The Argentine Government Prepares to Determine the Future of Hydroelectric Concessions Close to Expire

On March 10, 2022, Resolution No. 130 of the Secretary of Energy was published in the Official Gazette. Resolution 130 created and appointed the Work Team of Concessioned Hydroelectric Plants or “ETAHC” (after its acronym in Spanish) to integrally audit the different concessions for generating hydropower granted between 1993 and 1997.

Among the concessions that are reaching expiration there those  ending on 2023 and 2024. For this reason, Resolution 130 gave ETAHC a 1-year term as of its creation to audit those concessions expiring during 2023, and a 2-year term to audit the rest of the concessions (with the exception of those concessions with terminations dates between 2029 and 2044). 

The recitals of Resolution 130 highlight that hydropower (including binational plants, concessioned power plants subject to Resolution 130 and renewable small hydropower plants) amount to approximately 20% of the total generation of the Wholesale Electricity Market (MEM, after its acronym in Spanish) and have a total installed capacity of more than 10,800 MW.

The audit requested by ETAHC includes 22 concessions of hydropower plants located in 8 different provinces, with a total installed capacity of 5,800 MW.

Natural gas imports (both for  pipeline transported gas and  LNG) are becoming increasingly expensive, as well as other liquid fuel imports which are also used for generating electricity such as gasoil and fuel oil. Therefore, it is vital that all the installed hydropower is fully available. Obviously, regulatory risks and lack of predictability hinder the availability of hydropower plants.

Since the privatization of the hydropower plants, the regulatory framework applicable to these concessions was amended systematically and substantially in breach of the concessionaire’s rights and legitimate expectations. Particularly, the income regime, was completely modified.

Different international courts have considered the regulatory changes imposed on the MEM that reduced generators’ proceeds (including cases related to concessionaires of hydropower plants) as a breach of foreign investors’ rights guaranteed by bilateral investment treaties currently in force.

In this context, it is very important at the present moment to guarantee legal security and predictability, regardless of the regulatory solution to be proposed by the ETAHC audit. Respecting those principles is essential both for energy security and to reduce the exposure to international claims as the ones faced by Argentina in the past.