Financing to the Non-Financial Public Sector: Financing of Investments for the Wholesale Electricity Market (MEM)

2009 - Year of Tribute to Raúl SCALABRINI ORTIZ

COMMUNICATION “A” 4932
15/04/2009

TO FINANCIAL INSTITUTIONS:

Ref.: Circular
OPRAC 1 - 624

Financing to the non-financial public sector. Financing of investments for the Wholesale Electricity Market ("MEM").

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We address you to inform you that this Institution adopted the following resolution:

“1. Incorporate in Section 3. of the rules on “Financing to the non-financial public sector”, the following point:

“3.2.4. Subscription of debt instruments issued by trusts constituted under Law 24.441 or fiduciary funds for infrastructure works of the Wholesale Electricity Market (“MEM”), which comply with the following requirements:

a) Have authorized public offering under the regime of Law 17.811.

b) Have been constituted for the financing of infrastructure works of the Wholesale Electricity Market (“MEM”), declared by the competent authority as of public interest and/or critical.

c) The cancellation of said debt instruments is guaranteed by the assignment or pledge of the collection rights arising from contracts for the sale of electric energy in the forward supply market in which the administrator of the “MEM” is obliged to pay, provided that:

i) The works whose construction is financed have, at least, a 75% progress.

ii) When the condition established in the preceding subparagraph is verified and the works whose completion is financed are not enabled by the competent authority for their commercial operation, there must be a guarantee fund for the repayment of the financial services of the trust or fiduciary fund with funds from the proceeds of the placement of the debt instruments issued by the trust or fiduciary fund for the financing of the construction of the works for, at least, 120% of the amount of the financial assistance services and/or of those of the debt instruments issued by the financial trust for financing or fiduciary fund in charge of the construction of the works, whose maturity occurs until their effective projected commercial enabling.

CENTRAL BANK
OF THE ARGENTINE REPUBLIC

d) The supply contracts have been signed as buyer, by the administrator of the “MEM”.

e) The obligations of the administrator of the “MEM”, in its capacity as buyer in the supply contracts referred to in the preceding subparagraph, are cancelled with charge to the items from the tariffs that make up the Stabilization Fund of the “MEM”.

f) The seller in the supply contracts has effected the assignment of the collection rights of the supply contracts to the trustee of the financial trust or fiduciary fund for financing said works.

g) The debt instruments issued by the trust or fiduciary fund for the financing of the construction of the works have for their public offering a rating not lower than “A” granted by a risk rating agency admitted by the Central Bank according to the rules on “Evaluation of financial institutions”.

h) The transfer of funds to cancel the assigned rights is contractually provided for and is made directly by the administrator of the funds and accounts of the market to the financial institution that is the assignee, in its capacity as creditor or trustee, without any prior credit to an account of any other holder.

i) The participation of the National State as settlor in the financial trusts or fiduciary funds for the financing of the construction of the works does not exceed 50%, at any time. Otherwise, the trustee must notify that circumstance - with no less than 20 business days prior to the date on which such situation is verified - to the Superintendency of Financial and Exchange Institutions, remaining subject to the general limits established for operations with the non-financial public sector in points 7. and 8. of the resolution disseminated by Communication “A” 3911 and complementary, without any other consequence.

j) The financial assistance to the financial trusts or fiduciary funds constituted for the financing of the works and/or the subscription of the debt instruments issued by such trusts or funds may not exceed 90% of the value of the rights that are the object of assignment. For the purposes of computing this ratio, only the cash flows from the obligors to the payment of the tariffs that make up the Stabilization Fund of the “MEM” will be considered, not including the electric supply distribution companies, which will be computed at the date of assignment for up to an individual participation of 5% with respect to the total projected demand for the “MEM”. In cases where the participation in demand exceeds said percentage, the computation may not exceed that individual cap.

The special treatment established above will also apply to the transitional financial assistance granted to the aforementioned trusts or fiduciary funds until the placement, by public offering, of their debt instruments.

Said treatment is conditioned to the prior verification by the financial institutions involved in the operation of compliance with the requirements established in subparagraphs c), e), f), g), i) and j) on the basis of the information of the issuance prospectus authorized by the National Securities Commission and/or the required risk rating report on the debt instruments of the financial trusts or fiduciary funds constituted for the financing of the works and/or on a report

special of external auditor registered in the Special Registry of the Central Bank of the Ar- gentine Republic.

If there are addenda, modifications or updates to the trust contracts or to the information provided for in this point, they must be taken into account for the purposes of the evaluation of the classification indicated.”

2. Establish that the financial assistance granted and the holding by financial institutions of participation certificates and/or debt securities issued by trusts or fiduciary funds referred to in point 3.2.4. of Section 3. of the rules on “Financing to the non-financial public sector” (text as per point 1. of this communication) shall not be covered by the general rules in force on “Credit grading”.

3. Provide that the financings referred to in point 3.2.4. of Section 3. of the rules on “Financing to the non-financial public sector” (text as per point 1. of this communication) shall be subject to the limits and the conversion factor established for operations with the non-financial public sector provided for in points 4. and 5. of the resolution disseminated through Communication “A” 4838 (text as per Communication “A” 4926).

4. Establish that financial institutions that grant financial assistance to trusts or fiduciary funds for the financing of the construction of the works referred to in this resolution or that subscribe the debt instruments or participation certificates issued by them must report any of those operations to the Superintendency of Financial and Exchange Institutions within 2 business days following the date on which said assistance and/or subscription is made effective.”

Lastly, we send you the pages that, in replacement of those previously provided, should be incorporated into the ordered text of the reference. Likewise, it is recalled that on the website of this Institution www.bcra.gov.ar, by accessing “regulations” (“ordered texts”), you will find the modifications made with texts highlighted in special characters (strikethrough and bold).

We greet you very attentively.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Darío C. Stefanelli
Issuance Manager of Regulations
José I. Rutman
Deputy General Manager of Regulations

ANNEX

B.C.R.A.
FINANCING TO THE NON-FINANCIAL PUBLIC SECTOR
Section 3. Operations covered.

3.1.10. Financings, in all their modalities, granted by the parent company or foreign bank that exercises control of the local financial institution under the terms provided for in the rules on credit risk diversification, or by its branches in other countries, when they correspond to financing lines assigned to them by the local financial institution.

3.2. Excluded operations.

3.2.1. Holding of national public securities.

3.2.2. Opening of import documentary credits.

3.2.3. Guarantees for the payment of local taxes in foreign trade operations, provided that they only entail the assumption of a contingent liability.

3.2.4. Subscription of debt instruments issued by trusts constituted under Law 24.441 or fiduciary funds for infrastructure works of the Wholesale Electricity Market (“MEM”), which comply with the following requirements:

a) They have public offering authorized under the regime of Law 17.811.

b) They have been constituted for the financing of infrastructure works of the Wholesale Electricity Market (“MEM”), declared by the competent authority to be of public interest and/or critical.

c) The cancellation of said debt instruments is guaranteed by the assignment or pledge of the collection rights arising from contracts for the sale of electric energy in the forward supply market in which the administrator of the “MEM” is obligated to pay, provided that:

i) The works whose construction is financed have at least 75% progress.

ii) When the condition established in the preceding subparagraph is verified and the works whose completion is financed are not authorized by the competent authority for their commercial operation, there must be a repayment guarantee fund for the financial services of the trust or fiduciary fund with funds from the proceeds of the placement of the debt instruments issued by the trust or fiduciary fund for the financing of the construction of the works for at least 120% of the amount of the financial assistance services and/or of those of the debt instruments issued by the financial trust for financing or fiduciary fund in charge of the construction of the works, whose maturity occurs until their effective projected commercial authorization.

Version: 2nd. COMMUNICATION “A” 4932
Effective date:
15/04/2009
Page 2

B.C.R.A.
FINANCING TO THE NON-FINANCIAL PUBLIC SECTOR
Section 3. Operations covered.

d) The supply contracts have been signed as purchaser by the administrator of the “MEM”.

e) The obligations of the administrator of the “MEM”, in its capacity as purchaser in the supply contracts referred to in the preceding subparagraph, are cancelled against the items from the tariffs that make up the Stabilization Fund of the “MEM”.

f) The seller in the supply contracts has made effective the assignment of the collection rights of the supply contracts to the trustee of the financial trust or fiduciary fund for financing of said works.

g) The debt instruments issued by the trust or fiduciary fund for the financing of the construction of the works have for their public offering a rating not lower than “A” granted by a risk rating agency admitted by the Central Bank under the rules on “Evaluation of financial institutions”.

h) The transfer of funds to cancel the assigned rights is contractually provided for and is made directly by the administrator of the funds and accounts of the market to the financial institution that is the assignee, in its capacity as creditor or trustee, without any prior crediting in an account of any other holder.

i) The participation of the National State as trustor in the financial trusts or fiduciary funds for the financing of the construction of the works does not exceed 50%, at any time. Otherwise, the trustee must notify that circumstance - with no less than 20 business days' notice prior to the date on which such situation occurs - to the Superintendency of Financial and Exchange Entities, and it shall be subject to the general limits established for operations with the non-financial public sector in points 7. and 8. of the resolution disseminated by Communication “A” 3911 and complementary ones, without any other consequence.

j) Financial assistance to the financial trusts or fiduciary funds constituted for the financing of the works and/or the subscription of the debt instruments issued by such trusts or funds may not exceed 90% of the value of the rights that are the object of assignment. For the purposes of calculating this ratio, only the fund flows from those obligated to pay the tariffs that make up the “MEM” Stabilization Fund shall be considered, without including the electric supply distribution companies, which shall be computed at the date of assignment up to an individual participation of 5% with respect to the total projected demand for the “MEM”. In cases where the participation in demand exceeds said percentage, the computation may not exceed that individual cap.

The special treatment established above shall also apply to the transitional financial assistance granted to the aforementioned trusts or fiduciary funds until the placement, by public offering, of their debt instruments.

Version: 1a. COMMUNICATION “A” 4932
Effective:
15/04/2009
Page 3

B.C.R.A.
FINANCING TO THE NON-FINANCIAL PUBLIC SECTOR
Section 3. Operations covered.

Said treatment is conditioned upon prior verification by the financial entities participating in the operation of compliance with the requirements established in subsections c), e), f), g), i) and j) on the basis of the information in the issuance prospectus authorized by the National Securities Commission and/or the required risk rating report on the debt instruments of the financial trusts or fiduciary funds constituted for the financing of the works and/or a special report of an external auditor registered in the Special Registry of the Central Bank of the Argentine Republic.

In the event of addenda, modifications or updates to the trust contracts or to the information provided for in this point, these must be taken into account for the purposes of evaluating the indicated classification.

Version: 1a. COMMUNICATION “A” 4932
Effective:
15/04/2009
Page 4

CENTRAL BANK OF THE ARGENTINE REPUBLIC

B.C.R.A.
ORIGIN OF THE PROVISIONS INCLUDED IN THE CONSOLIDATED TEXT OF THE RULES ON “FINANCING TO THE NON-FINANCIAL PUBLIC SECTOR”

CONSOLIDATED TEXT ORIGINATING RULE
Section Point Paragraph Com. Annex Point Paragraph
Observations
1.1. “A” 3054 sole 1.1. According to Com. “A” 4798.
1.2. “A” 3054
1.
1.3. “A” 4527 According to Com. “A” 4581.
2.1. “A” 3054 sole 2.1.
2.
2.2. “A” 3054 sole 2.2.
3.1. “A” 3054 sole 3.1.
3.
3.2. “A” 3054 sole 3.2. According to Com. “A” 4932.
4.
4.1. “A” 3054 sole According to Com. “A” 3144, 3548,
3911, 4718 and 4798.