Energy

Resolution No. 165/2023 of the Secretary of Energy: Amendment to Resolution No. 285/2018 of the former Ministry of Energy and Mining

On March 20, 2023, Resolution No. 165/2023 of the Secretary of Energy ("Resolution 165") was published in the Official Gazette. Resolution 165 amends Article 1 of Resolution No. 285/2018 of the former Ministry of Energy and Mining ("Resolution 285") –which in turn had been previously amended by Resolution No. 742/2021 of the Secretariat of Energy ("Resolution 742")–, in connection with the applicable monthly payment cap of penalties foreseen under the power purchase agreements from renewable sources executed under the RenovAr Program Rounds 1, 1. 5, 2 and 3 and Resolution No. 202/2016 (the "PPA").

Initially, Resolution 285 set forth rules to be implemented by Compañía Administradora del Mercado Mayorista Eléctrico S.A. ("CAMMESA") regarding the termination of the PPAs, as well as payment terms for the penalties applicable for non-compliance with commercial operation dates (“COD”) and the supply of the contracted energy.

Accordingly, Article 1 of Resolution 285 established that the amount of the penalties imposed by CAMMESA in connection with the foregoing (the latter is not applicable to projects awarded under the RenovAr Program Round 3), could be offset starting on COD date from monthly payments to be made by CAMMESA to the generator under the PPA for the supplied energy (“Energy Payments”) in: (i) 12 monthly, equal and consecutive installments; or (ii) upon generator's decision, notified to CAMMESA, in up to 48 monthly, equal and consecutive installments, bearing interest at a 1.7% per annum.

Subsequently, Resolution 742 amended Resolution 285, in order to enable the projects that had experienced delays in COD, by adding that monthly payments payable in 48 installments would be limited up to 40% of the monthly gross revenue.

Likewise, if after the installments had been paid, there would be a balance, the same payment terms would be applied until the total payment of the penalties owed under the PPA would be paid. However, under Resolution 742, installments could not exceed the tenor of the PPA.

By means of Resolution 165, generator’s alternative to pay penalties in 12 or 48 installments as foreseen under Resolution 285 is still in force. Nevertheless, Resolution 165 added the following distinction:

1. The cap for monthly payments of the penalties was reduced to 20% of Energy Payments, and such cap applies until penalties are paid in full. This 20% cap will only be applicable as long as the installments for the payment of the penalties do not exceed the tenor of the PPA.
2. Provided that the remaining balance exceeds the tenor of the PPA, CAMMESA is authorized to restructure the applicable conditions or to increase the cap from 20% up to40% of the Energy Payments.

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Daiana Perrone and/or Rocío Valdez.

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Adhesion to the Power Availability and Efficiency Improvement Agreement for Combined Cycles

On February 7, 2023, Resolution No. 59/2023 of the National Secretariat of Energy (the "Resolution") was published in the Official Gazette with the purpose of enabling generators owning thermal power plants whose technology is classified as combined cycle (the "CC Generators") to adhere to a Power Availability and Efficiency Improvement Agreement (the "Agreement"). This Agreement will be subscribed with the Compañía Administradora del Mercado Mayorista Eléctrico S.A. ("CAMMESA"), on behalf of Distributors and Large Users of the Wholesale Electricity Market (the "WEM"), to promote necessary investments for major and minor maintenance of the existing generation equipment not committed in power purchase agreement ("PPA"). In this regard, the Agreement will ensure the supply of demand in the medium and long term, guaranteeing lower energy production costs.

The aim of the Resolution is to establish an additional remuneration scheme to the high efficiency thermal generators with energy or power not contracted under a PPA -i.e., those who receive their remuneration under Resolution No. 826/2022 of the Secretariat of Energy (the "Resolution 826")-, that due to their age may require the performance of minor and major maintenance tasks, and bear the costs of the investments associated with such tasks.

Relevant aspects of the Resolution and the Agreement

A. Purpose of the Resolution

As described before, the purpose of the Resolution is to promote the necessary investments for the execution of minor and major maintenance to maintain the reliability and availability of power of the combined cycle equipment not committed under PPA, in order to satisfy the requirements of the electricity demand in the WEM in the medium and long term. For such purpose, the CC Generators shall sign the Agreement attached as Annex to the Resolution.

B.Relevant aspects of the Agreement

The Agreement establishes:

1. The characteristics of the commitment of the qualified generator, stipulating an availability commitment of no less than 85% of the net power installed;
2. The units and power committed;
3. The price of the energy generated (fixed in U$S/MW-months);
4. The remuneration of the committed power, which will be governed in accordance with Resolution 826, with respect to the units included in the Agreement (fixed in U$S/MW-month), excluding non-fuel costs from the remuneration (cfr. point 5.1 of Annex II of Resolution 826);
5. CC Generating Agents agree to a 35% reduction on the price for the Guaranteed Capacity Offered DIGO under the terms of Resolution 826, applicable in the months of December, January, February, June, July and August, and 15% on the price for the Guaranteed Capacity Offered DIGO in the months of March, April, May, September, October and November;
6. The commercial documentation and the payment to be paid by CAMMESA, with the respective applicable exchange rate (Communication "A" 3500 BCRA);
7. The term, which in accordance with article 2 paragraph c. of the Resolution, may not exceed five (5) years; and
8. In relation to the machines included and the terms of the Agreement, the CC Generators shall irrevocably, fully and unconditionally waive any administrative claim or judicial proceeding that it has initiated and is in progress against the National Government, the Secretariat of Energy and/or CAMMESA related to the remuneration in force or that it may initiate in the future.

C. Procedure to proceed with the adhesion and signing of the Agreement

Those CC Generators interested in signing the Agreement shall submit to CAMMESA within 90 days from the publication date of the Resolution -term that, if no extension is granted, will be effective on May 7, 2023-, the following information:

1. The unit/s that will assume the commitment;
2. Net power of each one of the units and committed availability (which will be 85% of the net power); and
3. Term of the Agreement for each of the units (which will start from the subscription of the Agreement and may not exceed 5 years).

Finally, the Undersecretary of Electric Energy is authorized to issue the complementary or clarifying rules required for the implementation of the Resolution.

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, María Eugenia Muñoz and/or Rocío Valdez.

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Secretary of Energy Launches Tender for Renewable Energy Projects

The Secretary of Energy has opened a new tender seeking companies to build new power generation facilities totaling 620 MW.

By Resolution No. 36/2023 (“Resolution 36”), issued by the Secretary of Energy on February 2, 2023, the main rules applicable to such tender (“RenMDI”) have been approved.

RenMDI follows Resolution No. 330/2022 of the Secretary of Energy (“Resolution 330”), that called for expressions of interest (“MDI”, for its Spanish acronym, Manifestaciones de Interés) in connection with infrastructure projects that would allow the incorporation of renewable generation and/or energy storage facilities interconnected to medium-voltage transmission and/or distribution facilities. For additional information regarding Resolution 330, please visit this article published on our website.

Under the MDI, according to Resolution 36, 491 proposals were received, totaling 14,400 MW.

Moreover, RenMDI intends to continue increasing the share of renewable energy in Argentina, as mandated by Law No. 26,190 (as amended by Law No. 27,191), and implemented through successive renewable tendering processes.

Below are the key takeaways of Resolution 36.

I. Executive summary

1. RenMDI calls for interested parties to submit offers in order to enter a PPA with the Wholesale Market Administrator Company (“CAMMESA”), who will act as offtaker on behalf of the Distributors and Large Users of the Wholesale Electricity Market (“WEM”).
2. Such PPA will have a tenor of 15 years as of commercial operation date (“COD”) and will be hard currency-denominated, payable in pesos at a customary exchange rate.
3. RenMDI includes two lines: (i) Line 1 of renewable generation to replace forced generation, for biomass, solar photovoltaic, solar photovoltaic with storage and wind with storage (“Line 1”); and (ii) Line 2 of renewable generation to diversify the power matrix, for biogas, landfill biogas, Small Hydroelectric Developments (PAH) and biomass technologies (“Line 2”).
4. The goal is to contract 500 MW for Line 1 and 120 MW for Line 2, thus totaling 620 MW.
5. No payment guarantees and/or other type of guarantees from FODER are foreseen (as defined in section V).

II. Deadlines

Bidders may submit any requests for additional information or clarifications until February 24, 2023. In turn, March 1 is the date for CAMMESA to respond to any such requests.

March 15, 2023 is the deadline for bid submissions.

Selection of winners is scheduled for May 24, 2023 and the PPAs are expected to be entered no later than September 20, 2023.

III. Bidding Terms and Conditions - Most relevant Terms

Resolution 36 approves the Request for Proposals as Annex thereto (the “RfQ”), that foresees the terms and conditions to be complied by any bidder under the RenMDI.

Under the RfQ, as said before, two separate lines (please see above) are foreseen, with different technologies foreseen in each case.

Biomass projects submitted and not awarded under Line 1 will be added to the biomass projects submitted exclusively for Line 2.

Finally, bidders must submit, together with their bid, a bidding guarantee in accordance with the terms of the BTC.

IV. Terms of the PPA

The successful bidders will enter into a power purchase agreement with CAMMESA (“PPA”).

The PPA will have a term of 15 years following COD.

The price of the PPA will be fixed in U.S. dollars per Megawatt/hour and seasonality will be remunerated to encourage generation in periods of high demand.

V. Additional Matters – Differences with Prior Tenders

Power generation facilities awarded under the RenMDI will not have dispatch priority with respect to other renewable generation, self-generation or cogeneration facilities operating in the WEM in case of curtailment, except for those cases specifically provided in the RfQ.

Expansions of existing facilities (a) (A) under RenovAr 1, 1.5, 2 and 3, (B) Resolution No. 202/2016 of the former Ministry of Energy and Mining, and Resolutions No. 220/2007, 712/2000 and 108/2011 of the former Secretary of Energy, or (b) that have obtained dispatch priority in the corporate renewable term market, will not be eligible under the RenMDI.

In addition, and unlike other previous tenders, no payment guarantees by the Fund for the Development of Renewable Energies (“FODER”, for its Spanish acronym, Fondo para el Desarrollo de Energías Renovables) is foreseen for RenMDI projects.

For additional information, please contact Nicolás Eliaschev, Javier Constanzó, Daiana Perrone, María Eugenia Muñoz, Pablo Arrascaeta, Florencia Martínez, Luciana Tapia Rattaro and/or Rocío Valdez.

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Creation of the National Housing Labeling Program (PRONEV)

Resolution No. 5/2023, enacted by the Secretariat of Energy on 9 January 2023, (the “Resolution”) established the creation of the National Housing Labeling Program (“PRONEV”, for its Spanish acronym, Programa Nacional de Etiquetado de Viviendas) and the National Informatic Application of Housing Labeling (the "Application") (Aplicativo Informático Nacional de Etiquetado de Vivienda).

Relevant aspects of the Resolution

PRONEV goal is to implement an energy efficiency labeling system to classify the housing’s degree of efficiency, upon their global primary energy requirement. The Application, on the other hand, will issue an Energy Efficiency Label (Etiqueta de Eficiencia Energética) showing the technical information of the houses, once such information is loaded.

The Resolution will allow the government to measure the energy requirement of homes and living places throughout the national territory and set a baseline for the development of new programs for improving energy performances and reducing energy consumption in homes.

In this sense, the National Directorate of Electricity Generation of the Undersecretariat of Electricity is empowered to issue all necessary acts for the execution of PRONEV.

Finally, the Resolution invites the Provinces and the City of Buenos Aires to enter into agreements with the federal government to promote the PRONEV and the Application and to provide basic standards to be considered in their local Building Codes.

For additional information, please contact Nicolás Eliaschev, Pablo Arrascaeta, María Eugenia Muñoz and/or Rocío Valdez.

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Creation of the Environmental Crime Analysis and Prevention Unit and the Environmental Crime Assessment Board

Resolution No. 19/2023, issued by the Ministry of National Security on 16 January 2023 (the "Resolution"), set up the Environmental Crime Analysis and Prevention Unit (Unidad de Análisis y Prevención de Delitos Ambientales) and the Environmental Crime Assessment Board (Mesa de Evaluación de Delitos Ambientales) aimed at generating mechanisms for the prevention and fight against environmental crimes.

Relevant aspects of the Resolution

A. The Environmental Crime Analysis and Prevention Unit (the “Unit”)

The Unit -created within the scope of the Undersecretariat for Criminal Investigation and Judicial Cooperation-, is entitled to:

1. assist in the detection and prevention of environmental crimes that may take place within the national territory, whether they affect the flora, fauna, soil, air, water and/or maritime spaces subject to national jurisdiction;
2. collect and systematize information on environmental crimes committed in the national territory, from both non individualized sources and the Federal Police and Security Forces;
3. develop indicators and prepare periodic reports as an input for the work of the Board (as such term is defined in section B below) and upon the request of other areas of the Ministry of Security;
4. prepare a location map to detect "hot zones" and propose measures aimed at preventing environmental crimes;
5. coordinate the exchange of information between the Federal Police and Security Forces for the generation of early warnings regarding the commission of environmental crimes;
6. provide technical-administrative support for the operation of the Board and the supporting documentation related to the tasks accomplished in the field related hereto, and manage the appointment of representatives of the Federal Police and Security Forces that participate in the Board; and
7. Analyze legal cases regarding environmental crimes to improve the procedures followed by the Federal Police and Security Forces.

The Resolution authorizes the Secretary of Security and Criminal Policy to appoint the head of the Unit, who will oversee the Board. Likewise, it provides that the Unit will convene the Board to hold periodic meetings to fulfil its goals.

B. Creation of the Environmental Crime Assessment Board (the “Board”)

The Board -created within the scope of the Undersecretariat for Criminal Investigation and Judicial Cooperation- is meant to detecting and preventing environmental crimes -as well as other close related crimes that concur with the main crime foreseen and punishable by the Penal Code of the Argentine Nation (Código Penal de la Nación Argentina)-, for a comprehensive approach to the investigation.

The Board will be composed of representatives of the Unit, the National Criminal Investigation Directorate, the Federal Crime Investigation Directorate, the National Criminal Intelligence Directorate, the environmental divisions of the Argentine Federal Police, Argentine National Gendarmerie, Naval Prefecture Argentina and Airport Security Police, and all other personnel from federal, national or provincial entities and/or civil society organizations competent in environmental matters.

For additional information, please contact Nicolás Eliaschev, Pablo Arrascaeta, María Eugenia Muñoz and/or Rocío Valdez.

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Modifications to the Environmental Management System (EMS) regulations for agents of the Wholesale Electricity Market

On November 7, 2022, Resolution 558/2022 of the Ente Nacional Regulador de la Electricidad (hereinafter, "Resolution 558" and "ENRE", respectively) was published. The aim of this Resolution is to create new obligations related to environmental management for generating agents, self-generators, co-generators, transporters of electricity in high voltage, by trunk distribution, international interconnection, and distributors of electricity under federal jurisdiction of the Wholesale Electricity Market ("MEM"), all of them, hereinafter, the "Agents".

Resolution 558 also repealed numerous resolutions that established obligations related to environmental management and the submission of information.

i. The new obligations established by Resolution 558

Under Resolution 558, Agents must prepare, implement, and certify an Environmental Management System ("EMS") for the facilities under their responsibility. Likewise, the Agents' Environmental Plans must comply with the guidelines and requirements established in the resolution.

Failure to comply with the obligations set forth in Resolution 558 shall subject the Agents to the sanctions and penalties set forth in the respective Concession Agreements or in Article 77 of Law No. 24,065 (such as fines, disqualification, suspension, etc.), as applicable.

ii. Incorporation of alternative mechanisms for compliance with certain obligations derived from Resolution 558

Resolution 558 also establishes two alternative procedures, depending on the type of Agent involved, for compliance with certain obligations

Firstly, Resolution 558 provides an alternative procedure for the following agents (i) responsible for photovoltaic solar parks or solar thermoelectric power plants, whose facilities have an Environmental Complexity Level (hereinafter, "ECL") lower than 14.5 points; (ii) Agents responsible for wind farms, whose facilities have an ECL lower than 14.5 points; (iii) Agents responsible for thermal power plants with an installed capacity of less than or equal to 2 MW, consisting of a unit or combination of generation units equipped with internal combustion engines or gas turbines, which consume any type of fuel and whose facilities have an ECL of less than 14.5 points; (iv) Agents responsible for thermal power plants larger than 2 MW and less than or equal to 50 MW of installed power.

Secondly, Resolution 558 creates an alternative procedure for Agents responsible for hydroelectric exploitation of public watercourses when the normal power to be granted exceeds 500 kV.

iii. Additional remarks

As an additional aspect, Resolution 558 delegates to the head of the Public and Environmental Safety Area ("ASPA") of the ENRE the necessary powers for the effective implementation of this resolution.

For further information, please contact either Nicolás Eliaschev, María Eugenia Muñoz, Pablo Arrascaeta y/o Luciana Tapia Rattaro.

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Expansion of Natural Gas Transport Capacity

On February 14^th, 2022, Decree No. 76/2022 (“Decree 76”) was published in the Official Gazzette. The aim of the Decree is to regulate the “Transport.Ar National Production” Program (“Transport.Ar Program”) for the construction and expansion of several natural gas pipelines established by the Secretary of Energy through Resolution No. 67/2022 (“Resolution 67”).

Pursuant to its provisions, Decree 76:

• Entrusts the state-owned company Integración Energética Argentina S.A. (“IEASA”) to build and operate and new pipeline which would enable to expand of transport capacity from the Vaca Muerta reservoir.
• Regulates the Transport.Ar Program established by Resolution 67.
• Incorporates a trust fund -Argentine Gas Development Fund (“FONDESGAS”, for its acronym in Spanish)- to manage investments and raise debt to fund the works.

1. IEASA transport concession

Decree 76 grants a hydrocarbon transport concession to IEASA concerning a new natural gas pipeline to be built which would enable to significantly expand transport capacity from the Vaca Muerta reservoir (the “Pipeline”).

The concession is granted for a period of thirty-five (35) years, which may be extended according to current regulations.

Additionally, the rates related to the transport capacity agreed regarding the Pipeline will be determined by Gas Regulatory Authority (“ENARGAS” for its acronym in Spanish).

However, to achieve the construction of the gas pipeline expansion, the Decree also allows IEASA to execute any contract related to the transport capacity with producers or users. The rates of those contracts will not be regulated by ENARGAS.

2. Transport Capacity Priority

The Decree 76 awards priority for the resulting expanded transport capacity to the partially state-owned company Yacimientos Petrolíferos Fiscales S.A. (“YPF”).

Nonetheless, regarding the non-contracted transport capacity, IEASA must provide access to third parties.

3. Incorporation of FONDESGAS

To manage investments under the Transport.Ar Program, the Decree 76 creates the Argentine Gas Development Fund (FONDESGAS). The fund is entitled to issue debt instruments and participation certificates to fund the Pipeline construction.

For further information, please contact either Marcelo Tavarone, Nicolás Eliaschev, Tomás Villaflor or Luciana Tapia Rattaro.

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