New Central Bank regulation on financings for non-financial public sector energy companies

On September 29, 2006, the Central Bank issued Communication “A” 4581, which authorizes the grant of the same general regulatory treatment which is currently afforded to financings for members of the non-financial private sector, to financings granted to energy companies in the non-financial public sector that are not incorporated as Estate Companies (“Sociedades del Estado”) governed by Law No 20,705, provided the following requirements are met:

(a)   the borrower must have been created by a federal law, and must be a corporation (“sociedad anónima”) governed by the provisions of the Commercial Companies Law directly or indirectly state controlled;

(b)   the specific corporate purpose of the borrower must be the development of activities in the energy sector, and the borrower must be subject to the internal and external controls of the National Public Sector set out in Law No 24,156 on Financial Administration and Control Systems in the National Public Sector.

These requirements are met by Energía Argentina Sociedad Anónima (“ENARSA”), a state controlled corporation created by Law No 25,943 for the purpose of developing activities by itself, through third parties or in association with third parties, in the gas, oil and electricity industries. It would seem that Communication “A” 4581 was issued by the Central Bank to facilitate banking loan facilities for ENARSA, by excepting such financing from the usual general regulations of the Central Bank on financings to the non-financial public sector. These contain important restrictions on the ability of local banks and their foreign affiliates, branches or subsidiaries, to grant financing to entities of the non-financial public sector. The similar regulatory treatment set forth by Communication “A” 4581 is also relevant for the purposes of lenders’ compliance with Central Bank prudential regulations (e.g., in connection with Central Bank regulations on minimum capital requirements which take into account the counterparty risk for purposes of assets valuations).

As regards the formal requirements to be met, the borrower must deliver a letter executed by its legal representative to the Central Bank, requesting the Central Bank’s consent to affording the financing the same general treatment provided for financings to companies of the non-financial private sector. The borrower must attach to the letter:

(i)    a sworn statement executed by its directors confirming compliance with the requirements mentioned in paragraphs (a) and (b) above and undertaking to report to the Central Bank and the lender any future change to such requirements, and undertaking to deliver to the Central Bank any additional information that may be requested; and

(ii)   an affidavit by a chartered accountant, with its signature legalized by the competent accountants’ professional body, certifying compliance with the above mentioned requirements.

Together with its financing request to the lender, the borrower must attach a true copy of the Central Bank’s favorable resolution, a sworn statement signed by all its directors and an affidavit by a chartered accountant, both confirming compliance with the above mentioned formal requirements.