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 privadarenovables@minem.gob.ar

Documents available at: www.cammesa.com.ar and www.minem.gob.ar

Thank you