Argentina to forgo tenders, directly award energy mega-projects

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Wednesday, May 24, 2017

Argentina's government will forgo public tenders and seek to directly award three energy projects requiring some US$18bn of total investment in order to expedite their completion.

China has committed to financing all three projects, which comprise the US$5bn Kirchner-Cepernic dam complex in Santa Cruz province, the US$7bn Atucha III nuclear reactor in Buenos Aires province, and an US$8bn nuclear reactor in Río Negro province.

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The energy ministry plans to publish a decree of necessity and urgency (DNU) for the Chinese financing to come in the form of a concessional loan, Argentine state news service Télam reported.

The OECD defines concessional loans as "loans that are extended on terms substantially more generous than market loans. The concessionality is achieved either through interest rates below those available on the market or by grace periods, or a combination of these. Concessional loans typically have long grace periods."

That the Chinese loans carry interest rates far below what Argentina would be able to secure from commercial lenders justifies the decision to eschew a competitive bidding process, Argentine energy minister Juan José Aranguren (pictured) was reported as saying.

"The possibility of there being a lot of competition for a hydroelectric or nuclear plant is low," Aranguren also said.

The minister and former longtime Royal Dutch Shell executive said that the high volume of competitive offers received in national tenders for renewable and thermal energy last year will allow Argentina to avoid having to directly award mega-projects in the future.

The ministries of environment and energy are finishing an environmental impact study for the Santa Cruz dams. The report will be presented to provincial and national authorities next week, Aranguren said, with a public hearing expected for mid-July.

Work on the dams - which Argentina's Supreme Court suspended in December 2016, citing insufficient environmental evaluation and consultation with area residents - could resume as soon as September, the Télam report said.

Construction on the 700MW Atucha III is expected to begin in January 2018, while work on the 1,150MW Río Negro nuclear reactors is slated to start in 2020.

China has also committed to finance the 637MW Chihuido dam in Neuquén province.