The Secretary of Energy establishes conditions for the termination or amendment of power purchase agreements under the RENOVAR Program.
Power Department Report | The Secretariat of Energy establishes conditions for the termination or amendment of power purchase agreements under the RENOVAR Program
Dear Sir or Madam,
On December 27th, 2021, the Secretariat of Energy of the Republic of Argentina issued Resolution No. 1260/2021 (the “Resolution”), published in the Official Gazette today, in view of significant delays in the compliance of contractual milestones of the power purchase agreements (“PPAs”) entered into under the RenovAr Program (rounds 1, 1.5, 2 and 3 or that were incorporated to the Renovar Program under Resolution of the former Ministry of Energy 202/2016), establishing the requirements to terminate or amend said agreements. Below please find a brief description of such alternatives.
A. Termination of the PPA
Under the Resolution, companies that have entered into a PPA but have not reached the agreed Commercial Operation Date (the “COD”) may request the termination of the referred agreements subject to the fulfillment of the following conditions:
1. The payment of a defined amount for each technology, which shall be paid only once. Small Hydroelectric Power Plants (PAH), Bioenergies – Biogas or Biomass or Landfill Biogas – shall pay the amount of TWELVE THOUSAND FIVE HUNDRED UNITED STATES DOLLARS for each megawatt of Contracted Power (USD 12,500/MW) of the Plant. Wind and Solar Photovoltaic technologies shall pay the amount of US DOLLARS SIXTEEN THOUSAND FIVE HUNDRED DOLLARS for each megawatt of Contracted Capacity (USD 17,500/MW).
2. To waive any right, action, or administrative, judicial, extrajudicial, or arbitration claim, in the Argentine Republic, abroad and internationally, against the National Government (the “NG”), the Secretariat of Energy (the “SE”) and/or CAMMESA.
3. To undertake to hold the NG harmless against any action, administrative, judicial, extrajudicial or arbitration claim, in the Argentine Republic, abroad and internationally, of its shareholders or controlling, controlled, or related companies.
4. Submit an affidavit to waive the Promotional Benefits contemplated in Article 9 of Law No. 26,190, as amended by Law No. 27,191, and in Decree No. 814 dated October 10th, 2017, for those benefits granted and not yet enjoyed.
5. To terminate their respective Accession Agreements to the Fund for the Development of Renewable Energies (FODER).
B. Amendment of Term of the PPAs
The Resolution establishes that those project holders that need an additional extension of the agreed term to reach the COD, may request an extension of up to Three Hundred and Sixty-Five (365) calendar days, provided that the project holder accepts a reduction of term and price. The company owning the project will have to sign with CAMMESA an amendment to its PPA including these terms.
In order to be able to request the reconduction indicated in the previous paragraph, the following conditions must be strictly met:
1. Acceptance of a reduction of the term of the PPA, equivalent to Two (2) times the number of days elapsed between the original Scheduled COD (taking into account any extension of the latter due to the granting of the requested extensions or the suspension of terms ordered by the Secretariat, as applicable) and the COD, as defined in the PPA.
2. Acceptance of a reduction in the price of the PPA based on the formula set forth in the Resolution. The price resulting from the formula described in the Resolution shall be applicable to the Adjustment Factor and the Incentive Factor provided in the PPA.
3. Increase of the Performance Bond by Thirty Percent (30%) of its original amount. This requirement shall be deemed to have been met if at the time of requesting this extension the project has already increased the original amount of the aforementioned guarantee by a percentage equal to or greater than the aforementioned amount.
4. That the company owning the project proves (i) a minimum Declared National Component (“NDC”) in the electromechanical installations of the project of Thirty Percent (30%), or (ii) a minimum increase of Five Percent (5%) of NDC, in the event that a percentage lower than Thirty Percent (30%) has been committed.
5. To expressly waive or withdraw any administrative, judicial, extrajudicial, or arbitration action or claim, in the Republic of Argentina, abroad and internationally, against the NG, the SE, and/or CAMMESA for causes arising before the date of the execution of the amendment to the PPA.
Only companies owning projects awarded under Rounds 1, 1.5, and 2 of the RenovAr Program or that have requested their incorporation to such program through Resolution No. 202/16 of the former Ministry of Energy and Mining, may request the extension of the term of the PPA.
The companies owning projects awarded within the framework of Round 2 of RenovAr Program that had obtained the extension set forth in Section 1 of Resolution No. 52/19 of the former Government Secretariat of Energy, may also request this extension. The amendment entered into within the framework of the abovementioned resolution shall be terminated, but the guarantees granted on such occasion shall be maintained.
The companies owning projects that have entered into PPAs pursuant to Section 7 of Resolution No. 52/19 of the former Government Secretariat of Energy, may also opt for this extension on the conditions set forth in their respective PPAs.
C. Amendment of Contracted Capacity under the PPA
The companies owning projects awarded in Rounds 1, 1.5, and 2 of the RenovAr Program or that have requested their incorporation to the National Renewable Energy Promotion Regime through Resolution No. 202/16 of the former Ministry of Energy and Mining, may request a reduction of the contracted capacity.
The new capacity resulting from the commercial operation may be carried out in a single tranche for a fraction of the Contracted Capacity, maintaining the price, the term of the PPA, and the guarantees granted.
The companies owning projects that choose to request the amendment of the PPA due to capacity reduction shall expressly waive or withdraw any administrative, judicial, extrajudicial, or arbitration action or claim, in the Republic of Argentina, abroad and internationally, against the NG, the SE and/or CAMMESA for causes arising prior to the execution of the amendment to the PPA.
The Certificates of Inclusion granted shall be modified in order to adapt them to the new Contracted Capacity.
Both the PPA Termination request and the PPA Amendment request must be submitted to CAMMESA on or before 30 business days from the date of issuance of the Resolution.
Please, do not hesitate to contact us should you require any additional information on this matter.
José Carlos Cueva