Argentina: "RenovAr Program" (Round 1) Public Auction Process Launched

Resolution No. 136/2016 issued by the Ministry of Energy and Mining was published in the Official Gazette on July 26 (The "Resolution" and "Ministry of Energy", respectively). It (a) launches a public auction process so that bidders can apply  to the RenovAr program (round 1), (b) approves the Bidding Terms and Conditions of the above mentioned public auction, and (c) approves the Supply Contract of Renewable Electric Energy (the "Bidding Terms" and the "PPA", respectively)

As noted in the Resolution, the Bidding Terms and the PPA were approved after carrying out a Public Consultation Period regarding the preliminary version of the documents approved by the Ministry of Energy. During this process, the Ministry of Energy had invited the interested parties to submit comments and suggestions until July 1.

Overall, the amendments introduced in the final versions of the Bidding Terms and PPA have a direct objective to increase the number of potential bidders by making the different legal requirements more flexible.

Moreover, Emergency Decree No. 882/2016, published on July 22 in the Official Gazette (the "Decree"), modified and established different precisions regarding the Federal Promotional Scheme of Power Generation from Renewable Energy Sources approved by Law No. 26,190 and modified by Law No. 27,191 (the "Promotional Scheme")

Below are the main modifications introduced by the Decree and the main characteristics of the Bidding Terms and the PPA.

1. Schedule

Until August 22 interested parties can submit their queries to CAMMESA regarding the Bidding Terms and the documents comprising the RenovAr Program (Round 1) and until September 2 parties may acquire the Bidding Terms.

Between July 25 and August 29 CAMMESA will publish the answers to the inquiries received and the final version of the documents comprising the RenovAr Program (Round 1).

On August 8 the FODER Trust Fund Contract will be executed.

On September 5 the interested parties should submit their bids to CAMMESA. 

On October 12 the PPAs will be awarded.

On November 11 the PPAs and the FODER Adhesion Contracts will be executed.

2. Tax Share

As explained in Marval News # 161, published on May 31, 2016, Resolution No. 72/2016 issued by the Ministry of Energy regulated the proceedure to obtain the Certificate of Inclusion and the corresponding tax benefits under the framework of the Promotional Scheme. These benefits would be granted to the projects as long as the available annually tax share is not over.

The Decree establishes that the tax share for the exercise 2016 is of US$ 1,700,000,000.

In addition, the Bidding Terms established the maximum share of tax benefits that each offeror is able to include in their request, depending on the type of technology and the capacity of the project.

3. Bidding Terms and Conditions

The Bidding Terms loosens some legal requirements that bidders must fulfill when submitting their offers. In particular, bidders must evidence that they have started the proceedings for the registration as a generating, cogenerating or self-generating agent (depending on the case). Access permission to the grid will be required when requesting the commercial authorization of the project from CAMMESA, and not when the offer is submitted, as planned in the preliminary version of the Bidding Terms and Conditions.

Also, to increase the number of bidders, the amount of the minimum net worth required as financial requirement and the amount of the maintenance guarantee of the offer were reduced in the Bidding Terms.

Regarding the selection criteria of bids and PPAs awards, the priority that the Ministry of Energy will grant to projects that have the largest Argentine component declared and the shortest execution term is highlighted.

4. PPAs

The inclusion of an arbitration clause subject to the Arbitration Rules of the United Nations Commission for the Unification of International Trade Law (UNCITRAL) is outlined in the PPA model.

The place of arbitration is determined by the arbitral tribunal with regard to the nationality of the parties intervening in the arbitration process. 

5. Option contract with the Argentine Government

The Decree authorizes the Argentine Government to execute contracts with those bidders that were awarded with a PPA, which may provide: (a) purchase option rights of the generation power plant or of its assets in favor of the Argentine Government in case of breaches of CAMMESA which constitutes a termination cause of the PPA; and (b) sell option rights of the generation power plant or of its assets against the awarded PPA in light of the agreement of any of the sales causes. 

According to article No. 3 of the Decree, these contracts –as well as the PPAs– may have a term of 30 years; therefore, the limitations stipulated in the Civil and Commercial Code regarding the option and supply contracts would not be an issue. 

6. Public Trust Fund "FODER"

The Decree grants greater powers to the Ministry of Energy, at the same time it is appointed as settlor and final beneficiary of the FODER, and empowers it to: (a) substitute the trustee, which will be Banco de Inversión y Comercio Exterior (BICE, after its Spanish acronym) and (b) approve and sign the Contract of Trust with the trustee. Under Law No. 27,191, these powers were attributed to the currently Ministry of Economy and Public Finance.

In addition, the Decree contemplates that the Contract of Trust can be structured through different Public Trusts whose sole and exclusive purpose would be to: (a) secure the payment of electric energy; (b) finance the instruments established in the Promotional Scheme; (c) secure and make the payment of the price of purchase/sale of the generation plants and (d) issue debt securities.

The Decree also establishes that the Debits and Credits on Bank Accounts used by the Public Trust Fund to be structured (under the framework of the FODER and trustee, when making transactions related to FODER, will be exempt from the tax established by Law No. 25,413 (Tax on Debits and Credits on Bank Accounts whose general tax rate is 0.6 % on each credit and on each debit).

The exemption in this tax has been also been provided for by Law No. 27,191 which established that: "The FODER and the Trustee, when making transactions related to FODER, shall be exempt from all existing national taxes, rates and contributions and those taxes which may be introduced in the future. This exemption includes taxes set forth in Laws 20,628 (Income Tax Law), 25,063 (Minimum Presumed Income Tax Law), 25,413 (Tax on Debits and Credits on Bank Accounts) and 23,349 (Value Added Tax Law) and other internal taxes, as appropriate".

The Decree regulates the exemption regarding the Tax on Debits and Credits on Bank Accounts to refer specifically to the accounts used by Public Trust Funds to be structured under the framework of the FODER and trustee, when making transactions related to those accounts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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