RenovAr Program Round 1 First Public Call for Tenders for Renewable Energy Supply

Undersecretariat of Renewable Energy Ministry of Energy and Mining - MINEM Argentine Republic 1

Argentine Embassy London - June 23, 2016 MINEM – June 2016

Renewables will shape Argentina’s new energy matrix 1

CLEAR MANDATE

WIDE RESOURCE AVAILABILITY

Argentina has a clear mandate to reduce CO2 emissions and modernize its generation mix by using renewable energy sources…

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STRATEGIC DRIVERS …capturing key strategic benefits for the country based on recent market trends

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…leveraging on its wide availability of resources to develop world-class renewable energy assets…

Renewables Development in Argentina

ATTRACTIVE FRAMEWORK

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…and offering an attractive legal framework and tax incentives to investors

MINEM – June 2016 2

Argentina’s Renewable Energy targets • 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, GW12.0 18%

16%

10.0

RE Target, % 20% 25% 20%

12%

15%

8%

8.0

10%

1.9%

5%

6.0 4.0 6.3

2.0

0.0

7.9

8.6

10.1

10.8

0% -5% -10%

3.6

-15%

0.8 2015

-20% 2018 2019 2020 2021 2022 2023 2024 2025

Forecast 2025 3

7.1

9.4

* Estimated Additional Capacity. Source: AITPA based on Ministry of Energy and Mines

Capacity Needed (GW) MINEM – June 2016 3

Renewable Energy Program 2016-2025 Elements of the Regulatory Framework

Act 27.191

Senate -> 4Q’14 Lower Chamber -> 4Q’15

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D.R. 531

Res. 71 y 72

Presidential Decree -> 1Q’16

Ministry of E&M-> 2Q’16

RenovAr Round 1

CAMMESA -> 2Q’16

MINEM – June 2016

RE Regulatory Framework Mandatory Targets

Resource Diversification

8% @ 2017-18 20% @ 2025

Geographical and Technological

New RE Framework Act 27.191

Generous Fiscal Incentives IPP and Local Manufacturing 5

FODER Support Trust Fund for Guarantees and Financing MINEM – June 2016

100% of Renewable Energy Goals

RE Markets (Contracting Mechanisms)

PPAs Tenders

100% of the 300 kW-or-less demand and Major Users who do not opt-out.

Price determined through Tenders

Opt-Out

Private PPAs with Major Users*

Major Users >300 kW who exercise their right to opt-out.

Annual Goals subject to penalties. Privately-negotiated Price and T&C

Opt-Out

Self-Generation

* With Private Generators, Power Distributors or Commercializers 6

MINEM – June 2016

Act N° 27 191 – Fiscal Incentives

• Exemption of Import Duties for all projects starting construction prior to 12/31/2017 • Accelerated Fiscal Depreciation of applicable assets • Advance VAT Reimbursement paid on pre-COD purchases • Exemption of Minimum Presumed Income Tax • Exemption of Dividend Tax (subject to re-investment in infrastructure) • Extension of Income Tax Loss Carry Forwards to 10 years (standard 5) • Tax deduction of all financial expenses • Tax Credit on locally supplied CAPEX (transferable to third party)

MINEM will evaluate and approve the Access of the Project to the Incentives Regime 7

The Incentives are larger on the first stage as means of encouraging the Projects to expedite COD MINEM – June 2016

Call for Tenders

RENOVAR – ROUND 1

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MINEM – June 2016

Objectives & Benefits RenovAr 1 – Public Call for Tenders 1.000 MW worth of new Renewable Power Capacity => 1.500/2.000 million US$ direct investment

Solar PV

Expected Benefits First Step towards the fulfillment of the 8% goal 1,8% => 4,5%

New Jobs 5000 - 8000 Annual Savings on Imported Fuels for Power Generation 300 million US$ Emission Control 2 million ton CO2/year (~ 900.000 cars)

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* Hydro projects up to 50MW are considered RE.

MINEM – June 2016

Preliminary Schedule 18-May

01-Jul 15-Jul

15-Jul

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MINEM – June 2016

Extensive High Voltage Grid (>14k km) 1

HIGHEST SOLAR POTENTIAL 1

NOA - CUYO

HIGHEST WIND POTENTIAL 2

COMAHUE - PATAGONIA

2

500 kV 330 kV 220 kV 150 kV

132 Kv

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MINEM – June 2016

Transmission Grid and Interconnection Capacity CORRIDOR

LIMITING CAPACITY (*)

1

1

2 4

NOA

5 2 3

3

6

BUE-LITORAL-NEA

4

CENTRO

5

CUYO

6

COMAHUE

7 500 kV 330 kV

600 MW

220 kV

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150 kV 132 kV

7 8

PATAGONIA

400 MW

MAIN INTERCONECTION NODES (Tension in kV) La Rioja (132) La Rioja Sur (132) Villa Quinteros (132) ET Cobos (345) El Bracho (220) Cañada de Gomez (132) Rojas (132) Puerto Mineral (132) Villa Mercedes - Rio IV (132) San Luis (132) Cruz de Piedra (132) Jachal - Punta de Rieles (132) El Sosneado (132) Cañada Honda (132) ET Chocon (500) Alicurá (132) Puelches (132) Bahia Blanca (132) Santa Cruz Norte (132) Rio Santa Cruz (132) Puerto Madryn (132) Futaleufú – Madryn (330)

Max (MW)* 120 100 100 400 200 100 150 100 130 100 100 80 60 100 300 30 30 300 130 50 50 180 12

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*To be confirmed in definite version of bid documents.

MINEM – June 2016

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: 50.000 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 200.000 AR$) 13

MINEM – June 2016

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). 14

MINEM – June 2016

Requirements by Technology 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

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

730 days

730 days

730 days

Minimum of 1 year worth of on-site Renewable resource measurement Must provide an EPR resource at time of EPR. certified by an measurement Must provide an EPR Independent and/or certified by an Consultant (1) availability Independent Consultant (1) Maximal Execution Term from PPA Signature (2)

730 days

730 days

(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.

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MINEM – June 2016

Contents of Bid Submission 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) License as “Agente MEM”, (vii) Access to transmission capacity, authorized by “ENRE”

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) 16

 Guaranteed Energy (MWh/year)  Minimum Guaranteed Energy (MWh/year)  % Local Component (used as Tiebreaker)  Amount and term of World Bank Guarantee MINEM – June 2016

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, – The Bidder does not exceed its Financial Capacity

•

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.

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MINEM – June 2016

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 GE) with immediate application of a penalty equivalent to cost of generation using imported Diesel (cost which will be calculated periodically by MINEM) 18

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MINEM – June 2016

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

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MINEM – June 2016

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. 20

MINEM – June 2016

FODER Trust Fund Structure FODER Treasury Funds Public Offerings ANSES (Pension Fund) Multilaterals / Climate Funds

Treasury Funds Specific Charge to Consumers

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Project Finance Account

Long Term Project Loans Loan Guarantees Interest Rate Subsidies Equity Contributions

Payment Guarantee Account

Payment Guarantee (for all tendered PPAs) Termination Payment

MINEM – June 2016

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).

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MINEM – June 2016

Tendered PPAs - Cash Flows Diagram Sponsors

National Treasury Public Offerings Pension Funds

Debt Financing (Lenders)

Funding Equity

Loan Loan Repayment

Dividends

PPA

Payments Funding

(MHyFP)

Renewable Energy Trust Fund

Solvency Guarantee

(FODER)

(under negotiation)

Loans & Loan Guarantees

Payment & Termination Guarantee to PPA

Renewable Electricity through National Grid

PPA

Physical Flow

Renewable Energy Project Company

Argentine State

Sovereign Guarantee

Multilateral Banks Climate Funds

Guarantee Charge

Electricity End Consumers

Monthly Payment of Electricity Bills

Off-taker (CAMMESA)

Monthly Billing to End Users through DistCos

Guarantees 23

MINEM – June 2016

World Bank Partial Guarantee for Termination Payment Claim Mechanism Ministry of Economy and Public Finances (Trustor: FODER) Representative of the National State

5. The FODER submits the claim of budget line to the Ministry of Economy and Public Finances

FODER

(Trustee: BICE) 4. Individuals or legal entities which have issued a project submit the claim to the FODER

7. The FODER does not pay the Sales Prices of the Project

CAMMESA

11. National State pays to the WB

10. Individuals or legal entities which have issued a project claim for the balance

1. Cause for termination or sale of the project 2. Individuals or legal entities which have issued a project submit the claim to CAMMESA

6. The Ministry of Economy and Public Finances does not have the funds

Project

8. Individuals or legal entities which have issued a project submit the claim to the WB*

9. The WB pays the eligible amount to the Project* * 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. 3. CAMMESA cannot pay

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MINEM – June 2016

Thank you

Undersecretariat of Renewable Energy Paseo Colón 171 - Piso 8 - Oficina 812 +54.11.4349-8033/8186 [email protected] Documents available at: www.cammesa.com.ar and www.minem.gob.ar 25

MINEM – June 2016