Renewable Energy: Draft Regulation for Corporate PPA´s

The National Ministry of Energy and Mining has published on its website a draft regulation (hereinafter, the “Draft Regulation”) for corporate power purchase agreements from renewable resources (hereinafter, “PPA”).

The Draft Regulation will be subject to public consultation for 15 days starting on June 9th, 2017.

The Draft Regulation sets out several relevant rules, including, not only the ones referred to PPAs, but also, pertaining to issues such as curtailment and how dispatch will be assigned in such cases. Furthermore, it sets guidelines for Targeted Large Users (please, see below) who must comply with renewable portfolio targets.

The main aspects of the Draft Regulation are summarized below. Please do not hesitate to contact us for further information.

Main aspects of the Draft Regulation

1) Specific Fees

These provisions enable Targeted Large Users to assess the costs of Wholesale Electric Market Management Company´s (hereinafter, “CAMMESA” for its Spanish acronym) joint purchase mechanism in comparison with other available alternatives.

  • The Draft Regulation provides for a Trading Fee and an Administration Fee referred by Decree No. 531/2016 (the “Decree”), regulatory of Law No. 27.191 (the “Law”). Electricity consumers whose average electricity demand in the previous calendar year exceeds 300 kW (“Targeted Large Users”) and opt to comply with their consumption obligation through the joint purchase mechanism must pay the Administration and Commercialization Fee.
  • The Commercialization and Administration Fees are stipulated in U$S/MWh and will vary according to their consumption obligation and electricity demand. The Commercialization Fee will be allocated to the Stabilization Fund of the Wholesale Electricity Market (“MEM” for its Spanish acronym) and its value is set to increase through the years (starting in U$S 4/MWh up to U$S 20/MWh). The Administration Fee will be a fixed charge, destined to fund administrative expenses of the joint purchase mechanism.

2) Curtailment

The Draft Regulation seeks to establish a priority dispatch in cases of curtailment.

  • A priority order is established until transmission risks are overcome.
  • The priority order is as follows:
    1. Run of the river hydroelectric power plants and renewable energy power plants that have achieved commercial operation (“COD”) before January 1st, 2017.
    2. Power plants awarded with a PPA under “Program RenovAr, Rounds 1 and 1.5”.
    3. Power plants that will be awarded with PPAs in future Rounds of Program RenovAr.
    4. Power plants that operate under the corporate market and have been granted priority after future Rounds of Program RenovAr are published. If priority has been obtained before such publication, these power plants will have priority over the ones mentioned in (iii).
    5. Between the power plants that operate under the corporate market, the one who has obtained priority earlier, will have priority dispatch. If they had the same order, dispatch will be done at pro rata basis.

3) Registries

  • The Draft Regulation provides the creation of a Priority Dispatch Assignation Registry (“RAPID” for its Spanish acronym) under CAMMESA.
  • The creation of a National Renewable Energies Project´s Registry (“RENPER” for its Spanish acronym) under the Renewable Energy Sub-secretary where generation, cogeneration and self-generation projects connected to the Argentinian Interconnection System (“SADI” for its Spanish acronym) must be registered.

4) Main aspects of the corporate market

  • For purposes of complying with the consumption target, power generated from authorized projects will be considered. Authorized projects will be generation, self-generation or cogeneration projects that:
    1. Achieve COD after January the 1st, 2017;
    2. Are registered at the RENPER.
    3. Are not committed under other contractual arrangements or are expansions of projects committed under another contractual regime; the latter, only for the expanded power capacity and must have an independent commercial measuring system for the expanded capacity.

  • Tax benefits will apply and will be ruled by Resolution MEyM No. 72/16.
  • The terms of the PPA will be freely negotiated between the parties.
  • Up to 10% of the project´s energy generation can be sold to CAMMESA or in the spot market under Resolution SEE No. 19/2016, or its amendments.
  • Priority dispatch order: a specific procedure is prescribed, which will depend on proposed COD and tax benefits. Generators that assume the costs for transmission capacity expansions will have priority.
  • Capacity back-up: will not be required.

5) Authorized Large Users (“ALU”)

  • CAMMESA will publish a list of ALU obliged to individually comply with the consumption obligation.
  • After the list is published, the ALU will have twelve (12) months to opt out from CAMMESA´s joint purchase. Such exclusion, since communicated, will last for five (5) years.
  • Within the twelve-period term, the opt out can be made two (2) times per year, according to seasonal programming of the MEM.
  • The Draft Regulation provides the effects of the exclusion of the joint purchase mechanism and the obligation to inform and register the PPA or the self-generation or cogeneration project.
  • The audit of consumption target is annually and year past due.
  • The procedure for the fines is regulated. A 10% tolerance is prescribed that can be compensated the following year. The standards to establish sanctions is stipulated.
  • Authorized Large Users can choose to assign their energy consumption to base energy or energy plus program.

The Draft Regulation provides answers to the strong expectations that have been in place regarding the Argentine energy market around the possibility to start a corporate market.

Public consultation favors the opportunity for business players to state their opinions and proposals regarding the Draft Regulation.

This is good news for all the interested parties in the development of the renewable energy market in Argentina.

by trsym

Argentina: New Thermal Power Tender

On May 11th, Resolution No. 287/17 (the “Resolution”) of the Secretariat of Electric Energy (the “SEE”) was published, initiating the first round of tenders (“Stage I”) arising from the “Expressions of Interest” procedure called by Resolution SEE No. 420/16.

The Resolution approved the Tender´s Terms and Conditions (the “Bid Document”), including a draft of the Power Purchase Agreement (“PPA”) to be executed between bidders awarded in the Tender and the Wholesale Electric Market Management Company (“CAMMESA” or the “Off-taker”).

Projects included in Stage I:

  1. Close cycle gas turbine projects that: (i) currently operate or will be shortly in operation in simple cycle; (ii) have low specific consumption; (iii) are likely to improve its efficiency with the close cycle; (iv) do not affect transmission capacity; (v) have the necessary infrastructure to enable the permanent operation of the combined cycle and (vi) have a maximum term of construction of thirty (30) months.
  2. Co-generation projects that: (i) are efficient; (ii) do not affect transmission capacity; (iii) have available supply of the main and alternative fuel and (iii) have a maximum term of construction of thirty (30) months.

The main features of the projects allowed to participate in Stage I are outlined in Section II, Title I of the Bid Document.

New combined-cycle power plants and transmission and fuel supply projects will be contracted through future tenders.

Main aspects of the Bid Document:

  • Bid Bond: Among the formalities bidders should comply with, a bid bond equal to UDS 5.000 x the net power capacity (MW) offered should be submitted.

  • PPA´s term: 15 years.

  • Price: Seller will be entitled to collect a fixed price for the power availability established in US dollars per MW/month and a variable price for the energy produced established in US dollars per MW/hour. Such price will be paid in Argentine Pesos at the rate established in the PPA.

  • Fuel: If bidders offer alternative fuel, Buyer will monthly pay for such fuel calculated in accordance with the “The Procedures for Programming the Operation, the Dispatch and calculation of prices” and the reference prices detailed in Section II, Chapter 9 of the Bid Document.

  • Penalties: The PPA establishes daily penalties for not reaching Commercial Operation Date (“COD”) up to sixty (60) days from the estimated date included in the Offer. If COD is not reached within one hundred and eighty (180) days from the estimated date, the PPA shall be terminated. The penalty regime is equal to the one established under Resolution SEE No. 21/16.

  • Interconnection point: Section II, Chapter 7 of the Bid Document details the possible interconnection points to the Argentine Interconnection System, its maximum power capacity and loss factors.

  • Special Fund: An innovation compared to the PPAs under Resolution SEE No. 21/16 is given by the future incorporation of a special fund to secure six (6) month payments under the PPA. The features of this fund are to be stipulated in the following months.

Stage I schedule is as follows:

  • Q&A period: up to July 7th, 2017.

  • Bid submission and opening of envelope 1: July 19th, 2017 at 13.00.
  • Opening of envelope 2: August 9th, 2017.
  • CAMMESA´s prequalification: August 30th, 2017.
  • Execution of the PPA: no later than November 1st, 2017.

The Bid Document may be amended by the SEE through additional communications (“Circulares”).

For further information, please do not hesitate to contact us.

by trsym

Important News on FX Regulations: The Argentine Central Bank continues to simplify the FX Market

The Argentine Central Bank issued Communication “A” 6037, repealing some remaining regulations from the time in which the Argentine FX market was subject to considerable restrictions. Among other aspects, this new regulation has simplified the FX market, reducing bureaucratic requirements and operational costs.

Communication “A” 6037 has abrogated the need to produce documental evidence for undertaking FX transactions. Now it will be enough to execute a sworn statement in which the purpose of the transaction shall be specified (e.g., purchase of freely available currency, foreign trade, etc.), as well as certain basic information to be included. Monthly caps were also repealed and only transactions to be made in-cash continue to be limited, with the purpose of fostering anti-money laundering policies.

With these latest changes, the FX market can again be named as a “only and free FX market”, since now certain “alternative” transactions are no longer necessary, such as the blue-chip swap.

In addition, Communication “A” 4805, which considerably limited the ability of Argentine residents to enter into derivative transactions with foreign counterparties, was repealed.

by trsym