2018 Argentina Renewable Energy Report

Home , Argentine Northwest

22 - 25 OCTOBER 2018 - BUENOS AIRES

Argentina's largest clean energy congress & exhibition

2018 ARGENTINA RENEWABLE ENERGY REPORT

Written by Mariyana Yaneva, Plamena Tisheva, Tsvetomira Tsanova Edited by Mariyana Yaneva

May 2018

@AIRECnews | #AIREC www.airecweek.com www.AIRECWEEK.com CONTENTS

INTRODUCTION 3

POWER MARKET ARCHITECTURE AND INSTITUTIONS 4 WHOLESALE ELECTRICITY MARKET 4 MARKET PARTICIPANTS 6

ARGENTINA’S GRID INFRASTRUCTURE 7

THE RENOVAR PROGRAMME 10 ROUND 1 12 ROUND 2.0 16 PROJECTS PROGRESS 20 ROUND 3.0 20

SOLAR PV DEVELOPMENT IN ARGENTINA 21 SOLAR IRRADIATION AND GEOGRAPHICAL RESOURCE 21 CURRENT INSTALLED CAPACITY & POWER GENERATION 21 PROJECT LANDSCAPE AND CONSTRUCTION TIMELINES 22

WIND POWER DEVELOPMENT IN ARGENTINA 24 WIND SPEEDS AND GEOGRAPHICAL RESOURCE 24 CURRENT INSTALLED CAPACITY & POWER GENERATION 24 PROJECT LANDSCAPE AND CONSTRUCTION TIMELINES 25

FORECASTED INSTALLED CAPACITY OF WIND AND SOLAR POWER PROJECTS BY 2025 27

FINANCING RENEWABLE ENERGY PROJECTS IN ARGENTINA 28 FODER AND WORLD BANK GUARANTEES 28 GREEN BONDS 30 PROJECT FINANCING 30

PROCURING RENEWABLE ENERGY TO C&I CUSTOMERS 31

OPPORTUNITIES IN DISTRIBUTED GENERATION, OFF-GRID AND MINI-GRID 33

ENERGY STORAGE 35

REFERENCES & PHOTO CREDITS 36

www.www.airecweek.comAIRECWEEK.com INTRODUCTION

Argentina recently opened its electricity market to incorporate wide-scale clean energy and is currently one of the most promising markets for renewables in Latin America. The economic and political crisis at the turn of the millennium took its toll on the Argentine electricity market, providing little incentive to generators and distributors to further invest in increasing their generation and distribution capacity. However, the country’s bold clean energy targets and recent update of the regulatory framework has raised its profile for renewable energy investors. Argentina is targeting an 8% share of renewables in its power mix by the end of 2018, going up to 12% by 2019, 16% by 2021, 18% by 2023 and 20% by 2025.

3 GW 10 GW

20% 18% 19% % of the total power demand 17% 16% 14% 12%

8% RenovAr Round 1.0 Existing + 1.1 GW - 2.75% RenovAr Round 1.5 Auction 1.2 GW - 3.0% 2016 Legacy Conracts (R202) 0.5 GW - 1.5% 9% Existing 0.8 GW - 1.8% 2018 2019 2020 2021 2022 2023 2024 2025 Note: Percentage of RE in toral demand calculate using P75 genartion estimates and 2018 projected demand

Source: Comisión Nacional de Energía Atómica - October 2017 With an overall grid-connected capacity of 754 MW at the end of March 2018, renewables (excluding large hydro power plants) are currently generating around 2% of the electricity in Argentina. The 8% target for the end of 2018 looks ambitious but quite achievable if projects awarded in the RenovAr auction in 2016 get built in time, CNEA, the National Atomic Energy Commission in Argentina has estimated. This report will give you an overview of Argentina’s current power market architecture, the RenovAr auctions programme (including detailed project description of the rounds that took place so far), as well as the investment opportunities outside the tenders, both in the commercial and industrial (C&I) sector and off-grid, small scale developments.

Wind and solar power advances are explored in greater detail with an outline of the latest capacity and generation figures, as well as project progress. Special attention is also paid to financing schemes, grid issues and future development of energy storage.

www.airecweek.com www.AIRECWEEK.com 3 POWER MARKET ARCHITECTURE AND INSTITUTIONS

The institutional framework of the electricity sector in Argentina is defined by three main government entities – the Ministry of Energy and Mines (MINEM), the National Electricity Regulator (ENRE) and the wholesale electricity market operator Compañía Administradora del Mercado Mayorista Eléctrico (better known as CAMMESA).

The Ministry and its Secretaria de Energia Electrica (SEE) designs the national energy policy and sets the broad regulatory framework.

ENRE is an autonomous entity responsible for regulating and supervising the functioning of the national electricity market. It grants grid access licenses and supervises compliance of generation, transmission and distribution entities with safety, quality, technical and environmental standards set in the regulatory framework and the license agreements.

Argentina is a federal country, so provinces also have the legal capacity to regulate energy issues in their jurisdictions, implementing their own laws, regulations and support policies. Provincial energy laws and regulations cannot contradict the national regulatory framework but could build on it. Provincial electricity regulators (or ENRESP under their Spanish acronym) regulate the electricity activity in their respective provincial regulatory frameworks.

As the wholesale energy market administrator, CAMMESA coordinates dispatch operations, determines wholesale prices, manages transactions in the national interconnected system (Sistema Argentino de Interconexión, SADI), and acts as off-taker in certain power purchase agreements (PPAs). The board of directors includes equal representation of all market participants, including the Government of Argentina, the generation companies, transmission and distribution utilities and large power consumers.

WHOLESALE ELECTRICITY MARKET

All electricity transactions in the Argentine electricity sector are conducted through a wholesale electricity market which acts as a clearing house for electricity trading. Set up in 1992, the wholesale electricity market in Argentina is organized as a competitive market, including a spot market and a term market (or contracts market). Prices on the spot market are established on an hourly basis as a function of marginal cost of production measured at the system's load center.

On the term market, quantities, prices and contractual conditions are agreed upon directly between sellers and buyers. Generators declare their marginal costs

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semiannually. CAMMESA uses the semiannual marginal cost declarations from thermal and hydro generators to determine seasonal dispatch schedules to minimize energy cost in the spot market.

A stabilization fund, managed by CAMMESA, was designed to stabilize prices for end users. Financed from the difference between the regulated and spot prices, the fund is used when spot prices exceed the regulated price and replenished when the regulated price exceeds the spot price. The following chart shows how the wholesale electricity market in Argentina was designed to work.

Transmission Electricity Electricity flow flow Companies Seasonal Regulated Prices Customers

Generators Pool Distributors administered by Spot Prices CAMMESA (limited by Other RES 240-03) Generators Large Stabilization Customers Fund Traders Negotiated Prices SPOT MARKET

Large Customers

Negotiated Prices Other Generators

Traders

CONTRACTS MARKET Source: Endesa Americas SA SEC filing 2016

However, in the aftermath of the country’s 2001–2002 economic crisis, the market was reorganized to become effectively controlled by CAMMESA. A government decree declared a state of emergency in the energy sector from December 16, 2015 to December 31, 2017. Free bilateral trading was suspended and large customers were obliged to buy electricity directly from CAMMESA. Wholesale prices were virtually frozen and kept artificially below costs, therefore creating a structural deficit in the operation of the market. The deficit has been covered with subsidies from the Argentine government.

In February 2017, Resolution 19/2017 established generation remuneration based on capacity by technology and scale. The remuneration is denominated in US dollars and is converted at the exchange rate published by Argentina’s central bank on the last day before termination of each period set by CAMMESA.

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MARKET PARTICIPANTS

The Argentine wholesale electricity market has four types of market participants or agents: generators, transmission and distribution companies, traders and large users. At the end of March 2018, the market had 353 participants registered as market agents on the side of power generation:

*A self-generator is an NUMBER OF GENERATION electricity consumer PARTICIPANTS that generates electric energy as a byproduct, GENERATORS 320 since its main purpose is SELF-GENERATORS* 26 the production of goods and/or services CO-GENERATORS** 7 ** A co-generator is TOTAL 353 a market participant who generates electric energy and steam or other type of energy for industrial, marketing, heating or cooling purposes jointly with a third party.

On the consumption side, large consumers participating directly in the wholesale market are classified into three categories:

• Major Large Users (Grandes Usuarios Mayores, or GUMAs), with capacity higher than 1 MW and energy consumptions higher than 4,380 MWh/year • Minor Large Users (Grandes Usuarios Menores, or GUMEs), with capacity between 30 KW and 2 MW, and • Particular Large Users (Grandes Usuarios Particulares, or GUPAs), with capacity between 30 kW and 100 kW.

At the distribution level, all clients with a medium demand of over 300 kW are considered Grandes Usuarios en Distrubución Mayores (GUDI).

Each category has different requirements with respect to purchases of their energy demand. For example, GUMAs are required to purchase 50% of their demand through supply contracts and the remainder in the spot market, while GUMEs, GUPAs and GUDIs are required to purchase all of their demand through supply contracts.

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At the end of March 2018, the Argentine wholesale electricity market had a total of 8,547 large consumers registered as market participants, as illustrated in the table below.

NUMBER OF TYPE OF CONSUMER PARTICIPANTS GRANDES USUARIOS MAYORES 415 (GUMA) GRANDES USUARIOS MENORES 2,182 (GUME) GRANDES USUARIOS PARTICULARES 25 (GUPA) GRANDES USUARIOS EN 5,925 DISTRUBUCIÓN MAYORES (GUDI) 5,925 8,547

ARGENTINA’S GRID INFRASTRUCTURE

Argentina’s grid network currently includes about 14,000 km of 500 kV high-voltage transmission lines and about 19,500 km of mid-voltage lines.

Internationally, the country has interconnections that allow electricity trading with Brazil, Paraguay, Chile and Uruguay. When national electricity demand set a new record of 26,320 MW on February 8, 2018, it was covered entirely by local generation, without the need for imports. In comparison, peak annual demands in 2016 and 2017, which were also registered in February, required 1,884 MW and 1,069 MW of imports, respectively.

Since the country restructured and privatised its electricity sector in the 1990s, the 500-kV transmission grid has been operated by Transener under a 95-year concession.

Besides the high-voltage transmission system (STEEAT), which carries electricity between regions, Argentina has a regional distribution system (STEEDT), which operates at 132 kV/220 kV and links generators, distributors and large users within regions.

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There are six regional companies:

• Transnoa - covers the northwestern region of the country, including the provinces of Tucumán, Catamarca, La Rioja, Salta, Jujuy and Santiago del Estero • Transnea - the north-eastern region, including the provinces of Formosa, Chaco, Corrientes and part of Entre Ríos • Transcomahue/EPEN - the region of El Comahue, covering the provinces of Río Negro, Neuquén and part of La Pampa • Transpa - serves the Patagonian region • Transba - the province of Buenos Aires • Distrocuyo - the provinces of San Juan and Mendoza

Details by voltage level and regions are available in the table below.

Transmission 500 kV 330 kV 220 kV 132 kV 66 kV 33 kV Total system High-voltage 14,195 563 6 14,763 (km) Trunk 1,116 1,112 16,900 398 24 19,550 distribution (km)

Cuyo 641 626 1,267

Comahue 1,368 398 1,368

Buenos Aires 177 5,583 6,158

NEA 30 2,148 24 2,202

NOA 5,052 5,052

Patagonia 1,116 264 2,123 3,504

Source: CAMMESA, Informe Annual 2016 There are also independent transmission companies operating under technical license by the STEEAT or STEEDT companies.

The transmission and distribution services in Argentina are performed under long- term concessions with periodic rebidding. Edenor, Edesur and Edelap, the distribution companies that once made up national utility SEGBA, account for a substantial part of the Argentinian electricity distribution market.

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Transmission companies are responsible for the operation and maintenance of their networks, but not for expanding the grid. Thus, expansion of transmission capacity is mainly driven by its users. For example, to connect to the grid a renewable project developer must seek a permit from the local transmission system operator, which issues a preliminary decision for evaluation by CAMMESA. If approved by CAMMESA, the decision is forwarded to ENRE, which issues a final decision on grid access, followed by a five-day waiting period for contestations. The developer pays for the line that connects the plant to the connection point.

Argentina’s grid is currently operating at near capacity as electricity demand in recent years has increased at a quicker pace than generation, transmission and distribution capacities. Spare transmission capacity that existed before the 2016 and 2017 renewable energy and thermal energy auctions has already been taken. Despite this, the World Bank has indicated that Round 2 of the RenovAr programme is not expected to pose significant problems to grid integration. The round has incorporated some features to address concerns related to limited transmission capacity. It has set quotas per geographical region and technology, including an Annex with information about available capacity plus planned lines, and added a take-or-pay clause, under which projects will be paid for energy not dispatched if they become operational before the expected transmission expansion. About half of the awarded projects, or 940 MW out of 2,043 MW, have such a clause in their contracts.

In view of the country’s renewable energy targets and future expansion of intermittent renewables capacity Map – 500 kV lines. Source: CAMMESA the Argentine government has asked the World Bank for technical assistance and capacity building on renewables integration to improve power sector planning and governance.

According to recent energy scenarios by the energy ministry, Argentina expects to add between 14 GW and 18 GW of unconventional renewable energy capacity to reach 25% generation from unconventional renewables by 2030.

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To follow demand growth and reinforce the transmission system in the short term, the government plans to tender 2,825 km of 500 kV lines in 2018.

LEAT (Línea de Extra Alta Tensión) Río Diamante - Charlone (490 km, 600 MVA) LEAT Atucha - Belgrano 2 + ET Belgrano 2 (35 km) LEAT Belgrano 2-Smith + ET Smith (100 km, 1600 MVA) LEAT Atucha 2- Plomer + ET Plomer + doble LEAT 35 km (Anillo GBA) - (130 km, 800 MVA) LEAT Charlone - Junín-Plomer + ET Junín (415 km, 600 MVA) LEAT Pto Madryn - Choele Choel + LEAT Vivoratá - Plomer (705 km) LEAT Rodeo - La Rioja Sur + ET Rodeo + ET La Rioja Sur (300 km, 300 MVA) LEAT Choele Choel - Bahía Blanca (340 km) LEAT Sto Tomé - San Francisco-Malvinas + ET San Francisco (310 km, 450 MVA)

The ministry notes there are a number of challenges in the medium and long term. These include keeping pace with demand growth, while improving security of supply, and providing for dispatch of future renewables generation. As the country’s greatest solar potential is in the Cuyo and NOA regions and wind in the southern region, both away from the main demand zone, a network topology should be developed that allows renewable power to travel from these areas to the points of greater demand.

According to a January 2018 booklet by the Agencia Argentina de Inversiones y Comercio Internacional (AAICI), tenders will be launched throughout 2018 for seven 500 kV line projects totaling 2,175 km and representing investment of USD 2.2 billion. They will be based on the public-private partnership model. AAICI lists the first seven of the projects mentioned above

THE RENOVAR PROGRAMME

The RenovAr auction programme has the leading part in achieving Argentina’s objective of 20% renewables in electricity consumption by 2025. It was launched in May 2016 and has so far completed three bidding rounds, awarding 147 projects with a combined capacity of 4,466 MW.

The public tendering mechanism involves a mix of incentives and guarantees and was designed in a way that seeks to overcome some of the issues that hindered previous attempts by the country to foster renewable energy development. An earlier auction effort, the GENREN programme, was launched in 2009 with the aim to contract 1 GW of renewable power but only a small part of the 895 MW awarded got constructed as developers had difficulties obtaining financing.

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A key element of the new regime is the Fund for the Development of Renewable Energies (Fondo para el Desarrollo de las Energias Renovables, FODER), which was created to help mitigate risks and attract the much needed investments. FODER is a public trust fund set up to provide guarantees and financing. The fund, run by Argentina’s Investment and Foreign Trade Bank (Banco de Inversión y Comercio Exterior, BICE), provides two type of guarantees to RenovAr winners -- a liquidity guarantee, which ensures that project owners are paid for the electricity they deliver to the grid, and a solvency guarantee, designed to reduce country risk. The solvency guarantee allows project companies to exercise a put option under certain circumstances and transfer their assets to FODER in exchange for cash compensation.

An additional optional guarantee was available to RenovAr bidders. The World Bank provided a USD-480-million guarantee to backstop the government’s failure to fund FODER when it needs to pay a put price. This guarantee backed projects in the first two tenders, Rounds 1 and 1.5, of the RenovAr programme. In March 2018, the World Bank approved another USD-250-million guarantee to support Round 2.

The RenovAr programme has so far attracted strong investor interest, which led to significant oversubscription of the bidding rounds. Bidders compete to sign 20- year power purchase agreements (PPAs) with CAMMESA, which acts as off-taker on behalf of distribution utilities and wholesale market large users. Strike prices are denominated in USD and adjusted annually.

Round Capacity Bids (MW) Capacity Average Price tendered (MW) awarded (MW) USD/MWh

1 1,000 6,343 1,142 61

1.5 600 2,486 1,281 54

2.0 1,200 9,391 1,409 51

2 phase two 600 - 634

Round 1.5 and phase two of Round 2 competitions were launched upon announcing the results of the original tenders, in order to take advantage of the large number of offers presented.

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ROUND 1

The first RenovAr auction, Round 1, was announced in July 2016. It sought to award 1,000 MW (600 MW of wind, 300 MW of solar, 80 MW of biomass and biogas and 20 MW of small hydro).

A total of 123 bids were submitted, representing 6,343 MW of capacity, or more than six times the volume sought. In October 2016, the government announced 17 winning projects, totaling 1,108.6 MW -- 12 wind, four solar and one biogas project. Later that month, 34 MW of biomass, biogas and small hydro projects were added to the winning list after they agreed to match ceiling prices. A brief summary of contracted capacity and prices achieved by technology is available in the graphs below.

Round 1 Contracted capacity (MW) by technology

SMALL HYDRO 11 BIOGAS 9 BIOMASS 15 SOLAR 400 WIND 707

Round 1 Average / Minimum price by technology

Average Price (USD/MWh) 154 Minimum Price (USD/MWh) 118 110 110 105 105

29.39 59.75 58.98 49.08

WIND SOLAR BIOMASS BIOGAS SMALL HYDRO

In total, Round 1 awarded 29 projects with a combined capacity of 1,142 MW and average weighted price of USD 61.33/MWh. The complete list of projects follows.

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Technology Project name Capacity (MW) Bidder name Province

Vientos Los Hércules 97.2 Eren Santa Cruz Villalonga 50 Genneia Buenos Aires Chubut Norte 28.4 Genneia Chubut García Del Río 10 Envision/Sowitec Buenos Aires Cerro Alto 50 Envision Rio Negro Los Meandros 75 Envision Neuquen WIND Vientos Del Secano 50 Envision Buenos Aires Garayalde 24.2 Pan American Energy/3 Gal Chubut Enat/Seg/Otamendi/ N. Kosten 24 Cerro Dragón Chubut La Castellana 99 CP Renovables Buenos Aires C.T. Loma De La Lata (Pam- Corti 100 paEnergía) Buenos Aires Arauco II (phase 1 and 2) 99.8 P.E. Arauco S.A.P.E.M. La Rioja La Puna 100 Fieldfare/Isolux Salta Cauchari 1 100 Jemse Jujuy SOLAR Cauchari 2 100 Jemse Jujuy Cauchari 3 100 Jemse Jujuy Río Cuarto 1 2 Biomas Crop Cordoba Río Cuarto 2 1.2 Biomas Crop Cordoba Yanquetruz 1.2 ACA/Fersi San Luis BIOGAS San Pedro Verde 1.4 Adeco Agro Santa Fe FECOFE/Coop. Huinca Huinca Renancó 1.6 Ranancó Cordoba Biogás Ricardone 1.2 Nacarato/Otros Santa Fe

Gen. Biomasa Santa Rosa 12.5 Papelera Mediterránea/ Corrientes BIOMASS Lucena Pindó Eco-Energía 2 Pindó Misiones EMESA/Const. Elect. Del C. C. Guaymallén - Salto 8 1.2 Oeste Mendoza EMESA/Const. Elect. Del C. C. Guaymallén - Salto 6 1 Oeste Mendoza SMALL EMESA/Const. Elect. Del HYDRO Dique Tiburcio Benegas 1.7 Oeste Mendoza EMESA/Const. Elect. Del Triple Salto Unificado 0.5 Oeste Mendoza Rio Escondido 7 Patagonia Energia Rio Negro

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Unsuccessful solar and wind bidders from the first auction were given a chance to take part in a follow-up tender, called Round 1.5, which was completed in November 2016. The required capacity was 600 MW, split into 400 MW of wind and 200 MW of solar power. This time, there were quotas for the location of the projects. The awarded capacity reached 1,281 MW, double the planned volume while prices were down about 10% between the two auctions, which were a short time apart.

Round 1.5 Contracted capacity (MW)

SOLAR 516

WIND 765

Average Price (USD/MWh)

Minimum Price (USD/MWh)

54.94 53.34 48 46

WIND SOLAR

The 59 projects awarded in these two tenders are located in 17 provinces across the country. Argentina also converted 0.5 GW of legacy projects to the new legal framework in 2016.

The full list of Round 1.5 winners is given n the next page.

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Technology Project name Capacity (MW) Bidder name Province

Pomona I 100 Genneia Rio Negro La Banderita 36.8 Fravega/Lobo La Pampa Petroquimica Comodoro Del Bicentenario 100 Rivadavia Santa Cruz Loma Blanca 6 100 Isolux/Selena Chubut Miramar 97.7 Isolux/Selena Buenos Aires WIND El Sosneado 50 EMESA Mendoza Achiras 48 CP Renovables Cordoba Golden Peaks/ Sinohydro/ Pampa 100 Otros Buenos Aires Arauco II (phase 3,4) 95 Arauco S.A.P.E.M. La Rioja Vientos De Necochea 1 38 Centrales de la Costa Buenos Aires Lavalle 17.6 EMESA Mendoza Lujan De Cuyo 22 EMESA Mendoza La Paz 14.1 EMESA Mendoza Pasip 1.2 EMESA Mendoza General Alvear 17.6 EMESA Mendoza Cafayate 80 Fieldfare/Isolux Salta Nonogasta 35 Energias Sustentables/Fides La Rioja Fiambalá 11 Energías Sustentables Catamarca Tinogasta 15 Ivanissevich/Deykoll Catamarca Saujil 22.5 Energías Sustentables Catamarca SOLAR Sarmiento 35 Soenergy San Juan Ivanissevich/Energías Sus- Ullum 3 32 tentables San Juan Anchoris 21.3 EMESA Mendoza Caldenes Del Oeste 24.8 Quaatro San Luis Ullum 4 13.5 Colway/Clavijo/Maresca San Juan La Cumbre 22 Diaser San Luis Energias Sustentables/ Ullum N2 25 Fides/ Ivanissevich San Juan Ullum N1 25 Energias Sustentables/Fides San Juan Iglesia - Guañizuli 80 Jinkosolar San Juan Las Lomitas 1.7 Latinoamericana San Juan

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ROUND 2.0

Round 2.0 of the RenovAr programme was launched in August 2017 with an objective to contract 1,200 MW, with quotas per region and technology. The tender again drew strong investor interest and was more than seven times oversubscribed. The results were announced in November 2017 and showed a continued decline in prices with 1,408.7 MW of projects securing contracts. The government then decided to extend the auction by 600 MW and awarded a further 634 MW of projects in a so-called phase two of Round 2. Overall, 88 projects with a combined capacity of 2,043 MW were successful in this bidding round.

Round 2 (phase 1) Contracted capacity (MW)

SMALL HYDRO 20.8

LAND FILL BIOGAS 13.1 BIOGAS 35

BIOMASS 117.2 SOLAR 556.8

WIND 665

156.8 Average Price (USD/MWh) 150 Minimum Price (USD/MWh) 129.2 128

106.7 98.9 92 89

43.5 41.2 37.3 40.4

WIND SOLAR BIOMASS BIOGAS LAND FILL SMALL BIOGAS HYDRO

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The full list of winning projects from Round 2.0 is available in the table below.

Technology Project name Capacity (MW) Bidder name Province

Energetica I 79.8 CMS De Argentina S.A. Buenos Aires Chubut Norte IV 82.8 Genneia S.A. Chubut Chubut Norte III 57.6 Genneia S.A. Chubut Vientos Fray Guen 100 Senvion GmbH Buenos Aires WIND La Genoveva 86.625 Central Puerto S.A. Buenos Aires Cañada Leon 99 YPF Energía Eléctrica S.A. Santa Cruz General Acha 60 Miguel Oneto La Pampa Arauco II (phase 5 , 6) 100 Windar Renovables S.L. La Rioja Tinogasta II 6.96 360 Energy S.A. Catamarca Saujil II 20 360 Energy S.A. Catamarca Nonogasta II 20.04 360 Energy S.A. La Rioja Altiplano I 100 Neon SAS Salta La Pirka 100 Monteverdi & Gray Group Catamarca Ullum X 100 Monteverdi & Gray Group San Juan SOLAR Verano Capital Solar One 99.9 Monteverdi & Gray Group Mendoza V.Maria Del Rio Seco 20 Neuss Fund LLC Córdoba Cura Brochero 17 Neuss Fund LLC Córdoba Villa Dolores 26.85 360 Energy S.A. Córdoba Añatuya I 6 360 Energy S.A. Sgo Del Estero EPEC Empresa Prov de Arroyo del Cabral 40 Energ. de Cordoba Córdoba General Villegas 1.2 Maria Elena S.A. Buenos Aires Arrebeef Energia 1.5 Arrebeef S.A. Buenos Aires Bombal Biogas 1.2 Tanoni Hnos S.A. Santa Fe Resener I 0.72 Mario Gustavo Pieroni Buenos Aires Citrusvil 3 Citrusvil S.A. Tucuman James Craik 2.4 Universum Invenio Limited Córdoba

BIOGAS San Francisco 2.4 Universum Invenio Limited Córdoba Pollos San Mateo 2.4 Pollos San Matero S.A. Córdoba Bio Justo Daract 1 Biomass Crop S.A. San Luis Cotagro Cooperativa Agro- Jigena I 1 pecuaria Córdoba Del Rey 1 Silvina Hacen Santa Fe Recreo 2.4 Universum Invenio Limited Santa Fe Bella Italia 2.4 Universum Invenio Limited Santa Fe

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Antiguas Estancias Don El Alegre Bio 1 Roberto S.A. Córdoba Avellaneda 6 Industrias Juan F. Secco S.A. Santa Fe Villa Del Rosario 1 Crops Investments S.A. Córdoba Ampliacion Bioelectrica BIOGAS Dos 1.2 Biomass Crop S.A. Córdoba Don Nicanor 1 Silvina Hacen Santa Fe Antiguas Estancias Don Don Roberto Bio 1 Roberto S.A. San Luis Ampliacion 2 Central Bioelectrica 1.2 Biomass Crop S.A. Córdoba Ensenada 5 Industrias Juan F. Secco S.A. Buenos Aires LANDFILL Gonzalez Catan 5 Industrias Juan F. Secco S.A. Buenos Aires BIOGAS Ricardone II 3.12 Martín Alfredo Nacarato Santa Fe Biomasa Unitan 6.6 Unitan S.A.I.C.A. Chaco Generación Las Junturas 0.5 Emerald Resources SRL Córdoba Prodeman Bioenergia 9 Prodeman Bioenergía S.A. Córdoba Generacion Virasoro 3 Forestadora Tapebicuá S.A. Corrientes La Escondida 10 Indunor S.A. Chaco Kuera Santo Tome 12.92 Norcon SRL Corrientes Fermosa S.A. 6 Pegni Solutions S.A. Formosa BIOMASS Rojas 7 Global Dominion Access S.A. Buenos Aires Ticino Biomasa S.A. 3 Lorenzati, Ruetsch Y Cia S.A. Córdoba Capitan Sarmiento 7.2 Granja Tres Arroyos S.A.C.A.F.I Buenos Aires BM MM Bioenergia 3 Molino Matilde S.A Misiones Las Lomitas 10 BIOETANOL RIO CUARTO S.A. Formosa Cogeneración Ingenio Compañía Inversora Industrial Leales 2 S.A. Tucuman San Alonso 37 Garruchos Forestación S.A. Corrientes Lunlunta 6.34 Soledad Vigil Mendoza Empresa Provincial de Energía Cruz Del Eje 0.5 de Corboda E.P.E.C. Córdoba Empresa Provincial de Energía Pichanas 0.5 de Corboda E.P.E.C. Córdoba Empresa Provincial de Energía Boca Del Rio 0.5 de Corboda E.P.E.C. Córdoba SMALL HYDRO Latinoamericana de Energía Salto De La Loma 0.7 S.A. San Juan Construcciones Electrome- Salto 7 1.2 cánicas Del Oeste S.A. Mendoza Salto 11 0.51 Maximiliano Llamazares Mendoza Salto 40 0.52 Maximiliano Llamazares Mendoza Construcciones Electrome- Las Tunas 10 cánicas Del Oeste S.A. Mendoza www.airecweek.com www.AIRECWEEK.com 18 THE RENOVAR PROGRAMME

Phase 2 of Round 2 added the following projects:

Technology Project name Capacity (MW) Bidder name Province Price (USD/MWh) Pampa Chubut 100 Enel Green Power Chubut 40.27 San Jorge 100 P.C.R. Buenos Aires 40.27 WIND El Mataco 100 P.C.R. Buenos Aires 40.27 Diadema II 27.60 Capex S.A. Chubut 40.27 Energia Sustentable Nonogasta IV 1 S.A. La Rioja 41.76 Energia Sustentable Tocota 72 S.A. San Juan 40.80 SOLAR Latinoamericana De Los Zorritos 49.50 Energía S.A Catamarca 41.76 Martifer Renewables Guañizuil II A 100 SGPS S.A. San Juan 41.76 Zapata 37 Kuntur Energia Mendoz 41.76

Venado Tuerto 7 Global Dominion Santa Fe 106.73 BIOMASS Acces Biomasa La Florida 19 Genneia S.A. Tucuman 106.73 Pacuca Bio Energia 1 Pacuca S.A. Buenos Aires 171.85 Ab Energia 2 Ab Agro S.A. La Pampa 156.85 Enreco 2 Cecilia Debenedetti Córdoba 156.85 Santiago Energías Santiago Del Renovables 3 Los Amores S.A. Estero 156.85 Biogeneradora Santa Biogeneradora Catalina 2 Centro S.A Córdoba 156.85 Bio Energia Yan- BIOGAS Yanquetruz II 0.80 quetruz San Luis 177.85 Biocaña 3 Sesnich, Nestor Omar Santa Fe 156.85 Pergamino 2.4 Seeds Energy Buenos Aires 156.85 Seeds Energy De Venado Tuerto 2 Venado Tuerto S.A. Santa Fe 156.85 Carnes De La Pata- General Alvear 1 gonia Neuquina S.A. Buenos Aires 171.85 El Mangrullo 2 Carnes De La Pata- Buenos Aires 156.85 gonia Neuquina S.A.

After phase two, the average price of Round 2 wind projects inched down to USD 40.91 per MWh, and the price of solar projects to USD 42.84 per MWh. Bidders were invited to match the average prices of what was awarded under phase one of Round 2. The 88 winning projects under this round are located across 18 provinces. After the three tenders, the leading province for wind power projects is Buenos Aires, and for solar power projects - San Juan.

www.airecweek.com www.AIRECWEEK.com 19 THE RENOVAR PROGRAMME

PROJECT PROGRESS

As of May 2018, 41 of the 147 RenovAr projects are under construction or in operation, representing an investment volume of over USD 2.5 billion and north of 1,600 MW in terms of capacity, data from the energy ministry shows. Five projects have already started commercial operations, 36 are under construction.

The signing of the contracts awarded to the 59 projects in the first two RenovAr rounds was completed in January 2018. An initial set of seven projects under Round 2 got their supply contracts signed in March 2018. A further four contracts were signed in May. According to a February 2018 World Bank document, 20 projects for 513 MW in overall capacity, or nearly a third of the 59 projects awarded in Rounds 1 and 1.5, have reached financial close. A group of 33 projects with a combined capacity of 1.7 GW are working to meet their contractual deadlines and close financing, while six projects, representing 204 MW, have missed their deadlines.

At present, project developers in Argentina can mainly tap financing from domestic banks (which is relatively short-term), as well as development finance institutions and export credit agencies. For example, the province of Jujuy raised funds for a 300 MW solar development via a green bond sale.

ROUND 3.0

A new round of the RenovAr programme is planned for later in 2018. Energy minister Juan Jose Aranguren was cited by local media as saying that Round 3 would be launched between September and October. The size would be similar to Rounds 1 and 2, or around 1 GW.

www.airecweek.com www.AIRECWEEK.com 20 SOLAR PV DEVELOPMENT IN ARGENTINA

SOLAR IRRADIATION AND GEOGRAPHICAL RESOURCE

The Argentine Northwest region (Noroeste Argentino), which encompasses La Rioja, Salta and Jujuy, and the mountainous area of central-west Argentina known as Cuyo, where the provinces of Mendoza, San Juan and San Luis are located, has the best solar irradiation in the country.

In these two regions, the solar irradiation ranges from about 1,800 kWh/sq m to 2,200 kWh/sq m per year.

CURRENT INSTALLED CAPACITY & POWER GENERATION

Argentina’s first solar photovoltaic systems were installed as part of the Renewable Energy in the Rural Market Project (PERMER) between 1999 and 2012. The first grid-connected solar plant, a pilot 1.2-MW project in Ullum department, was built in 2010. There has been no significant progress in seven years -- at the end of 2017, the country had just 9 MW of large solar power plants, according to a report by the International Renewable Energy Agency (IRENA), released in March 2018. Neighbours Chile, Brazil and Uruguay are several hundred megawatts ahead of Argentina with installed solar capacities of 2,183 MW, 1,097 MW and 239 MW, respectively, at end-2017.

On the other hand, the RenovAr tenders in 2016 and 2017 awarded contracts to 1.73 GW of solar projects, which, once completed, will help Argentina catch up. In 2017, solar PV plants in Argentina produced 16.4 GWh, which represented just 0.012% of MEM demand. In the first quarter of 2018, the solar power output arrived at 5 GWh and its contribution, still negligible, was equal to 0.014% of MEM demand (CAMMESA, Informe Renovables ABR 2018). Data on solar power generation in Argentina since 2011 is available in the table below.

All in GWh 2011 2012 2013 2014 2015 2016 2017 Jan Feb Mar 2018 2018 2018 Solar generation 1.76 8.1 15 15.7 14.7 14.3 16.4 1.6 1.4 2.0 MEM demand 116,349 121,293 125,166 126,467 132,107 132,961 132,413 12,318 11,339 11,227

www.airecweek.com www.AIRECWEEK.com 21 SOLAR PV DEVELOPMENT IN ARGENTINA

PROJECT LANDSCAPE AND CONSTRUCTION TIMELINES

Four solar projects with a combined capacity of 400 MW won contracts in the first RenovAR tender round in the autumn of 2016, and another 20 solar schemes with a combined capacity of 516.2 MW were successful in round 1.5.

PROJECTS FROM RENOVAR 1.0 AND 1.5

The Cauchari solar complex in Jujuy province accounted for 300 MW of the 400 MW awarded in round 1.0. It is a project of the Jujuy State Energy and Mining Society (JEMSE), with an 80% stake, and Chinese partners Shanghai Electric and Zhongli Talesun Solar. JEMSE announced the start of work on the complex, comprising three separate solar parks, in the autumn of 2017. The installation schedule, however, was changed because of delays with the construction of the needed electrical infrastructure.

A JEMSE official in March told local media that a key substation would be ready to start work by February 2019. A new contract with CAMMESA has been agreed because of the delay, extending the deadline for the start of solar power supply to March 2019 from the previous date in May 2018. Under the revised project schedule, the solar panels will be arriving at the site in the second half of 2018.

The other big solar power project awarded in Round 1 has also been delayed. It was won by Isolux and FieldFare and later sold to French energy company Neoen. The company said in April it plans to start construction in November 2018 with the aim to have the La Puna Solar farm completed by end-2019 and operational in 2020. Isolux and FieldFare have also sold a solar project won in RenovAr 1.5, of 97.6 MWp in Cafayate, Salta province to Canadian Solar. The latter has announced plans to start construction in July. The park is to start feeding power to the grid by the second quarter of 2019.

Five solar projects of Empresa Mendocina de Energia SA (EMESA) in Mendoza were also in the RenovAr 1.5 list of awards and in January 2018 signed their contracts with CAMMESA. With a combined capacity of 72.5 MW, the solar parks have to start operation in 12 to 30 months from the signing. According to renewable energy firm 360 Energy, the 35 MW Nonogasta solar park was up and ready to run in April this year. More projects awarded in the 2016 rounds are progressing and, unless there are more delays, Argentina will grow its solar capacity significantly by the end of 2018.

www.airecweek.com www.AIRECWEEK.com 22 SOLAR PV DEVELOPMENT IN ARGENTINA

PROJECTS FROM RENOVAR 2.0

In November 2017 it was announced that 556.8 MW of solar projects have been successful in round 2.0 of the RenovAr programme. In the second phase of the tender, completed in December, there were five winning solar bids with a combined capacity of 259.5 MW.

At the end of March 2018 the signing of contracts with the successful round 2 projects started with seven contracts, four of which were allocated to solar projects. The 72- MW Tocota in San Juan, 6.96-MW Tinogasta II in Catamarca, and the 1-MW Nonogasta IV and 20.04-MW Nonogasta II, both in La Rioja, have been won by 360 Energy SA. The contracts are crucial for the start of preparations, but even before these are in place, developers are drawing and presenting their plans. Martifer Renewables, for example, presented to authorities in the province of San Juan its design for the 100- MW Guanizuil II PV park before the first contracts were signed.

In early April French firm Neoen informed government officials in Salta that it plans to start construction of a 100-MW solar farm in Altiplano in November and complete it by the end of 2019. The schedule is similar to that for the delayed La Puna Solar project. Financing for both projects, located in the same municipality, is being negotiated.

www.airecweek.com www.AIRECWEEK.com 23 WIND POWER DEVELOPMENT IN ARGENTINA

WIND SPEEDS AND GEOGRAPHICAL RESOURCE

The southern provinces of Argentina in the region of Patagonia, including Neuquén, Chubut, Rio Negro, Santa Cruz and Tierra del Fuego, have some of the richest wind resources on the planet (Gerlach et al. 2011). Central provinces such as Buenos Aires, La Pampa and Santa Fe also have sites with very good conditions. Wind speeds average 10 m/s in Patagonia and the central areas. Capacity factors are estimated to be around 45%-55%.

CURRENT INSTALLED CAPACITY & POWER GENERATION

So far, the enormous potential for wind power generation in Argentina remains largely untapped. The first large-scale wind farm connected directly to the SIN in Argentina was the 25.2-MW Arauco I project. It came online in 2011 and since then has expanded into a much larger project, expected to reach 400 MW.

At the end of 2017, Argentina had 228 MW of installed wind power capacity (GWEC, February 2018), after adding 24 MW in the year. The International Renewable Energy Agency (IRENA) put the figure at 257 MW in a recently published report. The country is lagging significantly behind Latin America’s wind leaders Brazil (12.8 GW), Chile (1.54 GW) and Uruguay (1.5 GW). This, however, is about to change when projects secured in the RenovAr tenders are fully realised.

In 2017, wind farms in Argentina produced a total of 615.8 GWh, which could cover less than 0.5% of MEM demand. In the first quarter of 2018 that share was 0.44% with 152 GWh produced by wind turbines. (CAMMESA, Informe Renovables ABR 2018) Details of wind power generation in Argentina are available in the table..

All in GWh 2011 2012 2013 2014 2015 2016 2017 Jan Feb Mar 2018 2018 2018 Wind generation 16 348.4 446.9 613.3 593.0 546.8 615.8 56.2 45.7 50.2 MEM demand 116,349 121,293 125,166 126,467 132,107 132,961 132,413 12,318 11,339 11,227

www.airecweek.com www.AIRECWEEK.com 24 WIND POWER DEVELOPMENT IN ARGENTINA

PROJECT LANDSCAPE AND CONSTRUCTION TIMELINES

Argentina’s wind energy capacity is expanding mainly thanks to the RenovAr awards. Back in 2009, there was also the GENREN tender, which got 1.4 GW in offers and resulted in 895 MW of contracts signed, but only 128 MW of commissioned capacity. The GENREN experiment failed due to investor concerns over the credit-worthiness of CAMMESA, and the overall risk perceived to be present in Argentina.

Wind capacity in the country is also growing through power purchase agreements with large energy consumers and wind projects for own use.

KEY PROJECTS FROM RENOVAR 1.0 AND 1.5

The first tender round of the RenovAR programme in the autumn of 2016 contracted 12 wind projects with a combined capacity of 708 MW. The government immediately launched an additional auction, round 1.5, in which it awarded contracts to 10 more wind projects, representing 765.4 MW of capacity.

One of the big wind farms being built under round 1.0 is the 97.2-MW Los Hercules wind farm in Deseado department, Santa Cruz province. The developer -- Total Eren, has to complete the plant by December 2018. Financing for the project was secured at the end of 2017 and the turbine supplier -- Senvion of Germany, said in December 2017 its contract for the supply and delivery of the 27 turbines for the park has become firm. It was later announced that the turbines would start arriving at the site in May this year.

Argentina-based power producer Central Puerto SA also secured financing, about USD 119 million, for the 100-MW La Castellana wind project in Buenos Aires province near the end of 2017. The wind turbine supplier, German firm Nordex, expects to complete the wind park in the summer of 2018.

Several phases of the Arauco expansion project in La Rioja province were also successful in the 2016 RenovAr rounds. Round 1.0 awarded a PPA for 100 MW of additional capacity at Arauco, while a further 95 MW were secured in round 1.5 of the programme. Parque Eolico Arauco SAPEM, 75% owned by the La Rioja government, is the company behind the expanding project. The 195 MW new capacity will be up and running by 2019.

Argentine thermal and renewable energy group Genneia SA secured several projects in the round 1.0 and 1.5 auctions, including the 100 MW Pomona wind farm.

www.airecweek.com www.AIRECWEEK.com 25 WIND POWER DEVELOPMENT IN ARGENTINA

The turbines for it will be installed in early 2019, according to the supplier Nordex. Construction works started in the spring of 2018 at the 38 MW Necochea Wind Park, Buenos Aires province, also secured by Genneia.

Danish wind turbine manufacturer Vestas is to start equipment delivery in the third quarter of 2018 for the 40 MW project Parques Eolicos Vientos del Sur SA, a unit of Grupo Frali SA. The contract for the La Banderita project in La Pampa was won in the RenovAr 1.5 renewable energy auction. The first turbine foundation was completed in April and the park is set to go on stream in the first quarter of 2019.

KEY PROJECTS FROM RENOVAR 2

The Argentine government in November 2017 awarded 1,408.7 MW of renewable energy capacity under round 2 of its renewable energy programme. This includes eight wind projects, representing 665.8 MW of capacity. A second auction in December 2017 awarded 634 MW, of which 328 MW were wind contracts.

Argentina signed the first seven contracts with successful projects in round 2 of its RenovAr renewable energy auction programme at the end of March 2018. The list did not include any wind. Updates regarding the financing, equipment orders and construction of the winning wind projects are expected after they sign firm contracts with CAMMESA.

WIND POWER PROJECTS OUTSIDE RENOVAR

There are a number of wind projects in Argentina that are being built outside the renewable energy auctions programme. This market is driven by companies in Argentina which want or need to buy wind power to cover some of their demand.

Aluminum producer Aluar Aluminio Argentino SAIC in the first quarter of 2018 started receiving components for 14 Vestas wind turbines of a 50-MW wind farm. It will help the company meet requirements for large electricity users to source a portion of their demand from renewables. The company has announced plans to install a total of 200 MW of wind power generation capacity in Chubut province.

Argentine state-run oil company YPF also built a wind farm -- the 100-MW Manantiales Behr, to meet a portion of its needs.

In early 2018, Argentina-based power company Pampa Energia announced the start of construction of two wind farms with a combined capacity of 100 MW, whose power will be sold to private large-scale consumers. The Pampa Energia and De la Bahia wind parks have been granted dispatch priority for 50 MW and 28 MW of their respective capacities. www.airecweek.com www.AIRECWEEK.com 26 FORECASTED INSTALLED CAPACITY OF WIND AND SOLAR POWER PROJECTS BY 2025

Demand for electricity in Argentina is expected to increase to 170 TWh in 2025 from 135 TWh in 2015. (Ministry of Energy and Mining, June 2017). Renewables will play a major role in meeting the additional demand with 10 GW of new capacity planned to be put online in the period. Thermal power, large hydro and nuclear power are to add 6 GW, 3 GW and 1 GW respectively.

According to market estimates, Argentina could have 5 to 6 GW of wind power capacity at the end of the year 2025. At least 2.5 GW have already been secured in the RenovAr tenders and a new one is coming up in the second half of 2018. For solar, the expectation is that the country could reach up to 2 GW of capacity by 2025.

The energy ministry has also released two scenarios to 2030. The “Trend+Investment” scenario envisaged total of 34.3 GW of new power capacity, including 18.2 GW from renewable energy sources. Capacity additions under the “Efficient+Investment” scenario stand at 26.4 GW, including 14.3 GW of renewables.

Estimated Investment (in US$ billions) 5 Bill. US$

TRANSMISSION 5 >5K km THERMAL POWER 4.8 +6 GW NUCLEAR POWER 6 +1 GW HYDROPOWER 10.2 +3 GW RENEWABLES 15 +10 GW DEMAND 2015 - 135 TWh DEMAND 2025 - 170 TWh

Source: Ministry of Energy and Mining, June 2017

www.airecweek.com www.AIRECWEEK.com 27 FINANCING RENEWABLE ENERGY PROJECTS IN ARGENTINA

Renewable energy projects in Argentina still mainly seek financing from domestic banks and for relatively short-term loans. Development finance institutions (DFIs) and export agencies can also be approached as well as the green bond market.

Though international banks are increasingly interested in the Argentine power sector, they have not yet fully re-entered the market, so projects in the country rely on equity more than is common in other markets, the World Bank observes. Via its FODER guarantees, the international institution is a key actor on the renewable energy stage in Argentina, offering guarantees to projects competing in the tenders.

In November 2017, long-term international project finance returned to the power sector in Argentina, where it had not been available since the early 2000s, with the financial close of Central Puerto’s 100-MW La Castellana wind project. It was led by the International Finance Corporation (IFC), which is also assessing options to extend debt financing to other IPPs in the country. It is working in close collaboration with the International Bank for Reconstruction and Development (IBRD), both being World Bank Group members. The Multilateral Investment Guarantee Agency (MIGA), another member of the group, is also contemplating its reengagement in the energy sector of Argentina.

FODER AND WORLD BANK GUARANTEES

Law 27.191, which in 2016 set the 20% renewable power target by 2025, also created the Trust Fund for the Development of Renewable Energies (FODER) and offered a VAT tax rebate and accelerated depreciation in order to boost investments in renewables. The government’s plan was to make it possible for RenovAr winners to get better financial conditions by getting access to guarantees by FODER, through escrow accounts (Cuenta de Garantía), and the World Bank, through the IBRD.

The risk mitigation instruments provided by FODER were welcomed by potential financiers, but these were not sufficient to attract the required investments. The political risk and the lack of experience financing renewable energy projects in Argentina were major concerns for financiers. Here is where the IBRD stepped in and announced a guarantee of USD 480 million for renewable energy IPPs in RenovAr rounds 1.0 and 1.5. The Indemnity and Guarantee Agreements were signed in August 2017 and the guarantee became effective in December 2017. A total of 27 projects with a combined capacity of 1,033 MW, out of 2,424 MW awarded in the 2016 rounds, opted for the IBRD guarantee.

www.airecweek.com www.AIRECWEEK.com 28 FINANCING RENEWABLE ENERGY PROJECTS IN ARGENTINA

In March 2018, the World Bank approved a new USD-250-million guarantee for RenovAr 2 projects. Fifteen projects with a combined capacity of 605 MW, out of 2,043 MW awarded in that round, have requested the guarantee. Overall, the World Bank observes increasing confidence in investing in the Argentinian renewable energy market, as the percentage of bidders requesting the guarantee has been decreasing in the three tenders. It stood at 52% in Round 1.0, at 35% in round 1.5, and at 19% in Round 2.0.

Wind and solar developers are more interested in the IBRD guarantee as 37% to 39% of the solar and wind capacity awarded has received it. In contrast, about 19% of bioenergy and small hydro projects have the guarantee. The difference is consistent with the greater size, financing needs and international profile of wind and solar projects, the World Bank explains.

The pie charts below show the origin of bidders with or without the guarantee.

RenovAr Program - Awarded bidders' origin with or without IBRD Guarantee

With IBRD Guarantee Without IBRD Guarantee

3% 2% 15% 2% 15% Argentina 5% Europe Usa / Canada China Brazil 29% 77% 51%

As a whole, 48% of bidders that opted for the IBRD guarantee included foreign investors. In rounds 1.0 and 1.5 the percentage of international investors that requested the IBRD guarantee stood at 56%, while in round 2 it increased to 67%.

www.airecweek.com www.AIRECWEEK.com 29 FINANCING RENEWABLE ENERGY PROJECTS IN ARGENTINA

GREEN BONDS

Argentina was one of 10 new entrants to the green bond market in 2017, according to the Climate Bonds Initiative (CBI). La Rioja province announced the issuance of a USD-200-million green bond due 2025 to support the expansion of the Arauco wind farm. The bond has an amortizing structure bearing a semi-annual coupon of 9.75%. The CBI recognised La Rioja’s issuance at its 3rd Annual Green Bond Pioneer Awards (GBPA) in 2018, in the “New Countries Taking Green Bonds Global” category. GBPA recognize organisations, financial institutions and government bodies and individuals who have led the development of green finance and green bond markets in the past year, providing positive examples of climate resilient and low carbon investment.

Jujuy province issued a USD-210-million green bond several months after La Rioja, raising financing for the 300-MW Cauchari solar project. It was several times oversubscribed, attracting offers for a total of USD 744 million. The term is of five years and the coupon is 8.62%.

Argentina’s Banco Galicia in March 2018 announced that the IFC has subscribed to its USD-100-million green bond. The proceeds will be used to support climate change mitigation projects, including energy efficiency, renewable energy, and sustainable construction projects. Argentina’s Banco Galicia in March 2018 announced that the IFC has subscribed to its USD-100-million green bond. The proceeds will be used to support climate change mitigation projects, including energy efficiency, renewable energy, and sustainable construction projects.

PROJECT FINANCING The table shows details on financing secured for some of the bigger wind and solar projects in Argentina.

Project Capacity Project owners Debt Lenders/Backers financing IDB Invest, international commercial San Juan Solar 80 MW JinkoSolar USD 60.15m entities, Canadian Climate Fund for the Power Project Private Sector in the Americas (C2F) Vientos los Hércu- KfW IPEX-Bank, DEG, FMO, Euler les Wind Farm 97.2 MW Total Eren USD 167m Hermes La Castellana Wind Project 100 MW Central Puerto USD 119m IFC, MCPP, IDB, Banco Galicia El Corti Wind Greenwind SA (owned by Pam- Project 100 MW pa Energia & Castlelake LP) USD 104m IIC, Banco Santander, ICBC Cauchari solar JEMSE, Shanghai Electric, complex 300 MW Zhongli Talesun Solar USD 331.5m China Exim Bank Manantiales Behr Wind Farm 100 MW YPF USD 200m IIC, BBVA, Citibank, Banco Santander

www.airecweek.com www.AIRECWEEK.com 30 PROCURING RENEWABLE ENERGY FOR COMMERCIAL AND INDUSTRIAL ENERGY USERS

Industrial and commercial users account for about 60% of the electricity consumption in Argentina, as illustrated by data for the first quarter of 2018, provided by CAMMESA.

Back in 2006, the government launched its Energia Plus 100% programme, which offered an 27% 28% 30% 80% alternative electricity supply Industrial service to large industrial clients 60% 29% 29% Commercial with a demand higher than 300 29% kW. Large users were allowed 40% Residential to contract directly with new 20% 44% 44% 40% generation and/or generating agents, co-generators or self- 0%

generators who were not agents January 2018 February 2018 March 2018 of the electricity market.

The renewable energy legislation (Laws 26.190 and 27.191) later introduced a requirement for the same group of power users to source 8% of their power from renewable energy sources by 2018, scaling up biannually to 20% by 2025. Following up, in August 2017, the Argentine Ministry of Energy and Mining published Resolution No. 281-E/2017, spelling out details of how this requirement should be met and how the new Renewable Source Electric Power Term Market Regime (or MATER in its Spanish acronym) will operate.

In a nutshell, to comply with their renewable energy consumption quotas, large power consumers can choose between 1) the joint purchases system (Compras Conjuntas through CAMMESA and the RenovAr programme), 2) concluding a private PPA, or 3) developing a self-generation project or a co-generation project.

Private PPAs are expected to be the preferred form of complying with the renewable energy consumption quota as the PPA terms and conditions can be freely agreed between the contracting parties with the only exception that the price cannot exceed USD 113/MWh.

Before concluding such a PPA, large consumers need to specifically opt out of the government’s joint purchasing mechanism. The opt-out notification can be done twice a year, at the beginning of the seasonal schedules of the MEM. The minimum term for the exclusion is set at 5 years.

www.airecweek.com www.AIRECWEEK.com 31 PROCURING RENEWABLE ENERGY FOR COMMERCIAL AND INDUSTRIAL ENERGY USERS

A total of 2,287 large electricity consumers with a combined consumption of 33,087 GWh in 2017 will need to meet the renewable energy consumption quota this year, CAMMESA said in April 2018. The 403 GUMA users account for the largest part of the demand or 19,961 GWh in 2017. Three GUMA companies – cement and aluminum producers, have already notified CAMMESA that they wish to opt out of the joint purchasing mechanisms. Details are given in the table below.

Company name Type of Consumption in Medium capacity Opt-out user 2017 (MWh) in 2017(MW) from date Loma Negra (Catamarca) GUMA 137,841.9 15,735 1/2/2018 Loma Negra (Olavarria) GUMA 162,758.7 18,580 1/2/2018 Aluar SA GUMA 2,521,557.3 287,849 1/8/2018 Cement maker Loma Negra was the first to sign a corporate renewable PPA under Argentina’s new regulatory framework. In October 2017, it announced it will buy wind power from the 24 MW extension of the Rawson wind farm of Argentine energy company Genneia SA under an agreement that runs through December 31, 2037.

According to Resolution No. 281-E/2017, to supply energy for the consumption quotas of large, renewable energy generation, self-generation and cogeneration projects must meet the following conditions:

1 - Started operation after January 1, 2017; 2 - Have been registered in the National Register for Renewable Energy Power Generation (RENPER) 3 - Do not qualify as projects committed under a different contractual regime (e.g. having an existing PPA with CAMMESA).

In the event that more than one project has filed for the same interconnection point, and the transport capacity is not enough for all of them, the regulation provides for a dispatch priority depending on: (i) the earliest beginning of the operation; and (ii) the biggest factor capacity project, fixed in accordance to the updated provisions of the production of energy, which shall be duly certified by a qualified independent consultant. Granted such priority, the renewable project will have the same dispatch priority as the projects in the joint purchasing mechanism.

In January this year, an initial group of nine wind and solar power projects, with a combined capacity 273.12 MW, was granted dispatch priority within the MATER framework. These assignments followed the receipt of 38 requests for 2,150 MW of capacity by the deadline of November 30, 2017. A total of 44 renewable energy projects with a combined capacity of 2,031 MW have submitted dispatch priority requests during the first quarter of 2018, CAMMESA said in a recent report. www.airecweek.com www.AIRECWEEK.com 32 OPPORTUNITIES IN DISTRIBUTED GENERATION, OFF-GRID AND MINI-GRID

At the end of December 2017, Argentina’s Ministry of Energy and Mines published Law No. 27.424, which declares distributed generation from renewable energy sources as a national interest and establishes legal and contractual conditions for distributed generation for self-consumption and a net metering scheme for feeding surplus electricity to the grid.

Under the law, all new national public buildings must include distributed generation systems for self-consumption from renewable energy resources. What is more, all retail power consumers can now install renewable energy generation systems. No prior autorisation from the distribution company is required if the capacity of the system is smaller or equivalent to the user’s consumption. Users that want to install higher capacity need to request authorization from distribution companies.

Argentina has more or less replicated the successful Brazilian model for remuneration of surplus electricity of distributed systems, connected to the grid. If users consume more power than they inject over the month, the difference will be charged in the monthly bill by the distribution company. If users inject more power than they consumed during the month, they do not receive money from the retail market, but a credit in kWh to be compensated in the following month.

A specialized fund - Fondo Para la Generación Distribuida de Energías Renovables (Fodis), was created to support investments in distributed generation via loans, guarantees and capital contributions. On the supply side, Argentina-based suppliers of distributed energy equipment will have access to an array of incentives, including tax certificates, accelerated amortization on assets, VAT rebate as well as access to finance with preferential rates. However, secondary legislation still needs to be published to provide more guidance and clear procedures on the implementation of the law.

Rural electrification also offers business opportunities for small-scale renewable energy systems. In 1999, Argentina started its Project for Renewable Energy in Rural Markets (PERMER). Essentially, it is an off-grid rural electrification plan through the use of sustainable sources, mainly solar PV. Its first phase, which ended in 2012, was funded mainly through a loan granted by the International Bank for Reconstruction and Development (IBRD) for an amount of USD 30 million, supplemented by a USD 10 million donation from the Global Environmental Fund (GEF). In 2008, IBRD approved a new loan of USD 50 million to provide additional financing. Between 2001 and 2012, PERMER helped 25,000 families from 15 provinces of the country to get residential kits while thermal and electrical equipment was installed in 1,800 schools, data of the National Audit Office shows.

www.airecweek.com www.AIRECWEEK.com 33 OPPORTUNITIES IN DISTRIBUTED GENERATION, OFF-GRID AND MINI-GRID

On September 21, 2015, IBRD approved a new loan agreement for an amount of USD 200 million, with the objective of developing PERMER 2. Earlier this year, the Energy ministry launched PERMER 2 -- a tender for the provision of solar kits for up to 120,000 rural households in Argentina. Each installation will consists of two photovoltaic panels with a total power of 120 Wp, a battery, a control board and five lamps of 18 W. The tender attracted 10 bidders, namely Nokero International Ltd, IPL – GLP Consortium, D.Light Design Inc, Emprecepar Partipacoes Ltda EPP, Apca DT Renewit, China National Huachen Energy Group Co.Ltd, Coradir SA, Exo SA, New San SA – Gamma SL and Dinatech SA. The bids were opened at the end of April and outcomes will be announced in the coming weeks. Installation processes are expected to begin in the last quarter of 2018.

www.airecweek.com www.AIRECWEEK.com 34 ENERGY STORAGE

Energy storage is a cornerstone tool for enabling the transition from fossil fuels to renewable energy supply and it finds application both in front-of-the-meter (utility & wholesale electricity market) and behind-the-meter (customer) applications. What is more, since 2010 the cost of batteries has decreased by more than 70% from about USD 1,000 per kWh to about USD 200 per kWh, at present (Lazard’s Levelized Cost of Storage Analysis—Version 3.0).

Argentina is already well known with its pumped-storage hydropower. The Los Reyunos power project has an installed capacity of 224 MW and has been in operation since 1983. Using the same technology but at a larger scale, the Rio Grande hydroelectric complex was built in 1986. It has an installed capacity of 750 MW comprised of four turbines of 187.5-MW each.

Battery-based utility-scale storage systems are also considered for big renewable projects in Argentina. For example, the governor of Jujuy Province Gerardo Morales said in March 2017 that Power China, the developer of 300 MW solar power projects Cauchari 1, 2 and 3, is also thinking about another 1 GW solar power project, coupled with round-the-clock storage. Morales also noted that Chinese PV maker Talesun, which is building a PV panel factory in the province, has already signed a contract for a 5 MW PV plant in La Quiaca, which will include lithium-ion battery storage.

The lithium-based energy storage solutions will be particularly interesting to investors as Argentina is part of the so-called lithium triangle which also includes Bolivia and Chile. The Puna Plateau, a region of the Andes Mountains spanning 1,800 km across Argentina, Bolivia, and Chile, houses the largest proven deposit of lithium on the globe but, at present, only Chile is a major producer of the white metal. However, as the investment climate improved in Argentina over the past three years, about 40 foreign companies began to consider opportunities in Argentina’s mining industry, more than half of those in lithium, Mining Secretary Daniel Meilan told Bloomberg in an interview last year.

Industry heavyweights Albemarle Corp., Soc. Quimica y Minera de Chile SA, Eramet SA and Jiangxi Ganfeng Lithium Co. are among those looking at expanding or building new lithium operations in Argentina, as part of a USD 20-billion pipeline of mining projects through 2025, Meilan said.

Outside utility applications, small-scale energy storage solutions – or “community batteries”, usually 100 kW to 500 kW installations (community storage) and 10 kW to 100 kW (village electrification) in size, can have a viable business case, supporting the ongoing growth of decentralized generation in Argentina.

www.airecweek.com www.AIRECWEEK.com 35 REFERENCES & PHOTO CREDITS

1. RenovAr Plan de energias renovables Argentina 2016 – 2015, Ministerio de Energia y Mineria. Republica Argentina. Accessed online on April 24, 2018.

2. Renewable Energy Argentina, December 2016, report by Undersecretariat of Renewable Energy, Ministry of Energy and Mining, Argentine Republic

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4. Ministerio de Energia y Mineria Presidencia de la Nacion, Adjudicciones del Programa RenovAr, Tableau public, accessed online on May 4, 2018

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13. RÉGIMEN DE FOMENTO A LA GENERACIÓN DISTRIBUIDA DE ENERGÍA

www.www.airecweek.comAIRECWEEK.com REFERENCES & PHOTO CREDITS

14. RENOVABLE INTEGRADA A LA RED ELÉCTRICA PÚBLICA, Ley 27424, accessed online on May 10, 2018

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www.www.airecweek.comAIRECWEEK.com 22 - 25 OCTOBER 2018 - BUENOS AIRES

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The event will take place over 4 days from 22-25 October in Buenos Aires and will feature 180 speakers delivering expert insights across the renewable energy market including solar, wind, grids and storage, finance and the commercial and industrial sector.

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