In a move toward increasing foreign investment, the Argentine government established a National Program to promote the use of Renewable Energy Sources declaring power generation to be of national interest (the “Program”). This initiative will include the use of renewable energy sources as well as research for the technological development and manufacture of equipment to serve this purpose. As a result, president Macri launched “Plan RenovAr” (or “Plan Renovate”) aimed at generating renewable energy to be added to the country´s electric supply. This program seeks to increase domestic and foreign investment for project development and electric power generation through alternative energy sources such as solar, wind, biomass, and other clean energies. The goal is to produce 1,000 MW of electricity with an estimated investment of 2,100 Million USD. The country has had an energy deficit for several years.
President Macri and his Minister of Energy and Secretary of New and Renewable Energy traveled to Houston, Texas, in March 2016 to seek investments. Therefore, companies and international funds are following this new initiative very closely. Argentina has an enormous capacity to generate solar, wind and biomass power, but historically the clean energy price has been so high that clean technologies constitute a little more than 1% of the country’s energy matrix. However, the Program requires the country to generate 8% of its electricity from clean energy sources by 2017 and that number rises to 20% for 2025.
Contracts will be awarded based on a public bidding process. The public bidding process, began in late June and investors have until August to submit bids. Initially, contract awards were expected by September, but as of July 2016, the process has been slightly delayed pending review of modifications to the projects submitted by bidders. Additional bidding processes can be expected for later dates. According to the Program, power generation parks should be operating by the last quarter of 2017.
The law provides a number of tax benefits to investors: accelerated amortization of income tax; compensation of losses for 10 year profits; early VAT reimbursement; Minimum Presumed Income Tax Exemption; exemption from 10% tax on dividends to reinvestment of profits; exemption from import duties on capital goods, components, supplies and equipment until 2017; no application of specific, national, provincial and municipal royalties and taxes during the promotional program. It permits the transfer tax increases to the selling price of energy. In addition, a tax certificate will be awarded to projects with facilities that meet certain criteria, mainly focused on using domestic resources in the facilities, and allows using the certificate to obtain additional tax advantages.
Further, a trust fund will be created to promote project financing. It will grant collateral and guarantees to support contracts for the sale of electricity. In turn, the Banco de la Nación Argentina will provide special short term credit lines with varying interest rates differentials designed to finance the payment of the Value Added Tax (VAT) to be paid by beneficiaries during implementation of the project and until its active commercial operation.
The Argentine government has given great impetus to these investments by implementation of the Program and other policies, which present an interesting opportunity for companies looking to invest in South America given that Argentina’s energy sector is emerging as the most promising destination in the region. The bidding process for contracts is commencing and it is expected to have the success envisioned by the President and his ministers.
Matias P. Cosentino: Matías P. Cosentino is an attorney based in Buenos Aires, Argentina and is based in the Firm’s Buenos Aires office. His areas of practice include corporate legal counsel, formation of legal entities, mergers, acquisitions, dissolutions, regulatory matters, commercial contracts, labor relations and conflicts, trust funds, industrial investment projects, international trade, trademarks and patents, as well as advisory services to corporate and entrepreneur clients. He is also a litigant in labor, commercial and contract issues, and has conducted numerous out-of-court settlements. He is experienced in counseling foreign companies doing business in Argentina. Cosentino’s extensive legal experience includes working as legal adviser to the Argentinian Government in the Ministry of Economy (Ministerio de Economía de la Nación) between 2005 and 2008, where he conducted the formation and administration of public trust funds, drafted and reviewed contracts, negotiated with banks and debtor companies, provided legal counsel in connection with debt restructuring plans, bidding processes in public and private tenders, and internal audits.
Gabriela N. Smith: Gabriela is the Managing Attorney of the Firm and is based in the Firm’s Dallas office. She is an international lawyer and has experience working with a broad spectrum of corporate clients, including start-up companies, privately-held multinationals and public companies.
Originally from Buenos Aires, Argentina, Gabriela represents multinational companies in a variety of international contractual and regulatory matters, and routinely acts as outside general counsel to companies in the outsourcing, technology, and professional services industries, among others. She enjoys counseling clients in matters where culture and business collide, and where her bilingual and bicultural skills can be an additional asset to her clients.
Gabriela regularly speaks locally and internationally on topics such as “Doing Business in the United States,” “Doing Business in Latin America,” “The Foreign Corrupt Practices Act,” and on domestic and international issues affecting multinational companies.
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