Power generation from renewable sources: Biomass and Biofuels

The state-owned company Energía Argentina S.A. (“ENARSA”) recently issued a call concerning two domestic and international public tenders (the “Tenders”) for the execution of agreements for the supply of power generated by Biomass and Biofuels (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 and “Power generation from renewable sources”, published in Marval News # 93).

The Tenders are aimed to supply electric energy and power produced by new power plants generating electricity from Biomass and Biofuels (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.

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).

In both cases the bidders must submit offers for a minimum level of 1 MW of capacity and a maximum limit of capacity of 50 MW for each Plant for which a bid is submitted. 

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

b) In the case of Biomass powered Plants there will be no compensation in exchange for the supply of power capacity; only power duly supplied will be compensated. In the case of Biofuels powered Plants both capacity and power delivered 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. 

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

e) 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.

f) 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 expressly granted by ENARSA.

g) 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). 

All individuals, duly incorporated companies, Temporary Company Unions (Uniones Transitorias de Empresas or “UTE”) and Corporate Consortiums (Consorcios de Cooperación Empresaria) may submit bids to the Tenders. 

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.

The deadline for the filing of bids for the Tenders regarding is September 27, 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 on September 20, 2010 at 4 pm.

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.