MINEM – July 2016 1
Undersecretariat of Renewable Energy
Ministry of Energy and Mining - MINEM
Argentine Republic
RenovAr Program Round 1
First Public Call for Tenders for Renewable Energy Supply
Hamburg Chamber of Commerce July 5th, 2016
MINEM – July 2016 2
Renewables will shape Argentina’s new energy matrix
2
Renewables
Development
in Argentina
…capturing key strategic benefits for the country based on recent market trends
Argentina has a clear mandate to reduce CO2 emissions and modernize its generation mix by using renewable energy sources…
…leveraging on its wide availability of resources to develop world-class renewable energy assets…
…and offering an attractive legal framework and tax incentives to investors
CLEAR MANDATE
STRATEGIC DRIVERS
WIDE RESOURCE AVAILABILITY
ATTRACTIVE FRAMEWORK
1 2
4 3
MINEM – July 2016 3
0,8
3,6
6,3 7,1
7,9 8,6
9,4 10,1
10,8
1,9%
8%
12%
16% 18%
20%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
0,0
2,0
4,0
6,0
8,0
10,0
12,0
2015 2018 2019 2020 2021 2022 2023 2024 2025
Capacity Needed (GW)
• Law 27.191 recently approved with high degree of support from all political parties
⁻ Had >80% approval in both Senate and Lower Chamber of Congress
• Target of 20% of power demand in 2025 (from 8% in previous law, and 1.9% in 2015)
% of Power Consumed Capacity, GW
RE Target, %
* Estimated Additional Capacity. Source: AITPA based on Ministry of Energy and Mines
Argentina’s Renewable Energy targets
3
Forecast 2025
*
MINEM – July 2016 4
Renewable Energy Program 2016-2025 Elements of the Regulatory Framework
Act 27.191 D.R. 531 Res. 71 y 72 RenovAr Round 1
Senate -> 4Q’14 Lower Chamber -> 4Q’15
Presidential Decree -> 1Q’16
Ministry of E&M-> 2Q’16
CAMMESA -> 2Q’16
MINEM – July 2016 5
RE Regulatory Framework
Mandatory Targets
8% @ 2017-18 20% @ 2025
Resource Diversification Geographical and
Technological
Generous Fiscal Incentives
IPP and Local Manufacturing
FODER Support Trust Fund for
Guarantees and Financing
New RE Framework
Act 27.191
MINEM – July 2016 6
RE Markets (Contracting Mechanisms)
Private PPAs with Major Users*
Opt-Out
Self-Generation
Opt-Out
* With Private Generators, Power Distributors or Commercializers
Major Users >300 kW who exercise their right to opt-out.
Annual Goals subject to penalties. Privately-negotiated Price and T&C 1
00
% o
f R
en
ewab
le
Ene
rgy
Go
als
PPAs Tenders 100% of the 300 kW-or-less demand and Major
Users who do not opt-out.
Price determined through Tenders
MINEM – July 2016 7
Act N° 27 191 – Fiscal Incentives
For all projects starting construction prior to 12/31/2017 (15%)
• Exemption of Import Duties for the project.
• Accelerated Fiscal Depreciation of applicable assets
• Advance VAT Reimbursement paid on pre-COD purchases
• Exemption of Minimum Presumed Income Tax (until year 8 of COD)
• Exemption of Dividend Tax (10% - subject to re-investment in infrastructure)
• Extension of Income Tax Loss Carry Forwards to 10 years (standard 5)
• Tax deduction of all financial expenses for accountable purposes
• Tax Credit on locally supplied CAPEX (20% of its value - transferable to third party)
MINEM will evaluate and approve the Access of the Project to the Incentives
Regime
The Incentives are larger on the first stage as means of encouraging the Projects to
expedite COD
MINEM – July 2016 8
RENOVAR – ROUND 1 Call for Tenders
MINEM – July 2016 9
Objectives & Benefits
* Hydro projects up to 50MW are considered RE.
First Step towards the fulfillment of the 8% goal
1,8% => 4,5%
New Jobs 5000 - 8000
RenovAr 1 – Public Call for Tenders 1.000 MW worth of new Renewable Power Capacity
=> 1.500/2.000 million US$ direct investment
Annual Savings on Imported Fuels for Power Generation
300 million US$
Emission Control 2 million ton CO2/year
(~ 900.000 cars)
Expected Benefits
Solar PV
MINEM – July 2016 10
FODER Trust Fund Structure
Project Finance Account
Treasury Funds Public Offerings
ANSES (Pension Fund)
Multilaterals / Climate Funds
Long Term Project Loans Loan Guarantees
Interest Rate Subsidies Equity Contributions
Payment Guarantee Account
Treasury Funds Specific Charge to Consumers
Payment Guarantee (for all tendered PPAs) Termination Payment
FODER
MINEM – July 2016 11
Financing & Guarantees Through FODER
FODER is structured with two separated accounts in order to provide support for RE generation projects:
• Financing Account:
– Construction and/or Long Term loans
– Financial Guarantees for Loans
• Guarantee Account:
– Energy Payment Guarantee (with a 12 month liquid reserve)
– Early Termination and/or Put Option payment (partially counter guaranteed by the World Bank)
– Call Option of the Project in case of early termination for reasons attributable to Seller.
FODER Authorities will eventually determine and offer the applicable T&C for FODER financing and/or guarantee instruments.
MINEM – July 2016 12
Tendered PPAs Energy Payment Guarantee
CAMMESA (Off-taker)
4. CAMMESA pays IPP on a monthly basis
under PPA
2. CAMMESA bills End Consumers on a monthly basis through DistCos Electricity
End Consumers
1. IPP Injects Renewable Electricity into National Grid
3. Consumers pay on a monthly basis through DistCos
Payments
Physical Flow
Guarantees
PPA
Renewable Energy Trust Fund
(FODER) 6. FODER pays IPP under Energy Payment Guarantee
IPP (Seller)
(*) To replenish FODER so that it always holds 12 months worth of elegible PPA payments as liquid reserve
5. IPP Issues a claim to FODER for late or non-payment of Energy under PPA
8. Ministry of Energy & Mining increases
Guarantee Charge (*)
7. FODER seeks repayment from CAMMESA after having made a Energy Guarantee Payment on its behalf
MINEM – July 2016 13
Renewable Power Purchase Agreement (RPPA) Early Termination and Project Put Option
Under the RPPA and the FODER Subscription Contract the following events are considered a cause for early termination and/or provide investors with a put option on the Project: :
– Lack of payment on behalf of the Buyer (CAMMESA) for 4 consecutive months or 6 non-consecutive months within the same year (as far as not cured under FODER Guarantee)
– Inability to convert local currency to US$ and/or impossibility to transfer funds abroad to pay debt services and/or dividends.
– Detrimental changes to the World Bank Guarantee or the FODER.
The termination payment is pre-established at 1x of the remaining unamortized book value of the Project´s Assets (valued in US$ according to
internationally accepted accounting rules).
MINEM – July 2016 14
Tendered PPAs Termination Payment Guarantee
Ministry of Economy and Public Finances (Trustor of FODER)
Representative of the National State
IPP (Seller)
Renewable Energy Trust Fund
(FODER) (Trustee: BICE)
CAMMESA (Offtaker)
4. IPP submits the claim for payment of the Project Sale
Price (#) to the FODER
5. The FODER submits a claim for needed budget line to the Ministry of
Economy and Public Finances
7. The FODER does not pay to the IPP the Project Sales Price (#)
1. Cause for termination or sale of the project
occurs
2. IPP submits the claim to CAMMESA
3. CAMMESA cannot pay IPP
8. IPP submits the claim to the WB (*)
9. The WB pays the eligible amount to
the IPP (*)
11. National State pays to the WB the amount due
(#) 1x of the remaining unamortized book value of the Project´s Assets (valued in US$ according to internationally accepted accounting rules). (*) The FODER grants individuals and legal entities which have issued projects the irrevocable right to directly submit claims before the World Bank in certain cases and to receive payments from the World Bank.
6. The Ministry of Economy and Public Finances does not
have the funds
10. IPP claims for the balance to the FODER Trustor
MINEM – July 2016 15
Preliminary Schedule
18-May 01-Jul
22-Jul
22-Jul
MINEM – July 2016 16
1
2
500 kV
330 kV
220 kV
150 kV
132 Kv
NOA - CUYO COMAHUE - PATAGONIA 1 2
HIGHEST SOLAR POTENTIAL
HIGHEST WIND POTENTIAL
Extensive High Voltage Grid (>14k km)
MINEM – July 2016 17
5
1
4
3
2
6
8
CORRIDOR LIMITING
CAPACITY (*)
MAIN INTERCONECTION NODES
(Tension in kV)
Max (MW)*
NOA
La Rioja (132) 120
La Rioja Sur (132) 100
Villa Quinteros (132) 100
ET Cobos (345) 400
El Bracho (220) 200
BUE-LITORAL-NEA
Cañada de Gomez (132) 100
Rojas (132) 150
Puerto Mineral (132) 100
CENTRO Villa Mercedes - Rio IV (132) 130
San Luis (132) 100
CUYO
Cruz de Piedra (132) 100 Jachal - Punta de Rieles (132) 80 El Sosneado (132) 60
Cañada Honda (132) 100
COMAHUE 600 MW
ET Chocon (500) 300 Alicurá (132) 30 Puelches (132) 30
Bahia Blanca (132) 300
PATAGONIA 400 MW
Santa Cruz Norte (132) 130
Rio Santa Cruz (132) 50
Puerto Madryn (132) 50
Futaleufú – Madryn (330) 180
1
3
2
7
6
5
7
4
8
500 kV
330 kV
220 kV
150 kV
132 kV
17
Transmission Grid and Interconnection Capacity
*To be confirmed in definite version of bid documents.
MINEM – July 2016 18
Bidder Qualification Criteria
• Bidders can be individuals or consortia who are either shareholders or have irrevocable rights over the Project´s SPV.
• Bidders must provide documents availing (individually or collectively):
– Minimum of 250.000 US$ Equity per MW of Offered Power Capacity (OPC)
– Project development, financing & construction experience, on previous projects of a size equivalent to at least 33% of the OPC
• Bidders must provide sufficient and acceptable guarantees:
– Bid Bond: 35.000 US$ per MW of OPC
– Performance Bond: 250.000 US$ per MW of OPC
• Bidders must register and purchase the Request for Proposals (RfP) from CAMMESA (cost 150.000 AR$)
MINEM – July 2016 19
Project Qualification Criteria
• Projects must be structured as independent SPVs
• As of the date of Bid Submission they must prove that they have:
– Approved Environmental Impact Study
– Real, verifiable rights over the Project site
– Acceptable and certified resource assessment (A minimum of 12 months worth of resource measurement for Wind projects)
– Energy production estimates
– Having had initiated the request for permission to operate as wholesale power market agent (“Agente MEM”) at MINEM
– Acceptable PT1 (technical interconnection studies) presented to ENRE (National Electricity Regulation Agency)
• All legal & technical project documents, as well as the appropriate documentation requesting the applicable fiscal benefits must be submitted in the “A” Envelope (Legal & Technical).
MINEM – July 2016 20
Requirements by Technology
(1) “EPR” or “Energy Production Report” means a briefing on the on site energy production capacity, which is to be certified by an Independent Consultant, who, in turn, must have a minimum of 1.000 MW verifiable background experience on similar renewable energy projects (local or international). This report must be current (max. 6 months old) when the bids are submitted.
(2) Except for Projects with interconnection points on the Andes-Cobos line (345 kV), which will have a term of 900 days from PPA signing.
Wind Solar Biomass Biogas Mini Hydro
Minimal Power Capacity
1 MW 1 MW 1 MW 1 MW 0,5 MW
Maximal Power Capacity
100 MW 100 MW 65 MW 15 MW 20 MW
Renewable resource
measurement and/or
availability
Minimum of 1 year worth of on-site
resource measurement at time of EPR.
Must provide an EPR certified by an Independent
Consultant (1)
Must provide an EPR certified by an Independent
Consultant (1)
Must provide certificate of source and sustainability of biomassic resource
Must provide certificate of source and sustainability of biomassic resource
Must provide certified EPR(1) and Energy
Production Estimates
Maximal Execution Term
from PPA Signature (2)
730 days 730 days 730 days 730 days 730 days
MINEM – July 2016 21
Contents of Bid Submission
Envelope “B” (Economic Offer)
Technology in which it competes
Offered Price, expressed in US$ per MWh without VAT
Offered Power Capacity (MW)
Minimal Offered Power Capacity for partial award (MW)
Guaranteed Energy (MWh/year)
Minimum Guaranteed Energy (MWh/year)
% Local Component (used as Tiebreaker)
Amount and term of World Bank Guarantee
Envelope “A” (Legal and Technical Project & Sponsor Information)
General project description and technical details
Bidders legal requirements
Bidders financial and technical requirements
Completed forms and details of requested applicable fiscal benefits
Technical Project Requirements: (i) Project Memo, (ii) Site/Land Rights, (iii) EPR (iv) Technology used, (v) Environmental permits, (vi) Proof of initiation of request for license as “Agente MEM”, (vii) Proof of initiation of request for access to transmission capacity (“ENRE”) and copy of PT1 Studies.
MINEM – July 2016 22
Selection and Award Process
For each individual Technology: • Calculate Adjusted Offered Price (POA) using Offered Price and Loss Factors (#)
• Discard those Bids whose POA is over the Maximum Award Price (*)
• Sort Bids in ascending order by POA
• In the case of a tie, the selection criteria will be, in order of hierarchy, lowest POA, highest Local Component, and finally, by draw.
• Allocation and award will occur only if:
– The Offered Power Capacity or Minimal Power Capacity for partial award do not exceed the Interconnection Node Capacity, the Maximum Power Capacity by Technology, nor the Total Required Capacity (1.000 MW) and,
• For Wind energy, only up to 500 MW will be allocated on the Comahue and Patagonia corridors, except in case the remaining 100 MW quota is not allocated in the rest of the country.
(#) Loss Factor are to be calculated by CAMMESA and will account for marginal losses in the transmission network attributable to the RE projects. (*) Maximum Award Price: Calculated by MINEM (Energy and Mines Ministry) and informed to CAMMESA in a closed envelope to be opened at the same time that economic bids are opened.
MINEM – July 2016 23
23
Renewable Power Purchase Agreement (RPPA) Main Issues
• Parties: CAMMESA (Wholesale Market Administrator), on behalf of the power distribution agents and the wholesale market large users who do not opt-out.
• Object: Building, commissioning, O&M of a Power Plant which will supply Renewable Power to the grid
• Price: According to each Bid, expressed in US$ per MWh, with annual pre-set adjustment plus Incentive Factor applied on a calendar-year basis.
• Volume: 100% of the power generated by the Contracted Power Capacity
• Guaranteed Energy: ≥ P90 according to the EPR
• Term: 20 years from Commercial Operations Date
• Penalties to the Seller:
– Failing to meet the Interconnection and/or Commercial Operations Deadline (penalty applied on a daily basis)
– Minor Supply Deficiency (<10% of Guaranteed Energy, GE) with makeup on the next year and Mayor Supply Difference (>10% of GE) with immediate application of a penalty equivalent to cost of generation using imported Diesel (cost which will be calculated periodically by MINEM)
MINEM – July 2016 24
Renewable Power Purchase Agreement (RPPA) Annual Price Adjustment and Incentive Factor
• The power prices will be adjusted on an annual basis (as pre-set in annex to PPA)
• In addition, an “Incentive Factor” will be applied on a calendar year basis as a way to incentivize early COD.
2017
MINEM – July 2016 25
Undersecretariat of Renewable Energy Paseo Colón 171 - Piso 8 - Oficina 812
+54.11.4349-8033/8186 [email protected]
Documents available at: www.cammesa.com.ar and www.minem.gob.ar
Thank you