Argentina’s renewable energy tender: Chinese supply chain finance wins the day

Summary: Argentina’s RenovAr Round One was a success, with 1109 MW of projects approved at credible prices for 20 year PPAs. But perhaps most noteworthy is that more than half of the winners are tied to Chinese firms, whose cost of technology and capital may set benchmarks that could be hard to match in future tenders.

carlos-miami-2016-croppedAbout the AuthorCarlos St. James is an advisor to energy investors and developers in emerging markets. He co-founded the Argentine Renewable Energies Chamber in 2005; has been a board member of the Latin American & Caribbean Council on Renewable Energy since 2010; and publishes the Latin American Energy Review in his free time.

 He will be speaking at the upcoming Chile International Renewable Energy Conference in Santiago on October 17-20.


Besides Argentina, the biggest winner of the 2016 Round One renewables tender is China: almost half the wind and three-quarters of the solar projects that were announced as winners are connected to Chinese technology and capital. A combined 55% of the 1109 MW of winning bids are connected to one nation — and it is still quite possible that even more end up with Sino-technology and capital. China has surplus manufacturing capacity, enormous amounts of available capital well versed in supply chain finance, a natural long term perspective – and is putting it to good use to gain market share in Argentina while everyone else ponders the matter.

The average winning bids of $59.40 per megawatt-hour (MWh) for wind and $59.75/MWh for solar are far better than what had been obtained in the GENREN tenders of 2011 (wind prices at $127/MWh and solar at an amazing $550). With that as a comparison, Ronda Uno is an unapologetic success.

But it seems that surplus capital seeking returns may be playing a greater role in the prices obtained than a true drop in country risk.

A brief recap is necessary.

Earlier this year the new energy ministry put out a tender for 1000 MW of renewables: 600 MW of wind; 300 MW solar PV; and 100 MW of a combined biogas, biomass and mini-hydro. They received 6366 MW in offers; 1104 MW were rejected a week later for technical reasons, leaving a strong 5262 MW still in play.

A week after that price envelopes were opened, and they were surprisingly low. Wind prices offered averaged $69.56/MWh (with the lowest bid at $49.08/MWh); solar prices averaged $83.87/MWh, with a low offer of $58.98/MWh (with one group, let’s call them conservatively-minded, offering $230/MWh). These prices were in line with what we had predicted in a previous analysis.

And last week the government announced they had selected a total 1109 MW of winners, comprised 708 MW of wind and 400 MW of solar (plus one MW of biogas).

I’m pleased to inform that our Argentine partner, DCDB Research, provided the financial engineering for no less than a third of all the winning wind bids, thus confirming itself as a key player in the sector.

It seems that surplus capital seeking returns may be playing a greater role in the prices obtained than a true drop in country risk.


After the ministry eliminated seven projects for technical reasons, the remaining 42 wind projects totaling 2871 MW had offers with prices ranging from $48.01 to $113.69 – with that one being the only bid above $100.

The government approved only twelve of these projects for a total 708 MW (remember, the tender was seeking 600 MW of wind) at an average price of $58.22. Click on charts to enlarge.


A total 309 MW (44% of the wind winners) have direct or indirect ties to Chinese technology and supply chain finance, including Envision (ninth largest turbine manufacturer in the world); 3GAL, through its association with Pan American Energy, in turn controlled by a Chinese energy conglomerate; and Arauco. Arauco is jointly owned by the government of the province of La Rioja and the federal government’s ENARSA, and already has 50 MW of wind operational. It partnered with a number of Chinese industrial firms to ensure the success of its bids, ceding control in the process. The fact that the federal government sits on both sides of the table in this instance raises eyebrows.

But the true irony is that Arauco’s original 50 MW was built by local turbine manufacturer IMPSA, who has now been left at the altar for a new bride with a much larger dowry. So much for the government’s promotion of local content — which in the end played a minimal role in this first round in any technology.


After elimination of eight projects for technical reasons, the remaining 50 wind projects totaling 2306 MW had offers with prices ranging from $58.98 to that wacky $230. There were only two bids above $100.

renovar-round-one-solar-winnersThe government approved only four of the fifty offers totaling 400 MW (remember, the tender was for 300 MW of solar) at an average price of $59.75. Here economies of scale helped pricing, since the average size of the original 2813 MW in solar offers was 48 MW.

Of these four, Spain’s Fieldfare has partnered with Isolux. JEMSE stands for Jujuy Energia y Mineria Sociedad del Estado, the province-owned business focused on energy and mining. For this tender the provincial government partnered with a number of Chinese entities to access financing and technology.

Hence, 75% of the solar projects will benefit from Chinese low cost of capital.

“Sino-Argentine investment” is therefore a term destined to be increasingly common in Argentina, leaving the Europeans and the U.S., all courting Argentina, at a disadvantage. Combining the winning wind and solar projects, no less than 55% of the winners for Round One are already married to Chinese technology – and more importantly, its capital. Some of the others may well go in the same direction, exacerbating the trend. In the end I expect about two-thirds of all Round One will be Chinese.

Round 1.5 Announced

With Round One of Renovar a formal success and a new price benchmark established, the energy ministry announced that the 5257 MW in bids that did not win due to disqualification or price may participate in a repechaje, or playoff, officially called Ronda 1,5. In it the government seeks an additional 400 MW of wind and another 200 MW of solar — essentially to those willing to come down in price and that offload at the right nodes.

Few variables will be allowed to be changed, the most significant of which is price, now established by the ministry at $59.40/MWh for wind and $59.75/MWh for solar.

New offers must be submitted by November 11 and envelopes will be opened on November 23rd. Please contact me directly or DCDB Research if you feel we may be of use.

Traditional financial engineering will no longer win the day in Argentina.

The significant Chinese participation adds a new layer of complexity to the Argentine market and highlights that in the absence of traditional commercial lenders, export credit agencies (ECA) have become key components of success. Chinese manufacturers have a number of options available while other countries’ ECAs “are still studying Argentina”. Presumably Rounds 2 and beyond should have equal or lower pricing than Ronda 1 y 1,5. Yet if this first round is dominated by Chinese technology and capital, can others match it? We have already seen that the largest investor in the region, ENEL – typically setting the pace on pricing in Latin America – held back in Argentina, offering $73 and $79 for only two wind projects (and no solar). Acciona, another typically aggressive player, came in with two wind bids at $71 and $76, plus one solar bid at $92. Traditional financial engineering will no longer win the day in Argentina.

A likely beneficiary is local player 360 Energy, which operates the only real utility scale photovoltaic project in the country and bid on 635 MW of the 2813 MW offered on solar: more than a fifth of all the solar bids came from this one firm, clearly committed to success. They didn’t win in this first round, but if you eliminate their three highest offers in the $90’s, their average bid was under $71/MWh. With a sharpening of the pencil and perhaps more Chinese capital, they are likely to win something in Ronda 1,5.


Argentina continues to be a country that defies logic and is often counter-intuitive. Most investors and lenders bid prices that more accurately reflect the still high risk that is long term investing in the country, and many more simply chose to wait out the first year or two, until the country “proves” it is capable of remaining consistent with investor-friendly attitudes.

Yet this may prove unsavvy. If Argentina remains a boom-and-bust economy, fluctuating from nationalist incompetence to pro-market shifts (the ‘70s with military-led Chicago School free markets; the ‘90s Menem years of parity to the dollar; and now the highly professional, pro-business Macri government), then there is a case to be made that these first market entrants are actually better positioned that later, “safer” investors. Those that enter early are being rewarded with higher returns. Their projects will pay off debt and/or be sold off ahead of the seemingly more prudent investors that wait — but might actually be entering closer to the next economic meltdown.

© Latin American Energy Review 2016


About the Author: Carlos St. James is the Managing Director of Santiago & Sinclair, LLC, a US-based financial advisory firm focused on renewables in emerging markets that partners with DCDB Group in Buenos Aires. Carlos co-founded the Argentine Renewable Energies Chamber (CADER, by its initials in Spanish) and was its first President until 2011; is a board member and was elected the first President of the Latin American & Caribbean Council on Renewable Energy (LAC-CORE); is the founder and chairman of the Middle East-Americas Energy Council (MEAMEC); and founder and publisher of The Latin American Energy Review. His private sector background is focused primarily on finance and bringing together stakeholders so that deals get done. He advises governments on renewable energy policy, counsels private equity firms seeking to enter the region; and brings together stakeholders, including investors, for new energy projects.

He obtained his undergraduate degree in international economics from DePaul University and his masters in international relations from the Fletcher School at Tufts University.

He can be contacted at

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