Measures adopted to tackle energy supply contingencies in 2008

1.    Argentine Plan for Rational and Efficient Energy Use

On December 21, 2007 the Argentine Government issued Decree No 140/2007 which created the Argentine Plan for Rational and Efficient Energy Use ("PRONUREE").

The PRONUREE will be implemented by the Secretary of Energy that is empowered to issue and communicate measures and regulations adopted under this plan.

The PRONUREE will include the following measures:

i)             implementation of energy efficiency programs for public administration;

ii)            execution of agreements with business, banking, commercial and industrial chambers in order to extend to the private sector any measures of energy efficiency proposed for Argentine Public Administration;

iii)            implementation of energy efficiency standards for production, importation and trading of energy-consuming equipments;

iv)           adoption of energy efficiency labeling to identify machinery and appliances according to relevant technical indicators;

v)            modernization of street lighting systems;

vi)           adoption of a maximum index of consumption of electric and thermal energy for new housing;

vii)          development of an incentive system to reduce energy use including preferential financing for measures regarding the reduction of consumption in existing housing;

viii)          promotion of the Clean Development Mechanism (CDM) within public and private agencies for identification, development and implementation of new projects in the field of energy efficiency in order to take advantage of this source of financing and international cooperation;

The PRONUREE has also included a modification of the time zone during summer periods. During this period the modification of the time zone will last until March 16.

Furthermore, the PRONUREE has ratified programs already in force such as the following

a)    Energia Plus (Extra Energy)

This program was approved by Resolution No 1281/2006 by the Secretary of Energy and adopted a division of consumption by large users demanding over 300 KW in:

(i)           a base demand equating to demand registered in 2005; and

(ii)           a surplus demand to be supplied by energy provided by generation infrastructure added to the system after September 2006 charged at differential rates. Users included in this program must purchase the surplus energy consumption (Contratos Energía Plus) or face substantial surcharges in their energy bills.

b)    Energía Total (Total Energy)

This program, approved by Resolution No 459/2007 by the Ministry of Federal Planning, Public Investment and Services, encourages replacement of natural gas and electricity consumption with the use of alternative liquid fuels for manufacturing or electricity auto-generation activities by means of state funded subsidies targeted to finance over costs stemming from liquid fuel consumption.

c)    Energía Delivery (Energy Delivery)

This program has been developed within the framework of Resolution No 220/2007 by the Secretary of Energy and is targeted at expanding distributed power generation facilities (small scale facilities -between 10 MW and 100 MW- destined to supply specific energy demands in different spots around the country). The State-owned energy company ENARSA has already called for two bids for the provision of this service.

2.    Argentine Regime of Incentives for the use renewable energy sources directed to power generation

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.

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 adopted an incentive program for investments for new power generation facilities from renewable sources. This program will be in force for ten years and has the following characteristics:

a)        Beneficiaries: persons or companies investing in works for new power generation facilities fueled by renewable energy sources, to be built in Argentine territory, approved by the authorities and with production destined to the Wholesale Electricity Market or the provision of public services.

b)        Benefits:

(i)           anticipated refunding in VAT and/or accelerated amortization in income tax pursuant to Law No 25,924 for the acquisition of capital goods and/or the undertaking works related to the program’s goals; and

(ii)           exclusion of assets destined to the program from the imposition base of Presumed Minimum Income Tax until the third fiscal year after the project commencement date.