Secured loan for an aggregate amount of up to US$ 150,000,000 granted by the International Finance Corporation to the Province of Córdoba

Tavarone, Rovelli, Salim & Miani assisted on the structuring of a cross-border secured loan for an aggregate amount of up to US$ 150,000,000 granted by the International Finance Corporation (“IFC”) to the Province of Córdoba to finance capital expenditures in connection with the Borrower’s transport sector investment plan. The loan is secured by a trust agreement entered into by the Province as trustor, Banco Comafi S.A. as trustee and IFC as beneficiary.


Public-Private Partnership Agreements. Indicative terms – Power transmission works

The Secretariat of Public-Private Partnership (the “SPPP”) has just outlined the tender terms for the first-high voltage power transmission lines (the “Executive Summary” and the “Project”, respectively), under the new public-private partnership scheme (“PPP”).

The Project comprises the construction and further operation and maintenance of: (1) the 500 kV high voltage line, between ET Río Diamante and the future ET Coronel Charlone; and (2) the future ET Coronel Charlone, along with the 132 kV connections in Laboulaye, Rufino, General Villegas, General Pico Sur and Realicó, and complementary works (hereinafter, referred as the “Main Works”).

The non-binding Executive Summary also foresees the provision of the O&M Services, during the O&M Period (as both terms are defined below).

The Project is designed under the PPP scheme, pursuant to Law No. 27.328 and its regulatory Decree No. 118/2017, which provides an alternative contracting structure to the Public Works and Public Works Concession frameworks (ruled by Laws No. 13,064 and 17,520, respectively).

The awarded bidders will execute a PPP Agreement (the “PPP Agreement”), with the Secretariat of Energy Politics Coordination, currently under the Federal Ministry of Energy (the “Contracting Entity” and the “ME”, respectively), for the execution of the Main Works and the performance of the O&M Services (as defined below).

Transmission projects must be up and running within thirty-three (33) months from the signing of the PPP Agreement (the “Construction Period”), while O&M Services will be provided for up to 15 years (the “O&M Period”) as from commercial operation date.

Please find below a summary of the most relevant aspects of the Project, as per indicated in the non-binding Executive Summary.

Main Works and O&M Services comprised by the Project

As indicated before, the Project involves the expansion of the current high-voltage transmission grid, by means of the execution of the Main Works -which shall be executed within the Construction Period-. The Construction Period is capped at a maximum of thirty-three (33) months from the execution of the PPP Agreement.

Following the Construction Period, the PPP Contractor shall provide the O&M Services within the O&M Period –capped at maximum fifteen (15) years-, comprised by the provision of O&M Services of the Main Works, pursuant to the terms and conditions set forth in the PPP Agreement, electricity regulatory framework, The Procedures and applicable regulations.

Applicable regulatory framework

The PPP Agreement will be governed and construed by (1) Law No. 27,328 and its regulatory Decree No. 118/2017, (2) Law No. 27,431, which approved the national budget for the current 2018 year, and (3) specific regulations of the electricity regulatory framework, such as (a) Laws No. 15,336 and 24,065; (b) their respective regulatory decrees (i.e Decrees No. 1398/1992 and 186/1995), and (c) “The Procedures”, which is a compilation of many resolutions that rule the electric market’s operation (comprised by Resolution No. 61/1992 of the former Secretariat of Electric Energy, as further complemented and amended).

The obligatory and direct application of specific electricity regulations, turns out to be innovative, in comparison with similar projects under the same PPP scheme.

Project’s structure

The PPP Contractor shall (1) execute the Main Works, within the Construction Period, and (2) provide the O&M Services, within the O&M Period. Repayment of investments incurred both during construction –CAPEX- and operation (OPEX) of the Project will be split and subject to different provisions, in order to mitigate the typical risks to which the PPP Contractor is exposed during those stages.

PPP Contractor’s payment

Main Works Payment

When placing its bid, the PPP Contractor will have to choose within two different payment arrangements concerning the Main Works’ execution, whether by (1) Investment Payment Titles Fee and Remaining Compensation, or (2) by a Monthly Compensation.

Such structure is new and differs from those previously adopted for other Argentine PPP Projects, whereas the repayment of PPP Contractor’s CAPEX was linked to long term recoverable TPIs (for its Spanish acronym: Título de Pago por Inversión) or TPDs (for its Spanish acronym, Título de Pago por Disponibilidad) exclusively.

TPI Compensation and residual Compensation

Under the first option, the PPP Contractor will receive a part of the TPIs total amount –which will not exceed the maximum of 80%- as from the fourth (4) year of the PPP Agreement’s term, through TPIs, nominated in US dollars, unconditional and irrevocable, according to the actual Main Works’ progress. These TPIs are linked to the Construction Period phase only.

The remaining 20% of the required total amount will be due and payable as from the Project’s commercial operation date –after the end of the Construction Period-, on a monthly basis, and within the O&M Period, through the residual Compensation (the “Residual Compensation”).

Under this structure:

  • The bidder shall indicate the TPI required percentage –equal or lower than 80% of the required total amount-.
  • Each TPI –that, as mentioned, will be nominated in US Dollars and fixed, unconditional, irrevocable and transferable- will involve thirty (30) biannual payments in US Dollars, being TPI’s first payment date at the thirty-ninth (39) month as from the date on which the PPP Agreement is executed. Non-timely TPIs (either by delays on its issuance or in its payment) will accrue interests.
  • TPIs will be issued by the Electric Transmission Individual Trust (please, see below), by instruction of the Contracting Entity, which shall also be responsible for TPIs payment.
  • In connection with the Residual Compensation, it will also be due under the same terms of the Monthly Compensation (See below).

Payment under Monthly Compensation scheme

Under the second option, the PPP Contractor will receive the total required amount through a monthly compensation (the “Monthly Compensation”), as from the Main Works’ commercial operation date and during the O&M Period.

Such Monthly Compensation will be invoiced by the PPP Contractor to the Contracting Entity, and will be payable by the Electric Transmission Individual Trust in one hundred and eighty (180) US Dollars equal and monthly installments.

Electric Transmission PPP Individual Trust

The Parties to the PPP Trust (the “Electric Transmission PPP Individual Trust”), will be (i) the Republic of Argentina, through the ME, as trustor; (ii) the Governmental Bank for Investment and Foreign Trade (in Spanish: Banco de Inversión y Comercio Exterior S.A., hereinafter, the “BICE”, for its Spanish acronym), as trustee; (iii) Banco de Valores S.A., as administrative agent of the trust; and (iii) PPP Contractor, as beneficiary.

The Electric Transmission PPP Individual Trust will operate as a single trust for the Project, for the administration of the allocated funds to the Project, and will be the obligor in respect to all payments due and payable to the PPP Contractor.

The Electric Transmission PPP Individual Trust will be funded by (1) contributions made by the Wholesale Electric Market Management Company (In Spansh: Compañía Administradora del Mercado Mayorista Eléctrico S.A, hereinafter “CAMMESA” for its Spanish Acronym), by means of Resolution of the former Secretariat of Electric Energy No. 1085/2017- and, (2) contingent contributions of the Federal State. The trust’s reserve account must be funded, at all times, in an amount equal or greater than the yearly PPP Contractor’s required amount. Such eventual contribution will be included in every year’s national budget law.

Bidding process and bidder’s selection

The selection process will be implemented through a national and international tender process, of multiple stages, on which bidders shall: (1) make their technical bid and comply with all the requirements set forth in the bidding terms and conditions (i.e. having experience on constructing high voltage lines in Argentina and abroad); and (2) indicate its selected payment option, as well as the required amount for the Main Works and O&M Services.

The awardee shall be the bidder which indicates the lower total required amount.

Incumbent transmission companies are entitled to place bids within the bidding process, as part of their non-regulated activity.

Required guarantees

The following guarantees are mandatory and therefore required by the Executive Summary (1) a bid bond (the “Bid Bond”), (2) the financial close bond (the “Financial Close Bond”, further to the PPP Agreement’s execution), and (3) the Main Works Bond (the “Main Works Bond”, further to the PP Agreement’s execution), which all of them shall be payable on demand by the issuer.

The term for the Financial Close Bond will be of six (6) months, extendable at the PPP Contractor’s request for additional two consecutive periods of three (3) months each, financial close is achieved. Financial Close shall occur no later than twelve (12) months as from the date on which the PPP Agreement is executed.

It is not required to provide an O&M guarantee during the O&M Period.

PPP Contractor’s constitution - SPV

Before the PPP Agreement is executed, the awarded bidder shall establish a sole purpose vehicle, in the form of a corporation (Sociedad Anónima), which will act as PPP independent transmission company, under the terms of Annex 16 of The Procedures.

Other relevant matters:

  • Risks related to the execution of the Project will be allocated pursuant to a risk matrix, to be agreed by both parties.
  • The early termination of the PPP Agreement for any reason will in no event affect the repayment of unamortized investments incurred by the PPP Contractor.
  • PPP Contractor will be in charge of obtaining all necessary permits and constituting the required power line easements, pursuant to Law No. 19,552.
  • The PPP Agreement will provide for an initial stage for dispute resolution in relation for matters of a technical or financial nature, or related to the interpretation of the PPP Contract, by a dispute board. The PPP Agreement will also establish a further stage of arbitration, whether locally or abroad, which foreign venue may be set forth in accordance with the PPP Contractor’s controlling parties.

At TRS&M, we are following these matters with great interest and are available to discuss any query regarding the above.


U$S 17,911,496 facility agreement granted by HSBC Bank plc. to Papelera San Andrés de Giles S.A.

Legal counsel to HSBC Bank plc., as coordinating arranger, mandated lead arranger and lender, and HSBC Securities USA Inc., as mandated lead arranger, in a loan granted to Papelera San Andrés de Giles S.A. for an aggregate amount of U$S 17,911,496 guaranteed by EKN (Exportkreditnämnden), the export credit agency of Sweden, for the acquisition of a paper machine made in Sweden.