The Role to Be Played by Provinces in the Upcoming Tendering: What Investors Look for with Regards to Renewables


Today we are sitting with Juan Carlos Doncel Jones, partner of the Conte Grand, Doncel Jones & Aicega studio.

In a general sense, how do you imagine Round 2 of the renewable-energy tenders playing out?

I see a strong decision that has been made politically, not only in terms of national authorities, but also from provincial governors, orientating themselves to capture the highest amount of investment possible in a sector that promises a lot in terms of dynamics. A when I say dynamics, I also refer to the laws that promote energy distribution; these laws will encapsulate new users by mandating energy storage coming from renewables via Law 27.191, converting them into self-generators. The energy that these users don’t consume will enter into the grid. Even if this situation doesn’t play directly into the tendering, it should still be followed attentively in the way that different jurisdictions will have things play out.

I should say that the announcement made by the Ministry of Energy and Mining, with respect to having sold more than 70 tender terms and conditions, surprised me a great deal; awards will be given to regions with known limitations regarding electricity transmission services. The maximum price for technology by region does not seem to have been a deterrent for investors, even though they seem relatively low at first. It is true that the price of related technology has gone down, but one needs to keep an eye on financing costs and relative tax rates, especially those that are local. The truth will come out on October 20th, when we know how many offers have been presented and for what grid-access points.

What provinces will adhere to the renewable-energy law 27.191?

A little over half of the provincial jurisdictions will adhere to law 27.191. Buenos Aires, the City of Buenos Aires, Catamarca, Chubut, Córdoba, Formosa, Jujuy, La Pampa, Misiones, Salta, San Juan, Tucumán, Rio Negro and Santa Cruz.

The City of Buenos Aires is limited in terms of receiving investment in renewables for reasons of surface availability and geographic location, and cannot generate via biogas because of local sanitary restrictions. The other provinces have not done so for a diverse set of motives.

One is surprised when they look at the provinces of San Luis, Mendoza and Neuquen. Neuquen might adhere to Law 26.190 via provincial law 2596, though they still have not applied the same to law 27.191, which would modify the anterior law and incorporate serveral articles and benefits that facilitate investment in renewables.

Legallly speaking, could one apply severance taxes to the provinces that don’t adhere to law 27.191?

Beyond whether or not a provincial jurisdiction does or doesn’t adhere to the law in question—it seems absolutely irrational to me to apply taxes in such a sense, and I’m speaking of taxes or any other type of tribute that intends to charge severances for the use of wind or solar energies. There are provinces that have thought about it and tried, but a certain voracity in terms of taxes needs to be checked with respect to certain jurisdictions.

It never occurred to anybody that the wind or sunbeams are resources within provincial domain, like it could be with hydrocarbons.

We also can’t forget that law 15.336 establishes a federal program of electric energy; article 12 of the same clearly establishes that the structures and installations related to the generation, transformation and transmission of energy cannot be levied by taxes, or subject to local legislation that restricts them or makes their free production and circulation more difficult.

With regards to hydroelectric energy, the same has been expressed with regards to the aforementioned law. Furthermore, we think that the investor would translate the cost of those taxes to the end user, inevitably ending with higher usage costs.

How will the application of local taxes and other types of tributes affect the plausibility of any given project?

This is a question to which renewable-energy investors should give special attention, especially in terms of local taxes. Like what was said earlier, a general exemption exists in Law 15.336. There are also errors within the Supreme Court with reference to the reach of the tax when energy was sold in the spot market.

But they should do an exhaustive analysis that goes jurisdiction by jurisdiction with respect to local taxes. Such an act could be what results in a final decision when determining price.

What other legal situations worry investors?

Beyond taxes and purchasing regarding the national grid, I would say that they question generating amount of inquietude are the lengths of the contracts. If CAMMESA releases tenders that follow the instructions of the Ministry of Energy, they will be 20 years long. The market with respects to renewable energy seems to have a roof of 5 years, which is the period for reentry, when the diagram for purchases made together with CAMMESA is released.

How will contract signing develop in terms of generators and large-scale users?

Information has begun to come out regarding the signing of some contracts between producers and large consumers with long-term contracts. But the truth is that I don’t see an explosion in the market being produced in the short term with respect to renewable energies.

It is true that some groups are multinational—and others local—that have decided to adopt a conservational or “green” policy will, in my opinion, adopt a “wait and see” position. These companies had taken on their original policy due to social responsibility on the part of the company, or a policy of environmental care. During the first few months of purchasing alongside CAMMESA and while they see how the auditing process will work out, how they will be impacted by the fees to CAMMESA, the application of fines, and the impact upon energy

costs within the cost matrix—they will opt to leave the purchase diagram and enter into contracts.

Perhaps my vision is wrong, but I don’t think that we will see a large number of companies celebrating contracts with producers for the next five years.

Gastón Fenés
Energía Estratégica