as of this month of June 2018, the Tax Advisory departments of both firms join their efforts and their capacities to add synergies and enhance their growth.

Julián Martin is a Chartered Public Accountant (UBA), was a Tax Partner of KPMG in charge of the Financial Services and Tax Planning Area, and previously was Manager of the Tax & Legal department of Price Waterhouse. He was also a member of the Federal Tax Administration working in the Internal Control Area.

His practice is recognized in the market due to his solid knowledge and experience in tax advisory matters with greater specialization in financial, banking, and capital market issues, which is why he was nominated by the International Tax Review among Argentina’s leading tax advisors in the Banking and Capital Markets Area.

The Tax Department of TRS&M, in charge of Gastón Miani, has established itself as a benchmark in the tax and customs dispute area, having obtained important rulings from the Federal Supreme Court of Justice and from the lower courts in highly complex cases. On the other hand, the tax advice practice of TRS&M has grown exponentially since the foundation of the firm, giving special support to the Corporate, Banking, Financial, and Energy areas, which is why TRS&M has managed to form a team of professionals with proven experience in the subject.

We are convinced that the union of both tax practices will develop the numerous synergies that will contribute to maintaining the sustained growth of the two firms.

by trsym

PPP News – Stage I Safe Roads Network and LED Luminaires

  1. Highways – Final Documents and Contracting Schedule Publication

    On January 29, 2018, Resolution No. 147/2018 issued by the National Highway Administration (hereinafter, “DNV”, for its Spanish Acronym), was published in the official gazette, which: (i) initiated the national and international procedure applicable to “Highways and Safe Roads Network – Stage 1” (the “Project”), (ii) approved the final documents for the Project, and (iii) sets forth April 3, 2018, as deadline for bid submission.

    As previously indicated in the newsletter “Public-Private Partnership Agreements. Preliminary Bidding Terms of the National and International Tender: Highways and Safe Roads Network- Stage 1”, dated as of December 21, 2017, the Project is the first procedure under the PPP regime, an innovative modality in Argentina, creating a high expectative and interest in its development.

    In addition, final documents are also available in the Undersecretariat of Public-Private Partnership’s (the “UPPP”) website.
     

  2. LED Luminaries Program

    Additionally, on January 22, 2018, a preliminary document in connection to the Public Lighting Energy Efficiency Program (hereinafter, the “Program”) was published on the web site of the UPPP. This Program is the second project under the PPP regime, and its main aspects are described below:

    1. Object of the Program

      The Program seeks to develop the energy efficiency and illumination quality of the public lighting, by means of the replacement of existing luminaries, for brand new LED technology luminaries. Therefore, the energy saved by using this new technology will have a positive impact in the maintenance costs of the public lighting network, whereas these will be ultimately reduced. This saving allows to afford the new LED luminaries installation and maintenance, as the cash flow related to such energy saving will be destined -either partially or totally- to the Program.

    2. Scope of the services

      The services to be provided by those awardees comprises:

      • Design of the LED luminaries, in accordance to high-quality standards.
      • Provision of the LED luminaries.
      • Installation and commissioning of such luminaries.
      • Waste disposal.
      • Training of municipal employees.
      • Public lighting service provision during the whole term of the PPP Contract.
    3. Contractual scheme
      • The Ministry of Energy and Mining is set forth as the entity in charge of the Program.
      • The Ministry of Energy will also act as contracting party thereof, by means of the Secretariat of Strategic Planning. Different agreements will be entered by and between the respective Governmental spheres involved in the execution of the Program.
      • The PPP Contractors will be those selected bidders.
    4. Program Stages and PPP Contractor’s works and services

      Upon selection as winner in this Program, the PPP Contractors will enter into a PPP Contract, for a total term of ten (10) years from its execution thereof. This PPP Contract will comprise two different stages: (i) Main Works construction and, (ii) Main Services provision.

      During the Main Works stage, the PPP Contractor will undertake all necessary works for the construction and commercial operation of the LED Luminaries. During the Main Works construction stage, the PPP Contractor shall conduct all the necessary works and tasks to put the luminaries into operation. The term for this stage is for a term of one (1) year, following the PPP Agreement execution.

      After the Main Works stage is completed, the Main Services provision stage will take place, for a term of nine (9) years. During the Main Services provision stage, the PPP Contractor is bound to comply with the following services: (i) LED luminaries’ maintenance; (ii) municipalities and citizens queries and claims, and (iii) elaboration of daily reports.

      In addition of these Main Works and Main Services, the Program also foresees the execution of: (i) Mandatory Additional Works –in light of public interest reasons-, and (ii) Voluntary Additional Works -proposed by the PPP Contractor-. Terms and conditions in regards to the payment of these additional works and services will be subject of regulation in the final bid documents.

    5. PPP Contractor’s income

      The PPP Contractor’s income comprises the Public Contribution (Spanish: Contraprestación Pública), which includes: (i) Availabilty contribution (Spanish: Contraprestación por Disponibilidad), linked to the Main Services during the Main Services Stage (OPEX); and (ii) Investment Contribution (Spanish: Contraprestación por Inversión), linked to the Main Works during the Main Works Stage (CAPEX).

      In regards to the Availability Contribution, Payment Availabilty Titles (“TPD”, for its Spanish acronym), will be issued in favor of the PPP Contractor, on a monthly-basis, whereas with respect to the Investment Contribution, Payment Investment Titles (“TPI”, for its Spanish acronym), will be issued in favor of the PPP Contractor. This TPI will represent the actual works executed during the respective investment period.

    6. Risk mitigation

      The PPP sets forth a risk-mitigation matrix, where the different risks that comprise the Program are assigned to each contracting party. As the PPP will be executed in EDENOR’s and EDESUR’s concession areas, these companies will act as collectors of the municipal taxes that will be affected to the Program, as a way to reduce the PPP Contractors’ payment risk. Therefore, the Program foresee that such distribution companies will collect the municipal taxes in favor of the Program, and these amounts will be then allocated to the Program.

      Additionally, for those cases where the exceeding cash flow results insufficient for the payment of the respective amount, the trustee will require the Province to allocate amounts resulting from the federal co-participation quota.

    7. Expected investment

      The Program contemplates the installation of around a hundred thousand (100,000) luminaries per year, with an expected initial investment of approximately US Dollars fifty millions (US$ 50,000,000) and annual operative costs (operation and maintenance) of approximately US Dollars two millions (US$ 2,000,000).

    8. PPP Trust

      As in the Highways Project, Stage 1, a separate PPP Trust will be created in order to administrate the necessary flows to perform the corresponding payments by the emission of the TPIs and TPDs. The trust will be funded with: (i) local municipal taxes, and (ii) contingent public contribution. The PPP Trust parties are not detailed, but it may be assumed that the National Estate – through the Ministry of Energy and Mining – will act as trustor; a financial entity as trustee; and every PPP Contractor as beneficiary.

    9. Other relevant matters
      • A risk matrix where the risk distribution between the contracting parties is available, in accordance to Section 9, subsection b) and c) of Law No. 27,328.
      • With regards to dispute resolution mechanism, a first technical instance is prescribed, following which arbitration will take place.

From TRS&M, we are following this process with much attention and we are available to expand any point developed above.

by trsym

Bureaucracy Reduction in the Public Administration

On January 11th, Necessity and Urgency Decree No. 27/2018 (hereinafter, the “Decree”) was published on the Official Gazette. The Decree introduces a great number of amendments to current rules in order to reduce bureaucracy and simplify the procedures before the National Public Administration. The declared aim of the Decree is to promote investment, productivity, employment and social inclusion.

Decree´s main amendments

  • SENASA: Certain rules regarding food safety and quality service were abrogated in order to avoid duplicate regulation.
  • CORPORATIONS:

    • Digital Registries are established for account and corporation books as prescribed for Simplified Corporations (“SAS”, for its Spanish acronym)
    • Section 34 of Law No. 19,950 was replaced, forbidding the performance of a hidden or pretended partner. Joint liability of the pretended partner is also established.
    • The digitalization of Public Registries is also settled.
  • FONCDE: The object of the Development of Entrepreneur Capital Fund is modified, introducing the possibility to finance micro, small and medium companies.
  • ARGENTINEAN GUARANTEE FUND (FOGAR): this fund replaces the Micro, Small and Medium Company Guarantee Fund (FOGAPYME). FOGAR´s object is: (i) to grant guarantees on behalf of the ones issued by reciprocate guarantee corporations and (ii) offer direct and indirect guarantees in order to facilitate credit access for developers of economics or productivity activities.
  • EANASE: the National Air Transit Control Direction is dissolved and the Air Navigation Argentinean Company State Corporation is created under the National Ministry of Transport´s orbit, transferring the jurisdiction of the first to the latter.
  • ROAD SECURITY AND TRANSIT: The requirements that owners of vehicles destined to passenger and load transport need to comply with are amended. National Road Direction is assigned as the Enforcement Authority of road concession agreements.
  • TRADEMARK AND PATENTS: Trademark and patents’ registration procedure is amended and simplified, by the introduction of e-government systems.
  • RECIPROCATE GUARANTEE CORPORATIONS: It is strictly forbidden to grant guarantees higher than five per cent (5%) of the risk fund total value to one partner or third parties.
  • DIGITAL SIGNATURE: Electronic official documents digitally signed have the same effectiveness and probative value than their equivalents in paper format.
  • FOSSIL FUELS: the National Ministry of Energy and Mining is assigned as the Enforcement Authority of Hydrocarbons Law No. 17,319. Additionally, the Decree entitles the National Executive Branch to delegate certain powers to the Enforcement Authority.
  • GAS: Section 66 of Law No. 24,076 is amended, introducing the possibility to appeal the National Gas Regulatory Agency´s (ENARGAS, for its Spanish acronym) jurisdictional resolutions before the pertaining Federal Court of Appeal.
  • STATE´S PROPERTY ADMINISTRATION: Certain sections of Decree 1023/01 regarding public auctions as the Administration´s contracting procedure are amended. It is also foreseen the preferential application of public auction rather than direct contracting.
  • PUBLIC WORKS: Section 10 of Law No. 13,064 referred to public tenders´ publicity is amended.
  • SUSTENTABILITY GUARANTEE FUND: ANSES is now authorized to issue any financial and trading market operation allowed by regulatory authorities.
  • SECURITIES: Amendments are introduced regarding digital deliverance, endorsement, guarantee and acceptance of securities.
  • INSURANCES: Related to insurance agreement´s proof, amendments to Law No. 17,418 are introduced. Mandatory Collective Life Insurance Law No. 13,003 is abrogated prior issuance of a regulation regarding National Public Sector employee’s life insurance by National Insurance Superintendence.
  • PORTS: The authorization can now be granted by the pertaining Ministry, and not only by the Executive Branch. Regulations are issued in order to regularize the situation of existing ports and penalties are updated.
  • FINANCIAL INFORMATION UNIT: Certain sections of Law No. 25,246 are amended, settling new information obligations.
  • SOCIAL CAPITAL FUND: The idea of “extraordinary incomes” is included in the definition of “Annual Rent” settled by section 1 of Annex II of the Trust Agreement executed between the National State and FONCAP S.A. Additionally, Financial Services Secretariat is authorized to re-arrange the Trust Agreement.
  • PAINTINGS: Certain aspects related to the importation of paintings are amended.
  • METRIC SISTEM: The necessity to register in a specific registry is established.

Please, do not hesitate to contact us for further information

by trsym

Renewable Energy - Corporate PPA´s: New Regulation

On January 10th, Disposition No. 1-E/2018 (hereinafter, the “Regulation”) issued by the Renewable Energy Sub-Secretariat (“SSER”, for its Spanish acronym) was published in the Official Gazette. The Regulation sets guidelines regarding the registration of the renewable energy generation projects (the “Projects”) before the National Renewable Energies Project´s Registry (“RENPER” for its Spanish acronym) and priority dispatch.

The Main aspects of the Regulation are summarized below:

  1. Priority Dispatch

    • If priority dispatch requests exceed the available capacity, the tiebreak shall be done according to the energy generation factor and requested tax benefits
    • If the owner of the Project is awarded priority dispatch and fails to submit the guarantee, priority dispatch for the same Project cannot be requested for at least four (4) quarters
    • Priority dispatch can be requested for a part of the total capacity of the Project
    • The expansion of transmission capacity which provoked the congestion will extinguish priority dispatch
    • Priority dispatch for future expansions of transmission capacity is regulated
    • Priority dispatch for expansions of transmission capacity on behalf of the Owner of the Project is regulated
  2. Investment Reference Values (in USD/MW)
    Wind Energy 1.250.000
    Photovoltaic Solar Energy 850.000
    Biomass (combustion and gasification) 3.000.000
    Biogas 5.500.000
    Sanitary Landfill Biogas 2.500.000
    Small Hydro 3.000.000
  3. Maximum Amount of Tax Benefits (in USD/MW)
    Wind Energy 625.000
    Photovoltaic Solar Energy 425.000
    Biomass (combustion and gasification) 1.500.000
    Biogas 2.750.000
    Sanitary Landfill Biogas 1.250.000
    Small Hydro 1.500.000
  4. RENPER

    • The registration before the RENPER shall be done by a formal presentation before the Renewable Energy Sub-Secretariat, that will be replaced, in the future, by Distance Procedure Platform (“TAD”, for its Spanish acronym)
    • Projects who have qualified under Program RenovAr are exempted to submit the technical information and are entitled to request the Inclusion Certificate for the tax benefits approved by the pertaining RenovAr Round up to the maximum available value
    • Registration procedure, requests and compliance deadlines are regulated
    • The RENPER will be made public at the Ministry of Energy and Mining´s website

Do not hesitate to contact us for further information.

by trsym

Electric Energy: “Critical Project” status and Tax Benefit procedure

On January 2 the Ministry of Energy and Mining (hereinafter, the “MEyM”) and the Ministry of Production (hereinafter, the “MP” for its Spanish acronym), issued Joint Resolution No. 4-E/2017 (hereinafter, the “Resolution”), which introduced the applicable procedure so as to obtain a “Critical Project” status, in the terms of Section 34 of Law No. 26.422 (hereinafter, the “Law”).

Section 34 of the Law foresees an exemption from import duties, statistic rates and tax-checking duties with regards to new imported goods, which are destinated to infrastructure works related to: (i) generation, transportation and distribution of electric energy, (ii) oil and gas up-stream and down-stream; (iii) construction of oil processing plants and expansion of those already in use; and (iv) oil and gas transportation, storage and/or distribution.

The Resolution is applicable to owners of wind farm projects, which have been awarded with a PPA under RenovAr 1, 1.5, and Resolutions No. 202/2016 and 168/2017 issued by the MEyM.

Main aspects of the Resolution are summarized below:

  1. Beneficiaries

    As indicated above, the Resolution shall only apply to owners of wind farm projects that have executed a PPA within RenovAr 1, 1.5 and Resolutions 202/16 and 168 /2017. Thus, the application of the benefits contained therein is not applicable to those projects under RenovAr 2.

  2. Comprised Goods

    The benefits are only applicable in regards to wind turbine generators (equal or greater than 700 kW), with tariff code 8502.31.00, as per indicated in the respective inclusion certificate. In the event that these wind turbine generators –and is tariff code- was not contained in the inclusion certificate, the applicants may request the Sub-Secretariat of Renewable Energy its insertion thereto.

  3. Application of the tax benefit

    The beneficiaries will benefit of this tax benefit to the extent that the exempted goods are solely allocated to the wind farm projects mentioned above.

  4. Time frame

    The “Critical Project” status may be requested until January 31, of current 2018, whereby the importation of the wind turbines must be complied on or before December 31, 2019.

  5. Applicable procedure

    The procedure establishes, inter alia, the following steps that must be complied so as to obtain the “Critical Project” status: (i) a benefit request application must be submitted before the MEyM; (ii) the “Company Information” form must be attached to such request; (iii) legal representative’s faculties must be accredited, (iv) project individualization; (v) affidavit that the applicants are not included in any of the Subsections a) and d) of Section 12 of Law No. 26.360; (vi) incorporation of the applicable goods to the Inclusion Certificate request, if applicable; and (vii) compliance of Hazardous Waste Law No. 24.051 and Chemicals Components Law No. 24.040 affidavit.

    Once the requirements have been fulfilled, a first stage of analysis by CAMMESA is carried out, jointly with the Direction of Renewable Energies. If documentation and/or information is uncompleted or insufficient, these organisms may, an additional 10 day term is contained so as to comply with such requirements.

    The procedure concludes with a Resolution to be issued by Sub-Secretariat of Renewable Energy, which shall be notified to the applicant and informed to the MP and AFIP.

At TRS&M, as a leading Law Firm in the electricity sector, we are following these developments with great detail and are available to discuss any query regarding the above.

by trsym

Renewable Energy: Distributed Generation

On December the 27th, Law No. 27,424 regarding “Renewable Energy Distributed Generation Promotion Program” was published on the Official Gazette (hereinafter, the “Law”).

The Law declares distributed generation as national interest and establishes the legal and contractual conditions for the generation of renewable energy for users of the distribution grid for self-consumption and eventual delivery of surplus electricity to the network (the “Projects”).

Main aspects:

  1. Targeted Users
    • Users connected to the distribution grid are allowed to install the necessary equipment to generate distributed energy for a power capacity equivalent to the one contracted with the distribution company.
    • An authorization from the distribution company is requested.
    • Projects regarding the construction of national public buildings must include distributed generation systems from renewable resources.
    • An efficient energy system will be proposed for the existing public buildings.
  2. Connection Authorization
    • It shall be required to the distribution company.
    • Term for issuance: the same as established by the local regulation for the electricity meters.
    • It cannot be denied when the equipment has been certified.
    • The distribution company will technically asses the safety of the Project.
    • Once the Project is technically approved, the user-generator and the distribution company will execute an agreement.
    • Installation costs cannot exceed the costs for changing or installing electricity meters.
    • Penalties are established for distribution companies who do not comply with the terms established by the Law.
  3. Billing

    Every distribution company will compensate the generated electricity with the consumed electricity for each user, according to the following guidelines:

    • The user-generator shall be entitled to a special rate for the electricity delivered to the grid, according to the seasonal price.
    • The billing shall reflect the volume of required energy and the amount of the electricity delivered to the grid. The user shall pay the net result of those values.
    • Shall there be a surplus in favor of the user-generator, it will constitute a credit for future billings. If the credit is not cancelled, the user-generator can request such credit to the distribution company. The credits can be assigned between users interconnected to the same distribution company.
  4. Enforcement Authority

    The Law´s enforcement authority will be empowered to:

    • Issue technical and regulatory rules for the approval of the Project.
    • Issue technical rules and guidelines for interconnection authorizations to the grid.
    • Act as a trustor.
    • Fix the rate for the electricity delivered to the grid.
    • Settle the general guidelines for the agreements.
  5. FODIS

    The Law established the Renewable Energy Distributed Generation Fund (“FODIS” for its Spanish acronym).

    • Purpose: the use of the trust assets for the granting of loans, incentives, warranties, capital contributions and acquisitions of other financial instruments for the development of the Projects.
    • Parties: the enforcement authority will act as trustor and a public financial entity as the trustee. The owners of the Projects shall be the beneficiaries of the fund.
    • Trust Assets: (i) resources of the national budget that cannot be lower than the fifty per cent (50%) of the effective saving in fossil fuels due to the electricity generated by the Projects; (ii) principal and interest recovery of the granted financing; (iii) resources granted by multilateral agencies; and (iv) incomes earned from the issuance of fiduciary values.
    • Instruments: (i) provide funds and grant loans; (ii) partially credit or subsidize interest rate of granted loans; (iii) grant incentives; and (iv) finance the diffusion, investigation and development of activities related to the application of these technologies.
    • Exemption: The FODIS and the trustee will be exempted to pay national taxes for transactions related to the FODIS.
  6. Promotional Benefits
    • FODIS will established, for twelve (12) years, extendable for the same term, bonuses for the acquisition of the equipment as a promotional benefit.
    • The enforcement authority can establish a tax certificate for national taxes as a promotional benefit.
    • The enforcement authority will give priority for promotional benefits for national equipment.
    • A maximum cap for Tax Benefits of pesos two hundred million ($ 200,000,000) is expected for 2017 in order to be used as promotional benefits.
  7. FANSIGED
    • Finally, the Law established the “Promotion Regime for the National Manufacture of Systems, Equipment and Inputs related to Distributed Generation” (“FANSIFED” for its Spanish acronym) for a ten-year term, extendable for the same term.
    • The activities benefit from the Promotional Regimen are the investigation, design, investment in capital goods, production, certification and install services for distributed generation.
    • The incentives are: (i) tax certificates; (ii) income tax accelerated amortization; (iii) VAT anticipated reimbursement; (iv) access to finance with preferential rates; and (v) access to the Supplier Development Program.
    • Only micro, small and medium-sized enterprises can request promotional benefits.
    • A budget cap of pesos two hundred million ($ 200,000,000) to be assigned to promotional benefits for the current fiscal year is established.

At TRS&M, we are following these projects with great interest and are available to discuss any query regarding the above.

by trsym

Public-Private Partnership Agreements. Preliminary Bidding Terms of the National and International Tender: “Highways and Safe Roads Network– Stage 1”

The Undersecretariat of Public-Private Partnership (the “UPPP”) published on its website an executive summary and the main aspects of the Public-Private Partnership Program (“PPP”) related to “Highways and Safe Roads Network– Stage 1” (the “Project”) and preliminary draft of the bidding terms and conditions (the “Preliminary Bidding Terms”).

This implies the first implementation of PPP under Law No. 27,328 –approved on November 16th, 2016- and it Regulatory Decree No. 118/2017 –issued on February 17th, 2017- which implies an alternative regime to Public Works Act (Law No. 13,064) and Public Works Concession Act (Law No. 17,520).

Public hearings are to be held for informative purposes on January the 8th, 10th and 12th in the City of Buenos Aires, Buenos Aires, Santa Fe and Córdoba. Prior registration is requested and can be done in the UPP´s website.

The Project implies an investment of 6 billion USD and the execution of approximately 3,000 kilometers of national highways.

The tender will result in the awarding of PPP agreement (the “PPP Agreement”) to be executed with the National Directorate of Roads and Highways (“DNV” for its Spanish acronym) for a fifteen year-term.

On December 21st, 2017, a draft of the PPA Agreement (“Preliminary Agreement”) was published on DNV´s website.


Main aspects of the Preliminary Bidding Terms and PPA Agreement

Both the Preliminary Bidding Terms and Preliminary PPA are subject to amendments to reflect suggestions that will arise on the public hearings.

Highways and Safe Roads Network included in the Project

The Project consists on the execution of five (5) Highways and Safe Roads (the “Highways”):

  • “A” NATIONAL HIGHWAY: includes parts of National Routes No 3 and 226 (706 kilometers)
  • “B” NATIONAL HIGHWAY: includes parts of National Route No 5 (538,65 kilometers).
  • “C” NATIONAL HIGHWAY: includes parts of National Routes No 7 and 33 (875,92 kilometers)
  • “E” NATIONAL HIGHWAY: includes parts of National Routes No 9, 193, 34, A012, A008 and 11 (389,41 kilometers)
  • “F” NATIONAL HIGHWAY: includes parts of National Routes No 9 and 33 (634,99 kilometers)
  • “SOUTH” NATIONAL HIGHWAY: includes parts of National Routes Riccheri Highway, Ezeiza-Cañuelas Highway, No. 205 and 3 (298,63 kilometers)

Structure:

The awarding includes:

  • The design, construction, rehabilitation and improvement of the Highways (the "Main Works") and
  • Its operation and maintenance (the “Main Services”)

The compensation for the execution of each work will be divided in order to mitigate the construction, rehabilitation and improvement risk of the Main Works.

The Preliminary Bidding Terms include the possibility to execute additional mandatory works –in terms of section 9, 1) of Law No. 27,328- (the “Additional Mandatory Works”) and additional voluntary works (“Additional Voluntary Works” together with the Additional Mandatory Works, the “PPP Contracting Party´s Works”).


Main aspects of the Preliminary Bidding Terms

  • Prequalification requirements – Strategic Partner
    Each bidder will be required to meet certain specific technical prequalification requirements, including submission of proof of having experience in the construction of road projects and/or operation of road concessions or other PPP infrastructure projects.

    Furthermore, each bidder must designate a strategic shareholder (“Strategic Partner”), which will be required to meet certain minimum solvency prequalification requirements and to maintain a minimum level of shareholding in the PPP Contractor of 30% until at least (i) 20% of the PPP Agreements has been executed or (ii) 20% of the committed investment has been made.

  • Tender process
    The PPA Agreement awarding will be subject to a multiple-stage tender process. The Ministry of Transport will call for the Tender and it will conducted with the UPPP.

    Laws No. 13,064, 17,520, its amendments and Decree No. 1023/01, its amendments will not apply to the Tender.

  • Limitations to the awarding: each bidder can only be awarded with a maximum of two (2) Highways.
  • National Component: bid submission will imply a commitment to execute the PPP Contracting Party’s Works with, at least, thirty three per cent (33%) of national component.
  • Bonds: each bidder will be required to submit a Bid Bond and, on the date of execution of the PPP Agreement, a Financial Close Bond. If the Bidder is composed by two (2) or more natural persons or legal entities, the Bid Bond shall be issued in name of the Financial Strategic Partner.

    PPP Contractor shall also submit the following bonds: (i) Main Works Performance Bond; (ii) Additional Mandatory Works Performance Bond; and (iii) Main Services Performance Bond (the “Compliance Bonds”).

  • Incorporation of the PPP Contractor:
    - Awarded bidders must incorporate, prior to the execution of the PPP Agreement, the PPP Contractor as a Corporation. Its minimum capital share will be determined by the competent authority. A breach will imply: (i) execution of the Bid Bond and (ii) an awarding of the PPP Agreement to the following bidder in merit list.
    - If one Bidder is awarded with two (2) Highways, a Corporation for each Highway must be incorporated.
  • PPP Agreement:
    - It shall be executed within ten (10) days from the awarding, term that can be extended by the Ministry of Transport.
    - It will have a fifteen-year- term.
    - Financial Close must be achieved within six (6) months from execution. Such deadline can be extended (i) three (3) months, prior to an increase of the Financial Close Bond of fifty basic points (50 bsp); and (ii) six (6) months, prior to an increase of the Financial Close Bond of one hundred basic points (100 bsp).
    - To achieve Financial Close, the PPP Contractor shall be required to submit proof of funds availability for an amount equal to the Main Works specified in the PPP Agreement. This can be through the capitalization of the PPP Contractor or a commitment issued by a financial institution. If financing will be achieved by loans, the entity providing such loans will be required to meet certain minimum credit requirements.
    - The PPP Contractor shall be required to submit proof that its shareholders have made equity contributions for, at least, ten per cent (10%) of the amount of the Main Works (“Equity Contributions”). Such Equity Contributions can be made by instalments, but no later than the date specified therefor in a schedule to be established in the PPP Agreement. If this is option is taken, the shareholders or affiliated entity shall satisfy certain financial solvency requirements.
  • Main Works’ Compensation
    - The Main Works´ Compensation shall consist on the delivery to the PPP Contractor of one or more Investment Payment Tittles (“TPI”, for its acronym in Spanish), after the compliance of works milestones.
    - The PPP Trust shall issue, every three months, one or more TPIs, in US Dollars, which will be unconditional, irrevocable and freely transferable. Each TPI shall provide for twenty (20) semi-annual payments in US Dollars and the interest rate for delayed payments. PPP Contractor can choose between fixed and unconditional TPI or a combination of fixed TBIs and variable and conditional TBIs.
  • Main Services Compensation
    - As compensation for the provision of Main Services, the PPP Contractor shall receive: (i) the incomes obtained from tolls, excess load charges and commercial exploitation of the Highway ("Compensation by Users"), and (ii) the compensation for infrastructure availability (the "Availability Compensation"), through monthly issuance and delivery of Availability Payment Titles (“TPD” for its Spanish acronym) to the PPP Contractor.
    - The TPDs shall be unconditional, irrevocable and freely transferable. The TPDs shall be issued by the PPP Trust, prior discount of applicable penalties. Interest rates for delay payment will be established.
    - Each TPD will provide for a single cash payment in Argentine Pesos, to be made within 15 business days from the date of its issuance
  • PPP Trust:
    - The parties to the PPP trust agreement ("PPP Trust Agreement") will be the Republic of Argentina, as trustor, a financial entity to be selected, as trustee, and each PPP Contractor, as beneficiary.
    - The PPP Trust will be solely destined to administrate cash flows allocated to make all payments related to the Projects, by the issuance of TPI and TPD at the contracting entity´s request.
    - The PPP Trust will have one or more collection accounts shared by all Projects. Each Project will also have individual accounts waterfall, which will be segregated from the accounts related to other Projects.
    - The PPP Trust shall be funded with (i) amounts corresponding to diesel fuel taxes allocated to the “Sistema Vial Integrado” (“SISVIAL”, for its Spanish acronym); and (ii) the PPP Contractor´s monthly payment to the PPP Trust (“Traffic Contributions”). The National Estate will be required to make one or more contingent contributions each year for the necessary amount to cover funding shortfalls in the PPP Trust.
    - Each PPP Contractor shall execute an adhesion agreement to the PPP Trust, in order to become the beneficiary.
  • Other relevant aspects
    - A specific treatment of certain risks is settled in order to ensure the economical-financial equilibrium along the term of the PPP Agreement. For instance, under some conditions, the PPP Contractor shall request adjustments to the PPP Agreement term or the Availability Compensation.
    - Related to the rate-exchange risk, PPP Contractors may enter into a currency collar agreement with the PPP Trust, which will remain in force during the construction period of the Main Works. The currency collar will establish a ten per cent (10%) band between the US Dollar and the “Unidad de Valor Adquisitivo” ("UVA"), published by Argentinean Central Bank at the time of the awarding.
    - Early termination of the PPP Agreement will not affect payment to be made under any Fixed TPIs or TPDs issued prior to the termination date. In addition, payment of undepreciated investment is established.
    - The PPP Agreement shall provide typical protections for secured creditors, such as step-in rights or cure periods, among others.
    - Regarding dispute resolution mechanism, the PPP Agreement shall provide for an initial stage for technical or financial matters, to be submitted to a technical board. A second stage of arbitration in established, to be settled in the Republic of Argentina or in any other jurisdiction.

This Project provides answers to the strong expectations that have been in place regarding the sanction of PPP´s Act, introducing a favorable opportunity for the development of new infrastructure under this new regime that presents specific modulations, different from traditional mechanisms as Public Works and Public Works Concession.

At TRS&M, we are following these matters with great interest and are available to discuss any query regarding the above.

by trsym

Electricity in Argentina: Sale of generation and transmission assets and other relevant changes

On November 1st, Decree No. 882/2017 was published in the Official Gazette (hereinafter, the “Decree”), introducing major change in Argentina’s Electricity Market.

The Decree provides for the spin-off and sale to the private sector of transmission and generation assets, including power plants totaling 840 MW of capacity, a power plant of 810 MW under construction, minority shareholding stakes in other power plants and the sale of 50% of the shares of CITELEC S.A., holding company of TRANSENER -main electricity transmission company in Argentina-.

This step is the first sale of State-owned infrastructure assets in more than 18 years.

In addition, a new State-owned company is created, from the merger of two existing entities, who will retain certain assets and is in charge of public works under State supervision, including gas pipelines, hydroelectric and thermal power plants.

Main aspects of the Decree

1) Asset sale: future competitive procedures

The Decree instructs the Ministry of Energy and Mining (“MEYM”, for its Spanish acronym) to proceed to the sale, assignment and transference, by means of a public and competitive process, of the following assets:

  • Thermal Power Plants “Ensenada de Barragán” and “Brigadier López”, under the condition precedent of executing the works to operate as a Combined Cycle Power Plant.
  • “Manuel Belgrano II” Thermal Power Plant
  • The shares in the following companies:
    • “Compañía Inversora de Transmisión Eléctrica CITELEC S.A.”
    • “Central Dique S.A.”
    • “Central Térmica Güemes S.A.”
    • “Central Puerto S.A.”
    • “Centrales Térmicas Patagónicas S.A.”
    • “Empresa de Transporte de Energía Eléctrica por Distribución Troncal de la Patagonia S.A. (TRANSPA)”

  • State rights related to:
    • Thermoelectric Power Plant Manuel Belgrano
    • Thermoelectric Power Plant José de San Martín (Central Timbúes)
    • Thermoelectric Power Plant Vuelta de Obligado
    • Thermoelectric Power Plant Guillermo Brown

The Decree enables the interested parties to submit certain titles issued by CAMMESA in the past (“Liquidaciones de Venta con Fecha de Vencimiento a Definir”) as a way of payment for the assets.

2) Absorption Merger of ENARSA and EBISA: IEASA

The Decree instructs the MEYM to proceed to the absorption merger of Energía Argentina S.A. (“ENARSA”, for its Spanish acronym) and Emprendimientos Energéticos Binacionales S.A. (“EBISA”, for its Spanish acronym), becoming ENARSA the absorbing entity, whose business name will be Integración Energética Argentina S.A. (“IEASA”).

3) Public works transfer and concession agreements awarding

The Decree sets the transfer of certain public works under the direction of MEYM to IEASA, who shall act as principal in the following works:

  • “Central Térmica Río Turbio”
  • “Hydroelectrical Poryects over the Santa Cruz river “Cóndor Cliff” and “La Barrancosa”
  • “Extension of Natural Gas´ Distribution and Transmission System” Project that includes the following works: (i) Regional Centro II gas pipeline – Esperanza/Rafaela/Sunchales; (ii) Cordillerano/Patagónico System; (iii) Cordillerano gas pipeline and (iv) “La Costa” gas pipeline
  • Additionally, IEASA is awarded with concession agreements to generate electricity from hydroelectric power plants Cóndor Cliff and La Barrancosa

At TRS&M, as a leading Law Firm in the electricity sector, we are following these developments with great detail and are available to discuss any query regarding the above.

by trsym