CREG defines the entry-into-operation guarantee regulation applicable to the sellers that are successful bidders in the Long Term Electric Power Contracting Auction – 2019

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CREG defines the entry-into-operation guarantee regulation applicable to the sellers that are successful bidders in the Long Term Electric Power Contracting Auction – 2019

CREG defines the entry-into-operation guarantee regulation applicable to the sellers that are successful bidders in the Long Term Electric Power Contracting Auction – 2019

January 31, 2019

On Monday, January 21, 2019, the Energy Regulation Commission (CREG) published, through Resolution 011 of 2019 (Resolution 011), the regulation of the guarantees to be delivered by sellers -i.e generators-, with new generation plants, which are awarded PPAs in the auction of long-term power contracting, which is scheduled for February 26, 2019. This resolution regulates the entry-into-operation guarantee (the "Guarantee") as follows:

When the Guarantee is granted by a Colombian financial institution	When the Guarantee is granted by a foreign financial institution: (Included in the Central Bank’s list of foreign financial entities)
The credit risk rating of the long-term debt must be accredited to be of least "investment grade"; and the rating agency must be supervised by the Financial Superintendence of Colombia; - In case of execution, the financial institution must pay the Guarantee within 2 business days following the first request for payment; The value of the Guarantee will be calculated in Colombian Pesos or in U.S. Dollars(), and will be paid in accordance with Colombian law; the value paid must be equal to the total value covered. Types of guarantees admitted: Bank Guarantee, Aval Bancario,* Letter of Credit. () This resolution does not define the applicable exchange rate*	The financial institution must certify a long-term debt rating by S & P / Moody's / Fitch Ratings, of at least "investment grade"; In case of execution, the financial institution must pay the Guarantee within 15 calendar days following the first request for payment; The value of the Guarantee will be calculated in U.S. Dollars(), and has to comply with RUU 600 of the International Chamber of Commerce, for the purpose of being executed. The value paid must be equal to the total value covered. Types of guarantee admitted: Letter of Credit () This resolution does not define the applicable exchange rate

When the Guarantee is granted by a Colombian financial institution

When the Guarantee is granted by a foreign financial institution:
(Included in the Central Bank’s list of foreign financial entities)

The credit risk rating of the long-term debt must be accredited to be of least "investment grade"; and the rating agency must be supervised by the Financial Superintendence of Colombia;
- In case of execution, the financial institution must pay the Guarantee within 2 business days following the first request for payment;
The value of the Guarantee will be calculated in Colombian Pesos or in U.S. Dollars(*), and will be paid in accordance with Colombian law; the value paid must be equal to the total value covered.
Types of guarantees admitted: Bank Guarantee, Aval Bancario, Letter of Credit.

(*) This resolution does not define the applicable exchange rate

The financial institution must certify a long-term debt rating by S & P / Moody's / Fitch Ratings, of at least "investment grade";
In case of execution, the financial institution must pay the Guarantee within 15 calendar days following the first request for payment;
The value of the Guarantee will be calculated in U.S. Dollars(*), and has to comply with RUU 600 of the International Chamber of Commerce, for the purpose of being executed. The value paid must be equal to the total value covered.
Types of guarantee admitted: Letter of Credit

(*) This resolution does not define the applicable exchange rate

General Conditions of the Guarantee
Obligations to be guaranteed: (i) Entry into commercial operation of the plant no later than December 1, 2021; and (ii) Payment of the audit fees to verify compliance with schedule; Delivery: As a condition for the signature of the PPA awarded contract, sellers must present the guarantee approved by the Administrator of the Commercial Exchange System (ASIC); Amount: 10% of the average annual energy awarded in the auction multiplied by the price of said energy provided in the contract (kilowatt-hour price (COP) + the CERE charge). This amount (i) will increase for projects with construction delays of >30 days, or (ii) will decrease if a guarantee of the same kind was granted over the same generation plant and under an agreement with firm energy obligations. The reduction will be for the amount of this last guarantee. Term: (i) Due Date for the new generation plant to start operations + 3 months, or (ii) 12 months minimum (to be extended 15 business days before its expiration); Enforceability: Of irrevocable and unconditional execution.

General Conditions of the Guarantee

Obligations to be guaranteed: (i) Entry into commercial operation of the plant no later than December 1, 2021; and (ii) Payment of the audit fees to verify compliance with schedule;
Delivery: As a condition for the signature of the PPA awarded contract, sellers must present the guarantee approved by the Administrator of the Commercial Exchange System (ASIC);
Amount: 10% of the average annual energy awarded in the auction multiplied by the price of said energy provided in the contract (kilowatt-hour price (COP) + the CERE charge). This amount (i) will increase for projects with construction delays of >30 days, or (ii) will decrease if a guarantee of the same kind was granted over the same generation plant and under an agreement with firm energy obligations. The reduction will be for the amount of this last guarantee.
Term: (i) Due Date for the new generation plant to start operations + 3 months, or (ii) 12 months minimum (to be extended 15 business days before its expiration);
Enforceability: Of irrevocable and unconditional execution.

Other rules applicable to the Guarantees

Events of Default: (i) Qualified failure to comply with the schedule; (ii) not putting the plant in operation before or on the date of beginning of the obligation; (iii) put into operation less than 90% of registered capacity; (iv) not to accredit payment of audit fees before ASIC; (v) no adjustment or replacement of guarantees before ASIC when necessary.
Change of date of entry into operation: Seller may extend the start date of obligation for up to two years from the initial date, extending the guarantee and updating its value.
Execution: XM S.A. E.S.P. will be the one who executes the guarantee.
Auditor of construction and entry into operations: The audit will be contracted by ASIC, but the vendor who has signed the contracts will assume the costs.
Adjustment and replacement of guarantees: If the credit quality of the entity or the value of the guarantee falls below that required in Resolution 011, it will be necessary to replace or adjust the guarantee. Additionally, the value of the guarantee will be adjusted monthly, according to the Producersʹ Price Index –IPP-.

Download the complete resolution.

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CREG defines the entry-into-operation guarantee regulation applicable to the sellers that are successful bidders in the Long Term Electric Power Contracting Auction – 2019

CREG defines the entry-into-operation guarantee regulation applicable to the sellers that are successful bidders in the Long Term Electric Power Contracting Auction – 2019

Other rules applicable to the Guarantees

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CREG defines the entry-into-operation guarantee regulation applicable to the sellers that are successful bidders in the Long Term Electric Power Contracting Auction – 2019

CREG defines the entry-into-operation guarantee regulation applicable to the sellers that are successful bidders in the Long Term Electric Power Contracting Auction – 2019

Other rules applicable to the Guarantees

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How can the world's largest global law firm help you today ?

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