Milea’s first legislative victory that will have a major impact on the energy sector as the Large Investment Incentive Scheme was approved

After more than six months of legislative deliberations, the Argentine Congress finally approved the Fundamentals and Starting Points of the Freedom of the Argentine People (Fundamental Law), which was the first bill submitted by President Mileia in December 2023. This piece of legislation initially included more than 600 articles, although only 238 were ultimately removed.

As we explained in our previous update (see “Argentine energy sector on the threshold of transformation after President Mileia’s inauguration”), with regard to renewable energy and energy transition projects, the initial draft law included:

• a system for promoting large investments; and
• a section on energy transition, under which the executive will be empowered to establish and regulate the greenhouse gas emissions market.

The energy transition section was postponed for later legislative debate, but the Incentive Regime for Large Investments (RIGI) was finally approved. Companies with large projects in Argentina have high expectations for this regime, as it could completely change the prospects for new energy and mining projects.

Additional changes to the Constitution include broad legislative powers authorizing the executive branch to issue regulations on various matters relating to electricity.

RIGI is good news for investment

Although this regime has some similarities and common points with previous laws, the benefits and incentives for RIGI projects replace all previous investment promotion programs combined. Energy is one of the key economic sectors supported by RIGI, along with oil and gas and infrastructure.

Definition of an investor and a large investment

As a rule, RIGI will be available only to entities implementing single projects, joint ventures or various types of divisions with large investment projects – generally, special purpose vehicles (SPVs). The minimum investment amount is $200 million in calculable assets, and the executive branch may set higher thresholds for specific sectors – up to a maximum of $900 million.

Investments equal to or greater than USD 1 billion in projects that could position Argentina as a long-term supplier in global markets may qualify as a long-term strategic export and qualify for additional benefits and incentives. This type of RIGI project may be of interest to mining and hydrogen projects, which are generally export-oriented.

Applications for admission to RIGI must be submitted within two years, and the executive power may agree to extend the deadline by one year.

Incentives and benefits

RIGI includes extensive tax breaks (e.g. reduced rates and special exemptions), customs incentives and a special exchange rate regime that reduces current repatriation obligations. These incentives and benefits would be covered by stability guarantees.

Dispute resolution

RIGI also has a mechanism for resolving disputes that may arise between the SPV and the Argentine government. RIGI SPVs may resort to international arbitration instead of local courts, choosing from three arbitration rules:

• Rules of the Permanent Court of Arbitration;
• The Rules of the International Chamber of Commerce; or
• International Centre for Settlement of Investment Disputes.

Delegation on Electricity Matters

The Fundamental Law also authorizes the executive power to amend the regulatory framework for electricity (Laws 15,336 and 24,065) by 31 December 2025.

There are certain topics that can have a significant impact on renewable energy and energy transition projects, including:

• ensuring international trade in electricity;
• ensuring maximum possible competition and choice of electricity supplier (which is currently not allowed);
• determining the economic disposition for energy transactions based on a payment scheme according to the hourly economic cost of the system; and
• enabling the development of electricity transmission infrastructure through open, transparent, efficient and competitive mechanisms.

Opportunities and challenges for the future

There are still obstacles that negatively impact long-term investment in Argentina’s renewable energy and power sector (see “Argentina: Renewable Energy and Energy Transition – Policy and Recent Developments”). However, RIGI is designed to encourage large-scale investment by creating conditions that promote predictability and stability (a kind of carve-out of Argentina’s legal risks) in order to protect RIGI projects from some of the most complex difficulties associated with investing in Argentina.

In the coming months, the executive branch will have to approve implementing regulations for RIGI. It is expected that once these regulations are in place, many energy companies with projects in Argentina will apply to join the regime.

Future electricity regulations are also expected to be introduced, in particular updated rules for the development of new electricity transmission infrastructure.