ORGANIC LAW TO PROMOTE PRIVATE INITIATIVE IN ENERGY GENERATION

On October 28, 2024, the Organic Law to Promote Private Initiative in Energy Generation came into effect. Below is a summary of the key provisions:

1. Purpose: The Law aims to promote economic solutions and renewable energy generation to address the energy crisis.

2. Thermal Generation: Legal entities engaged in thermal generation must submit transition plans towards technologies with less environmental impact and develop hybrid projects that combine thermal generation with renewable energy sources, such as natural gas. The Ministry of Energy and Mines will coordinate with other entities for licensing, as well as for the import, exploitation, and use of natural gas.

Likewise, the Law allows certain legal entities domiciled or established within the country to import natural gas, provided that it is intended for self-consumption in productive processes or for electricity generation to replace other hydrocarbons in national productive activities.

3. Incentives for Private Investment:

1. Reversion: Self-generators, co-generators and non-conventional renewable energy generators of up to 10 MW are exempted from the reversion of assets to the State at the end of the term of the title.
   
   
2. Trust: Distribution companies are authorized to to establish trusts funded by collections from end-users for public energy and street lighting services to secure payment for generated energy.
   
   
3. Direct Delegation: The Ministry of Energy and Mines may delegate the development of projects to private entities that are not included in the Master Electricity Plan (PME) and do not exceed 100 MW in non-conventional renewable or transitional energy
   
   
4. Right to Improve the Offer: For generation projects within public selection processes not included in the Electricity Master Plan, the proponent has the right to improve its offer if other bidders participate in the public selection process.
   
   
5. Financing: Financiers are authorized to enter into direct financing agreements with the granting entity.
   
   
6. Legal Stability: The Ministry of Energy and Mines must include legal stability clauses in all contracts entered into with public or private entities, ensuring that applicable legal conditions remain unchanged throughout the contract’s duration. Such clauses shall consider central and sectional taxes in force at the time of contract execution.
   
   
7. Banking Benefits: Public and private banks may include preferential-rate loans in their financial product offerings, aimed at individuals and private sector entities interested in implementing renewable energy generation systems for self-consumption. These systems must enable beneficiaries to sell any surplus energy generated, in compliance with current regulations and procedures established by relevant authorities.

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This publication contains information of general interest and does not constitute legal opinion on specific issues. Any analysis will require legal advice from the Firm.