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Bidding process for 1 gw of renewable energy

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By Alfaro Abogados

The first stage of the program requires an investment of between US$ 1,500 million and US$ 2,000 million.

The bid process has been announced within the framework of a new Renewable Energy Law that mandates that by the last day of 2017 at the latest, the country must generate an 8% of the electricity by using clean technologies, a number that increases to the 20% in 2025.

 The promotion regime for renewable energy implemented by the government grants fiscal benefits established by law and a priority in the payment with respect to other energy sellers. The fiscal benefits include an anticipated VAT return, an accelerated amortization for income tax and exemptions in import duties, among others. The application for the Certificate of Inclusion into this promotional regime has to be made under the bid procedures in which the interested party participates.

 The 1 GW of this first auction of the so-called “RenovAr” plan (Resolution 71/2016) would be divided in 600 Megawatts of wind power, 300 of solar power, 65 of biomass power, 20 of small hydroelectric projects and 15 of biogas power. The term for the completion of the works would be of 24 months. Only with this first round the country would be saving around US$ 300 million in fuel importation for electricity generation, considering an international Price of USD 50 per bbl.

The government expects that renewable energy projects will bring investments for US$ 5,000 million until 2017, and a total of 20,000 million by the end of 2025.

With respect to the financing of the projects the authorities stressed the rate of 7.14% applied to the payment to the holdouts as a positive indicator of Argentina new position in international financial markets. The government is currently negotiating with the World Bank for a Triple A multilateral guarantee of US$ 500 million for the awarded projects.

 Consultation period on the draft terms:

The draft terms and conditions of the bid are already available in Spanish at the web site of CAMMESA, the public company that administers the large Argentina electricity market: http://portalweb.cammesa.com/Pages/RenovAr.aspx.

 There is a public consultation period in which interested parties have 20 calendar days to make comments about the draft. Once the consultation period expires the definitive terms would be published in June.

The deadline for the submission of offers would be on August 22, and the announcement of the awards would be on September 28..

 The economic evaluation of the offers would consider the price in US$ per Megawatt Hour, the location and interconnection node, the committed date for the entry into commercial service, and other promotion requirements such as the use of domestic supplies in, as a minimum, a 20% for electromechanical components and a 30% in the whole project.

 The government would set a minimum price of US$ 70 per MWh, while currently the value per MWh is of AR$ 320 for residential use and AR$ 700 for industries and businesses that do not buy directly to the generators.

 In order to qualify, the offers shall include a report of the project, an evaluation of resource availability, technology and estimated energy production and environmental clearance granted by the authorities at the time of their submission, among other legal and accounting documentation.

For further information you may contact Mr.Juan Ruiz JRuiz@alfarolaw.com
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