Electricity Sector in Argentina - Investment and Financing

Investment and Financing

In 1991, the Government of Argentina created the National Fund for Electric Power (FNEE, Fondo Nacional de la Energía Eléctrica), to be funded by a share of the petrol tax and a surcharge on sales from the wholesale market. This Fund, which is administered by CFEE (Electric Power Federal Council), provides funding to the following other funds at the shares indicated:

• 47.4%: Subsidiary Fund for Regional Tariff Compensation to Final Users (FCT), for homogenization of tariffs across the country (this created a de facto subsidy for those consumers in the areas with higher electricity costs)
• 31.6%: Fund for the Electric Development of the Interior (FEDEI), for generation, transmission and rural and urban distribution works. Most funds have been directed to rural electrification
• 19.75%: Fiduciary Fund for Federal Electricity Transmission(FFTEF) (created in 2000), for co-financing or projects in electricity transmission.
• 1.26%: Wind Energy Fund (created in 2002), for the development of wind energy,

In addition, CAMMESA, the administrator of the wholesale electricity market, had projected that by 2007 the country's energy demand would require an additional capacity of 1,600 MW. Faced with the need for specific investments but also with a lack of private investment, the Energy Secretariat (SENER) enacted Resolutions 712 and 826 in 2004, which created FONINVEMEM, the Fund for the Investment Needed to Increase the Supply of Electricity in the Wholesale Market. The Fund, which sought to encourage participation from creditors of the wholesale market, invited those creditors, mainly generation companies, to participate with their credit in the creation of the Fund itself.