Power generation from renewable sources

The state-owned company Energía Argentina S.A. (“ENARSA”) recently issued a call concerning four domestic and international public tenders (the “Tenders”) for the execution of agreements for the supply of power generated by Biogas, Solid Urban Waste (“SUW”), Geothermal Energy and Solar Thermal Energy (the “Agreements”).

The Tenders were issued under the renewable source power requirement provided by Law No. 26,190 (see “Measures adopted to tackle energy supply contingencies in 2008” published in Marval News # 69 and “Electric Energy Generation from Renewable Sources Promotion Regime” published in Marval News # 83) and continues the path started by ENARSA Public Tender No. EE01/09 (the “2009 Tender”; see “Public Tender for the Generation of Energy from Renewable Sources New terms and guarantees” published in Marval News # 89).

1. Purpose of the Public Tenders

The Tenders are aimed to supply  electric energy and power produced by new power plants generating electricity from Biogas, SUW, Geothermal Energy and Solar Thermal Energy (the “Plants”).

Successful bidders must build, start-up and obtain the relevant commercial permits for the operation of the Plants. Moreover, successful bidders must operate and maintain the Plants throughout the terms foreseen in the Agreements.

2. Main Features

Pursuant the terms of the Tenders General Specifications, successful bidders will become ENARSA power suppliers.

ENARSA will act as a generator agent for the Wholesale Electricity Market (“MEM”) providing Compañía Administradora del Mercado Mayorista Eléctrico Sociedad Anónima (“CAMMESA”, a company in charge of the dispatch of electricity) the capacity, availability and power which will be supplied by successful bidders. To this end, ENARSA and CAMMESA will execute Power Purchase Agreements (“PPA”) as provided under Resolution No 712/2009 of the Energy Secretary (see “Supply of electric energy from renewable sources” published in Marval News # 88).

No limit is foreseen in the Tenders for the total amount of capacity that will be taken by ENARSA. On the contrary, the Tenders only provide a minimum level of 1 MW of capacity and a maximum limit of capacity for each Plant for which a bid is submitted. These limits are the following:

• Biogas: 20 MW

• SUW: 120 MW

• Geothermal: 30 MW

• Solar Thermal: 25 MW

3. PPA Features

a) The term may be set up to fifteen years starting from the date in which the Plants’ commercial permits are granted.

b) There will be no compensation in exchange for the supply of power capacity; only power duly supplied will be compensated.

c) The compensation will be agreed in US Dollars and the payments will be delivered in Argentine Pesos, according to CAMMESA’s payment regime. Throughout a 200-day term to be provided annually, 6 months in advance, within the months of December to March and May to August, an additional 5 USD/MWh fee will be paid over the stipulated compensation for off-peak hours on business-days and for all hours on Saturdays, Sundays and holidays; and an additional 10 USD/MWh will be paid for business-day peak hours.

d) The prices offered by the bidders will remain unvaried throughout the whole term of the agreement, except when a price adjustment is authorized under the power purchase agreement entered into between ENARSA and CAMMESA, and under the terms provided therein. The compensation shall be paid monthly and is calculated on CAMMESA’s monthly sales basis.

e) Tax benefits granted on a national, provincial or municipal range for the generation of electric energy from renewable sources will be collected by ENARSA.

f) The sale of “Carbon Bonds” (also known as “Renewable Energy Certificates” or “RECs”) will be deemed as a risk of the bidders, and the potential failure to obtain any profit for the sales of said bonds will not entitle the bidders to demand an adjustment of the offered price.

g) The Agreements may be assigned to third parties in full or in part, and the Plants may be pledged or encumbered in other ways, as long as prior written authorization is granted by ENARSA.

h) As guarantee to the fulfillment of their duties,  successful bidders will be included as beneficiaries to the Guarantee Fund to be constituted under the 2009 Tender (see “Public Tender for the Generation of Energy from Renewable Sources New terms and guarantees” published in Marval News # 89). That Guarantee Fund will be constituted by ENARSA and will be integrated by 10% of the monthly amount to be liquidated in connection to all agreements entered into under the Tender.

i) ENARSA guarantees the purchase of power generated by the Plants, free from requirements by the suppliers, and upon a dispatch to be determined by the plant’s capacity and availability. ENARSA will acquire 100% of the MWh produced during the term of each one of the PPAs.

j) Within twelve months prior to the date of expiration of the agreement, ENARSA will inform the successful bidder its intention to extend the PPA. That request must be answered to by the successful bidder within the lapse of three months, and if same decides to renew the agreement, it must become a partner to ENARSA.

k) If the successful bidder declines  the renewal of the agreement, it may choose to: (i) continue operating the plant and commercialize the electric energy independently from ENARSA; (ii) dismantle the plant; or (iii) transfer or stop operating the plant, as long as ENARSA declines to take over its operation and/or acquire the plant under a preferential purchase right.

4. Bidders. Requirements

All individuals, duly incorporated companies, Temporary Company Unions (Uniones Transitorias de Empresas or “UTE”) and Corporate Consortiums (Consorcios de Cooperación Empresaria - Law No. 26,005) may submit bids to the Tenders. Foreign entities may also submit bids as long as they constitute a partnership with an Argentine native individual or domestic company, whose interest in such partnership agreement will not be less than 25%.

The price offered in the bids to be submitted must mainly contain: (i) freight, assembly, construction and setting of the plant, initial tests, general expenses, direct and indirect work costs, and plant’s operation and maintenance; (ii) fuel supply cost (if applicable); (iii) transmission connection costs and the revamping of existing facilities in order to allow that connection; and (iv) costs resulting from the fulfillment of applicable regulations.

An Environmental Feasibility Study must be submitted within the bid’s technical aspects.

The bidders must submit a bond bid for one-hundred thousand Argentine Pesos (AR$ 100,000) per each MW of power offered. Successful bidders will subscribe a performance bond for three percent (3%) of the total price of the corresponding agreement, and are entitled to reduce 6.67% of said guarantee on each year of operation.

5. Terms

The deadline for the filing of bids for the Tenders regarding the generation from SUW, geothermal energy and solar thermal energy is May 10, 2010 at 12.30 am, and deadline for the filing of bids for the Tender concerning the generation from biogas is May 17, 2010 at 12.30 am. ENARSA may be contacted in connection to all Tenders for comments or questions. The term set for the latter will lapse five business-days prior to the expiration of the term for the filing of bids; May 3, 2010 and May 10, 2010 respectively.

The price set for the acquisition of the Tender’s Specifications has been set in fifty-thousand Argentine Pesos (AR$ 50,000) and these may be purchased up to five business days prior to the expiration of the term set for the filing of bids; May 3, 2010 and May 10, 2010 respectively. Offerees who had filed bids under the 2009 Tender (see “Public Tender for the Generation of Energy from Renewable Sources New terms and guarantees” published in Marval News # 89) are exempted from paying for the acquisition of such specifications.