The Argentine Electricity Sector

Electricity was first made available in Argentina in 1887 with the first public street lighting in Buenos Aires. The Argentine Government’s involvement in the electricity sector began in 1946 with the creation of the Dirección General de Centrales Eléctricas del Estado (General Directorate of Electric Power Plants of the State) to construct and operate electricity generation plants. In 1947, the Argentine Government created Agua y Energía Eléctrica S.A. (Water and Electricity, or ‘AyEE’) to develop a system of hydroelectric generation, transmission and distribution for Argentina.

In 1961, the Argentine Government granted a concession to the Compañía Italo Argentina de Electricidad (Italian Argentinean Electricity Company, or ‘CIADE’) for electrical distribution in a part of the City of Buenos Aires. In 1962, the Argentine Government granted a concession formerly held by the Compañía Argentina de Electricidad (Argentine Electricity Company, or ‘CADE’) to Servicios Eléctricos del Gran Buenos Aires (Electricity Services of Greater Buenos Aires, or ‘SEGBA’) for the generation and distribution of electricity to parts of Buenos Aires. In 1967, the Argentine Government granted a concession to Hidroeléctrica Norpatagónica S.A. (‘Hidronor’) to build and operate a series of hydroelectric generation facilities. In 1978, CIADE transferred all of its assets to the Argentine Government, following which CIADE’s business became state owned and operated.

By 1990, virtually all of the electricity supply in Argentina was controlled by the public sector (97% of total generation). The Argentine Government had assumed responsibility for the regulation of the industry at the national level and controlled all of the national electricity companies, AyEE, SEGBA and Hidronor. The Argentine Government also represented Argentine interests in generation facilities developed or operated jointly with Uruguay, Paraguay and Brazil. In addition, several provinces operated their own electricity companies. Inefficient management and inadequate capital spending, which prevailed under national and provincial government control, were in large measure responsible for the deterioration of physical equipment, decline in quality of service and proliferation of financial losses that occurred during this period.

In 1991, as part of the economic plan adopted by then President Carlos Menem, the Argentine Government undertook an extensive privatization program of all major state owned industries, including within the electricity generation, transmission and distribution sectors. In 1992, the Argentine Congress adopted Law No. 24,065, the Electricity Regulation Framework (a supplement to Law No. 15,336, Federal Electricity Law, and its Administrative Order No. 1,398/92), which was the keystone for the reform and privatization of the sector. The goal of the law was to modernize the electricity sector by promoting efficiency, competition, improved service and private investment.
It restructured and reorganized the sector, and provided for the privatization of virtually all business activities that had been carried out by Argentine state-owned enterprises. The law established the basis for the ENRE (Ente Nacional Regulador de la Electricidad or the ‘National Electricity Regulatory Entity’) and other institutional authorities in the sector, the administration of the Wholesale Electricity Market(‘WEM’), pricing at the spot, tariff-setting in regulated areas and for evaluating assets to be privatized. This law also had a profound, albeit indirect, impact at the provincial level, as virtually all of the provinces followed the regulatory and institutional guidelines of this law. Finally, this law, which continues to provide the framework for regulation of the electricity sector since the privatization of this sector, divided generation, transmission and distribution of electricity into separate businesses, each subject to segment-specific regulation.

Under Law No. 24,065, distribution and transmission activities are considered public services and defined as natural monopolies. These activities are completely regulated by the Government and require a concession. Although the concessions granted to distributors do not impose specific investment parameters, distributors are obligated to connect new customers and meet any increased demand. The expansion of existing transmission facilities by the respective concessionaires is not restricted. In contrast, generation, although regulated by the Government, is not deemed a monopoly activity and is subject to free competition by new market entrants. Operation of hydroelectric power plants requires a concession from the Government. New generation projects do not require concessions but must be registered with the Former Secretariat of Energy (‘SE’).

Many of the provincial governments, following the privatization path in the sector, have established their own politically and financially independent regulatory bodies at the provincial level. Local distribution in the provinces (except the City of Buenos Aires and certain areas of the Province of Buenos Aires that were served by SEGBA and today are served by Edenor and Edesur) is regulated by each province. Previously, the utilities themselves had played a major role in making sector policies and setting tariffs for the provinces.

At the end of 2001 and beginning of 2002, Argentina experienced an unprecedented crisis that virtually paralyzed the country’s economy through most of 2002 and led to radical changes in Government policies. The crisis and the Government’s policies during this period severely affected the electricity sector. Pursuant to the Emergency Law, the Argentine Government, among other measures:

• Converted electricity prices and transmission and distribution tariffs from their original U.S. Dollar values to Pesos at a rate of Ps. 1.00 per US$1.00;
• Froze all regulated transmission and distribution tariffs, revoked all price adjustment provisions and inflation indexation mechanisms in public utility concessions (including electricity transmission and distribution concessions), and empowered the Executive Branch to conduct a renegotiation of these concessions, including the tariffs for electricity transmission and distribution services; and
• Required that spot prices on the WEM be calculated based on the price of natural gas (which is also regulated by the Argentine Government), regardless of the fuel actually used in generation activities, even if gas is unavailable.

These measures created a huge structural deficit in the operation of the WEM and, combined with the devaluation of the Peso and high rates of inflation, had a severe effect on the electricity sector in Argentina, as electricity companies experienced a decline in revenues in real terms and a deterioration of their operating performance. Most electricity companies had also incurred large amounts of foreign currency indebtedness under the Convertibility regime. Following the elimination of the Convertibility regime and the resulting devaluation of the Peso, the debt service burden of these companies increased sharply, leading many of these companies to suspend payments on their foreign currency debt in 2002. This situation caused many Argentine electricity generators, transmission companies and distributors to defer further investments in their networks. As a result, Argentine electricity market participants, particularly generators, are currently operating at near full capacity, which could lead to insufficient supply to meet a growing national energy demand. In addition, the economic crisis and the resulting emergency measures had a material adverse effect on other energy sectors, including oil and gas companies, which has led to a significant reduction in natural gas supplies to generation companies that use this commodity in their generation activities.

In December 2004 the Argentine Government adopted new rules to meet demand growth, including the construction by the Argentine Government of two new 800 MW combined cycle generators. These generators commenced operations at full capacity in the first half of 2010. The costs of construction were primarily financed with net revenues of generators derived from energy sales in the spot market, deposited into a fund called the Fondo de Inversiones Necesarias que Permitan Incrementar la Oferta de Energía Eléctrica en el Mercado Eléctrico Mayorista (’FONINVEMEM’).

The construction of these new generators reflects a recent trend by the Argentine Government to take a more active role in promoting energy investments in Argentina. An example of this is the creation of Energía Argentina S.A. (‘ENARSA’) (Law No. 25,943), currently Integración Energética Argentina S.A. (‘IEASA’) with the purpose of developing almost every activity in the energy sector, from the exploration and exploitation of hydrocarbons, the transport and distribution of natural gas, to the generation, transmission and distribution of energy. In addition to these projects, in April 2006 the Argentine Congress enacted a law that authorized the Executive Branch to create a special fund to finance infrastructure improvements in the Argentine energy sector through the expansion of generation, distribution and transmission infrastructure relating to natural gas, propane and electricity. The special fund would obtain funds through cargos específicos (specific charges) passed on to customers as an itemization on their energy bills.

Finally, in September 2006 the Argentine Government, in an effort to respond to the sustained increase in energy demand following Argentina’s economic recovery after the crisis, adopted new measures that seek to ensure that energy available in the market is used primarily to service residential users and industrial and commercial users whose energy demand is at or below 300 kW and who do not have access to other viable energy alternatives. In addition, these measures seek to create incentives for generation plants to meet increasing energy needs by allowing them to sell new energy generation into the Energía Plus (Resolution No. 1281/06 of the SE (former Secretariat of Energy) system at unregulated market prices.

Continuing with the trend to encourage the installation of new generation, the SE by means of its Resolution No. 220/2007 and modifications thereto, allowed CAMMESA to execute WEM Supply Agreements with a generator agent of the WEM. The values to be paid by CAMMESA (Compañía Administradora del Mercado Eléctrico Mayorista or the ‘Argentine Wholesale Electricity Market Clearing Company’) in consideration for the capacity and the energy supplied by the generator must be approved by the SE. The generator shall guarantee certain availability of the generation units (established as a percentage), and if it fails to do so, penalties apply.

In 2008, the SE allowed CAMMESA to execute WEM Supply Agreements with generators the intention of which is to execute plans to repair and/or repower their generating equipment, and for the cost which would exceed 50% of the revenues that they expect to receive on the sales to the spot market.

Since 2013, the SE introduced material changes to the structure and operation of the WEM through Resolution No. 95/2013, as amended, establishing a different remuneration scheme in Pesos (payable in cash and receivables) for the whole generation sector, except certain power plants and electricity sold under contracts with differential remuneration, regulated by SE.

Transactions among different participants in the electricity industry take place through the Wholesale Electricity Market, or WEM, which was organized concurrently with the privatization process as a competitive market in which generators, distributors and certain large users of electricity could buy and sell electricity at prices determined by supply and demand, and were allowed to enter into long-term electricity supply contracts. The WEM consists of:

• a term market where quantities, prices and contractual conditions are agreed upon directly between sellers and buyers (after the enactment of former Secretariat of Energy (‘SE’) Resolution No. 95/2013, this was limited to the Energy Plus market, and later being added the Term Market from Renewable Energy Sources, also known as MAT ER, according to Resolution No. 281/2017 of former Ministry of Energy and Mining);
• a spot market where prices are established on an hourly basis as a function of economic production cost; and
• a stabilized pricing system of spot prices, which we refer to as the seasonal price, set on a semi-annual basis and designed to mitigate the volatility of spot prices for purchases of electricity by distributors.

The following chart shows the relationships among the various actors in the WEM:

CAMMESA

The creation of the WEM (‘Wholesale Electricity Market’) made it necessary to create an entity in charge of the management of the WEM and the dispatch of electricity into the SADI (Sistema Argentino de Interconexión or ‘Argentine Electricity Grid’). The duties were entrusted to CAMMESA (Compañía Administradora del Mercado Eléctrico Mayorista or ‘Argentine Wholesale Electricity Market Clearing Company’), a private company created for this purpose.

CAMMESA is in charge of:

• the dispatch of electricity into the SADI, maximizing the SADI’s safety and the quality of electricity supplied and minimizing wholesale prices in the spot market;
• planning energy capacity needs and optimizing energy use in accordance with the rules set forth from time to time by the Former Secretariat of Energy (‘SE’);
• monitoring the operation of the term market and administering the technical dispatch of electricity under agreements entered into in that market;
• acting as agent of the various WEM agents and carrying out the duties entrusted to it in connection with the electricity industry, including billing and collecting payments for transactions between WEM agents (upon enactment of SE Resolution No. 95/2013, this was limited to the contracts then in force and, thereafter, to those contracts executed under Energy Plus Program, and later being added those contracts executed under Term Market from Renewable Energy Sources (‘MAT ER’) according to Resolution No. 281/2017 of former Ministry of Energy and Mining);
• purchasing and/or selling electric power from abroad or to other countries by performing the relevant import/export transactions;
• purchasing and administrating of fuels for the applicable WEM generators; and
• providing consulting and other related services.

Five groups of entities each hold 20% of the capital stock of CAMMESA. The five groups are the Argentine Government, the associations that represent the generation companies, transmission companies, distribution companies and large users.

CAMMESA is managed by a board formed by representatives of its shareholders. The board of CAMMESA is composed of ten regular and ten alternate directors. Each of the associations that represent generation companies, transmission companies, distribution companies and large users are entitled to appoint two regular and two alternate directors of CAMMESA. The other directors of CAMMESA are the Under Subsecretariat of Electric Energy, who is the board chairman in virtue of the delegation of the Federal Government, and an independent member, who acts as vice chairman. The decisions adopted by the board of directors require the affirmative vote of the board chairman. CAMMESA’s operating costs are financed through mandatory contributions by the WEM agents.

Generators

Generators are companies with electricity generating plants that sell output either partially or wholly through the SADI. Generators are subjected to the scheduling and dispatch rules set out in the regulations and managed by CAMMESA. Privately owned generators may also enter into direct contracts with distributors or large users. However this possibility was suspended by SE Resolution No. 95/2013, limited to the contracts executed under Energy Plus Program, and later being added those contracts executed under MAT ER according to Resolution No. 281/2017 of former Ministry of Energy and Mining.

As of December 31, 2023, Argentina had a nominal installed capacity as reported by CAMMESA of approximately 43,774 MW (846.9 MW compared to 2022), composed by 58.1% of thermal, 24.8% of hydroelectric, 13.1% of renewable and 4.0% of nuclear. This rise is mainly due to the commercial commissioning of renewable units under RenovAr and MAT ER programs (+657.4 MW), as well as thermal facilities, most of them under SEE Res. No. 287/17 and SE Res. No. 220/07 (+335.4 MW), including CTEB’s cycle closing (+281 MW). These increases were partially offset by power capacity adjustments (-8.7 MW), unit recategorizations (-68.0 MW) and terminations (-69.2 MW).

Moreover, power generation experienced a 2% recovery in 2023, reaching 140,580 GWh volumes, against 137,932 GWh recorded in 2022. Greater water resources mainly account for this rise due to higher flows from the El Niño phenomenon and increased power generation availability. For the second consecutive year, in 2023 the SADI was a net power importer.

Increases in hydropower generation net of pumping (+9,138 GWh vs. 2022), nuclear power (+1,494 GWh) and renewable energy (+745 GWh) were partially offset by a decrease in thermal generation (-8,728 GWh).

Thermal power generation remained the primary source to meet the demand, using natural gas, liquid fuels (GO and FO), and mineral coal, contributing a 73,018 GWh electricity volume. Hydropower generation follows, contributing 38,514 GWh net of pumping, renewable energy with 20,085 GWh and nuclear energy with 8,963 GWh. Additionally, there were imports of 6,214 GWh (vs. 6,310 GWh in 2022), exports of 98 GWh (vs. 31 GWh in 2022) and losses of 5,840 GWh (+7% vs. 2022).

The following chart shows the evolution of power generation by source (thermal, hydroelectric, nuclear, and renewable) in GWh:

Transmission companies

Transmission companies hold a concession to transmit electric energy from the bulk supply point to electricity distributors. The transmission activity in Argentina is subdivided into two systems: the High Voltage Transmission System (‘STEEAT’), which operates at 500 kV and transports electricity between regions, and the regional distribution system (‘STEEDT’) which operates at 132/220 kV and connects generators, distributors and large users within the same region. Transener is the only company in charge of the STEEAT, and six regional companies are located within the STEEDT (Litsa, Transnoa, Transnea, Transpa, Transba and Distrocuyo). In addition to these companies, there are also independent transmission companies that operate under a technical license provided by the STEEAT or STEEDT companies.

Transmission and distribution services are carried out through concessions. These concessions are re-distributed periodically based on a re-bidding process. Transmission companies are responsible for the operation and maintenance of their networks, but not for the expansion of the system. The transmission concessions operate under the technical, safety and reliability standards established by the ENRE (Ente Nacional Regulador de la Electricidad or ‘National Electricity Regulatory Entity’). Penalties are applied whenever a transmission concessionaire fails to meet these criteria, particularly those regarding outages and grid downtime. Generators can only build lines to connect to the grid, or directly to customers. Users pay for new transmission capacity undertaken by them or on their behalf. A public hearing process for these projects is conducted by the ENRE, which issues a ‘Certificate of Public Convenience and Necessity’. Transmission or distribution networks connected to an integrated system must provide open access to third parties under a regulated toll system unless there is a capacity constraint.

Distribution companies

Distributors are companies holding a concession to distribute electricity to consumers. Distributors are required to supply any and all demand of electricity in their exclusive areas of concession, at prices (tariffs) and conditions set in regulation. Penalties for non-supply are included in the concessions agreements. The three distribution companies divested from SEGBA (Edenor, Edesur and Edelap) represent more than 40% of the electricity market in Argentina. Only a few distribution companies (i.e., Empresa Provincial de Energía de Córdoba, Empresa de Energía de Santa Fé, and Energía de Misiones) remain in the hands of the provincial governments and cooperatives. Edelap has been transferred to the jurisdiction of the Province of Buenos Aires.

Each distributor supplies electricity and operates the electricity distribution network in a specific geographical area under a concession. Each concession determines, among others, the concession area, the quality of service required, the tariffs to be paid by consumers, and the extent of the obligation to meet the demand.

The ENRE monitors the compliance of the distributors at the federal level, and provides a mechanism for public hearings in which complaints against distributors can be heard and resolved. In addition, the provincial regulatory bodies control the compliance of the local distributors with their respective concessions and local regulatory frameworks.

The provincial authorities and the ENRE control the fulfillment of the concession agreements of these public services in the provinces. Many provincial governments that have launched reforms in the electricity sector have followed the terms and conditions of the concessions used for the distribution of public services at the national level.

Large users

The wholesale electricity market classifies large users of energy into three categories: (1) Grandes Usuarios Mayores (Major Large Users or ‘GUMAs’), (2) Grandes Usuarios Menores (Minor Large Users or ‘GUMEs’) and (3) Grandes Usuarios Particulares (Particular Large Users or ‘GUPAs’).

Each of these categories of users has different requirements with respect to purchases of their energy demand. For example, GUMAs are required to purchase 50% of their demand through supply contracts and the remainder in the spot market, while GUMEs and GUPAs are required to purchase all of their demand through supply contracts.

Large users participate in CAMMESA by appointing two acting and two alternate directors through the Asociación de Grandes Usuarios de Energía Eléctrica de la República Argentina (‘Argentine Association of Electric Power Large Users’ or AGUEERA).

Price of electricity

The energy authority has kept the policy launched in 2003, under which the WEM (Wholesale Electricity Market) spot price is determined according to the available generating units’ CVP (Costo Variable de Producción or Variable Production Cost) with natural gas, even if they are not generating electricity with this fuel (SE (Secretariat of Energy) Resolution No. 240/03). Any additional liquid fuel consumption cost is recognized outside the specified market price and considered a temporary dispatch surcharge. Moreover, the WEM bears the costs of natural gas and its regulated transportation, as well as the associated costs in case of import (SGE (former Government Secretariat of Energy) Resolution No. 25/18 and SE Resolution No. 354/20).

As of November 2022, the approved maximum spot price for energy was AR$1.682/MWh (SE Resolution No. 719/22), AR$2,691/MWh from May 2023 (SE Resolution No. 323/23), AR$3,767/MWh from August 2023 (SE Resolution No. 612/23) and AR$7,534/MWh from February 2024 (SE Resolution No. 7/24). However, the following chart shows the average monthly price that all electricity system users should pay so that the power grid would not run into a deficit. In addition to the energy price, this includes the power capacity fee, the generation cost, fuels such as natural gas, FO (fuel oil), GO (gas oil) and mineral coal, and other minor items.

Note: Average monthly monomic price in US$/MWh. Source: CAMMESA, converted into dollars at the official exchange rate.

Fuel supply and consumption

Under the Ministry of Productive Development (former SGE) Resolution No. 12/19, fuel commercial management and procurement for power plants were centralized in CAMMESA (Compañía Administradora del Mercado Mayorista Eléctrico or the Argentine Wholesale Electricity Market Clearing Company) from December 30, 2019, except for generators with PPA (Power Purchase Agreements) under Energía Plus and SEE (Subsecretariat of Electric Energy) Resolution No. 287/17. However, due to the implementation of Plan Gas.Ar (SE Resolution No. 354/20), an optional scheme was established granting exempted generators the option to assign the operation of natural gas supply and its transportation to CAMMESA, effective January 2021. Pampa opted into this scheme. The new scheme set a new thermal dispatch order centralized in CAMMESA, prioritizing units supplied with gas imported from Bolivia under a ToP condition, followed by those under Plan Gas.Ar and, lastly, units with gas assigned to CAMMESA.

Despite the drought and the increase in electricity demand, in 2023 fuel consumption reached a total of 44.9 million m³/day of gas equivalent, representing an 11% year-on-year decrease, explained by increased hydropower dispatch and mild temperatures. The use of natural gas for power plants reached 38.2 million m3/day in 2023 (-2% vs. 2022), 89% of which was local gas and 11% imported gas. Besides, the consumption of alternative fuels (FO, GO and mineral coal) was also lower than in 2022, especially during winter. The consumption of FO and GO decreased by 39% and 47%, respectively, reaching 2.2 million and 3.6 million m3/day of gas equivalent, as well as mineral coal consumption was reduced by 33% to 0.9 million m3/day of gas equivalent.

The main changes in legacy energy remuneration during 2023 are summarized below:

• General increases: in December 2022, 25% and 28% updates were provided for February and August 2023, respectively (SE Res. No. 826/22). In September 2023, a 23% increase was regulated (SE (Secretariat of Energy) Resolution No. 750/23). In October 2023, the remuneration increased by 28% from the November transaction (SE Resolution No. 869/23). Finally, in February 2024, a 74% update was established, applicable from the same month (SE Resolution No. 9/24).
• In March 2023, a non-spot remuneration for CCGT (Combined Cycle Gas Turbine) under legacy energy was implemented (SE Resolution No. 59/23).

Thermal power generators

The remuneration comprises a fixed payment for the monthly available power capacity, with or without offering DIGO (Guaranteed Availability Commitments), and a variable remuneration for the generated and operated energy and that is generated during each month’s hours of maximum thermal demand. The prices for power capacity, in AR$/MW-month, for generators not offering DIGO are as follows:

The prices for power capacity, in AR$/MW-month, for generators offering DIGO are as follows:

Prices for generated energy according to fuel, in AR$/MWh, are as follows:

The price for operated energy was set at AR$204/MWh (Jan-23), AR$255/MWh (Feb-23), AR$326/MWh (Aug-23), AR$401 (Sep-23), AR$513 (Nov-23) and AR$892 (Feb-24), irrespective of the fuel type.

The price for generated energy at peak hours each month equals the prices for generated energy for the fuel type dispatched between 18:00 and 23:00, applying a 2.0 factor in the summer (Dec-Feb) and winter (Jun-Aug) periods and a 1.0 factor in the Mar-May and Sep-Nov periods.

Unconventional source power generators

The remuneration for energy generated from any unconventional source was set at AR$4,090/MWh (Jan-23), AR$5,113/MWh (Feb-23), AR$6,545/MWh (Aug-23), AR$10,304/MWh (Nov-23) and AR$17,919 (Feb-24). This price is reduced by 50% for energy generated before commissioning.

Hydro power generators

The remuneration for hydros includes a fixed payment for the monthly available power capacity and a variable pay for generated and operated energy and that generated at peak hours. In addition, a 1.05 factor is maintained on the power capacity to compensate for programmed maintenance’s impacts, and a 1.20 factor for units in charge of maintenance of control structures on river courses and not having an associated power plant. The following chart shows power capacity prices in AR$/MW-month:

The price for generated and operated energy was set in AR$/MWh:

The price for generated energy at peak hours each month equals the prices for energy generated between 18:00 and 23:00, applying a 2.0 factor in the summer (Dec-Feb) and winter (Jun-Aug) periods and a 1.0 factor in the Mar-May and Sep-Nov periods.

In September 2006, the SE (Secretariat of Energy) approved Resolution No. 1281/06 implementing the Energía Plus scheme to encourage the development of new power generation supply. This program allows generators to install new units to sell to GU300 (Large users with demands in excess of 300 kW) energy above the base demand (electricity consumption for 2005) at a negotiated price, provided the fuel supply and transportation are secured. Generators not meeting Energía Plus demand should purchase that power in the spot market.

The SE established GU300, which does not purchase its Surplus Demand within the Term Market, should pay the Surplus Demand Incremental Average Charge (Cargo Medio Incremental de la Demanda Excedente, CMIEE). The difference between the actual cost and the CMIEE would be monthly accumulated in an individual account for each GU300 within CAMMESA’s (Compañía Administradora del Mercado Mayorista Eléctrico or the Argentine Wholesale Electricity Market Clearing Company) scope (Note No. 567/07, as amended). From June 2018, the CMIEE became greater between AR$1,200/MWh and the temporary dispatch surcharge (SE Note No. 28663845/18). Additionally, it was provided that, until further instruction, movements in each GU300’s individual account would temporarily not be recorded.

CAMMESA’s price variation adjusts part of Energía Plus PPA (Power Purchase Agreements) prices and are US$-denominated. In 2023, the energy demand remained high, with a significant degree hired under Energía Plus. From January 2021, with the implementation of Plan Gas.Ar, Pampa assigns gas supply and transportation to CAMMESA. CTG, EcoEnergía and CTGEBA provide the Energía Plus service to different WEM customers, with a 283 MW total gross capacity.

Aiming to encourage new investments to increase generation supply, the SE (Secretariat of Energy) passed Resolution No. 220/07 empowering CAMMESA (Compañía Administradora del Mercado Mayorista Eléctrico or the Argentine Wholesale Electricity Market Clearing Company) to execute PPAs (Power Purchase Agreements) with WEM (Wholesale Electricity Market) generating agents for the energy produced with new generation equipment. These are long-term PPA denominated in US$, and the price payable by CAMMESA should compensate for the investment made by the plant at a rate of return accepted by the SE.

79 MW from CTLL’s TG04 and CTEB’s 279 MW expansion are remunerated under this scheme until July 2026 and February 2033, respectively.

In March 2016, the SEE launched a call for tenders for new thermal power generation capacity, committed to making it available in the WEM (Wholesale Electricity Market) between 2016 and 2018. Successful tenderers entered a PPA (Power Purchase Agreements) for a fixed price (US$/MW-month) and a variable price excluding fuels (US$/MWh) with CAMMESA (Compañía Administradora del Mercado Mayorista Eléctrico or the Argentine Wholesale Electricity Market Clearing Company), which functioned as counterparty for distributors and the WEM’s (Wholesale Electricity Market) GU (Large Users).

The units remunerated under this regulation are CTLL’S GT05 (105 MW) and CTPP (100 MW) until August 2027 and CTIW (100 MW) until December 2027.

On May 10, 2017, the SEE (Subsecretariat of Electric Energy) issued Resolution No. 287/17 launching a call for tenders for co-generation and the closing to CCGT (Combined Cycle Gas Turbine) of existing equipment. Projects should have low specific consumption/high thermal efficiency and not exceed existing transmission capacities; otherwise, the tenderer would bear the cost of necessary expansions.

Awarded projects are remunerated under a 15-year PPA (Power Purchase Agreement) for an available power capacity price plus the non-fuel CVP (Costo Variable de Producción or Variable Production Cost) for the delivered energy and the fuel cost (if tendered), minus the penalties and fuel surpluses. Power capacity surpluses are remunerated as legacy energy.

Under this regulation, CTGEBA has a 400 MW gross capacity PPA until July 2035. With the implementation of Plan Gas.Ar, as of January 2021 CTGEBA assigns gas supply and transportation to CAMMESA (Compañía Administradora del Mercado Mayorista Eléctrico or the Argentine Wholesale Electricity Market Clearing Company). Besides, a centralized dispatch order was established considering the fuel designated for generation.

To promote the maintenance and efficient use of CCGT (Combined Cycle Gas Turbine) under the legacy energy scheme, on February 7, 2023, the SE (Secretariat of Energy) published Resolution No. 59/23 calling generators to execute a Power Capacity Availability and Efficiency Improvement Agreement with CAMMESA (Compañía Administradora del Mercado Mayorista Eléctrico or the Argentine Wholesale Electricity Market Clearing Company) for a maximum term of 5 years. Adhering units undertake to keep an 85% net power capacity availability. The PPA (Power Purchase Agreements) offers a US$2,000/MW-month power capacity price, adjusted based on availability, adding a partial payment of the power capacity price in AR$ under the legacy energy scheme.

The generated energy price was US$3.5/MWh for natural gas, US$6.1/MWh for FO (fuel oil) or GO (gas oil), and US$8.7/MWh for biofuel. The price for energy operated and generated at peak hours is set in AR$ according to the legacy energy price scheme.

Moreover, on March 15, 2023, the SE established the implementation criteria, especially the following: (i) CCGT partially committed under other PPA could opt in, excluding self-generators with associated industrial or commercial demand; (ii) the scheme’s term could not begin after January 1, 2024 or extend beyond May 31, 2028; and (iii) power generators could request the termination, subject to the SE’s approval, by proving that the supplementary remuneration resulting from the legacy energy does not reflect cost variations.

Under this scheme, Pampa signed the CCGT at CTLL and CTGEBA (1,243 MW total gross capacity) and the GTS at CTEB, which are part of the CCGT inaugurated in February 2023 (569 MW gross capacity). This differential remuneration became effective on March 1, 2023, and will continue until February 29, 2028.

On July 27, 2023, a call for tenders was launched to install between 2,250 and 3,000 MW of thermal generation or co-generation to replace or increase existing capacity and improve the SADI’s (Sistema Argentino de Interconexión or Argentine Electricity Grid) reliability and sustainability. In total, 66 projects for 7,112 MW were submitted. On November 24, 2023, 29 projects for 3,340 MW were awarded under SE (Secretariat of Energy) Resolution No. 961/23.

The call stipulated that the awarded projects would enter into a PPA (Power Purchase Agreement) with CAMMESA (Compañía Administradora del Mercado Mayorista Eléctrico or the Argentine Wholesale Electricity Market Clearing Company) for up to 15 years and would be commissioned from 2025 and no later than 2028. The PPA remunerated a price per base power capacity ranging from US$9,000 to US$19,800/MW-month (depending on the line item under the call), operation and maintenance in US$/MW-month, a variable charge in US$/MWh depending on the fuel used, and the cost of the associated fuel, if offered.

Pampa was awarded the installation of a 300 MW GT in CTGEBA and an 11 MW capacity increase at CTEB. However, on December 28, 2023, the SE instructed CAMMESA to temporarily hold the issuance of commercial documentation for the guarantee’s tender maintenance payment.

In October 2015, Law No. 27,191 was enacted, providing that by December 31, 2025, 20% of Argentina’s total demand for energy should be covered with renewable energy sources. To meet this objective, WEM’s (Wholesale Electricity Market) GU (Large Users) and CAMMESA (Compañía Administradora del Mercado Mayorista Eléctrico or the Argentine Wholesale Electricity Market Clearing Company) should cover 20% of their demand with such sources by December 31, 2025. The average price under agreements entered with GU (Large Users) and GUDI (Large Distribution Company Users) may not exceed US$113/MWh.

Additionally, several incentives were established, including tax benefits (advance value-added tax return, accelerated amortization on the income tax, import duty exemptions, etc.) and the creation of the Fund for the Development of Renewable Energy (Fondo para el Desarrollo de Energía Renovables, FODER) destined for financing projects.

In 2016, RenovAr Program’s rounds 1 and 1.5 were launched (MEyM (former Ministry of Energy and Mining) Resolutions No. 71/16 and 252/16). 1,142 MW and 1,281.5 MW were awarded under round 1 and round 1.5, respectively. In 2017, round 2 was called, and 2,043 MW were awarded (MEyM Resolution No. 275/17). Finally, in 2018, 246 MW were awarded under round 3 (MiniRen).

PEA (100 MW) is remunerated under RenovAr round 1 until March 2040. PEA also has a World Bank guarantee in case the PPA (Power Purchase Agreement) is terminated.

All greenhouse gas reductions resulting from projects under RenovAr or any other renewable power capacity project as per Law No. 27,191 should be considered as the Federal Government’s contribution target to meet the United Nations Framework Convention on Climate Change and the Paris Agreement.

In January 2022, due to significant delays in the completion of certain awarded projects and to recover the transmission capacity, the SE (Secretariat of Energy) established, upon compliance with certain conditions, the following options: (i) terminating the PPA with the payment of US$17,500/MW (wind or solar projects) or US$12,500/MW (others) for the contracted power capacity; (ii) extending the term for commissioning, reducing the PPA’s term and price; or (iii) commissioning the project for a lower capacity.

In April 2023, the SE issued new provisions to regularize the penalties for delayed projects awarded under RenovAr, including installment payments and caps on discounts on economic transactions to cover fines (SE Resolution No. 165/23). Besides, to release the committed transportation capacity under projects facing commissioning difficulties, a system was approved to request the termination of the PPA with CAMMESA (Compañía Administradora del Mercado Mayorista Eléctrico or the Argentine Wholesale Electricity Market Clearing Company) against the payment of a fine equivalent to US$35,000 per MW of the project’s power capacity and the waiver of all rights, actions, claims and granted and unused tax benefits (SE Resolution No. 162/23).

In November 2023, a penalty offsetting scheme was established for delays, shortcomings or national components against the commitment to making new renewable generation investments. This scheme provided a 36-month term for installing new renewable power capacity, which location and technology may differ from the original project.

MEyM (former Ministry of Energy and Mining) Resolution No. 281/17, issued in August 2017, regulated the MAT ER (Term Market from Renewable Energy Sources), a system that allows WEM (Wholesale Electricity Market) GU (Large Users) and GUDI (Large Distribution Company Users) to purchase or self-generate clean energy to meet their supply obligation from renewable sources. MAT ER projects may not be committed under other remuneration mechanisms, such as the RenovAr Program.

Power generation exceeding commitments with MAT ER is remunerated for up to 10% of the power generation at the minimum price for the applicable technology under the RenovAr Program. The balance will be sold in the spot market. Moreover, the contractual terms —life, allocation priorities, prices and others, except for the maximum price set forth by Law No. 27,191— may be freely agreed between the parties under the WEM Procedures. However, committed volumes are limited to generators or suppliers that can execute MAT ER agreements.

In May 2023, the SE (Secretariat of Energy) introduced several modifications, including granting a dispatch priority to joint incremental demand projects with new renewable generation and over incremental transmission capacity for projects financed at their own cost (SE Resolution No. 360/23). The possibility of granting a ‘Referential A’ Dispatch Priority in corridors without full availability at all hours of the year stands out, with an expected probability of 92% of the typical annual energy. It is worth highlighting that this has been obtained for PEPE VI.

Under this scheme, PEPE II and III (106 MW) have sold energy since May 2019, and PEPE IV (81 MW) since February 2023. We estimate that we will add PEPE VI (140 MW) in the second semester 2024. The energy produced is sold under US$-denominated PPA with private parties for an average term of approximately 5 years.

On top of its own generation, since 2019 Pampa has sold renewable energy generated by third parties for an average volume of 10 GWh in 2023, contributing to increasing the MAT ER segment’s margin.

On February 2, 2023, the SE (Secretariat of Energy) launched the RenMDI round to add 120 MW of new renewable capacity to substitute forced generation for 500 MW, thus diversifying the energy matrix (SE Resolution No. 36/23). 514 MW were awarded at an average price of US$73.1/MWh, whereas 120 MW were awarded for the energy matrix diversification at an average price of US$145.8/MWh. Successful tenderers entered into a 15-year PPA (Power Purchase Agreement) with CAMMESA (Compañía Administradora del Mercado Mayorista Eléctrico or the Argentine Wholesale Electricity Market Clearing Company). Pampa has not participated in this call.

On August 10, 2023, LNG, natural gas, electric power and good imports for the GPNK’s (Gasoducto Presidente Néstor Kirchner) construction and commissioning, the Northern Gas Pipeline reversal and works under the Transport.Ar Program were exempted from the ‘País’ tax as per SE (Secretariat of Energy) Resolution No. 671/23. Later, SE Resolution No. 714/23 extended the exemption to goods for power generation-related works. This exemption covers PEPE IV and PEPE VI works.

In September 2019, Transener received the last semiannual tariff update under the RTI (Integral Tariff Review), implemented in February 2017. Subsequently, with the entry into effect of the Solidarity Law in December 2019, no changes were implemented in electricity transmission tariffs under federal authority.

However, due to the evolution of macroeconomic variables, from February 2022, Transener and Transba experienced transitionary tariff increases for cost variations on account of the future RTI. In fiscal year 2023, Transener and Transba received, respectively, the following updates to their tariff schemes:

• 155% and 154% from January 1, 2023 (ENRE (Ente Nacional Regulador de la Electricidad or National Electricity Regulatory Entity) Resolution No. 698/22 and 702/22 dated December 29, 2022);
• 20.9% and 20.8% from August 2023, and a quarterly update formula based on Consumer Price index, wholesale prices and salaries was established (ENRE Resolution No. 661/23 and No. 660/23 dated September 8, 2023);
• 37.3% and 38.4% from November 2023 (ENRE Resolution No. 781/23 and 780/23 dated November 1, 2023).

Regarding the RTI, the Solidarity Law delegated the power to provide for a new review to the PEN (Poder Ejecutivo Nacional or National Executive Branch), launched on December 17, 2020 (DNU (Decreto de Necesidad y Urgencia or Necessity and Urgency Decree) No. 1020/20) and successively extended. On May 29, 2023, the ENRE approved the transmission RTI schedule (Resolution No. 421/23).

Finally, on December 18, 2023, DNU No. 55/23 declared an emergency in the national energy sector, covering the electricity generation, transmission and distribution and natural gas transportation and distribution segments, effective until December 31, 2024.

To ensure the proper provision of public utilities, the SE (Secretariat of Energy) was instructed to implement measures procuring free competition, low barrier pricing, and maintaining regulated income in purchasing power terms. Also, RTI processes were launched for electricity and natural gas transportation and distribution, which entry into effect may not exceed the end of 2024. In this context, the ENRE held a public hearing to address the tariff update and the monthly updating index. Through ENRE Resolutions No. 104/24 and 105/24, 179.7% and 191.1% increases were established over Transener and Transba’s November 2023 tariff schemes, respectively, applicable as of February 2024. Also, from May 2024, a formula combining wages, wholesale and consumer prices was determined to update tariffs monthly.

Additionally, the DNU seeks to create a single National Regulatory Authority for Gas and Electricity (Ente Nacional Regulador del Gas y la Electricidad), which would eventually replace ENRE and ENARGAS (Ente Nacional Regulador del Gas or National Gas Regulatory Entity).