Electric Energy: Current Projects and New Plans Targeting an Expansion of Installed Power Capacity and the Fostering of Investment

1. New tenders for power plants 

On November 25, the state-owned company Energía Argentina S. A. (“ENARSA”) issued two tenders for the construction or expansion of power plants.

In both cases the hiring system to be used in order to hire services and performances will be the lump sum (global price) and turnkey.

a. Tender for the conversion of Power Plants

The main purpose of the call for national and international public tender EE N° 7/10 is to contract the project, supply, construction, assembly, start-up, in the form of "Turnkey", of the conversion of power plants known as "Ensenada de Barragán" and "Brigadier López”, from an open cycle to a combined cycle.

Official budget of this tender amount is $4.009.500.000 without VAT. This budget will be allocated, as follows: (i)  Ensenada de Barragán, $2.673.000.000 without VAT. (ii)  Brigadier López, $1.336.500.000 without VAT.

The term for the completion of both works is 20 months.

The deadline for submission of bids, also fixed for the opening of the technical bids (Envelope N ° 1) is February 1, 2010.

The bidding terms and conditions have a value of $50,000 and can be purchased at ENARSA’s Offices, Libertador Avenue 1068, 2nd floor, Buenos Aires City up to 5 working days before the opening of the bids of Envelope No. 1.

Queries or clarification requests may be made in the offices of ENARSA, located at Paraguay 346, 10th floor, of the City of Buenos Aires, up to 10 working days before the opening of the bids of Envelope No. 1.

b. Tender for the construction of a new combined cycle power generation plant

The purpose of the tender EE N° 8/10 is to contract the project, supply, construction, assembly, start-up, in the form of "Turnkey", of a 810 MW combined cycle power generation to be installed in the city of Campana, in the Buenos Aires Province.

The official budget of the tender is $ 4.860.000.000, without VAT.

For the completion and start up of the power plant, the term will be of thirty-six (36) months as follows: (i) Commercial Operation of the Power Plant in open cycle operation mode: eighteen months. (ii) Commercial Operation of the Power Plant in full combined cycle operation: eighteen months.

The deadline for submission of bids, also fixed for the opening of the technical bids (Envelope No. 1) is February 4, 2010.

Bidding terms and conditions have a value of $ 50,000 and can be purchased at ENARSA’s Offices, Libertador Avenue 1068, 2nd floor, Buenos Aires City up to 5 working days before the opening of the bids of  Envelope No. 1. 

Queries or clarification requests may be made at ENARSA’s Offices, located at Paraguay 346, 10th floor, of the City of Buenos Aires, up to 10 working days before the opening of the bids of Envelope No. 1.

2. Changes in the remuneration of the availability of power capacity

On November 25, 2010, the Executive Power announced its decision to adjust and update the remuneration corresponding to the availability of power capacity offered by the Wholesale Electricity Market’s generating agents. The implementing regulation has not been published yet, but is expected to be released soon.

3. Renewable Energies

Law No 26,190, published on January 2, 2008, approved the National Regime of Incentives for the use renewable energy sources directed to power generation (see “Measures adopted to tackle energy supply contingencies in 2008”).

The renewable energy sources included in this regime are the following non-fossil renewable energy sources:

(i) Wind
(ii) Solar
(iii) Geothermal
(iv) Tidal
(v) Hydraulic (power plants up to 30 MW).
(vi) Biomass, exhaust gases and biogas (with the exception of uses foreseen in Law No 26.093.

Law No. 26,190 stated a target for the year 2016 by means of which 8% of the electric energy consumed in the country should come from renewable sources mentioned above.

On May 20, 2009, Decree No 562/2009 was published on the Official Gazette (see “Electric Energy Generation from Renewable Sources Promotion Regime”). This decree regulates the “National Promotion Regime Power Generation from Renewable Sources”, created by Law No. 26,190 (the “Promotion Regime”). It also regulates a special regime for tax bonuses such as the anticipated refund of the Value Added Tax (“VAT”) of the new amortizable goods used in the project of renewable energies and the accelerated amortization of the goods in relation with the Income Tax.

On October 15, 2009, Resolution No 712/2009 of the Energy Secretary was published in the Official Gazette (see “Supply of electric energy from renewable sources”). This Resolution approved the contract models (the “Contracts”) that must be celebrated between Compañía Administradora del Mercado Mayorista Eléctrico (“CAMMESA”) and ENARSA for the electric energy supply coming from renewable sources that will be generated by the awarded projects in ENARSA’s Tender.

Within this context, many tenders have been called with the purpose of contracting the supply of electric energy generated from renewable sources. As a consequence, different kind of projects which, jointly, surpassed 1500 MW of power capacity have been submitted. Many of these projects have also been awarded, while other tenders are under way.

Some of the most significant characteristics of these Contracts are the following:

(i) The power supplied shall be generated only by the offered generators that result from requests for dispatch to CAMMESA and that were not forced by generator’s request.
(ii) The term of the Contracts is 15 (fifteen) years, extendable for another 18 (eighteen) additional months, except in the cases of generation from biofuels.
(iii) A bond is set to ensure the fulfillment of the obligations arising from the Contracts. This bond will be paid with a TRUST constituted for such purpose, backed by the National Treasure and stipulated in the Official Budget Law.

4. National Program of Hydroelectric Works

The National Program of Hydroelectric Works (the “Program”) was created by means of Resolution No 762/09 of the Secretariat of Energy (“Resolution 762”) that, on November 11, 2009, published it in the Official Gazette (see “National Program of Hydroelectric Works”). 

The purpose of the Program is to encourage the construction of hydroelectric power plants within the territory of Argentina through the creation of an appropriate cash flow that guarantees the repayment of the investments performed and the finance provided.

To this end, the Program provides the possibility for Compañía Administradora del Mercado Mayorista Eléctrico Sociedad Anónima (“CAMMESA”) and the power generators of the Mercado Eléctrico Mayorista (“MEM”) to enter into power purchase agreements (“PPA”) linked to the energy generated by the Hydroelectric Works comprised in the Program.  

The PPA will have a maximum term of 15 years, which may be exceptionally extended by the Secretariat of Energy. Once the term has elapsed, each hydroelectric power plant incorporated to the Program will be able to trade its power generation at the price established theretofore by the MEM.

Within this program many Works have been awarded for different kind of projects that jointly surpass a power capacity of at least 2500MW and the announcement of new tenders within a short term is expected.