Argentina auction seeks to spur $2 billion clean-power spending

Bloomberg

Argentina set rules for its first planned auction for renewable energy, an event that’s expected to spur as much as 1 gigawatt of new capacity led by wind and solar farms.
The auction may drive as much as $2 billion in investments, the government said in an e-mailed statement. The deadline to submit proposals is Aug. 22 and the results will be announced Sept. 28, Renewable Energy Undersecretary Sebastian Kind said.
This will be the first power auction since the country passed a law last year to promote wider use of renewable energy. President Mauricio Macri is seeking to expand Argentina’s efforts to fight climate change and diversify Argentina’s power mix. The government is expected to organize additional energy auctions.
“The government did what it said it would do and what the market expected, which is good,” said Ana Verena Lima, a Bloomberg New Energy Finance analyst in Sao Paulo. “That generates confidence that investments will start entering the market and banks will increase their capability to finance renewable projects. If everything goes right, the market will look at Argentina with more confidence.”

New Capacity
More than 60 percent of Argentina’s energy comes from fossil fuels, according to Bloomberg New Energy Finance. The auction will include 600 megawatts of wind power, almost triple the 215 megawatts in operation now, and 300 megawatts of solar power, up from almost nothing, as well as 65 megawatts of biomass, 20 megawatts of small hydropower and 15 megawatts of biogas.
Projects are expected to be financed by bonds and corporate finance, and multilateral banks will provide guarantees, according to Verena.
Developers will be competing for 20-year contracts to sell power from planned power projects, which should be complete within two years after the auction. As many as 8,000 construction jobs may be created.
Contract prices will probably be closer to $40 a megawatt-hour than current rates of more than $100, Kind said, in part because Argentina will offer a sovereign warrant and the World Bank Group plans to provide a $500 million special warrant.
“The warrant scheme we have structured for this auction should ensure that bidders awarded the projects will get financing at 300 basis points below the sovereign,” Kind said. “That’s the main strength for the success of this auction.” Future auctions over the next four years will be set in October, with the country expecting to spur a total of 10 gigawatts of capacity.