Argentina • The companies that own projects for the generation of electricity from renewable energy sources that were awarded Renewable Electricity Supply Contracts (“PPAs”) that have not reached the Commercial Operation Date (“COD””), may choose to request the termination of their PPA or its renewal.

By DLA Piper on January 7, 2022

By: Juan Manuel Barros and Antonio Arias.

Through resolution No. 1,260/2021 (hereinafter, “Resolution 1,260/21”) of the Secretariat of Energy (Official Bulletin 12/29/2021), it was established that companies that own projects for the generation of electricity from renewable energy sources that were awarded PPAs entered into with the “COMPAÑÍA ADMINISTRADORA DEL MERCADO MAYORISTA ELÉCTRICO SOCIEDAD ANÓNIMA” (hereinafter “CAMMESA” for its acronym in Spanish), within the framework of Rounds 1, 1.5, 2 and 3 of the RenovAr Program, or that were authorized to request their incorporation to the National Renewable Energy Promotion Regime, according to the provisions of Resolution N° 202/2016 of the then Ministry of Energy and Mining, and that have not reached the COD, may choose to request the termination of their PPA or its renewal.

I. In order to exercise the termination option, companies must comply with the following requirements:

One-time payment of a defined amount for each technology. USD12,500 per MW for Small Hydroelectric Developments (SHP), Bioenergy, Biogas or Biomass or Landfill Biogas technologies and USD17,500 per MW for Wind and Solar Photovoltaic technologies.
The presentation of a waiver by the company owning the project of any right, action or administrative complaint, judicial, extrajudicial or arbitration claim in Argentina, abroad and internationally, against the National Government, the Secretariat of Energy and/or CAMMESA and of a declaration by which it undertakes to hold the National Government harmless from any action, administrative, judicial, extrajudicial or arbitration claim, in Argentina, abroad and internationally, of its shareholders or controlling, controlled or related companies.
The presentation of an affidavit of resignation of the tax benefits contemplated in Section 9° of Law No. 26,190, as amended, and Decree No. 814/2017, for those benefits granted and not enjoyed.

The Contractual Termination Request must be filed before CAMMESA within a term no longer than 30 business days as of the publication of Resolution 1260/21 (12/29/2021, consequently expiring on 02/09/2021). Once the Affidavit of Resignation has been submitted, the administrative act by which the Certificate of Inclusion was granted, if applicable, shall be annulled.

If all the above mentioned requirements are fulfilled, the company owning the project (as Seller) and CAMMESA (as Buyer), will sign the instrument that will terminate the contractual relationship.

To the companies owning projects that choose to terminate their PPA will have to terminate their respective FODER Accession Agreements.

II. On the other hand, the companies owning projects that have not reached the COD, may request a contractual renewal with an extension of up to 365 calendar days for the scheduled COD. For this purpose, the company owning the project will have to sign with CAMMESA an Addendum to its PPA in which the terms of its renewal will be established.

In order to obtain the extension, the company in question must comply with the following:

(i) Acceptance of a reduction of the Contract Supply Period, equivalent to 2 times the number of days elapsed between the original Scheduled COD and the COD.

(ii) Acceptance of a reduction in the price of the PPA, based on the formula indicated in Section 2, paragraph b of Resolution 1260/21 (which basically refers to the average price of the round in which the project was awarded and the number of days of delay in the COD).

(iii) Increase of the Contract Performance Bond by 30% of its original amount. This requirement will be deemed to have been met if at the time of requesting the extension in question the project had already increased the original amount of the aforementioned guarantee by a percentage equal to or greater than the aforementioned amount.

Likewise, the company must comply with one of the following alternatives:

(iv) Accreditation of a minimum Declared National Component (“CND” for its acronym in Spanish) of 30% in the electromechanical installations of the project. In the event that this value has been committed in the original bid, this condition shall be considered fulfilled.

(v) Increase of at least 5% of the CND, when the project has committed less than 30%.

This extension may be requested exclusively by the companies owning projects of Rounds 1, 1.5 and 2 of the RenovAr Program and the companies owning projects that joined the aforementioned Program through Resolution No. 202/16 of the former MINISTRY OF ENERGY AND MINING.

On the other hand, the Request for Contractual Renewal by Extension must be submitted to CAMMESA within 30 business days as from the publication of Resolution 1260/2021 (expiring on 02/09/2022). Likewise, the company owning the project must specify in the request note the options chosen.

The companies owning projects that choose to adhere to the above mentioned mechanism must expressly waive or desist from any administrative, judicial, extrajudicial or arbitration action or claim, in the Argentine Republic, abroad and internationally, against the National Government, the Secretariat of Energy and/or CAMMESA for causes prior to the date of signature of the Addendum to the PPA for its renewal.

III. 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 Energy Promotion Regime (according to Res. 202/2016), may request a reduction of the contracted capacity.

The new installed capacity resulting from the COD 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 constituted. In no case, it may be less than the minimum capacity established in the Bidding Terms and Conditions applicable to each Round.

Such minimum installed capacity levels are:

Rounds 1 and 1.5:

1MW for Wind, Solar Photovoltaic, Biomass and Biogas.

0,5MW for PAH.

Round 2:

1MW for Wind and, Solar Photovoltaic.

0,5MW for PAH, Biomass and Biogas.

The Request for Contractual Renewal for Reduction of the Contracted Capacity must be submitted to CAMMESA within a term no longer than 30 business days as from the publication of Resolution 1260/2021 (expiring on 02/09/2022). The companies owning projects that choose to request the contractual renewal must expressly waive or desist from any administrative, judicial, extrajudicial or arbitration action or claim, in Argentina, abroad and internationally, against the National Government, the Secretariat of Energy and/or CAMMESA for causes prior to the date of signature of the Addendum to the PPA due to capacity reduction. The Certificates of Inclusion granted shall be modified in order to adapt them to the new contracted capacity.

The resolution in question does not specify the conditions associated with the Request for the Contractual Redistribution due to a Reduction of the Contracted Capacity (e.g., extension of the COD, treatment in case of default, etc.).

IV. Finally, it instructs CAMMESA to issue the Notice of Cause for Termination and to execute the constituted guarantees, in the event that upon expiration of the terms set forth in Section 1, 2 and 3 of this Resolution, the companies owning the projects have not submitted any request or have not submitted the documentation required by CAMMESA and in the case of projects that have exceeded 180 days of delay of the Scheduled COD.