Energy Newsletter - January 2019

On January 7, 2018, the Argentine Executive Powerissued Decree No. 28/2019 (the “Decree”), whereby it (i) accepted the resignation of Mr. Javier Iguacel as the former Federal Secretary of Energy; and (ii) appointed Mr. Gustavo Lopetegui as the new Secretary.
Javier Iguacel had become head of the former Ministry of Energy (the “MINEM”) on June 21, 2018. On September 3, 2018, following an administrative reshuffle, the MINEM was reduced to a secretariat, dependent from the Ministry of Finance. Iguacel hadsubmitted his resignation on December 28, 2018,after six months in office.
The Decree appointed Gustavo Lopetegui as the new Secretary. Lopetegui is a public accountant and business administrator graduated from Universidad Argentina de la Empresa (“UADE”), who also obtained an MBA (Master in Business Administration) degree from the IESE Business School (University of Navarra, Spain). His experience in the private sector includes (i) working for McKinsey & Company assessing firms in Argentina, Brazil, United States and Spain; (ii) founding his own businesses, such as Eki Mini Mart, a store chain, and the dairy firm Pampa Cheese; and (iii) being LAN Argentina ́s CEO between 2009 and 2015.
His political career started in 2004, when he assumed as Buenos Aires’s Minister of Production. Since 2015,Lopetegui has held positions such as Public Policies Coordination Secretary and Presidential Adviser.

On December 21, 2018, the Secretary of Energy (the “Secretary”) issued Resolution No. 316/2018 – published in the Official Gazette on December 26, 2018 – (the “Resolution”), by means of which the Liquefied Petrol Gas (“LPG”) cylinders framework has been modified.
The Secretary authorized the use of Composite Material Cylinders for Fractioning and Distributing LPG in 10 (ten), 12 (twelve) and 15 (fifteen) kilograms units (the “CM Cylinders”).
Furthermore, Requirements and Procedures that must be complied by National Manufacturers, Importers, Workshops, Fractionators and Certification Organisms related to CM Cylinders (the “Requirements and Procedures”) were also approved. These Requirements and Procedures are listed in Annex I to the Resolution, and include all the general and particular specifications that must be fulfilled in order to deploy this kind of cylinders.
The Resolution also endorsed the Technical Standards for the Construction, Testing, Conditioning and Destruction of CM Cylinders (the “Technical Standards”), detailed in Annex II to the Resolution. Both Rules and Requirement and Procedures are mandatory throughout the country.

In order to streamline the exercise of its attributions, the Secretary of Energy (the “Secretary”) issued Resolution No. 1/2019 - published in the Official Gazette on January 14, 2019- (the “Resolution”) delegating faculties on the Undersecretariat of Renewable Energy and Energy Efficiency (the “Undersecretariat”) including, among others, the following actions:

By means of Resolution No. 2/2019 published in the Official Gazette on January 14, 2019 (the “Resolution”) the Secretary of Energy set a Procedure to Determine the Price of Biodiesel for Blending in the Domestic Market (the “Procedure”), replacing the former procedure. According to Presidential Decree No. 109/2007, the Procedure should enable producers to generate enough income to satisfy operating costs, tax, depreciation and a reasonable return.
The Resolution establishes an initial price of AR$ 28,341 (approximately USD 700) per ton of Biodiesel, which will apply to sales made from January 1, 2019, until the publication of a new price.

By means of Resolution No. 12/2019 published in the Official Gazette January 14, 2019 (the “Resolution”) the natural gas transportation and distribution watchdog, ENARGAS, has opened a consultation period on the process to pass the natural gas producers’ price through to utility rates (the “Process).
The draft Process is set forth in the Annex to the Resolution (the “Annex”). The obligation of the gas distribution companies to make efforts to obtain best conditions and price shall be deemed satisfied if gas sales agreements concluded by public auction in the Electronic Market of Natural Gas (“MEGSA”). In the case of contracts concluded outside MEGSA, ENARGAS will verify that contract prices are in line with the weighted average price per basin considering contracts concluded within MEGSA.
To enable pass-through of any US Dollar- denominated contractual price to peso- denominated utility rates, such price shall be converted into Argentine pesos using the lower of (i) the exchange rate established by the parties in the relevant contract or (ii) the average selling exchange rate quoted by Banco de la Nación Argentina for the period between the first and the fifteenth day of the immediately preceding month. The Annex also sets out a “General Procedure for the Calculation of Accumulated Daily Differences,”defined as the cumulative difference between the Daily Gas Purchase Amount to be recognized to the Distributor, and the Daily Gas Sales Amount per the tariff chart approved by ENARGAS for the relevant period. Once the Daily Difference Amount has been determined, the Monthly Difference Amount will be calculated and updated by the effective rate quoted by the Banco de la Nación Argentina for 30-daytime-deposits of Argentine currency. Finally, to calculate the Accumulated Daily Differences measured in AR$ per cubic meter, the Updated Monthly Difference Amount will be consolidated and divided by an estimate of the total volume to be delivered in each area, based on the volumes delivered in the same period of the previous year in the same area.