COVID-19 expected to delay renewable power projects in Argentina in near-term, says GlobalData

The COVID-19 pandemic and the tightening of the economy over the last two years are expected to delay the construction and commissioning of the renewable energy projects in Argentina, says GlobalData, a leading data and analytics company.

Reportedly, the tightening of the economy had restricted the project awardees of the RenovAr auction program to access low-cost financing, causing delays in the commencement of construction projects.

Around 12 developers are approaching the 30 June 2020 deadline to sign power purchase agreements (PPA) with the state, failing which, the bid guarantee of US$0.05m/MW shall be forfeited. On the other side, signing PPAs require a deposition of US$0.25m/MW to secure the contract.

Somik Das, Senior Power Analyst at GlobalData, comments: “The pandemic has hurt the renewable sector further as certain wind and solar projects experienced halt in the construction. CAMMESA, a wholesale electric market management company in Argentina, had informally agreed to the extension of the project deadline due to these unexpected delays. A key challenge to the power projects is the depreciation of the local currency against the US Dollar.”

Usually, utilities such as CAMMESA manage the fund shortage due to forex variation from government subsidies. High forex volatility induced by the pandemic is expected to pose severe challenges in attracting foreign capital.

Das concludes: “Argentina is crippled with high levels of sovereign debt. The effect of the crisis on the global economy is likely to delay payments from international lenders. This, in turn, is likely to stress thecountry’s economy for timely payments; which potentially could delay payments to the projects in the power sector.”

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