www.pwc.

com/ar

Renewables in Argentina
Opportunities in a new
business environment

March 2017
 Contents
Why renewables in Argentina? 4
Auction of electric energy supply 10
What are the incentives for this industry? 14
Argentina’s new business environment 16
Financing and analysis of Renewable Energy Projects 20
Exhibit 24

2 EnergíasRenewables
renovables en
in Argentina
 A new beginning
Argentina issued new laws establishing that facilitated the presentation of proposals and their
renewable energies should account for 20% of the subsequent distribution was also very important.
national electric energy consumption by 2025.
However, this is only the beginning of a
At present, they represent 1,8%; therefore, big
transformation process of the national energy
investments are necessary to achieve this goal in
mix, as Argentina will continue with the bidding
the upcoming years. To accomplish this, the new
processes in 2017 and the years to follow, thus
political and economic environment in Argentina
generating business opportunities for different
since 2015 is the most favorable context, as the
energy companies worldwide. Our country's
government has taken steps towards reinserting
potential to develop renewable energies is
Argentina in the global agenda and has taken
limitless, given the quality of the winds and
measures to free and integrate its economy, such
the sunlight, which offer a significant distinct
as: lifting of foreign-exchange controls, settling
advantage.
holdout debts, readjustment of public utility rates
and elimination of import tariffs, among others. It is estimated that, when this plan is completed,
Argentina will obtain USD 15 billion in
The first bidding process carried out at the end
investments and will have an installed capacity
of last year was a remarkable success, with 58
of solar energy of 1 to 2 GWH and 5 to 6 GWH of
projects awarded for more than 2,400 MW. But the
wind energy; as a result, renewable energies will
great interest in the country was demonstrated not
represent 20% of the electric consumption of the
only by these allocations, but by the total amount
country.
of offers received, which exceeded 6,200 MW.
We have included in this report the key issues for
What were the critical factors of this success? The
the potential investors: why to invest in Argentina,
process was simple, efficient and transparent,
the tax environment, how the Argentina
implemented by a Government who listened to the
Investment and Trade Promotion Agency can help
investors’ needs and offered long-term purchase
investors and what to take into account when
agreements in dollars. The role of the Argentine
developing their business models.
Investment and Trade Promotion Agency which
We hope it will be useful.

Ezequiel Mirazón
Energy, Utilities &
Mining Leader
PwC Argentina

PwC Argentina 3
Why renewable
in Argentina?
Argentina is a country with vital natural
resources for the generation of wind and
solar energy.

Although there were previous laws, Law No. 27191, published

in 2015, established that renewables should achieve 20% of
the energy matrix by 2025. Afterwards, decree 531/16 defined
in more detail the objectives of the law and how to attain
them.

Percentage of the total demanded energy

3 GW 10 GW

25%

19% 20%
20%
17% 18%
16%
14%
15%
12%

10%
8%

5%

0%
2018 2019 2020 2021 2022 2023 2024 2025

Current situation (2016)

Share of renewable energies = 1.8% | Installed capacity = 0.8 GW

Source: www.minem.gob.ar

To reach the goal of 20% by 2025, 10.000 MW should be

incorporated into renewables, an objective that will come with
a significant reduction of greenhouse gas (GHG) emissions
and annual investments of USD 1.5 billion.

4 Renewables in Argentina
 Marcelo Iezzi
Sustainability
PwC Argentina

es

PwC Argentina 5
The Government decided to implement this strategic project
based on the following pillars:
• Release of Plan RenovAR, which includes regular public
biddings through which the different companies submit their
investment projects and the price at which they are willing to
sell their capacity;
• Signing of long-term power purchase agreements (PPA’s) in
US dollars that allow companies to ensure their sales without
exposing themselves to potential devaluations of the peso;
• CAMMESA, the company that manages the electricity
wholesale market, will administer these agreements.

The first bidding process was carried out at the end of 2016
and the result went beyond the Government’s expectations,
both for the power offered and its prices, which led to a
second call for bidding to improve the prices for the bidders
who weren't initially selected.

Allocated Projects

Technology Projects MW GWh/Year USD/MWh

Wind 12 708 3002 59

Solar 4 400 959 60
Biogas 6 9 58 154
Biomass 2 15 121 110
SWP1 5 11 65 105
Total 29 1,143 4,205 63

Small water projects

1

The second call, Round 1.5 was also successfully accepted by In this process, wind energy prevailed and, in second
the market. place, photovoltaic solar energy: between the two rounds,
22 wind projects were awarded for 1,473 MW of power
Allocated Projects and an expected annual generation of 6,039 GWh, plus
24 solar-photovoltaic projects for 916 MW of power and
Technology Projects MW USD/MWh GWh/Year an expected generation of 2,233 GWh. In the aggregate,
technologies based on biogas, biomass and small hydraulic
Wind 10 765 53 3,037
developments have only 35 MW of power and offer an
Solar 20 516 54 1,274 expected generation of 244 GWh.
Total 30 1.281 53 4.311
It is worth mentioning that 64% of the offers received were
from local investors while the remaining 36% were from
foreign investors.

The weighted average price offered was USD 59, which is

higher than those of the biddings in Mexico (USD 33) and
Spain (USD 47), although lower than the internal prices in
force.

The current installed capacity for the generation of energy

in Argentina is approximately 31,000 MW, thus the
allocations mentioned above altogether represent an 8%
almost increase of that capacity.
6 Renewables in Argentina
This proves that Argentina is beginning to follow the steps in
renewable energy generation that most of the Latin American
developed economies and neighboring countries have already
taken. In this way, Argentina places value on the admirable
supply of resources it has as regards winds, radiation and
sunlight, as well as on the process of diversifying its matrix
and increasing the generation distribution.
This decision to increase the participation of renewables in the
national matrix occurs in a very special moment at a global
scale. After having adopted the Paris Agreement in December
2015, which aims at limiting the global temperature increase
to 2°C or less by 2100, great part of the efforts worldwide are
focused on reducing GHG emissions, which mainly derive
from energy generation. Furthermore, the Sustainable
Development Goals established by United Nations pursue
the need to guarantee the access to trustworthy, sustainable
and modern energy sources for all the world population, also
mentioning the need to increase the use of renewable sources.
PwC Argentina
Argentina counts on exceptional conditions for the
development of renewable energies, which together with the
technological improvements, the higher supply of equipment
and better access to financing, make it possible to think
about transforming that potential in a concrete reality in the
following years.
According to the Argentine Wind Energy Association,
Argentine natural resources supply for the generation of
wind energy is very high, with winds of more than 6 m per
second in 70% of its territory, with a direction and constant
speed that allow to obtain capacity factors of 35% and higher.
With these capacity factors, wind generators achieve higher
efficiency and profitability and can replace fossil generation
for a longer period.
In the case of photovoltaic solar generation, according to the
Argentine Solar Energy Atlas, more than half of the national
territory receives an annual average sunlight over 3.5 kwh/
m2, which makes it technically viable for its exploitation.
7
The solar and wind resources combined show a development
potential for the immediate future, particularly limited by
the current capacity of the transmission networks, which
will have to be expanded to face the higher demand of
energy. As for the proposed projects, the private sector was
willing to invest based on the results of Round 1, which saw
an oversubscription of more than six times the requested
capacity.
Map of Argentine wind potential.
Annual average wind speed at 50 metres above ground level
8 Renewables in Argentina
Apart from the wind and solar energies mentioned, Argentina
also has favorable conditions for the development of biogas,
biomass, biofuel and small water projects. However, given
the growth of the first two and their better conditions for
technological offers and locations for their installation, both
the authorities and the private sector focus their activities and
attention on them.
The moment also coincides with unprecedented levels of
global investments in renewables. China has become the
largest investor in the field, surpassing the United States
and investing more than USD 36 billion globally for the
Average sunlight for December.
Values in kwh/m2
development of projects based in renewables; the total amount
invested by all the countries being USD 348 billion (BNEF,
2016).
Latin America has also obtained an important flow of
investments in renewables, reaching almost USD 16.4 billion
in 2015, with a very important participation of wind energies
(slightly over 60%) and in second place, the photovoltaic
solar energy (with approximately 20%). Moreover, the region
maintains annual investments in renewables of more than
USD 10 billion since 2006 (Source: Bloomberg).
Analyzing how these investments evolved in Latin America,
compared with the ones made in the rest of the world between
2004 and 2015 (see Chart 1), Latin America multiplied its
investments by 11 times while the rest of the world multiplied
them by 6 during the same period.
A large part of this important increase in renewables is
explained by the cost reduction (see Chart 2) and by the
improvement in the design and implementation of appropriate
public policies.

Chart 1: Development of the investments in renewable energy in Latin America and the world, 2004-2015

12

10

0 Latin America
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Rest of the World

Source: IRENA. Market analysis en Latam

Chart 2: Decrease in costs of key technologies, 2008-2015

Land - Based
Wind -41%

Utility Scale
PV -64%

LED -94%

Distributed
PV -54%
Modeled Battery
Costs -73%

Source: Utility of the future. MIT Energy initiative

PwC Argentina 9
Auction of
electric energy
supply
The auction in numbers
In this context of a gap between the increase in the demand of
electric energy (3% CAGR12-15) and the changes in installed Round 1.0 Round 1.5
capacity (0.4% CAGR12-15), generated by a regulatory
5,246
framework that has been unable to awaken interest of the Other (includes small water
projects, biomass and biogas)
1%
private sector in the development of new generation capacity,
the process of auctioning implied reactivation for Argentine
electricity sector and materialized the development of 2.3 GW
of new capacity for renewables generation, to start operation
x4.7
within a two-year period, resulting in an investment of 46%

approximately USD 3 billion. 2,5

The auction was implemented in two rounds: the first one x1.9
37%
(round 1.0) was awarded in October 2016 and the second 1,143 1,281
0%
one (round 1.5) was awarded two months later (end of 36%
40%

November). 54% 64% 63% 60%

During the first round, 117 offers were received, of 5 different
technologies (though most of the offers were wind and
solar photovoltaic generation technologies), which in the
aggregate represented 5.2 GW, ~5 times more power than
demanded. The technology with the greater number of offers
was solar photovoltaic, even when the demanded power
corresponding to this technology was less than the demand of
wind generated energy (0.3 GW solar versus 0.6 GW wind).
In the end, 17 offers were allocated, which meant awarding
1.1 GW of renewable energy, distributed into 707 MW of wind
generated energy, 400 MW of solar photovoltaic energy and
1.2 MW of biogas.
Pre-qualified Awarded Pre-qualified Awarded
1. Detail of pre-qualified and awarded capacity
for each round – MW. Source: Ministry of Energy and Mining
During the second round, 47 offers were received, related
only to wind and solar photovoltaic generation technologies,
which in the aggregate represented 2.5 GW, ~2 times more
power than demanded. Among the offers for wind generation
technology (19 offers received) there was no new plant
proposal(i.e., one that had not applied at the first round),
while among those for solar generation technology (28 offers
received in total) there were three new plants. Finally, 1.3 GW
of renewable energy were awarded, distributed into 765 MW
of wind generated energy and 516 MW of solar energy.

10 Renewables in Argentina
 Carlos
Fernandez
Landa
Deals
PwC España

A material success in energy policy

The auction conveyed a success beyond the already mentioned
historical difficulties to accompany the demand growth rate
with new investments in electricity generation assets. In this
regard, deploying the new renewable capacity awarded at the
auction is the first milestone in the development of an energy
policy that can combine the 3 major guidelines in renewable
energies: security of supply, economic competitiveness and
environmental sustainability.
Argentina generation mix appears clearly leveraged on two
types of sources: large run-of-the-river power generation
facilities (+30%, TWh 2015) and fossil fuel electricity
generation (+60%, TWh 2015). This scarce diversification
of the generation mix is coupled to the fact that +50% of
the fuel used to supply/serve consumption at the fossil fuel
plants is imported from abroad, emphasizing Argentine energy
dependence and thus weakening the country’s strategic
position as to security of supply.

…focused on achieving security of

Need to enlarge electricity supply… …and to diversify sources…
supply
Installed generation capacity vs. Electricity generation Consumption of fossil fuels in 2015
Demand, [yoy %, GW vs TWh/year] [TWh] [%]
137
100%
Demand Installed Capacity 6.4% Other Total

Coal
4.6% 5%
4.3%

30.3% Hydroelectric

Fuel/ Gas Oil 26%

3.8%

3.2%
18% Local

1.5%
26% Bolivia
1.1% Natural
Gas

0.5% 63.3% Fossil 25% LNG

0.0%

2012 2013 2014 2015 2015

> 50% imports

Renewable energies must be a cornerstone of our national energy strategy

PwC Argentina 11
Security of supply

In recent years, installed generation capacity in Argentina has

recorded spells of growth lower than 1%, while the demand
for electricity has grown at higher ratios; this created a deficit
in the reserve margin of the system, which is expected to
be corrected in the next years to face the greater growth in
demand anticipated.

The 2.4 GW of renewable power derived from the auction can

be translated into a 7% growth above the current installed
capacity. Although wind and solar photovoltaic generation
technologies are not dispatchable technologies and their
contribution to the system’s steady-flow capacity is reduced,
if Argentina makes avail of its excellent own resources for
generation based on renewable technologies it is expected
that these technologies, given the country’s generation profile,
can contribute to power generation need at the system’s peak
demand intervals.

Meeting clean energy targets

With the enactment of the Renewable Energy Law (Law No.

27191), the target was set of generating 8% (2018) and 20%
(2025) of national consumption from clean energy sources,
which would imply reaching 10 GW of renewable installed
capacity by 2025. At present, the country has an installed
capacity of ~0.8 GW.

The 2.3 GW added with the auction will represent 5.7% of

the electric energy demand of 2018, which, together with the
current installed capacity (0.8 GW) and 0.5 additional GW
derived from Resolution No. 202/16, will make it possible to
reach the 8% goal set for that year.

Economic competitiveness

The average sale price of wind generated energy in the first

and second round was 59 and 53 USD/MWh, respectively. In
the case of solar energy, the average price in the first round
amounted to 60 USD/MWh, while in the second round it
decreased to 54 USD/MWh.

The prices observed in this first bidding process in Argentina

are highly competitive compared with those recorded in other
countries more advanced in their renewables development
and with a macro regulatory framework perceived as more
reliable for the various foreign parties taking part in the
auction process, many of them waiting to witness political
changes that ensure legal security for foreign investment.

Thus, the context of awarded prices is not far from that

recorded in other geographies with excellent resources such as
Peru, Mexico and Chile that in 2016 experienced record prices
at global level in the renewables industry.

Even though this first auction was intended as an opportunity

for those developments in a mature progress status and,
accordingly, mostly in the hands of local operators, as the new
regulatory framework for renewable generation turns out to
be a healthy mechanism to channel interest in investments
by the large global industry operators, it seems reasonable
to expect that these prices become even more competitive,
considering the excellent natural resources available in
Argentina for the development of these generation sources.
National goals for Renewable Energies, 2018-2025.

3 GW Renewable capacity, estimated 10 GW

20%
19%
Auctions in 2016: 17%
18%

- % of demand: 5.7% 16%

- Installed capacity: 2.3 GW
14%

12%

Renewables in 2016: 8%
- % of demand: 1.8%
- Installed capacity: 0.8 GW

2018 2019 2020 2021 2022 2023 2024 2025

Source: Ministerio de Energía y Minería

Price range of photovoltaic solar technology projects awarded at auctions worldwide, USD/MWh 2016.

USD/MWh
120
120

100

80 78
73
66
60 60 58
60 54 55 53
48 46 45
44
40 37
33 29 30 30
27 24
20

Awarded 0
capacity (MW)

185 162 1,1001 620 400 7071 ,853 ,038 n/a n/a 120 1,853 1,038 26 140 1,300 850 800 350 1,000 6,500

Source: IRENA, Strategy& PwC

Natural resources for renewables development in Argentina.

Argentina has suitable regions for ...and great attraction for solar
wind development applications
Wind intensity [km/h] Annual Solar Irradiation [kWh/m2- day]

-36.0 -7.0

-6.5

-26.2
-6.0

-5.5

-20.3
-5.0

-4.5
-14.4
-4.0

-3.5
-10.0

-3.0

-4.1 -2.5

Source: Análisis Strategy& PwC

PwC Argentina 13
What are the in
for this in
As part of this program, Argentina has recently
adopted a series of laws and regulations to
promote renewable energy sources.

The production of electricity by means of renewable energy

sources was declared a national interest. It is required that
8% of the total electricity consumed at national level is to be
generated by renewable sources by 2018, and 20% by 2025;
within this commitment, a first auction was successfully held,
sponsored by the World Bank and with several important
participants, and a second one is scheduled for the first
semester of 2017.

The pertinent legislation includes tax incentives.

In fact, with the enforcement of Law No. 26190, amended

by Law No. 27191 and Regulatory Decrees 562/2009 and
531/2016, the Argentine government launched and updated
promotion measures for the energy sector, with the purpose
of encouraging the use of renewable energy sources for the
production of electricity.

Pursuant to this system, certain tax benefits will be granted

upon demand, by means of submitting one or more projects
before the relevant authorities, provided that they start to
be executed prior to December 31, 2017. The applicable law
and regulations establish that the project will be considered
started when expenditures have been made for at least 15% of
the total amount of the investment.

In the case of infrastructure works, including capital assets,

civil works, electromechanical and assembly works and
other related services being part of a new generation plant or
included in pre-existing plants that functionally operate jointly
to produce electricity by means of renewable energy sources,
the following benefits apply:

14 Renewables in Argentina
ncentives
ndustry?
• Accelerated depreciation: for the purpose of income tax
(35%), the beneficiaries can opt for applying depreciation by
the straight-line method, as allowed by the Income Tax Law,
or depreciation by a special method consisting of three (3),
four (4) or five (5) yearly and consecutive equal installments,
depending on the projects considered to have started (15% at
least) in 2017, between 2018 and 2021, or between 2022 and
2025, respectively; in the case of real estate assets,
accelerated depreciation would result in reducing useful life
to 60% (2017), 70% (2018-2021) or 80% (2022-2025). The
relevant assets must be held for a minimum period of three
(3) years.
• A 5-year extension period to compute tax losses from projects
under promotion regime (i.e. expiration date 10 years after
generation, instead of 5).
• Early recovery of VAT (21% general rate or 10.5% for certain
activities) paid on the purchase of new assets or infrastructure
works that has not been offset against the tax debit by means
of a refund or tax credit for other federal taxes. This benefit
will be effective after at least one fiscal period –month– as
from the date of the investments, if the projects were
considered started before December 31, 2017. If this condition
is fulfilled on a later date but prior to December 31, 2021, two
fiscal periods must elapse; and three fiscal periods, if it occurs
after this date but prior to December 31, 2025.
• Relief from minimum notional income tax (1% on computable
assets) for the relevant assets, during 8 years. However, this
tax will be repealed from 2019 onwards and it grants a
regular exemption for the acquisition of brand-new movable
assets and works on real estate property for the year in which
the investments were made and in the following one.
PwC Argentina
Ignacio
Rodriguez
Tax & Legal
PwC Argentina
• A tax credit certificate to be applied against federal taxes will
be granted, equal to 20% of the amount of purchases in
domestic components for the project (certain exclusions
apply) to the extent it can be proven that at least 60% of the
total components are of domestic source (a lower percentage
may be accepted as long as it can be proven that the items
cannot be obtained in the domestic market, but never lower
than 30%).
• Relief from import duties and other related taxes (“Statistical
charge”) on the import of brand-new assets included in the
project (only for imports completed before December 31,
2017).
The benefit also applies to replacement items and new
accessories needed to ensure start and development of the
activity; their destination must be verified and coincide with
the project for which those assets were imported.
• Likewise, this benefit applies to the import of capital goods,
parts, components and inputs used in the production of
generation equipment for electricity from renewable energy
sources and intermediate assets along the value chain of such
equipment, not only for the purpose of domestic sales but also
for export, as long as it could be proven that there is no local
manufacture of those products. These capital goods, parts,
components and inputs can be sold, transferred or no longer
used in the activity for which they were imported, only upon
completion of the activity or the end of its useful life,
whichever comes first.
To obtain the tax benefits described above, some guarantees
must be provided.
Further, from the point of view of provincial taxes, Law No.
26190 invites all Argentine provinces to adhere to a system
of enforcing local regulations with tax benefits to promote
and encourage the production of electricity by means of
renewable energy sources. Most of the provinces that develop
projects of this type and are favored have already adhered to
the promotion system and replicated it by granting temporary
exemptions for provincial turnover tax and stamp tax (tax on
contracts being formally executed).
15
 Argentina’s
New Business
Environment
Argentina has very strong fundamentals to become a regional economic engine.
It is the third largest Latin American economy in GDP terms (after Brazil and
Mexico), yet the second largest when measured in GDP per capita. In addition,
Argentina’s population nears 43 million, 60% of which is below 35 years of age.

16 Renewables in Argentina

Argentina has highly qualified human capital, with
outstanding technical skills but also notable creativity and
versatility. The country is ranked first in Latin America’s
Human Development and Education Index.
Despite its size, Argentina’s infrastructure is ample and far-
reaching, with more than 35,000 kilometers of roads and
railway networks, 43 ports and 54 airports.
To pave the way for reform and growth, in his first year
President Macri implemented several measures to normalize
the economy: removal of capital controls and repatriation
restrictions, floating of the exchange rate and recovery of
monetary reserves, resolution of defaulted debt and new
access to global financial markets, removal of export taxes
on many products, among others. The results obtained were
positive, and the high inflation levels inherited from the
previous administration are now decreasing, with the target of
reaching single-digit levels by 2018. Also, the administration
PwC Argentina
Andrés Tahta
Executive Vice
president
Argentina Investment
and Trade
Promotion Agency
re-launched the National Statistics Bureau (INDEC) and
promoted laws to foster investment and employment, amongst
which is the Law for Small and Medium Enterprises and
the Auto Parts Law, the Public-Private Partnership Law and
the Entrepreneur Law. It also established a 4-year plan to
eliminate the primary fiscal deficit and implemented a very
successful tax amnesty scheme. Argentina is also making
headway in the National Productivity Plan to increase
competitiveness, propel production, accelerate growth and
achieve full employment and better quality of life for our
citizens.
Argentina’s macroeconomic indicators are projected to
improve markedly beginning in 2017, with higher growth
rates than those of Latin America’s average and inflation
dwindling significantly. This added to low leverage at the
household, corporate and government levels, constitutes a
unique opportunity to invest in our country.Energías
17
Argentina Investment and Trade
Promotion Agency
To grow and develop as a country, we need a strong economy
connected to the world. In February 2016, President Macri
created the Argentina Investment and Trade Promotion
Agency, an independent organization that centralizes all
efforts to foster and facilitate investment and international
trade.

The Agency’s mission is to become the strategic partner and

the main point of contact for companies that wish to invest in
Argentina and to export their goods to the world. The main
goal of the Agency is to contribute to the creation of quality
jobs in Argentina, fostering investment and international
trade.

To attain this goal, the Agency works across the public sector:
Ministries, Provincial Governments, public organizations and
independent institutions (such as AFIP, IGJ, BICE, INTI, etc.),
along with the domestic and international private sectors
(such as business and investment groups, federal chambers
and associations, etc.).

In general terms, the Agency designs the investment

and foreign trade promotion strategy by sectors, and in
coordination with Ministries and Provincial Governments,
develops and executes the programs and plans of action to
carry out investments and foreign trade operations.

The Agency is organized into the following teams:

• "Invest Argentina": Promotes Argentina as an attractive
investment destination and assists investors throughout the
investment process: analysis, decision-making, establishment,
operation and reinvestment.
• "ExportAR": Develops and manages export promotion
programs to help local companies grow their businesses in
international markets and become integrated into global
value chains.
• "Facilitación": Assists investors in the process of solving
difficulties and conflicts that may emerge during the entire
investment and trade cycles.
• "Promoción de políticas": Identifies structural obstacles in
the country and works to eliminate them, whether they
involve administrative processes or regulatory or tax matters
that hinder investment. Even though the Agency does not
have the power to eradicate these obstacles, our responsibility
is to take the matter to the relevant government body to
discuss and change it.

18 Renewables in Argentina
 The Agency professional team is committed
to help companies understand the
opportunities offered by our country and
guide them through the investment and
international trade processes, with clear
rules, transparency and trust.

PwC Argentina 19
Financing and
Analysis of Renew
Energy Projects
Financing

In May 2016, Macri launched Plan RenovAR, a decade-long plan to attract USD 15
billion in renewable energy investments.

The first phase of the bidding process was encouraging; The equity contributions to renewable energy generation project
Argentine government received offers for more than 6,000 companies. FODER is run by Argentina’s Investment and
MW, and granted contracts to build 2,400 MW (1,500 MW in Foreign Trade Bank (BICE).
wind and 900 MW in solar), with estimated investments of
Renewable energy projects can also be financed by Project
USD 1.8 billion. The next bidding process will be in May 2017.
Finance, a financing scheme in which debt and equity are
Financing is now the main challenge most companies face.
used to finance an energy project and are then paid back from
To meet the challenge of financing, Argentina’s government the cash flow generated by the project. Argentina already
implemented a sector-specific trust fund, the “Trust Fund for has experience with this type of financing, which is used
Renewable Energy” or FODER as part of its Renewable Energy commonly by oil companies.
Law. FODER provides payment guarantees for all tendered
Lastly, projects can be financed by the Project for Renewable
power purchase agreements (PPA’s) in addition to project
Energy in Rural Markets (PERMER), which was implemented
financing assistance. The Argentine government allocated
in 1999 to help the rural low-income areas of Argentina meet
ARS 12 billion to FODER. The fund’s project finance account
their energy needs. PERMER receives its funds from a variety
is funded by a mix of treasury funds, public offerings, the
of sources, such as loans from the World Bank, donations
Argentine government-administered pension fund (ANSES)
from the Global Environment Facility, the Argentine Ministry
and multilaterals. The account will be used to offer long-term
of Education, provincial funds and the private sector.
project loans as well as to provide interest rate subsidies and

20 Renewables in Argentina
 Ignacio Aquino
Deals
PwC Argentina

wable

PwC Argentina 21
Project analysis
Macroeconomic considerations
One of the most significant aspects to consider when analyzing
an investment in Argentina is the economy, with a specific
focus on inflation and exchange rates.
Argentina has had high inflation rates since 2007. From 2010
to 2014 the official exchange rate remained relatively stable
despite the increase of costs measured in local currency. This
situation was partially reverted in January 2014 when the
Argentine Peso depreciated by 26% (from 6.50 AR$/US$ in
December 2013 to 8.00 AR$/US$ in January 2014). Even
though the devaluation was supposed to improve Argentine
competitiveness, the industries passed through, totally or
partially, the devaluation effect to prices, which was translated
into the acceleration of monthly inflation rates.
In December 2015 the new Macri Administration lifted foreign
exchange controls and placed the Argentine peso under a
managed-float regime. The peso devalued 30% on the first
day of unrestricted trading, from 9.84 to 13.94 ARS per USD,
and proceeded to further decline in the subsequent months,
trading currently c. to 16.00 ARS per USD. Economists and
investors have hailed the move as one that will ultimately
stabilize the peso at levels set by the market and boost
investor's confidence.
For 2017, the Argentine Government predicts GDP (est. USD
550 billion in 2016) growth of 3.5%, a USD/ARS exchange
rate of 18, a government deficit of 4.2% and an inflation
rate of 17% (private consultants predict inflation rate to be
closer to 22%). In any event, these expectations represent
a significant improvement compared to 2016. From 2018
onwards, specialists project an annual decrease in the inflation
rate, predicting that it will reach 6% by 2022. The exchange
rate is expected to float freely in order to maintain the current
real exchange rate, thus allowing Argentine to once more be
considered atractive by international markets.
22
Expected rate of return
When considering local investment, investors should
understand certain aspects of Argentina’s expected rate of
return.
• Country risk: The country risk that is usually considered
in the local market is that of the EMBI+ (an index
developed by JP Morgan). It is common to consider either
the spot value or the one year average. The credit default
swap methodology is not usual nor completely accepted.
In the long run, country risk which is currently in 480
basic points (b.p.) is expected to go down to 300 b.p.
• Size premium: When estimating the Cost of Equity (the
return for an equity investor) it is usual to consider a
size premium, because the comparable companies used
to estimate the Beta are significantly larger than the
company that is under analysis. In Argentina the stock
market is rather small – as a result there are usually no
comparable trading companies. Consequently one will
usually look in Latin America or the US for comparable
companies. Considering the size of all local companies,
the small cap size premium should be applied for the
companies in Argentina (even the ones with the largest
capitalization levels). In Argentina, a smaller premium is
usually considered (between 1% and 2% depending on
the size of the company or the stage of the project); no
higher premiums are observed.
Restrictions to buy foreign currency and
pay dividends abroad
Late in 2011, the former National Government tightened
controls on currency exchange by requiring an approval from
the tax authorities when converting AR$ into any foreign
denominated currencies. The stated goal of this measure
was to clamp down on tax evasion and money laundering.
However, in practical terms and according to public
statements by market experts, the true motive was to prevent
the capital outflows from Argentina.
Market experts also stated that the Central Bank of Argentina
had informally instructed financial institutions to obtain
approval before authorizing any purchase of foreign currency
to pay dividends abroad.
Although there are no restrictions under the Argentine foreign
exchange regulations for the payment of interests, dividends,
royalties and other commercial payments, these types of
transactions would have been delayed or denied as a result of
the informal restrictions.
This kind of practices and polices have been eliminated by the
current government; and consequently dividend payments
abroad are allowed.
Renewables in Argentina
 Jonathan Park
Deals
PwC Argentina

Sources:
• Foder: http://www.renewableenergyworld.com/articles/2016/06/argentina-launches-innovative-renewables-program.html
• Permer: https://permer.se.gob.ar/contenidos/verpagina.php?idpagina=3697
• Project Finance en Argentina: http://www.energiaestrategica.com/project-finance-argentina-condiciones-financiamiento-
desarrollo-proyectos-energia-renovable/

PwC Argentina 23
 Exhibit

24 Renewables in Argentina
Bids awarded, by technology, under renewable electric power purchase agreements, according to the
terms established in resolution 136e/2016 of the Ministry of Energy and Mining

Bid Bidders Name Province Locality Price offered Power Power

[USD/mwh] offered allocated
(mw) (mw)
GLOBAL C.T. Biogás
BG-06 SANTA FE Ricardone 118.00 1.2 1.2
GREEN Ricardone

Bid Bidders Name Province Locality Price offered Power Power

[USD/mwh] offered allocated
(mw) (mw)
ENVISION P.E. García del
EOL-14 BUENOS AIRES Bahía Blanca 49.81 10 10
ENERGY 1 Rió
ENVISION P.E. Vientos del
EOL-17 BUENOS AIRES Buratovich 49.08 50 50
ENERGY 2 Secano

EOL-06 GENNEIA I P.E. Villalonga BUENOS AIRES Villalonga 54.96 50 50

ENVISION P.E. Los

EOL-16 NEUQUEN Confluencia 53.88 75 75
ENERGY 2 Meandros
ENVISION
EOL-15 P.E. Cerro Alto RIO NEGRO Pilcaniyeu 56.98 50 50
ENERGY 2
C. T. LOMA DE
EOL-44 P.E. Corti BUENOS AIRES Bahía Blanca 58.00 100 100
LA LATA

EOL-22 3 GAL S.A. P.E. Garayalde CHUBUT Garayalde 59.00 24.15 24.15

CP P.E. La
EOL-35 BUENOS AIRES Villarino 61.50 99 99
RENOVABLES Castellana
Pampa del
EOL-33 ENAT S.A P.E. Kosten CHUBUT 59.41 24 24
Castillo
P.E. Vientos Los
EOL-05 EREN SANTA CRUZ Las Heras 62.88 97.2 97.2
Hércules
P.E. Chubut
EOL-O8 GENNEIA I CHUBUT Puerto Madryn 66.00 49.875 28.35(*)
Norte
ARAUCO P.E. Arauco II
EOL-46 LA RIOJA Arauco 67.19 99.75 99.75
S.A.P.E.M. (Etapa 1 y 2)
(*)
This bid is pre-alloted partially in order to not exceed the limit established
in Exhibit 3 The power to be allotted will be adjusted considering the
aerogenerators module, without exceeding the assigned power.

Bid Bidders Name Province Locality Price offered Power Power

[USD/mwh] offered allocated
(mw) (mw)

SFV-38 JEMSE SE P.S. Cauchari 1 JUJUY Cauchari 60.00 100 100

SFV-39 JEMSE SE P.S. Cauchari 2 JUJUY Cauchari 60.00 100 100

SFV-40 JEMSE SE P.S. Cauchari 3 JUJUY Cauchari 60.00 100 100

San Antonio de
SFV-13 FIELDFARE P.S. La Puna SALTA 58.98 100 100
los Cobres

PwC Argentina 25
ROUND 1.5 - Awarded Projects: WInd

Technology Region ID Province Name of the Bidder MW Price

project allocated
(USD/Mwh)

SINOHYDROCORTPORATION
EOL-45 BUENOS AIRES P.E. Pampa 100 46,0
LIMITED
BUENOS P.E. Vientos de CENTRALES DE LA COSTA
EOL-48 BUENOS AIRES 38 55,5
AIRES Necochea 1 ATLÁNTICAS. A

EOL-29 BUENOS AIRES P.E. Miramar ISOLUX INGENIERIAS.A. 98 56,4

P.E. La
EOL-19 LA PAMPA FACUNDO FRAVEGA 37 50,0
Banderita
COMAHUE
EOL-09 RIO NEGRO P.E. Pomona 1 GENNEIAS.A. 100 54,9
WIND
P.E. Del PETROQUIMICA COMODORO
EOL-20 SANTA CRUZ 100 49,5
Bicentenario RIVADAVIAS.A.
PATAGONIA
P.E. Loma
EOL-27 CHUBUT ISOLUX INGENIERIAS.A. 100 53,5
blanca 6
EMPRESA MENDOCINA DE
EOL-32 MENDOZA P.E. El Sosneado 50 55,0
ENERGÍAS.A.P.E.M.
RESTO P.E. Arauco II PARQUE EÓLICO ARAUCO
EOL-47 LA RIOJA 95 56,7
EOLICA (Etapa 3 y 4) S.A.P.E.M.

EOL-37 CORDOBA P.E. Achiras CP RENOVABLES S.A. 48 59,4

ROUND 1.5 - Alloted Projects: Solar

Technology Region ID Province Name of the Bidder MW Price

project allocated
(USD/Mwh)

ENERGÍAS SUSTENTABLES
SFV-21 CATAMARCA P.S. Saujil 23 51,9
S.A.

SFV-20 CATAMARCA P.S. Tinogasta ALEJANDRO IVANISSEVICH 15 53,4

NOA ENERGÍAS SUSTENTABLES

SFV-18 CATAMARCA P.S. Fiambalá 11 53,7
S.A.

SFV-12 SALTA P.S. Cafayate ISOLUX INGENIERIAS.A. 80 56,3

SFV-15 LA RIOJA P.S. Nonogasta FIDES GROUP S.A. 35 56,4

EMPRESA MENDOCINA DE
SOLAR SFV-34 MENDOZA P.S. Anchoris 21 48,0
ENERGÍAS.A.P.E.M.
P.S. General EMPRESA MENDOCINA DE
SFV-06 MENDOZA 18 55,0
Alvear ENERGÍAS.A.P.E.M.
EMPRESA MENDOCINA DE
SFV-04 MENDOZA P.S. La Paz 14 55,0
RESTO ENERGÍAS.A.P.E.M.
SOLAR EMPRESA MENDOCINA DE
SFV-01 MENDOZA P.S. Lava lie 18 55,0
ENERGÍAS.A.P.E.M.
EMPRESA MENDOCINA DE
SFV-02 MENDOZA P.S. Lujan de Cuyo 22 55,0
ENERGÍAS.A.P.E.M.
EMPRESA MENDOCINA DE
SFV-05 MENDOZA P.S. PASIP 1 52,0
ENERGÍAS.A.P.E.M.

26 Renewables in Argentina
ROUND 1.5 - Alloted Projects: Solar

Technology Region ID Province Name of the Bidder MW Price

project allocated
(USD/Mwh)

SOENERGY INTERNATIONAL
SFV-31 SAN JUAN P.S. Sarmiento 35 53,0
INC.

SFV-46 SAN JUAN P.S. Ullum NI FIDES GROUP S.A. 25 53,7

P.S. Iglesia - JINKOSOLAR HOLDING

SFV-49 SAN JUAN 80 54,1
Guañizuli CO.LTD.

SFV-45 SAN JUAN P.S. Ullum N2 ALEJANDRO IVANISSEVICH 25 55,2

RESTO SFV-37 SAN JUAN P.S. Ullum 4 COLWAY 08 INDUSTRIAL 14 56,5

SOLAR
SOLAR
SFV-32 SAN JUAN P.S. Ullum3 ALEJANDRO IVANISSEVICH 32 57,6

LATINOAMERICANA
SFV-57 SAN JUAN P.S. Las Lomitas 2 59,2
ENERGIA

SFV-41 SAN JUAN P.S. La Cumbre DIASER S.A. 22 56,7

P.S. Caldenes del QUAATRO PARTICIPACOES

SFV-36 SAN JUAN 25 58,9
Oeste S.A.

PwC Argentina 27
Contacts
PwC Argentina
Ezequiel Mirazón Hernán Rogriguez Cancelo Ignacio Rodriguez
Energy Leader Assurance Tax & Legal Services
ezequiel.mirazon@ar.pwc.com hernan.rodriguez.cancelo@ar.pwc.com ignacio.rodriguez@ar.pwc.com

Ignacio Aquino Marcelo Iezzi Ariel Fleichman

Deals Sustainability Strategy &
ignacio.aquino@ar.pwc.com marcelo.iezzi@ar.pwc.com ariel.fleichman@ar.pwc.com

PwC Spain
Carlos Fernandez Landa David Rodriguez Villanueva
Energy Leader Strategy &
carlos.fernandez.landa@es.pwc.com david.rodriguez.villanueva@
strategyand.es.pwc.com

Argentina Investment and Trade

Promotion Agency
Andrés Tahta Francisco Preusche
Executive Vice president fpreuche@invest.org.ar
atahta@invest.org.ar

Offices
Buenos Aires Córdoba Mendoza Rosario
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©2017 In Argentina, the member firms of the global network of PricewaterhouseCoopers International Limited are Price Waterhouse & Co. S.R.L, Price Waterhouse & Co. Asesores de
Empresas S.R.L. and PwC Legal S.R.L, each of which, either separately or jointly, are identified as PwC Argentina.