CDM_english_formato Traducci n Pblica

8/8/2019 CDM_english_formato Traducci n Pblica

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TRADUCCIN PBLICA.-------------------------------------------------------------------------------------

TRANSLATION.--------------------------------------------------------------------------------------------------

[There are two logos on the letterhead, which reads on every page of the document:] PROJECT

DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM Executive Board .Page [the

number of the appropriate page follows] -----------------------------------------------------------------------

CLEAN DEVELOPMENT MECHANISM. PROJECT DESIGN DOCUMENT FORM

(CDM-PDD) VERSION 03 - IN EFFECT AS OF: 28 JULY 2006. ------------------------------------

CONTENTS --------------------------------------------------------------------------------------------------------

A. General description of project activity-----------------------------------------------------------------------

B. Application of a baseline and monitoring methodology --------------------------------------------------

C. Duration of the project activity / crediting period ---------------------------------------------------------D. Environmental impacts-----------------------------------------------------------------------------------------

E. Stakeholders comments ---------------------------------------------------------------------------------------

Annexes--------------------------------------------------------------------------------------------------------------

Annex 1: Contact information on participants in the project activity--------------------------------------

Annex 2: Information regarding public funding --------------------------------------------------------------

Annex 3: Baseline information ----------------------------------------------------------------------------------

Annex 4: Monitoring plan ----------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------------SECTION A. General description of project activity -----------------------------------------------------

A.1 Title of the project activity: -------------------------------------------------------------------------------

Molinos Ro de la Plata- Cogeneration Plant San Lorenzo. Version 01. October 24th, 2006 -----------

A.2.Description of the project activity: --------------------------------------------------------------

Purpose ----------------------------------------------------------------------------------------------------------

The Cogeneration Project comprises the installation of equipment for the simultaneous generation

of 26.91 MW of electricity and 212 tonnes/hour of heat for the industrial plant located in the city of

San Lorenzo, Province of Santa Fe- Argentina. ---------------------------------------------------------------

The plants main activity is the production of soy flour, raw soy oil and other sub-products, mainly

for the foreign market. ---------------------------------------------------------------------------------------------

Explain how the proposed project activity reduces greenhouse gas emissions ----------------------

Molinos Ro de la Plata has an industrial plant located in the city of San Lorenzo. This industrial

plants main activity is the production of raw soy oil and soy flour. --------------------------------------

The current production capacity is 17,500 tonnes a day, and such industrial process demands an

electric power of 27 MW and a heat power of 180-230 tonnes/hour. --------------------------------------


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Should the project not be realized, the plants power demand is covered by:-----------------------------

electricity purchased from the power grid, -----------------------------------------------------------

heat produced in several boilers, using natural gas as fuel with the exception of about 30

days per year, when fuel oil is used. -------------------------------------------------------------------

The project activity comprises the installation of a cogeneration plant, i.e. the simultaneous

generation of electricity and heat using two high pressure boilers and a counter-pressure steam

turbine as technology. ---------------------------------------------------------------------------------------------

The emissions produced without the implementation of the project mainly include:--------------------

emissions in the Argentine Electric Generation System for the 26.91 MW electric power

which the cogeneration plant would generate. -------------------------------------------------------

emissions resulting from the combustion of fossil fuels in the boiler for heat generation.----

This is the current situation of the plant which has been operating since December 2005. The

emissions produced with the implementation of the project mainly include: -----------------------------

emissions resulting from the combustion of fossil fuels in the boiler operating in high

pressure for the generation of electricity and heat for the production process. -----------------

The difference between both scenarios results in the reduction of emissions produced by the project

activity. With the project activity a reduction of emissions of 51,943 tonnes/CO2 per year is

estimated for the first two years and 26,711 tonnes/CO2 for the following years. ----------------------

Should the project not be realized, i.e. should the steam turbine not be installed and the boiler

continue to operate in the same way, there will not be a reduction of greenhouse gas emissions.-----

Contribution to sustainable development ------------------------------------------------------------------

The Project contributes to the sustainable development of Argentina on the following grounds: -----

it significantly reduces greenhouse gas emissions. --------------------------------------------------

it allows the Electric System to have a higher electric power availability. ----------------------

it contributes to the rational use of energy, as a result of a lower use of non-renewable fuels.

it reduces the impact on the environment generated by industrial activity.----------------------

it contributes to the general development of the economy as a result of a higher use of

workforce and transfer of technology.-----------------------------------------------------------------

The Project allows for the displacement of an average 30,828 tonnes/CO2 per year throughout the

first seven years. ----------------------------------------------------------------------------------------------------

A.3. Project participants:----------------------------------------------------------------------------------------

Name of party involved (host): Argentina (host).-----------------------------------------------------------

Private and/or public entity(ies) project participant: Molinos Ro de la Plata S.A. -----------------


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The Cogeneration project is developed by Molinos Ro de la Plata S.A. ----------------------------------

A.4. Technical description of the project activity: ---------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------

A.4.1. Location of the project activity:-----------------------------------------------------------------------

Molinos industrial project is located in the city of San Lorenzo, Province of Santa Fe, Argentina.---

A.4.1.1. Host Party(ies): -----------------------------------------------------------------------------------------

The host country for the project is Argentina.------------------------------------------------------------------

A.4.1.2. Region/State/Province etc.: --------------------------------------------------------------------------

Province = Santa Fe ------------------------------------------------------------------------------------------------

A.4.1.3. City/Town/Community etc:-------------------------------------------------------------------------

City= San Lorenzo--------------------------------------------------------------------------------------------------

A.4.1.4. Detail of physical location, including information allowing the unique identification of

this project activity (maximum one page):-----------------------------------------------------------------

San Lorenzo city is located in the province of Santa Fe, to the north of the city of Rosario. -----------

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San Lorenzo City -

Rosario- Air View

Paran RiverSan Lorenzo City

San Lorenzo


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A.4.2. Category(ies) of project activity: ---------------------------------------------------------------------

Sectorial Scope: 4.- Manufacturing Industries. ----------------------------------------------------------------

A.4.3. Technology to be employed by the project activity: ---------------------------------------------

A cogeneration project comprises the simultaneous generation of electricity and heat to cover the

power needs of an industrial plant.-------------------------------------------------------------------------------

Of the thermal cycles which may be applied to the industry, the installation and operation of a high

pressure boiler has been selected. In this way, steam is generated first, then, that steam evolves in a

counter-pressure steam turbine which generates an electric power of 26.91 MW, using the output

heat of the turbine directly in the industrial process.----------------------------------------------------------

This is an old technology which suits Molinos process better than other technologies on the

following grounds:--------------------------------------------------------------------------------------------------

Electric Power/ Thermal Power Relation -----------------------------------------------------------------------

the plant has a heat demand of 212 tonnes/hour and an electricity demand of 26.9 MW, and

the project comprises the simultaneous production of 100% of both values, compared to

other cycles, such as gas turbines, where it is not possible to generate both values

simultaneously.--------------------------------------------------------------------------------------------

Fuel Availability and Costs ---------------------------------------------------------------------------------------

The plant is located in the province of Santa Fe and has a restriction of 30 days per year as

regards the supply of natural gas, using Fuel Oil as alternative fuel for such days. Other

cogeneration cycles, such as those based on gas turbines, demand gas oil as fuel for their

operation. This means that on the days of natural gas restriction, gas-based cogeneration

cycles use a much more expensive fuel than steam-turbine cycles and this significantly

affects the return on investment rate. ------------------------------------------------------------------

As regards the equipment to be used in the project, the cogeneration plant includes: -------------------

Boiler Number 3 ----------------------------------------------------------------------------------------------------

Brand = Gonella ----------------------------------------------------------------------------------------------------

Nominal Pressure = 70 kg/cm -----------------------------------------------------------------------------------

Operating Pressure = 65 kg/cm ----------------------------------------------------------------------------------

Temperature = 480 ------------------------------------------------------------------------------------------------

Steam Production = 120,000 kg/hour----------------------------------------------------------------------------

Year = 2006----------------------------------------------------------------------------------------------------------

Efficiency = 93% ---------------------------------------------------------------------------------------------------

Boiler Number 4 ----------------------------------------------------------------------------------------------------

Brand = Gonella ----------------------------------------------------------------------------------------------------


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Nominal Pressure = 70 kg/cm -----------------------------------------------------------------------------------

Operating Pressure = 65 kg/cm ----------------------------------------------------------------------------------

Temperature = 480 ------------------------------------------------------------------------------------------------Steam Production = 120,000 kg/hour----------------------------------------------------------------------------

Year = 2006----------------------------------------------------------------------------------------------------------

Efficiency = 93% ---------------------------------------------------------------------------------------------------

Steam Turbine-------------------------------------------------------------------------------------------------------

Input Pressure = 65 kg/cm----------------------------------------------------------------------------------------

Capacity = 234 tonnes/hour---------------------------------------------------------------------------------------

Temperature = 480 C ---------------------------------------------------------------------------------------------

Extraction 1

Pressure = 14 kg/cm -----------------------------------------------------------------------------Temperature = 281.2 C-------------------------------------------------------------------------------------------

Capacity = 50 tonnes/hour-----------------------------------------------------------------------------------------

Extraction 2 Pressure = 8 kg/cm ------------------------------------------------------------------------------

Temperature = 221 C ---------------------------------------------------------------------------------------------

Capacity = 184 tonnes/hour---------------------------------------------------------------------------------------

Isoenthropic Efficiency = 87.2% ---------------------------------------------------------------------------------

Electric Power = 28.7 MW----------------------------------------------------------------------------------------

A.4.4 Estimated amount of emission reductions over the chosen crediting period: ---------------Year Annual estimation of emission

reductions in tonnes of CO2 e

2007 30,300

2008 51,943

2009 51,943

2010 26,711

2011 26,711

2012 26,711

2013 26,711

Total estimated reduction (tonnes of

CO2 e)--------------------------------------

215,800

-----------------------------------------------

Total number of crediting years 7 (first crediting period)

Annual average of estimated reduction(tonnes of CO2 e) over the creditingperiod

30,828

-----------------------------------------------


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For 2007 the emission reductions correspond to just 7 months of operation of the cogeneration

project. In 2008 and 2009 there will be higher reductions as a higher grid emission factor is

expected, similar to that of 2005. Likewise, as from 2010, there are a series of energy projects of

new generation plants which shall bring about emission factor reductions of the power grid. ---------

A.4.5. Public funding of the project activity: ---------------------------------------------------------------

No public funding has been used for the project development. ---------------------------------------------

SECTION B. Application of a baseline and monitoring methodology -------------------------------

-------------------------------------------------------------------------------------------------------------------------

B.1. Title and reference of the approved baseline and monitoring methodology applied to the

project activity: ---------------------------------------------------------------------------------------------------

The approved Baseline Methodology which shall be used in the project is AM0014 Natural Gas

based package cogeneration / Version 02, Sectorial Scope: 1 and 4 - 28 July 2006. ----------------

The approved Monitoring Methodology which shall be used in the project is AM0014 Natural Gas

based package cogeneration Version 02, Scope 1 and 4, 28 July 2006. --------------------------------

The following documents have also been used:----------------------------------------------------------------

Tool for demonstration and assessment of additionality- Version 2 - 28 November 2005

ACM0002 - Consolidated baseline methodology for grid-connected electricity generation

from renewable source" Version 06 - Sectorial Scope: 01 - 19 May 2006 ----------------------

B0.2 Justification of the choice of the methodology and why it is applicable to the project

activity: --------------------------------------------------------------------------------------------------------------

Molinos project consists in the installation of a Cogeneration plant. To this end, we use the

AM0014 Natural Gas based package cogeneration methodology, approved for a similar

cogeneration scheme. ----------------------------------------------------------------------------------------------

Firstly, in Technological Aspects, we will describe the different cogeneration technologies to which

the AM0014 methodology may be applied. Secondly, in Applicability, the AM0014 methodology

applicability conditions to Molinos' project are analyzed. Thirdly, the Methodology Title is

analyzed and its reference to Molinos' project; and in fourth place, in Emission from Electricity

Generation the criteria for the calculation of power grid emissions are defined. -------------------------

Technological Aspects ---------------------------------------------------------------------------------------------

Cogeneration projects are applicable to the industry and their technical implementation differs as

regards the thermal machines used. -----------------------------------------------------------------------------

In this regard, there are:--------------------------------------------------------------------------------------------


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Systems where the electricity generation is produced with an internal combustion engine

and with exhaust gases and cooling water, hot water or low-pressure steam is produced.

These engines may use natural gas, fuel oil, diesel oil or gas oil.---------------------------------

Systems where the electricity generation is produced in a gas turbine, and with the exhaust

gases, steam is produced in a recovery boiler. These turbines normally use natural gas or

gas oil as fuel. ---------------------------------------------------------------------------------------------

Systems where steam is produced in a high-pressure boiler, then electricity is generated

using a counter-pressure steam turbine, and such heat is then used in the process. ------------

In all cases, fossil fuel is used, electricity is generated and thermal energy is generated as steam or

hot water.-------------------------------------------------------------------------------------------------------------

The choice of each kind of technology depends on two main aspects:-------------------------------------

the prices of fuels and the hours of use of each fuel per year. -------------------------------------

the amount of steam in tonnes/h needed for the process in function of the electricity

generated. --------------------------------------------------------------------------------------------------

There are industrial processes where: ---------------------------------------------------------------------------

There is no natural gas supply every day of the year and liquid fuels must be used at

different prices.--------------------------------------------------------------------------------------------

The three technologies available have certain typical features: -----------------------------------

- Molinos project requires almost 27 MW of electricity generation and it is not usualto have internal combustion engines of such size in the market. An important

engine for these applications has a module of about 3 MW; therefore, a significant

number of machines would have to be installed. ------------------------------------------

- In the market there are gas turbines to generate about 27 MW of electricity and

such power generates in turn about 50 tonnes/hour of steam with the heat contained

in the exhaust gases. Molinos has a demand of 212 tonnes/hour of steam, which

makes it necessary to produce an additional amount of steam in a conventional

boiler or with post-combustion in the same recovery boiler. ----------------------------

- In the cycle used, about 212 tonnes/hour of steam are generated, which corresponds

to the basic consumption of the plant and that allows for the generation of about

26.9 MW of electricity. Therefore, this cogeneration cycle meets the requirements

of Molinos Ro de la Plata S.A. industrial process.----------------------------------------

Nevertheless, the three technologies described above have a common denominator: -------------------

they are all intensive capital activities, thus low return rate projects. ----------------------------


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they are all technological projects for efficiency improvement, thus representing a lower

consumption of fuel as regards traditional power supply solutions. ------------------------------

as a result of a lower use of fossil fuels, these projects produce GHG emission reductions.

We consider that the existing AM0014 methodology, approved for a Cogeneration Project, may be

used for Molinos project. ----------------------------------------------------------------------------------------

Applicability---------------------------------------------------------------------------------------------------------

The methodology is applicable to the project since we consider that the following applicability

conditions set forth in said methodology are met:-------------------------------------------------------------

The cogeneration system is a third party cogeneration system, i.e. not owned or operated by

the consuming facility that receives the project heat and electricity or the cogeneration

system is owned by the industrial user (henceforth referred to as self-owned) that consumes

the project heat and electricity. In our case, Molinos R o de la Plata is the owner of the

Cogeneration plant and the user of the cogenerations heat and electricity produced. --------

The cogeneration system provides all or part of the electricity and/or heat demand of the

consuming facility. Molinos project comprises electricity generation with a counter-

pressure turbine having a maximum capacity of 234 tonnes/hour. If the plant consumes

more than such value, the heat is generated with conventional boilers which are outside the

project boundary and do not produce emission reductions. Such heat values may generate

between 24 and 27 MW depending on the volumes of each 7 and 12 kg/cm extraction. ---- No excess electricity is supplied to the power grid and no excess heat from the cogeneration

system is provided to another user. No excess heat is supplied to third parties. The

cogeneration plant shall provide heat and electricity to cover the total values foreseen. No

supply of electricity to third parties has been foreseen.---------------------------------------------

Molinos project meets the applicability conditions set forth in the AM0014 methodology.-----------

Methodology Title --------------------------------------------------------------------------------------------------

The Methodology Title (Natural gas-based package cogeneration ) refers to natural gas as the fuel

used. In Molinos project, the cogeneration project uses natural gas and fuel oil, which does notinvalidate the projects emission reductions. In fact, Molinos uses fuel oil on 30 days per year, when

the gas demand for residential use increases in winter and the industries and factories with

interruptible service use alternative fuel. This produces an increase in the emissions of Molinos

boiler, but, in the same winter period the use of fuel oil and gas oil also increases for the same

reasons in the thermal plants making up the last 10% of the dispatched machines. Therefore, the

electricity displaced from the power grid also suffers increases in GHG emissions. -------------------


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Despite the fact that the Methodology Title refers to natural gas as fuel, the AM0014 methodology

may also be applied using the corresponding emission factors for each fuel used. ----------------------

Emission from Electricity Generation ---------------------------------------------------------------------------

CO2 emissions resulting from electricity generation of the cogeneration project are estimated

proportionally to the electricity generated by the project. The BEFelec (Baseline Emission Factor

tonne CO2 /kWh) proportionality factor as per the stipulations of the AM0014 methodology shall

refer to the "Consolidated Baseline Methodology for Zero-emissions Grid-Connected Electricity

Generation from Renewable Source" where different ways of determining CO2 emission factors for

electricity supply from the grid are provided, or to the "Simplified Methodology for Small-scale

CDM Project activities"(in case electricity displaced is less than or equal to 15 MW equivalent). ---

Molinos' project exceeds 15 MW; therefore, it is not a small-scale project and for the estimation ofthe grid electricity generation emissions the method considering a detailed analysis of the

generation dispatch has been used. Such method was approved by the AM0002 consolidated

methodology. This methodology (AM0002) requires a large amount of information in order to

make a detailed assessment of the combined margin. CAMMESA(1) has the detailed information

on the required data, which is available for Molinos. ---------------------------------------------------------

For the estimation of the Electric System emissions displaced by the Cogeneration Plant a computer

method was developed. This method analyzes the dispatch of hydro-thermal machines on an hourly

basis, determining the metric tonnes of GHG. Its calculation details are described in Annex 4. ------(1) CAMMESA Compaa Administradora del Mercado Elctrico Mayorista Sociedad Annima. ---

B.3. Description of the sources and gases included in the project boundary ------------------------

Factory Boundary---------------------------------------------------------------------------------------------------

The Factory Boundary comprises all the facilities of the San Lorenzo industrial plant of Molinos

Ro de la Plata. Figures B3.1. and B.3.2 show two air views of the industrial complex.----------------

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Figure B.3.1. Air View of the Industrial Plant. ----------------------------------------------------------------

Figure B.30.2. Air View of the Industrial Plant. --------------------------------------------------------------

Project Site-----------------------------------------------------------------------------------------------------------

The Project Site comprises the facilities of the Cogeneration Plant, which includes: -------------------

High pressure boilers-------------------------------------------------------------------------------------

High pressure steam facilities---------------------------------------------------------------------------

Turbo-generator-------------------------------------------------------------------------------------------

Auxiliary systems-----------------------------------------------------------------------------------------

Within the Project Site we have high pressure boilers using fuel oil and natural gas and the

combustion of which is the source of CO2, CH4 and N2O.---------------------------------------------------

Project Boundary ---------------------------------------------------------------------------------------------------


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The project boundary for the CDM project include: ----------------------------------------------------------

Project Site-------------------------------------------------------------------------------------------------

SADI (1) Generators -------------------------------------------------------------------------------------

(1) SADI: Sistema Argentino de Interconexin (Argentine Interconnection System): comprises all

the hydroelectric, nuclear and thermo-electric generators which generate supplying the grid.----

The following table shows the GHG sources included within the project boundary, indicating the

Methodology originating them.-----------------------------------------------------------------------------------

Source Gas Included Justification / ExplanationCO2 Yes Methodology AM0014

CH4 Yes Methodology AM0014

BoilerFuel: Fuel Oil---------------------------------- N2O Yes Methodology AM0014

CO2 Yes Methodology AM0014CH4 Yes Methodology AM0014BoilerFuel: Natural Gas---------------------------------- N2O Yes Methodology AM0014

CO2 No Methodology AM0014

CH4 Yes Methodology AM0014

LeakageNatural Gas Transport---------------------------------- N2O No Methodology AM0014

CO2 Yes Methodology ACM0002

CH4 No Methodology ACM0002

Baseline

Grid Emission-------------------------------------------------------------------- N2O No Methodology ACM0002

CO2 Yes Methodology AM0014CH4 Yes Methodology AM0014

BoilerFuel: Fuel Oil---------------------------------- N2O Yes Methodology AM0014

CO2 Yes Methodology AM0014CH4 Yes Methodology AM0014

BoilerFuel: Natural Gas---------------------------------- N2O Yes Methodology AM0014

CO2 No Methodology AM0014

CH4 Yes Methodology AM0014ProjectAct

ivity

LeakageNatural Gas Transport---------------------------------- N2O No Methodology AM0014

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B.4. Description of how the baseline scenario is identified and description of the identified

baseline scenario: -------------------------------------------------------------------------------------------------

How the methodology determines the baseline scenario: ----------------------------------------------------The baseline scenario is that which would take place in the absence of the project activity. ----------

The alternatives to the project activity considered are those described in the Additionality section

of AM0014 Methodology.-----------------------------------------------------------------------------------------

A.- Alternatives to the project activity --------------------------------------------------------------------------

1.- Industrial plant continues to operate with equipment replacement as needed and no change in

equipment efficiency (the frozen-efficiency scenario). -------------------------------------------------------


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All soy oil production plants in Argentina cover their power demands with the purchase of

electricity from the power grid and with the independent heat generation in a boiler. This includes a

whole set of existing plants, installed between the 80s and 2004 and a whole set of new industrial

ventures installed in 2004, 2005 and 2006, such as Cargill (Villa Gobernador Galvez- Santa Fe -

Argentina) and T6 Industrial (Puerto General San Martn - Santa Fe - Argentina). ---------------------

This means that Molinos Ro de la Plata, just as the rest of the agro-industrial sector, may continue

with its customary practices for the procurement of power demands.--------------------------------------

In fact, the industrial plant has been operating since December 2005 in what we call customary

practices, that is to say, generating heat in the boiler by using fossil fuels and purchasing electricity

from the power grid.------------------------------------------------------------------------------------------------

In December 2005, Molinos industrial plant increased its production capacity of soy milling from5,500 tonnes/day to 17,500 tonnes/day with the incorporation of a third production line.--------------

The plant engineering development attempted not just to increase production capacity but also to

have a lower demand of electric and thermal power per product unit. ------------------------------------

Consequently, we consider that the baseline scenario is to continue operating the existing plant

through customary practices, that is to say, by generating heat in a boiler and purchasing electricity

from the power grid. -----------------------------------------------------------------------------------------------

2.- Industrial plant continues to operate with improved efficiency new equipment at the time of

equipment replacement: -------------------------------------------------------------------------------------------There is no improved efficiency to be achieved with new equipment at the time of equipment

replacement since we are talking about a recently enhanced plant with all possible improvements as

regards efficiency already incorporated. ------------------------------------------------------------------------

Therefore, this alternative does not correspond to the baseline scenario.----------------------------------

3.- The efficiency of boiler(s) is upgraded immediately:-----------------------------------------------------

Molinos industrial plant has two high-efficiency (93%) boilers acquired in mid-2005, which cover

all the plant demands. ----------------------------------------------------------------------------------------------

The boiler

s performance cannot be improved as it is a highly efficient boiler. Moreover, the heatgeneration process is made in high pressure (64 kg/cm), reducing pressure through laminating

valves, which accounts for a heat generation system of higher efficiency than direct generation in

low pressure.---------------------------------------------------------------------------------------------------------

When taking efficiency improvement measures, the selection of the boiler has been made from the

beginning of the industrial plant project based on its performance and heat production system

design. ---------------------------------------------------------------------------------------------------------------


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Therefore, there are no efficiency improvement measures concerning the boiler which may be

implemented. This is due to the fact that they were adopted before the Cogeneration Project. Should

the Cogeneration Project not be implemented, the plant would operate with new high pressure and

high performance boilers, which means the same efficiency before and after the Cogeneration

Project implementation.--------------------------------------------------------------------------------------------

Therefore, this alternative does not correspond to the baseline scenario.----------------------------------

4.- The heat and or electricity demand of the industrial plant is reduced through improvements in

end-use efficiency.--------------------------------------------------------------------------------------------------

There are no improvements which may be implemented in order to reduce the end-use electricity

and fuel consumption since they were introduced in the improvements made in 2005. -----------------

Therefore, this alternative does not correspond to the baseline scenario.----------------------------------5.- Installation of a cogeneration system owned by industrial plant: --------------------------------------

The AM0014 Methodology establishes that the Cogeneration Plant may be owned by the user,

which is the case for Molinos. This is the CDM project scenario. ------------------------------------------

6.- Installation of a package cogeneration system owned by a company other than the industrial

plant . -----------------------------------------------------------------------------------------------------------------

Molinos Cogeneration Project is also owned by Molinos, which means that it is not a third-party

project. In some countries, there are companies called Energy Services which offer the installation

of cogeneration packages. They are responsible for the investment, operation and maintenance andthey sell electricity and heat to the industrial user. In Argentina, there are no major Cogeneration

records, and in the particular case of projects owned by third parties, there is only one case: CMS

Energy in the Cogeneration Project of CMS Ensenada. -----------------------------------------------------

In our case, this is not the project scenario or the baseline scenario. ---------------------------------------

7.- Analysis of Other Cogeneration Technologies:------------------------------------------------------------

There are other technologies to implement cogeneration cycles which have been discarded.----------

There are cycles implemented with internal combustion engines on natural gas or dual.

These machines are usually manufactured with 3MW modules, which means that 9machines would be required to cover the 27 MW needed. This implies significant overcosts

of infrastructure. Moreover, it is impossible to generate the 212 tonnes/h of steam with the

residual heat of such machines. Consequently, this technology has been discarded. ----------

There are cycles implemented with gas turbines and recovery boiler. With the installation

of a 27 MW GT we would be generating 100% of the electricity needs. With exhaust gases

80 tonnes/h of steam would be generated. This means that the other 130 tonnes/h would

have to be produced in a conventional boiler or in the same recovery boiler with post-


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combustion. Besides the difference in performance, the most serious problem is that the GT

operates with natural gas or gas oil as alternative fuel. When the GT operates with gas oil,

costs are very high and the project is not economically viable. The GT uses distilled fuels

which are more expensive than the fuel oil used in a boiler.---------------------------------------

Molinos industrial process uses about 27 MW of electricity and 212 tonnes/hour of heat. This

means that with a high pressure boiler for the heat volume needed for the process, 100% of the

electricity needs of the plant may be generated. ---------------------------------------------------------------

Moreover, the alternative fuel to natural gas is fuel oil, cheaper than other distilled fuels. In

consequence, both measures indicate that the best technological choice is the one using a boiler and

a counter-pressure steam turbine. --------------------------------------------------------------------------------

For this reason, the cogeneration based on other kinds of technology is not the baseline scenario,either. -----------------------------------------------------------------------------------------------------------------

B.- Identify the customary practices in the market for the power supply of other industrial plants

producing soy sub-products. --------------------------------------------------------------------------------------

The project activity is the first Cogeneration project in a Soy Oil plant in Argentina. No soy project

in Argentina has worked with the technology described. ----------------------------------------------------

Molinos Ro de la Plata has the first soy oil extraction plant which would operate with a

Cogeneration plant. Most industrial projects generate steam in low pressure boilers, between 7 and

15 kg/cm.------------------------------------------------------------------------------------------------------------The heat generation project using high pressure boiler is a more efficient process than customary

practices, which proves that Molinos aims to have the most efficient project of its kind in terms of

power. ----------------------------------------------------------------------------------------------------------------

In Argentina, there are a number of Soy Oil plants which operate generating heat in a boiler and

purchasing electricity from the power grid. --------------------------------------------------------------------

Molinos industrial plant in San Lorenzo has a milling capacity of 17,500 tonnes/day, i.e. 6,000,000

tonnes/year. Molinos increased its production capacity in December 2005. It should be pointed out

that the whole soy market has shown a strong growth in the last years. Table S.3.1. shows soymilling in thousand tonnes per year, broken down by company. Each company has two or more oil

plants and the table shows the actual production for 2005 and forecast production for 2006 and 2007

(prepared by Molinos).---------------------------------------------------------------------------------------------

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In 2005, total milling reached 23,821,000 tonnes/year, of which Molinos processed 10%. Total

milling expected for 2007 is 40,851,000 tonnes/year, of which Molinos would process 16%. This

implies that Molinos has increased its share in the soy market, but also that it is the first plant with a

cogeneration project. -----------------------------------------------------------------------------------------------

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Table S.3.1. Soy Milling per Industrial Plant

Capacity 2005 Capacity 2006 Capacity 2007Mtonne/year Mtonne/year Mtonne/year

BUNGE 4,862 6,375 6,375Tancacha 945 945 945San Martn 2,083 2,083 2,083San Jernimo S 608 608 608Terminal 6 1,226 2,739 2,739

DREYFUS 3,553 4,763 5,973Gral.Lagos 3,553 3,553 3,553Timbues 1,210 2,420

0 0

MOLINOS 2,274 6,357 6,357Santa Clara 712 712 712San Lorenzo 1,562 5,645 5,645

AGD 3,672 5,548 5,548Chabas 1,103 1,103 1,103Terminal 6 1,220 2,732 2,732Deheza soy/sunfl. 323 323 323Deheza soy 1,027 1,390 1,390

CARGILL 4,518 6,665 8,631San Martin 2,942 2,942 2,942Buyatti 930 930 930Reconquista 229 229 229Bahia Blanca 185 185 185Necochea 232 414 414VGG 1,966 3,932

VICENTIN 2,603 5,627 5,627Ricardone 652 652 652Puerto 1,950 4,975 4,975

OTHERS 2,339 2,339 2,339

TOTAL 23,821 37,674 40,851


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Molinos has increased its milling capacity by building a new oil plant but so have other companies,

such as Cargill, Dreyfus, Bunge, AGD and Vicentn in the same period. However, all these plants

have continued to follow their customary practices, that is to say, generating heat in a boiler and

purchasing electricity from the power grid. --------------------------------------------------------------------

Table S.3.3. shows a detail of some of the plants mentioned above, including the electric power they

demand from the power grid. -------------------------------------------------------------------------------------

Table S.3.3.---------------------------------------------------------------------------------------------------------------------

Company Location Power (1)------------------------------------------

Cargill Puerto San Martin Plant 15 MW------------------------------------------------

Cargill Villa Gobernador Galvez Plant 13 MW------------------------------------------------

Buyatti Puerto San Martn Plant 4 MW--------------------------------------------------

Buyatti Reconquista Plant 3 MW------------------------------------------------

Vicentin San Lorenzo 20 MW------------------------------------------------

Louis Dreyfus General Lagos 22 MW------------------------------------------------

(1) Source: CAMMESA, Economic Transactions Document, April 2006- Maximum Electricity

Purchased from the grid.------------------------------------------------------------------------------------------

This proves that there are other industrial plants comparable to Molinos San Lorenzo as regards

power demand.All industrial plants producing soy flours and oils cover their power demands by

purchasing electricity from the power grid and by generating heat in a conventional boiler. ----------

Baseline Determination ------------------------------------------------------------------------------------------

The alternative analysis has been made through the study of alternatives to customary practices. The

baseline scenario is the alternative which would take place in the absence of the project activity.

The AM0014 methodology establishes a set of scenarios which may be considered as Project

Alternatives to determine the baseline scenario. ---------------------------------------------------------------

Should the project not be implemented, Molinos would operate the plant in accordance with the

customary practices of the oil industry, that is to say, by generating heat in a boiler and purchasing

electricity from the power grid. This is the way in which all the existing soy plants operate. In fact,

Capacity 2005 Capacity 2006 Capacity 2007BUNGE 4,862 20.41% 6,375 16.92% 6,375 15.60%DREYFUS 3,553 14.92% 4,763 12.64% 5,973 14.62%MOLINOS 2,274 9.55% 6,357 16.87% 6,357 15.56%AGD 3,672 15.42% 5,548 14.73% 5,548 13.58%CARGILL 4,518 18.97% 6,665 17.69% 8,631 21.13%VICENTIN 2,603 10.93% 5,627 14.94% 5,627 13.78%OTHERS 2,339 9.82% 2,339 6.21% 2,339 5.73%TOTAL 23,821 37,674 40,851

Table S.3.2. Soy Milling per Company Plant


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prior to the plants enhancement works towards the end of 2005, Molinos operated the San Lorenzo

plant in accordance with the customary practices used by the other industries. --------------------------

The installation of the cogeneration plant is not a result of the increase in milling capacity since it is

foreseen that in 2007 Argentinas total milling will be 70% higher than that of 2005, and

notwithstanding such fact, all new industrial plants but Molinos continue to follow customary

practices. -------------------------------------------------------------------------------------------------------------

Due to the number of soy industries in Argentina, a highly competitive export market has emerged,

where other recently installed plants may operate applying the customary practices, without losing

competitiveness as a result. ---------------------------------------------------------------------------------------

Therefore, the baseline scenario corresponds to heat generation in a boiler and purchasing of

electricity from the power grid.-----------------------------------------------------------------------------------

B.5.Description of how the anthropogenic emissions of GHG by sources are reduced below

those that would have occurred in the absence of the registered CDM project activity

(assessment and demonstration of additionality): ---------------------------------------------------------

Additionality:--------------------------------------------------------------------------------------------------------

The AM0014 Methodology establishes that in order to determine the projects additionality, the

alternative scenarios to the project must be determined first. Then, five Additionality Tests are

conducted, including an analysis of technological and institutional barriers. All the Additionality

assessment is based on a Qualitative Test. ---------------------------------------------------------------------

In the CDM Molinos Ro de la Plata project, additionality is demonstrated by using the latest

version ofTools for the demonstration and assessment of additionality approved by the CDM

Executive Board, available at UNFCCC CDM web site. The Additionality Test described in the

AM0014 Methodology has also been included.----------------------------------------------------------------

This change is proposed since the AM0014 Methodology is limited to the use of natural gas as fuel

and Molinos project uses natural gas and fuel oil. ------------------------------------------------------------

Step 0 - Preliminary screening based on the starting date of the project activity: ------------------------

The incorporation of the CDM into the San Lorenzo - Molinos R o de la Plata S.A. CogenerationProject has a set of elements that we describe hereinbelow:-------------------------------------------------

Throughout 2005, a series of economic assessments were made for the installation of a

Cogeneration Plant in Molinos Ro de la Plata. ------------------------------------------------------

As a result of such assessments, the projects Internal Return Rate was evaluated, with and

without the incorporation of the sale of CER future bonds in the market.-----------------------

Said analysis was presented to the companys Board of Directors, who analyzed the results

and on October 31, 2005 approved the investments in the cogeneration project considering


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the revenue which may be gained from the sale of CER bonds as per Board of Directors

Decision number 1769. ----------------------------------------------------------------------------------

On August 8, 2006, the Environment and Sustainable Development Secretariat granted

Molinos the No-objection Letter as regards the Project Form (PIN) presented on November

10, 2005. ---------------------------------------------------------------------------------------------------

Therefore, there are clear evidences that CDM incentives to the Cogeneration Project were crucial

for the approval of the investment project. ---------------------------------------------------------------------

Step 1 - Identification of alternatives to the project activity consistent with current laws and

regulations -----------------------------------------------------------------------------------------------------------

Sub-Step 1 a . Define alternatives to the project activity -----------------------------------------------------

The alternatives to the project activity considered are those described in theAdditionality

Section

of the AM0014 Methodology and were analyzed in sub-section B.4 where the baseline scenario was

determined. ----------------------------------------------------------------------------------------------------------

1.- Industrial plant continues to operate with equipment replacement as needed and no change in

equipment efficiency (the frozen-efficiency scenario). -------------------------------------------------------

This is the baseline scenario relative to the operation of the existing industrial plant, supplying the

demand of thermal energy with a conventional boiler and purchasing electricity from the power

grid. ------------------------------------------------------------------------------------------------------------------

2.- Industrial plant continues to operate with improved efficiency new equipment at the time ofequipment replacement: -------------------------------------------------------------------------------------------

There are no improvements on the equipment and, therefore, this alternative does not apply to the

baseline scenario. ---------------------------------------------------------------------------------------------------

3.- The efficiency of boiler(s) is upgraded immediately:-----------------------------------------------------

Existing boilers are high-efficiency boilers, making replacement unnecessary. Therefore, this

alternative does not apply to the baseline scenario. -----------------------------------------------------------

4.- The heat and or electricity demand of the industrial plant is reduced through improvements in

end-use efficiency.--------------------------------------------------------------------------------------------------There are no improvements made on the thermal and electric power in the plant. Therefore, this

alternative does not apply to the baseline scenario. -----------------------------------------------------------

5.- Installation of a cogeneration system owned by industrial plant: --------------------------------------

The AM0014 Methodology establishes that the Cogeneration Plant may be owned by the user,

which is the case for Molinos. This is the CDM project scenario. ------------------------------------------

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6.- Installation of a package cogeneration system owned by a company other than the industrial

plant. ------------------------------------------------------------------------------------------------------------------

In our case, this is not the project scenario or the baseline scenario. ---------------------------------------

7.- Analysis of Other Cogeneration Technologies:------------------------------------------------------------

The cogeneration based on other kinds of technology does not apply to the baseline scenario either,

due to the limitations set by the production process in terms of electricity and heat demand. ---------

Sub-Step 1 b. Enforcement of applicable laws and regulations: --------------------------------------------

The section above mentioned alternatives to the CDM project and it must be pointed out that there

are no legal regulations opposed to such project alternatives. -----------------------------------------------

There are no regulations opposed to the usual practices. In fact, both San Lorenzo Molinos Ro de la

Plata industrial plant and other oil industries cover their power demands without the implementationof a cogeneration project. Neither are there legal regulations promoting or offering tax incentives,

subsidies or other facilities to industries which install cogeneration projects. ----------------------------

Step 2 - Investment Analysis--------------------------------------------------------------------------------------

Investment analysis is a quantitative assessment of the CDM additionality. Notwithstanding the

fact that the implementation of a cogeneration project is not the customary practice, in order to

demonstrate that it is not a baseline scenario, a benchmark analysis will be made to prove the effect

that the revenue from the sale of carbon bonds has on the project. -----------------------------------------

Sub-step 2 a Determine appropriate analysis method: the implementation of the CDM project on theproject activity generates an improved profitability which will be analyzed.-----------------------------

The criterion used for the analysis is a benchmark: -----------------------------------------------------------

"...determine whether the proposed project activity is economically or financially less attractive

than other alternatives without the revenue from the sale of CERs" Step 2, Annex 3 to the 15

meeting of the CDM EB.-----------------------------------------------------------------------------------------

Sub-step b - Option III . Apply benchmark analysis ----------------------------------------------------------

Below is the description of a compared economic analysis with and without CDM incentives.-------

Firstly, we adopt the IRR Internal Return Rate as the most suitable financial indicator for the type ofproject and the decision context. The Internal Tax Rate is widely used in the evaluation of

investment projects and will consequently be used in this analysis instead of other indicators, such

as NPV (Net Present Value) and the cost-benefit ratio. ------------------------------------------------------

The project implies an investment of USD 10,900,000, which includes the purchase of equipment

and their start-up, together with all equipment and facilities needed for their operation. ---------------

The alternatives to the project that we have considered are two: -------------------------------------------

implementing the project without the CDM benefits -----------------------------------------------


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continuing with customary practices ------------------------------------------------------------------

If the project is implemented without the CDM benefits, we have an investment project with its own

Internal Return Rate. On the one hand, we have the initial investment in infrastructure. The

revenues are the result of the difference of expenses in electricity and fuel between the cogeneration

project and customary practices. ---------------------------------------------------------------------------------

Together with the CDM benefits, we consider an additional yearly revenue from the sale of the

CER bonds. By considering this additional revenue, we have an increase in the IRR.------------------

In order to determine whether the cogeneration projects IRR without the CDM benefits is

appropriate, a Benchmark analysis is conducted. A Benchmark is a representation of a standard rate

in the market which considers the specific risk of the kind of project. For the CDM project, the

reference rate used is the following: -----------------------------------------------------------------------------

USA Treasury Bonds (Risk-free rate) -----------------------------------------------------------------

S&P 500 (it includes the risk-free rate plus an expected market return) -------------------------

Argentinas Country Risk-------------------------------------------------------------------------------

The S&P500 rate is a reference of the performance of the 500 most important companies in USA

considered as a suitable rate to reflect private investment risk. ---------------------------------------------

On the other hand, we consider that the Country Risk Rate represents another suitable additional

rate to take into account as regards the economic risk of the region or country where the project is to

be implemented.-----------------------------------------------------------------------------------------------------

All indicators were estimated as regards the time when the decision to conduct the investment

project and the CDM project was made (August - September 2005). The analysis was made together

with the decision of the investment project. Reference values were considered, dismissing values

prior to July 2005, since the Country Risk Rate exceeded 29% as a result of the economic default of

2002. ------------------------------------------------------------------------------------------------------------------

Chart 2.b.Financial IndicatorsBaseline Scenario

S&P 500 Country Risk USA Bonds S&P 500 +Country Risk

September 2005 10.51% 4.02% 4.25% 14.53%August 2005 12.02% 4.18% 4.25% 16.20%

Average 11.27% 4.10% 4.25% 15.36%

Chart 2.b- shows financial indicators and the resulting IRR with and without the incentive of carbon

bonds for the most likely scenario described in detail in subsection 2.c. ----------------------------------

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As it can be observed, CDM incentives have a positive effect on the investment project s

profitability.----------------------------------------------------------------------------------------------------------

Sub-step 2 c. Calculation and comparison of financial indicators (only applicable to options II and

III)---------------------------------------------------------------------------------------------------------------------

2.c.1- Initial Investment: The investment project comprises the installation if a high pressure boiler

and of a counter-pressure steam turbine, the investment of which amounts to:---------------------------

1- adaptation to heat generation system USD 4,000,000

2- counter-pressure steam turbine USD 3,250,000

3- civil works USD 1,299,000

4- facilities USD 1,144,000

5- auxiliary equipment USD 842,000

6- mechanical assembly USD 160,000

7- electrical assembly USD 145,000

8- engineering and approvals USD 105,000

Total USD 10,900,000

One of the alternatives to the project is to continue with customary practices, which- as it has

already been mentioned above- includes the heat generation in a conventional boiler and the

purchasing of electricity from the power grid. In this case, the boiler is not necessarily a high

pressure 64 kg/cm boiler, but the heat for the process may be produced in a lower pressure 15

kg/cm boiler, with a lower cost. --------------------------------------------------------------------------------

In consequence, the implementation of the cogeneration project implies the acquisition of a high

pressure boiler, together with the turbine, accessories and assembly. -------------------------------------

For the purpose of evaluating the investment project, only the additional cost incurred on account of

the acquisition of the high pressure boiler instead of the low pressure boiler must be allocated to the

project, together with the higher costs in plant as regards water treatment and particularly the steam

turbine. ---------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------------

Anlisis TIR Proyecto de Cogeneracion

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

12,00%

14,00%

16,00%18,00%

S&P 500 Riesgo Pais Bonos USA S&P 500 +

Riesgo Pais

TIR s /CER TIR c /CER

Cogeneration Project IRR Analysis

CountryRisk

USABonds

S&P 500+ Country

Risk

IRR withoutCER

IRR with CER


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2.c.2.- Determination of Savings: should the cogeneration project not be implemented, the

customary practice is the generation of heat in a boiler and the purchasing of electricity from the

power grid.-----------------------------------------------------------------------------------------------------------

In such case, the industrial plant has the following power expenses: --------------------------------------

- purchasing of electricity from the power grid----------------------------------------------

- purchasing of natural gas and fuel oil as fuel for the boiler------------------------------

Molinos Gas Price: In this respect, a set of different scenarios for power and fuel prices have been

considered. Molinos Ro de la Plata S.A. may acquire throughout the project natural gas and fuel oil

at different values on account of the international price of petroleum, the gas imports negotiations

with Bolivia and the domestic energy policies of Argentina.------------------------------------------------

At the time of evaluating the project, Argentina has agreed on a gas imports price from Bolivia ofUSD 5/MM BTU. This price is affected by a 50% of royalties in such country. Domestic market

prices tend to be aligned with the resulting value. Therefore, for the purposes of the project, the

following price scenarios of gas at the pits mouth have been considered for the purchase of

Molinos:--------------------------------------------------------------------------------------------------------------

--------------------------------------------USD 2.30/MM BTU---------------------------------------------------

--------------------------------------------USD 2.45/MM BTU---------------------------------------------------

--------------------------------------------USD 2.60/MM BTU (1)---------------------------------------------

--------------------------------------------USD 2.75/MM BTU-----------------------------------------------------------------------------------------------USD 3.00/MM BTU--------------------------------------------------

--------------------------------------------USD 3.15/MM BTU---------------------------------------------------

(1) Most likely value taken as a reference ----------------------------------------------------------------------

The most likely value as long-term price that we have considered is USD 2.60/MM BTU. This

value corresponds to 50% of the gas price of Bolivia placed at city gate Buenos Aires. The other

values are considered for a sensitivity analysis described in sub-step 2.d. --------------------------------

The price of gas in plant results from the sum of: -------------------------------------------------------------

- Pit

s Mouth Gas: described above.------------------------------------------------------------ Retained Gas: it is the natural gas additional to the plant consumption needed for

the transportation of gas. It is a fixed percent value for each transport route.---------

- Transport and Distribution: this is a value regulated and fixed by the Natural Gas

Distribution Licenses.--------------------------------------------------------------------------

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-------------------------------------------------------------------------------------------------------------------------

Chart 2.c.2,-1Natural Gas Costs Molinos Ro de laPlataBaseline Scenario

Pits Mouth

Retained GasID Transport

USD/MM BTU$/dm3$/dm3$/dm3

2.30262.3713.1225.47

2.45279.4813.9725.47

2.60296.5914.8325.47

2.75313.7015.6925.47

3.00342.2217.1125.47

3.15359.3317.9725.47

Total in Plant $/dm3 300.96 318.92 336.89 354.86 384.80 402.77USD/MM BTU 2.64 2.80 2.95 3.11 3.37 3.53

Chart 2.c.2.-1 shows the price of gas in plant for each one of the scenarios studied, taking into

consideration the regulated values and the prices of gas at the pits mouth described above. ----------

Fuel Cost: For the baseline scenario, the fuel consumption throughout the year depends on the

hours the plant operates on fuel oil and the hours the plant operates on natural gas. --------------------

The operating scenario which has been considered as most likely is the following:---------------------

Fuel Oil Operation: a total of 30 days per year, with a cost of USD 300/tonne.--------------------------

Interruptible Service Natural Gas Operation: 255 days per year with a cost as per the stipulations of

Chart 2.c.2.1. --------------------------------------------------------------------------------------------------------

Natural Gas Operation with Assistance: In Argentinas gas system, soy plants purchase natural gas

with interruptible transport. This means that there are a total of 90 days of natural gas outage, as a

result of the transport congestion of the Gas Distributor. This is due to the increase of household

consumption in winter months. In actual operation, Molinos purchases assistance services, that is to

say, it purchases gas and transport from third parties, other than the Distributor. This means that of

the 90 days of gas outage, Molinos reduces to 30 days the actual time of gas outage, only using fuel

oil on 30 days per year. As regards prices, gas with transport in those shortage periods is paid at

alternative fuel costs, that is, at the cost of fuel oil. Therefore, for price purposes, there are 90 days

on which the fuel price is like that of fuel oil, that is to say USD 300/tonne, while in the operating

phase there are only 30 days of actual operation with fuel oil. ----------------------------------------------

Fuel cost in the baseline scenario can be observed in Chart 2.c.2.-2. --------------------------------------

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Molinos Electricity Price: ---------------------------------------------------------------------------------------

In the Argentine Electric System, power generation is made with a set of power plants of the

following kinds:-----------------------------------------------------------------------------------------------------

- Hydroelectric ------------------------------------------------------------------------------------

- Nuclear -------------------------------------------------------------------------------------------

- Thermal-------------------------------------------------------------------------------------------

For the purposes of electricity price in the market, there is an Organization in Charge of the

Dispatch, conducted by a company named CAMMESA (Compaa Administradora del Mercado

Elctrico Mayorista S.A., Wholesale Electrical Market Managing Company), responsible for the

requirements of the demand, the determination of the machines that generate energy hourly, while

establishing costs and prices for energy. ------------------------------------------------------------------------

Energy prices are set based on an economic dispatch, where the thermal machines are ordered from

the lowest to the highest price. Besides the efficiency of the thermal machine fixing the market

price, energy prices are in function of fuel prices. That is to say, as a result of the dispatch, there are

thermal machines which generate liquid fuel (gas oil, fuel oil), coal or natural gas. Each machine

has its specific consumption and its price depends on the price of fuels.----------------------------------

Therefore, fuel and energy markets are interrelated. All this is intended to show that the investment

project assessments have been made based on different price scenarios of fuels used by Molinos.

But those fuels are directly related to the generation costs of electricity, which Molinos will

purchase in case the project is not implemented and it continues with customary practices. -----------

In general, thermal power plants have a purchasing volume much higher than that of industries. In

consequence, the gas purchasing price of power plants is lower than that paid by industries. On

Chart 2.c.2.-2Molinos Ro de la Plata Natural Gas CostsBaseline Scenario

Natural Gas Consumption 16,712.19m3/hFuel Oil Consumption 14,617.07 kg/hOperation Days per Year 345days/yearGas Outage Days 90days/yearFuel Oil Cost 300u$s/tonne

Gas Scenario Outage DaysUSD/MM BTU 75 90 105

2.64 18,475,077.94 19,465,841.04 20,456,604.142.80 19,106,798.68 20,062,466.18 21,018,133.682.95 19,738,519.41 20,659,091.32 21,579,663.223.11 20,370,240.15 21,255,716.46 22,141,192.773.37 21,423,108.05 22,250,091.69 23,077,075.34

3.53 22,054,828.78 22,846,716.83 23,638,604.89

ID Fare- Incr.0% B.P. 2.30 USD/MM BTUID Fare- Incr.0% B.P. 2.45 USD/MM BTUID Fare- Incr.0% B.P. 2.60 USD/MM BTUID Fare- Incr.0% B.P. 2.75 USD/MM BTUID Fare- Incr.0% B.P. 3.00 USD/MM BTU

ID Fare- Incr.0% B.P. 3.15 USD/MM BTU


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these grounds, for each price scenario of gas purchase by Molinos, different cases for the price of

gas at the pits mouth of thermal power plants have been analyzed. ---------------------------------------

Analyzed cases include: -------------------------------------------------------------------------------------------

Molinos Pits Mouth Gas Factories Pits Mouth GasUSD/MM BTU USD/MM BTU

2.30 2.302.45 2.302.60 2.30 (1)2.60 2.602.75 2.603.00 2.603.15 2.60

(1) Most likely value taken as reference ------------------------------------------------------------------------

The rest of the analyzed cases were considered for the sensitivity analysis of the investment.

Moreover, the systems generation costs depend on the cost of fuel and the efficiency in the

generation. Three scenarios of the system have been analyzed in a 10-year horizon in order to

evaluate the project. Molinos cogeneration plant has a specific fuel consumption of 1,094 kcal/kWh,

and such value competes in the market with the generation of different thermal power plants the

specific consumption of which varies as regards the kind of technology used.---------------------------

- Combined cycles: they are modern power plants, installed in the last 10 years, the

representative specific consumption of which is 1600 kcal/kWh, and whose power

is 800 MW per power plant. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Combined Cycle Power kcal/kWh ConsumptionAES Parana 845 1508Capex 661 1808 (1)Buenos Aires 321 1603Central Puerto 798 1487Doce Sud 795 1528Genelba 674 1524C.T.Mendoza 290 1650S.M.Tucuman 382 1725Costanera 851 1486

Tucuman 446 1757(1) combined cycle with post-combustion in recovery boiler.

-------------------------------------------------------------------------------------------------------------------------

- Heat power plants: they are older power plants, installed more than 10 years ago,

the specific consumption of which is 2300 kcal/kWh, in the case of the larger plants

and whose power ranges from 500 to 1000 MW per plant. ------------------------------

----------------------------------------------------------------------------------------------------------------------

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Heat power plants Power kcal/kWh ConsumptionPiedrabuena 620 2300Guemes 261 2296Central Puerto 390 2323Central Puerto 589 2330San Nicols 650 2428Costanera 1131 2158

-------------------------------------------------------------------------------------------------------------------------

- Open Cycle Gas Turbines: we have plants less than 10 years old, the specific

consumption of which is 2500 kcal/kWh and machines more than 10 years old with

3000 to 4500 kcal/kWh. In new power plants we are in the 300 MW range and

older machines are below the 50 MW range.-----------------------------------------------

-------------------------------------------------------------------------------------------------------------------------

Gas Turbines Power kcal/kWh ConsumptionCentral Neuqun 375 2550Pluspetrol Norte 232 2613

-------------------------------------------------------------------------------------------------------------------------

In a 10-year horizon, we expect a generation dispatch with a significant participation of combined

cycles, to a lesser extent with heat power plants and a marginal contribution of older machines.-----Based on the future operation of the system, the Molinos cogeneration plant with 1,094 kcal/kWh

will compete in the market and we have identified three different scenarios.-----------------------------

- 1600 kcal/kWh generation --------------------------------------------------------------------

- 1800 kcal/kWh generation (1) ----------------------------------------------------------------

- 2200 kcal/kWh generation --------------------------------------------------------------------

(1) the baseline scenario of the Molinos project for a 10-year assessment is to compete with a

1800 kcal/kWh system as average machine fixing the market price.-----------------------------

The price scenarios for the purchasing of electricity by Molinos will depend on the gas price offactories and of the average specific consumption of the system. The baseline scenario corresponds

to a gas price at the pits mouth of factories of 2.30 USD/MM BTU and a specific consumption of

1800 kcal/kWh. The prices of electricity in plant have been estimated based on such values for

Molinos project.----------------------------------------------------------------------------------------------------

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The plant power cost comprises generation costs and other charges on associated services and

transport. Specific charges are detailed below: ----------------------------------------------------------------

National Energy Fund: it is a tax levied on the demand created by Act 24,065. -------------------------

Additional Power Charge: it is a charge on losses in the transport system which are not function of

power flows. ---------------------------------------------------------------------------------------------------------

MEM (Wholesale Electrical Market) Investment Funds: it is a temporary charge foreseen for the

construction of a set of combined cycle power plants between 2008 and 2009. (1) ---------------------Cost of Dispatched Power: it is charge for generators on the power made available by their

machines in the market. (1) ---------------------------------------------------------------------------------------

Dispatch Temporary Overcosts: it is a charge on overcosts for the generation with liquid fuels (1).

All these charges are proportional to the power consumption of the plant. -------------------------------

(1) The charges mentioned above may have a strong variation throughout the duration of the

project. Nevertheless, the sum of all of them is expected to remain stable. Throughout time, the

Dispatch Temporary Overcosts would be eliminated and the Wholesale Electrical Market

Chart 2.c.2.- 3.Molinos Ro de la Plata Electricity CostBaseline Scenario

Cost of Gas at Pits Mouth in Factories 2.30 USD/MM BTUFactories Average Consumption 1,800.00 kcal/kWhSpot Energy Market Cost 21.69 USD/MWh

Cost of Dispatched Power 5.07 USD/MWhAdditional Power Charge 1.00 USD/MWhNational Energy Fund 2.00 USD/MWhMEM Investment Fund 1.17 USD/MWhReserve Charge and Associated Services 2.03 USD/MWhDispatch Temporary Overcosts 1.03 USD/MWh

500 and 132 kV Power Transport 3.79 USD/MWh

Power Cost in Plant 37.78 USD/MWh

Power Cost without back up 31.96 USD/MWh


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Investment Temporary Charge would also be eliminated, but the Cost of Dispatched Power would

be increased in the same volume. --------------------------------------------------------------------------------

500 kV and 132 kV Power Transport: it is the cost of transporting power from the wholesale market

to the plant. It is a value expressed in USD/MWh, but in practice it is a charge proportional to the

15-minute maximum demanded power.-------------------------------------------------------------------------

Reserve Charge and Associated Services: they are charges on market machinery in reserve,

frequency primary and secondary regulation services, start-up expenses and stoppage of steam

turbines. It is expressed in USD/MWh, even though they are charges proportional to the 15-minute

maximum demanded power. --------------------------------------------------------------------------------------

Power Cost in Plant: it is the power cost resulting from adding all the charges indicated.-------------

Power Cost without Back Up: it is the wholesale power cost, that is to say without the chargeswhich continue to be paid when the cogeneration starts to operate, since the grid back-up continues

to be considered. This means that the cogeneration project implementation is made with the

generation connected in parallel to the grid. Therefore, the systems and the transport networks

back-up charges shall continue to be paid.----------------------------------------------------------------------

Higher Costs due to Cogeneration: the implementation of Cogeneration in Molinos has the

following overcosts allocated to the project: -------------------------------------------------------

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