Argentinian watch: “Working capital pressure” of the thermal generator and tender for solar-powered pumps
Following changes in Argentina’s electricity tariffs, independent power producer Rurelec said it “will continue to be under pressure on its working capital”.
British company Rurelec has a 50% stake in Energía del Sur, which in turn owns and operates the 136 MW Comodoro combined cycle power plant in the southern province of Chubut.
The Argentine authorities had announced a new tariff regime in May through resolution 440/2021. As part of the changes, spot production tariffs increased by 29% on average, applied retroactively from February 2021.
Spot prices are no longer linked to the US dollar but to the Argentine peso.
Annual inflation in Argentina was around 46% in April.
Resolution 440 replaces resolution 31/2020. In 2010, Rurelec signed a contract with the wholesale electricity market administrator Cammesa as part of the electricity purchase contract program.
“Despite the increases in Resolution 440, the revenue generated by this new tariff will be significantly lower than in Resolution 220,” Rurelec said in a regulatory filing.
He adds: “Resolution 220 applied to the removal of steam turbines. It expired in September 2020, after which the production of the steam turbines was subject to resolution 31 of the spot tariffs. Therefore, the directors expect that [Energía del Sur] EdS turnover will be strongly impacted by this change.
Rurelec added that the ongoing tariff negotiations with the Energy Department could potentially result in a lessening of the impact – depending on when the negotiations are concluded and their outcome.
The company’s board of directors is exploring potential funding opportunities, including the sale of turbines, according to the filing.
The local think tank, the General Mosconi Energy Institute, has warned of increasing electricity subsidies in the country.
In a statement, rating agency Fitch commented on the matter: “Controlling electricity prices requires a very expensive subsidy from the power system. during the year. However, authorities only authorized a 7% increase in May. Higher subsidy costs will add to the budget deficit and lead to more central bank funding.
The Argentine authorities have also approved new gas tariffs, resulting in an average increase of 6% in gas bills for individuals and 4% in gas bills for businesses.
In separate regulatory documents, two intermediary players – TGS and TGN – said that under the new regime they would not see any tariff increases and would not be allowed to distribute profits, prepay debt, to acquire businesses or grant loans, except to users or entrepreneurs who are not shareholders.
Companies in the gas sector had called for larger increases, citing as the main reason the impact of high inflation on their margins.
Argentina had frozen electricity and gas prices in 2019.
Hampered by large sovereign debt and a tarnished currency, Argentina’s economy has been struggling since 2018. Foreign investment has fallen. The country is expected to return to growth this year, but the medium-term outlook is impacted by macroeconomic imbalances.
Energy department officials received eight offers to install 1,574 solar water pumps in the provinces of Catamarca, Chaco, Cordoba, Jujuy, La Pampa, La Rioja, Neuquén, Río Negro, San Juan and Tucumán.
The pumps, which are part of the departmental program of renewable energy Permer in rural markets, will benefit 3,000 farmers who do not have access to the electricity grid.
The parties that bid on the eleven-lot $ 6 million tender were Sungreen, Electrocivil, Ecos, Fabrica, Mega, Kioshi, Coba and Solflix, according to a finance ministry statement.
The Permer program targets off-grid rural communities. The target segments, in addition to agriculture, are residential, education and SMEs.