Lower risk, easier financing in Argentina's RenovAR - Fitch

The way Argentina’s renewable energy programme, RenovAR, is structured will help lower project risk and make it easier for developers to secure financing, Fitch Ratings says.

Over 6.3 GW of wind and solar projects, alongside several megawatts from other sources, bid in Argentina’s first 1-GW tender under RenovAR. The ultimate goal of the programme is to boost the share of renewables to 8% in 2017 and 20% in 2020.

Fitch explains in a note that RenovAR's structure addresses legal and off-take risks, and mitigates counterparty risks present in traditional renewable energy projects. There is a three-level guarantee mechanism, including for delinquencies or nonpayment by power purchase agreement (PPA) off-taker CAMMESA, and for PPA termination. There is also a guarantee for USD 500 million provided by the World Bank.

To participate in the tender, bidders need to have at least 12 months of measurement data, which, Fitch says is adequate for solar projects. However, the agency warns that the period may not be long enough to accurately assess the volatility of wind resources. So there still remains some risk for generation volumes there.

Meanwhile, raising debt for Argentine projects under RenovAR would be easier, Fitch says, thanks to the requirement for special purpose vehicle structures, pre-tender environmental studies and minimum financial guarantees from potential sponsors.

Leaving all that aside, Argentina also provides fiscal incentives for renewable energies, such as import duty exemption, accelerated depreciation, and other tax incentives.

It was announced recently that wind and solar offers have fallen to as low as USD 49 (EUR 43.7) per MWh and USD 59 per MWh, respectively.

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