pdd potrerillos traducci n version finalparatv200706012

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 1

CLEA� DEVELOPME�T MECHA�ISM PROJECT DESIG� DOCUME�T FORM (CDM-PDD)

Version 03 - in effect as of: 28 July 2006

CO�TE�TS A. General description of project activity B. Application of a baseline and monitoring methodology C. Duration of the project activity / crediting period D. Environmental impacts E. Stakeholders’ comments

Annexes Annex 1: Contact information on participants in the project activity Annex 2: Information regarding public funding Annex 3: Baseline information

Annex 4: Monitoring plan Annex 5: CEMPPSA´s newspaper article Annex 6: Photographs of project

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 2 SECTIO� A. General description of project activity A.1 Title of the project activity: Exploitation of the Mendoza River, Potrerillos Project (Original title: Aprovechamiento Integral del río Mendoza, Proyecto Potrerillos) – Hydroelectric Power - Argentina. Version 01 April 2007 A.2. Description of the project activity: The objective of this Project is the generation of renewable electric power at the Álvarez Condarco and Cacheuta Nueva Hydroelectric Power Stations, located in the Province of Mendoza, Argentine Republic. The reduction of CO2 emissions is achieved through the displacement of electricity generated from fossil fuel by electricity generated from renewable sources. Thus, it is estimated that the annual average of emission reduction will be of 221,998.53 tons of equivalent CO2 during a crediting period of 7 renewable years (21 altogether).

The Potrerillos Exploitation Project was carried out by CEMPPSA (Consortium of Mendocinian Companies for Potrerillos Business Corporation). The Project uses the water flow of the Mendoza River with the following purposes:

• To enlarge and normalize the irrigated area;

• To control flood events in the Mendoza River;

• To satisfy the requirements of potable water and water for agriculture and industrial use in the Mendoza suburban area and its influence area;

• To increase the production of electric power in the province.

CEMPPSA was granted the concession of the old power stations Álvarez Condarco and Cacheuta and it has undertaken the construction of the Potrerillos Dam and the Cacheuta Nueva Power Station. Moreover, two existing machines from the Álvarez Condarco Station were repowered and a third machine was incorporated, as explained below:

− To the effects of this CDM project activity, the Cacheuta Nueva Power Station has been built. The station has a Maximum Installed Generation Capacity of 126.40 MW, and is made up of four (4) generation units of 31.60 MW each. This station has replaced the old Cacheuta Station, which had a maximum installed capacity of 9 MW and three (3) generators of 3 MW each of which had been working since the year 1926.

− Also, as part of the CDM Project, two existing equipment units of 13.7 MW have been repowered at the Álvarez Condarco Station, which now have 15.20 MW, and a new generator has been incorporated of 24.54 MW.

Both stations are located in a cascade design and are fed by their own adduction, which originates at the Potrerillos Dam. During the period between May 2002 and October 2003, the units at both stations gradually began operating commercially. However, this Project does not claim retroactiveness for the years of operation before 2007.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 3 With the registration of the Project in the CDM, CEMPPSA plans to implement an aid fund for state technical schools in the province of Mendoza. The funding necessary to carry out said activity will be secured from the sale of carbon credits obtained by this Project, by means of a trust fund created for this purpose. This will be an important contribution by the Project to the region´s sustainable development, apart from the contributions inherent to the Project which are set forth below:

• The increase of the clean energy rate in the Argentine Interconnection System (SADI), by displacing sources of intensive carbon generation, and covering approximately 25% of the electric power consumption of the Province.

• Expansion and improvement of the water supply for the irrigated oasis, which will favor the necessary conditions for the sustained growth of Mendoza´s economy.

• The assurance of a potable water supply for the population of the Mendoza River oasis, control of its flow volume and reduction of the risk caused by its periodic overflooding.

• A substantial boost to local and foreign tourism, through the existence of a permanent water mirror, attractive to both effective and sedentary tourists, which will represent an important source of indirect employment and a growth factor for the whole province. In fact, during the construction stage, 1,200 people have benefited from direct employment.

A.3. Project participants:

�ame of Party involved (*) ((host) indicates a host Party)

Private and/or public entity(ies)

project participants (*) (as applicable)

Kindly indicate if the Party involved

wishes to be considered as

project participant (Yes/�o)

Argentina (Host) CEMPPSA (Consortium of

Mendocinian Companies for

Potrerillos Business Corporation)

�o

(*) In accordance with the CDM modalities and procedures, at the time of making the CDM-PDD public at the stage of validation, a Party involved may or may not have provided its approval. At the time of requesting registration, the approval by the Party(ies) involved is required.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 4 A.4. Technical description of the project activity: A.4.1. Location of the project activity: A.4.1.1. Host Party(ies): Argentine Republic A.4.1.2. Region/State/Province etc.: Province of Mendoza A.4.1.3. City/Town/Community etc: Departments of Las Heras and Luján de Cuyo. A.4.1.4. Detail of physical location, including information allowing the unique identification of this project activity (maximum one page): The Potrerillos Exploitation Project is located on the Mendoza River, in the Province of the same name, in the Cuyo region of the Republic of Argentina (mid-west).

Mendoza is bounded by the province of San Juan to the north, by the provinces of San Luis and La Pampa to the east, by the provinces of La Pampa and Neuquén to the south and finally by the Republic of Chile to the west.

The Potrerillos Dam is situated on the Mendoza River, at 33° 01´ south latitude and 69° 06´ west longitude, at 1,300 m.a.s.l. in the area near the village of Cacheuta and downstream from the village of Potrerillos. The Project area has access from Provincial Route N° 82. The distance from the city of Mendoza is 35 km from Cacheuta and 46 km from Potrerillos.

In the Project area, the Mendoza River –which is part of the Desaguadero Basin- constitutes the boundary between the departments of Luján de Cuyo and Las Heras, the former extending from the right margin of the River while the latter from the left margin.

The Cacheuta Nueva Station is specifically located at geographic coordinates X: 6.346.375 and Y: 2.489.575, while the Álvarez Condarco Station is located at coordinates X: 6.344.300 and Y: 2.495.200, both on the margins of the Mendoza River.

The department of Luján de Cuyo has a surface of 4,847 km2 and a population of approximately 70,000 inhabitants; while the department of Las Heras has 8,955 km2 and 130,000 inhabitants.


Area of the Project activity Map References:Río Mendoza: Mendoza River Río Blanco: Blanco River Río Seco Cacheuta: Cacheuta Dry River Zona Curva del �icho: Curva del �icho Area Túnel de riego, desvío y descargador de fondo: Irrigation, Diversion and Bottom Discharge Tunnel (350 m of length, 10.80 m in diameter) Presa Potrerillos: Potrerillos Dam

Vertedero: Spillway (Morning Glory type, Design flood 1800 m3/sec) Túnel de aducción: Adduction Tunnel Central Cacheuta: Cacheuta Power Station Central Álvarez Condarco: Álvarez Condarco Power Station Sub-Estación Luján de Cuyo: Luján de Cuyo Substation

South America Mendoza/Argentina


A.4.2. Category(ies) of project activity: According to the Categories and Scope of the CDM projects defined by the UNFCCC, this project activity belongs to Category 1: Renewable Energy (Scope �umber: 1 - Sectorial Scope: Energy industries (renewable - / non-renewable sources)). A.4.3. Technology to be employed by the project activity:

The basic operating principle by which the technology used allows the generation of electricity consists of exploiting the potential energy of the water collected in the dam, situated at a higher level than the power station, where the hydraulic turbines and generators are placed. The water gets there carried through a discharge or adduction pipeline.

The Potrerillos dam consists essentially of a main body of triangular shape made of loose rockfill, not earthfill, strongly compacted and with a high draining capacity, and of a thin layer of concrete in the upstream face to provide impermeability. This type of dam is also commonly called CFRD (Concrete Faced Rockfill Dam).

It is situated at around 3.5 km upstream from the village of Cacheuta, where the riverbed reaches around 1,272 m.a.s.l. Its maximum height from the foundation is 116 m, its length at the crest is 480 m, and its width is 395 m wide at the base. The dam thus formed floods a maximum surface of 1,300 Ha and creates a useful volume of 310 hm3. The dam has a Morning Glory-type spillway with a tunnel that is 300 m long and 11.8 m in diameter.

The figure below shows the typical sections of the Potrerillos Project:

Figure 1. Typical sections of the Potrerillos Project References Figure 1- �ivel Agua: Water level - m.s.n.m.: m.a.s.l.

- Pantalla H° Armado: Reinforced concrete lining - Enrocado: Rockfill

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 7 - Espaldón: Embankment - Dren: Drainage - Pared H° Colado: Concrete wall

- Chimenea de Equilibrio: Staff gage - Túnel de Aducción y Conducción: Adduction tunnel - Central: Power station

The Machine House of the Cacheuta Nueva Power Station is situated very close to the old Cacheuta Power Station --which has been out of service since May 2002--, in a new building constructed next to the old one. This new building is made up of reinforced concrete in all its levels and is earthquake-resistant, in accordance with the regulations for earthquake-resistant buildings in Mendoza. Four new Francis-type turbogenerators have been installed at the Cacheuta Nueva Power Station, each with a maximum capacity of 31.60 MW, the four of them totaling 126.40 MW. They have a vertical axle, a maximum turbinable flow of 80 m3/s of water and a maximum gross head of 178.2 m. The power station is fed through an adduction tunnel that is approximately 4.650 m long. Cacheuta Nueva has been an agent of the MEM (Argentine Wholesale Electric Market) since April 2002, and sells the generated energy through the SPOT Market.

Operations at the old Cacheuta Station ceased in May 2002 and its facilities and equipment are not currently used. This power station had started running in 1926 and had three generators of 3 MW, which amounted to a total maximum installed generation capacity of 9 MW. The old Cacheuta Station was not an agent of the MEM but used to sell the generated energy directly to the distributor, EDEMSA1 being the last distributor.

Table 1 summarizes the main technical characteristics of the old Cacheuta and the Cacheuta Nueva Power Stations:

Table 1. Characteristics of the old Cacheuta and the Cacheuta �ueva Power Stations

Hydroelectric Power

Station Characteristics Unit or Description Amount

Cacheuta �ueva

Maximum installed capacity

MW 126.40

Maximum installed capacity per unit

MW 31.60

Number of units U 4

Type of turbines Francis - vertical axle Annual generation GWh/year 520 +/- 60

Old Cacheuta


MW 9


MW 3

Number of units U 3

Type of turbines Francis - vertical axle Average annual

generation (five-year period 1996-2000)

GWh/year 60.15

1 http://www.edemsa.com/

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 8 The Machine House of the Álvarez Condarco Power Station is situated downstream from the Cacheuta Power Station. The CDM Project added a generator unit to the Power Station with a maximum capacity of 24.54 MW and repowered two existing units from 13.7 MW to a maximum installed capacity of 15.20 MW.

Before the implementation of the CDM Potrerillos Project, the Álvarez Condarco Power Station provided the generated energy directly to the distributing company, EDEMSA. After the implementation of the Potrerillos Project, it still provides its energy directly to EDEMSA, but its dispatch is now controlled by CAMMESA (Wholesale Electric Market Managing Company), the company in charge of dispatch (OED) in Argentina.

Table 2 summarizes the main technical characteristics of the old and new Álvarez Condarco Power Stations:

Table 2. Characteristics of the old and new Álvarez Condarco Power Stations

Hydroelectric Power

Station Characteristics Unit or Description Amount

�ew Álvarez Condarco


MW 54.94


MW 1x24.54 2x 15.20

Number of units U 3

Type of turbines Francis - vertical axle Annual generation GWh/year 259+/- 30

Old Álvarez Condarco


MW 27.4


MW 2x 13.7

Number of units U 2

Type of turbines Francis - vertical axle Average annual

generation (five-year period 1996-2000)

GWh/year 125.07

Before this Project was implemented, the Álvarez Condarco Power Station generated an annual average of 125.07 GWh (five-year period 1996-2000). The energy generated from the Cacheuta Nueva Power Station gets to the Argentine Interconnection System through a new line of 132 KV that connects the power station with the Luján de Cuyo Transforming Station, located at a distance of 15 km. The Project also involved the construction of two new service lines of 13.8 KV. One of them links Cacheuta and Álvarez Condarco and is 6.8 km long, and the other, which is 6 km long, is a service line to the dam used to feed the power station itself. The telecontrol and communications system includes two processing units in Hot/Stand-by mode (Front-End) which enables the communications interface between the digital control level and the local control level.


A.4.4 Estimated amount of emission reductions over the chosen crediting period:

Year

Annual estimation of emission reductions in tons

of CO2e

2007 221.998,53

2008 221.998,53

2009 221.998,53

2010 221.998,53

2011 221.998,53

2012 221.998,53

2013 221.998,53

2014 221.998,53

2015 221.998,53

2016 221.998,53

2017 221.998,53

2018 221.998,53

2019 221.998,53

2020 221.998,53

2021 221.998,53

2022 221.998,53

2023 221.998,53

2024 221.998,53

2025 221.998,53

2026 221.998,53

2027 221.998,53

Total reduced emissions (tons of CO2e)

4.661.969,14

Total number of years of the crediting period

7

Annual average of reduced emissions throughout the crediting period (tons of

CO2e)

221.998,53

A.4.5. Public funding of the project activity: The Project does not include public funding.


SECTIO� B. Application of a baseline and monitoring methodology B.1. Title and reference of the approved baseline and monitoring methodology applied to the project activity: This Project uses the methodology ACM0002/Version 06: “Consolidated baseline methodology for grid-connected electricity generation from renewable sources”. ACM0002 - Version 06 Sectorial Scope: 1 May 19, 2006 B.2 Justification of the choice of the methodology and why it is applicable to the project activity: The methodology ACM0002/Version 06 has been chosen since this project complies with its applicability conditions. • It applies to electricity generation capacity additions from:

− Run-of-river hydroelectric power plants; hydroelectric power plants with existing reservoirs where

the volume of the reservoir is not increased − New hydroelectric power plants with reservoirs having power densities (installed power generation

capacity divided by the surface area at full reservoir level) greater than 4 W/m2 − Wind sources − Geothermal sources − Solar sources − Wave and tidal sources • This methodology is not applicable to project activities that involve switching from fossil fuels to

renewable energy at the site of the project activity, since in this case, the baseline scenario would be the continued use of fossil fuels at the site.

• Both the geographic boundaries of the project and the boundaries of the relevant electric grid must

be clearly identified, and information on the electric grid must be available. The development of this Project according to the methodology ACM0002/Version 06 is appropriate because of the following reasons: − This Project involves the electricity generation capacity addition from a new hydroelectric power

station with a reservoir having a power density greater than 4 W/m2 (this calculation is explained in detail in section B.6.3).

− This proposed Project does not involve switching from a fossil fuel to a renewable energy source at

the site of the project activity. − Both the geographic boundaries of the Project and the Argentine Interconnection System (SADI) can

be clearly identified, and information on the characteristics of the grid is publicly available.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 11 As explained so far, the consolidated baseline methodology ACM0002/Version 06: “Consolidated baseline methodology for grid-connected electricity generation from renewable sources” is applicable to this project activity. This methodology is used together with the approved and consolidated monitoring methodology ACM0002/Version 06: “Consolidated monitoring methodology for zero-emissions grid-connected electricity generation from renewable sources”. B.3. Description of the sources and gases included in the project boundary In order to determine the baseline emissions, the adopted methodology states that only CO2 emissions from electricity generated with fossil fuels should be considered, which is displaced by this project activity.

According to the methodology ACM0002/Version 06, within the boundaries of new hydroelectric power station projects with reservoir, emissions occurring at the physical site of the plant as well as in the reservoir area must be included.

The spatial extent of the project should include the project site itself as well as all the power plants physically connected to the electric grid to which the CDM project is connected.

The following definitions are used in order to determine the emission factors of the Build Margin (BM) and the Operating Margin (OM):

− The Project Electric Grid: the spatial extent of the generating power plants that can be dispatched without significant restrictions on transmission.

− The Connected Electric Grid: electric grid connected through transmission lines to the Project electric grid and in which generating plants can be dispatched without significant restrictions on transmission. It can be national or international.

This CDM project has adopted the MEM (Argentine Wholesale Market) as the Project´s Electric Grid and the dispatch information will be provided by CAMMESA (Wholesale Electric Market Managing Company).

The MEM is the number of transactions of electric power in block made through the Argentine Interconnection System (SADI), or through any other interconnection system subject to federal jurisdiction, since the latter would be subject to the interjurisdictional wholesale electric trade.

The SADI is the number of transmission, transformation, compensation and operation facilities that comprise the High Voltage Transport System and the Electric Power Transportation by Trunk Distribution of the different electric regions of Argentina.2

2 Definition from CAMMESA´s 2004 Annual Report

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 12 With the Álvarez Condarco and Cacheuta Nueva hydroelectric power stations, the Potrerillos Project joins the SADI as part of the electricity system of the Cuyo region. Figure 2 below shows a geographic diagram of the SADI, figure 3 describes the electricity system of Mendoza city, and figure 4 represents the MEM´s installed capacity divided by areas.

Figure 2. Geographic Diagram of the SADI´s Electric Grid3

3 http://www.cammesa.com/inicio.nsf/marcomemnet


Figure 3. Geographic Diagram of the electric grid of Mendoza city4

4 http://www.cammesa.com/inicio.nsf/marcomemnet


Figure 4. MEM Installed Capacity5 References Figure 4: Autogenerators are not included except Agua del Cajón - Valores en MW: Values in MW - �OA: �orthwest Argentina - �EA: �ortheast Argentina - Centro: Central Region - GBA+LIT+BAS: Buenos Aires Suburbs + Littoral Region + Southern Buenos Aires - COM: Comahue Region - PATAG: Patagonia Region

5 CAMMESA´s Monthly Report – December 2006

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 15 Figure 5 shows the unifilar diagram of the SADI owners in the Cuyo region (March 2007)6, including the Cacheuta Nueva Power Station and the Alvarez Condarco Power Station:

Figure 5. Unifilar diagram of SADI owners (March 2007) – Cuyo region

In order to determine the emission factor of the Operating Margin (OM), one of the following options must be used to determine the CO2 emission factor of the net electricity imports of the electric grid connected within the host or guest country:

a- 0 tCO2/MWh; or

b- The emission factor(s) of the specific generating power plant(s) from where electricity is imported, but only if this specific plant(s) is clearly identified; or

c- The average emission factor of the exporting grid as long as the net imports do not exceed 20% of the total generation of the Project´s electric grid; or

d- The emission factor of the exporting network as long as the net electricity import does not exceed 20% of the total generation of the Project´s electric grid (Combined Margin).

For electricity imports from systems situated in other countries, the emission factor is considered to be zero (0 tons of CO2 per MWh/year). The emission factor of the specific power plant from where the electricity was imported may be used, but only if the said power plant is clearly identified.

6 The complete document of the March 2007 Unifilar Diagram is available at http://www.cammesa.com/inicio.nsf/marcomemnet (access Esquemas de la Red Eléctrica – Unifilar por Propietarios del SADI)

Old Station (units out of service)

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 16 The electricity exports shall not be extracted from the information on electricity generation used for the calculation and monitoring of the baseline scenario emissions.

Source Gas Included? Justification/Explanation

Baseline

Thermal power plants

CO2 Yes Fossil fuel burning at the thermal power plants.

Project Activity

Reservoir CH4 No According to Item II b of the methodology AM0002/Version 06, if the power density of the project is greater than 10 W/m2, then the project emissions must be considered zero (PEy = 0). The power density of the Potrerillos Project is 11.1492 W/m2.

B.4. Description of how the baseline scenario is identified and description of the identified baseline scenario: The baseline scenario is constituted upon the assumption that the electric power generated by the CDM project activity would have had to be generated by the operation of the generation plants connected to the grid (Operating Margin) and by the addition of new power sources (Build Margin).

To this end, the methodology ACM0002/Version 06 requires the calculation of an emission factor for the baseline scenario. This factor is expressed as Emission Factor of the Combined Margin and is calculated from the Operating Margin and the Build Margin. The information needed to calculate the Combined Margin must be obtained from an official source. For the purposes of this Project, such information will be provided by CAMMESA.

The methodology ACM0002/Version 06 states the calculation method for each of the factors mentioned. The equations were included in this section of the PDD (as they are part of the identification of the baseline scenario) and are shown in detail in Annex 3.

This section aims at providing a detailed description of the baseline scenario. To this end, all the steps involved in its identification and definition will be explained below as well as the way in which each of these steps are applied to this project activity.

In order to identify the most suitable baseline scenario for this Project activity, the methodology ACM0002/Version 06 states the following two categories, depending on the intrinsic characteristics of the project:

1) Project activities that do not involve changing or revamping the existing power generation facilities, and

2) Project activities that involve changing or revamping the existing power generation facilities.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 17 This Project activity may fall into both categories depending on the hydroelectric power station and unit being considered. The following chart shows the baseline scenario selected for each of the units of the Cacheuta Nueva and Álvarez Condarco Power Stations.

The following items refer to the scenario each unit belongs to:

b belongs X does not belong

Table 3. Baseline Scenario according to Power Station and unit considered

Cacheuta Nueva Power Station Álvarez Condarco Power Station

Unit 1 Unit 2 Unit 3 Unit 4 Unit 1 Unit 2 Unit 3

Scenario 1 (Project activities that DO NOT involve changing or revamping the existing power generation facilities)

X X X b X X b Scenario 2

(Project activities that involve changing or revamping the existing power generation facilities)

b b b X b b X

Description of the baseline scenarios

− Scenario 1

Electricity delivered to the grid by the project would have otherwise been generated by the operation of grid-connected power plants and by the addition of new generation sources, as reflected in the combined margin (CM) calculations described below.

− Scenario 2

In the absence of the CDM project activity, the existing facility would continue to provide electricity to the grid (EGbaseline, in MWh/year) at historical average levels (EGhistorical, in MWh/year), until the time at which the generation facility would be likely be replaced or retrofitted in the absence of the CDM project activity (DATEBaselineRetrofit). From that point of time onwards, the baseline scenario is assumed to correspond to the project activity, and baseline electricity production (EGbaseline) is assumed to equal project electricity production (EGy, in MWh/year), and no emission reductions are assumed to occur.

Where EGhistorical is the average of historical electricity delivered by the existing facility to the grid, spanning all data from the most recent available year (or month, week or other time period) to the time at which the facility was constructed, retrofit, or modified in a manner that significantly affected output (i.e., by 5% or more), expressed in MWh per year. A minimum of 5 years (120 months) (excluding abnormal years) of historical generation data is required in the case of hydro facilities.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 18 All project electricity generation above baseline levels (EGbaseline) would have otherwise been generated by the operation of grid-connected power plants and by the addition of new generation sources, as reflected in the combined margin (CM) calculations described below. In order to estimate the point in time when the existing equipment would need to be replaced in the absence of the project activity (DATEBaselineRetrofit), project participants may take the following approaches into account:

a) The typical average operational lifetime of the type equipment may be determined and documented, taking into account common practices in the sector and country, e.g. based on industry surveys, statistics, technical literature, etc.

b) The common practices of the responsible company regarding replacement schedules may be evaluated and documented, e.g. based on historical replacement records for similar equipment.

The point in time when the existing equipment would need to be replaced in the absence of the project activity should be chosen in a conservative manner, i.e. if a range is identified, the earliest date should be chosen. The baseline emission factor (EFy) is calculated as a combined margin (CM), resulting from the combination of operating margin (OM) and build margin (BM) factors according to the following three steps. Calculations for this combined margin must be based on data from an official source and made publicly available. Power plant capacity additions registered as CDM project activities should be excluded from all calculations below (subsets j, m, n below).

The following graph attempts to show clearly the baseline scenario presented as number 2, in which an existing facility is modified by the project activities:


Existing units without CDM Project

The units deliver energy to the grid at historical levels

Moment when units ( ) would have probably had to be repowered or replaced by other units of similar characteristics in absence of the CDM

From this moment ( ) on, the baseline scenario is the CDM Project activity

The energy generated at the baseline is the energy of the Project ( )

Therefore, from this moment on, the energy ( ) generated with the units of the CDM Project ( ) considered for emission reduction is that generated above the historical average ( )

CDM Project units

Graph 1. Representative diagram showing the baseline scenario where the project activities modify an existing facility

Once the Project´s baseline scenario has been identified, the GHG emissions for that scenario must be calculated, i.e., the baseline emissions. Below is a description of the three steps to be followed in order to calculate –according to the methodology ACM0002/Version 06 —such emissions. The equations and values linked to the emissions will be described in section B.6.

STEP 1. Calculate the Operating Margin emission factor(s) (EFOM,y) based on one of the four following methods: (a) Simple OM, or (b) Simple adjusted OM, or (c) Dispatch Data Analysis OM, or (d) Average OM. According to methodology ACM0002/Version 06, Method 3 (Option c: Operating Margin according to the Dispatch Information Data Analysis) must be the first methodological option. This method requires detailed information on operation and dispatch of the power stations connected to the grid. This Project uses method c) Dispatch Data Analysis, and the information needed for its application will be obtained from the National Dispatch Center managed by CAMMESA7. The calculation and related information are shown in detail in Annex 3. STEP 2. Calculate the Build Margin emission factor (EFBM,y) as the generation-weighted average emission factor (tCO2/MWh) of a sample of power plants m.

7 http://memnet2.cammesa.com/

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 20 The methodology requires two calculation options out of which the Project proposer must choose one. The first option has been applied to this Project (ex –ante), i.e.: The Build Margin Emission Factor (EFBM,y) has been calculated ex ante on the basis of the most recently available information from the plants built, for a group of plants m at the moment of submission of the project document. The group of plants m consists of:

- the 5 plants most recently built, or - capacity additions in the electric grid that account for 20% of the system´s generation (MWh) and

that have been most recently built. In the case of this Project, the option involving most power corresponds to the capacity additions in the electric grid that accounted for 20% of the system´s generation (MWh) and that have been most recently built. The calculation and related information are shown in detail in Annex 3. STEP 3. Calculate the baseline emission factor EFy as the weighted average of the operating margin emission factor (EFOM,y) and the build margin emission factor (EFBM,y). The weights by default for each of the emission factors are 50% (except for wind and solar source projects). Said weighted average –which is applied to this Project—has been set for the first crediting period and will be checked at renewal. As explained before, the explanation of the baseline emission factor is included in detail in Annex 3, and section B.6 shows the calculations related to the emission reduction associated to the Project. B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered CDM project activity (assessment and demonstration of additionality): This Project´s potential for applicability to the Clean Development Mechanism has been assessed before. In August 2001, before the devaluation of Argentine currency and the declaration of default on the country´s foreign debt, and before the completion of the Project´s construction and the beginning of its operation, CEMMPSA requested Mariana Conte Grand, PhD, Professor at CEMA (Argentine Center of Macroeconomic Studies) and expert on the Kyoto Protocol, to assess the Project´s applicability within the CDM framework.8 Said report, after making reference to the history of the Kyoto Protocol, concludes: “It is very likely that the Project will obtain emission credits since it involves the displacement of power generated from more polluting technologies such as thermal generation”. After the political, economic and financial Argentine crisis at the end of 2001 and beginning of 2002, and a few months before starting up the operation of the two first units of the Cacheuta Nueva Station, in May 2002, the possibility to introduce the Project into the Kyoto Protocol was reconsidered in order to get, in this way, additional revenues from the sale of carbon credits. The Report by consultants Mercau and Ontiveros entitled “Application of Green Credits to the Potrerillos Project” was motivated by the macroeconomic and regulatory changes caused by the crisis, which prompted a new economic and financial equation, different from the original Project.

8 Analysis of the Potrerillos Project´s potential to obtain Carbon Credits: steps to be taken. Mariana Conte Grand. August 2001.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 21 Both documents reveal the intention of implementing the Potrerillos Project as a CDM activity, prior to the start up of any of the projected works. The delay in the registration of this Project in the Mechanism was mainly due to the uncertainty prevailing at that moment regarding the Project´s feasibility and implementation methodology. Moreover, the macroeconomic crisis that Argentina went through during 2002 –lasting until 2005—had a strong impact on the regulations of the Argentine power sector, which delayed even more the registration of the Project in the Mechanism. However, at the end of 2005, with a stable macroeconomic scenario and the certainty of the negative impacts that the regulatory changes had had on CEMPPSA`s cash flows, the additionality of the Project, far from being considered circumstantial, became a real and stable condition. Along the lines of the foregoing, the Notes to the Accounting Statements of José Cartellone Construcciones Civiles S.A. (JCCCSA), one of CEMPPSA`s private stakeholders, corresponding to the fiscal year ended on December 31st, 2002 and 2003, state that “with regard to Norelec S.A., EDET S.A., Gascart S.A., CEMPPSA and Hidronihuil S.A., there is uncertainty about the effects of the cancellation, as of January 2002, of the adjustment clauses in dollars, about the pesification of rates related to public service concessions and about the beginning of a new stage of negotiation of concession contracts, taking into consideration different criteria related to the impact of rates on the economy, on users and their accessibility to public services, on the quality of the services, on investment plans and on the security of companies` profitability systems”. They also state that “the creation of future funds and their capacity to continue doing business depend on the successful renegotiation of their liabilities and concession contracts. The future development of the economic crisis might require the modification by the Government of some of the adopted measures or the announcement of additional regulations. Therefore, the Company´s accounting statements must be read in the light of such circumstances”. In addition, the Auditors` Report of the fiscal year mentioned above underlines that “As a consequence of the uncertainty raised after 2002 and after the changes in the economic conditions of the country, we are unable to predict whether the premises used to make the estimates that support the accounting value of the assets of the companies mentioned in the previous paragraph will prove to be true in the future”. It is for the reasons stated so far that the Potrerillos Project is applying to the Clean Development Mechanism during 2007. The studies carried out in the Additionality demonstration are based on the previously mentioned Report by Mercau and Ontiveros “Application of Green Credits to the Potrerillos Project”, which analyzes the additionality of the Project at the beginning of 2002, before the Álvarez Condarco and Cacheuta Nueva Hydroelectric Power Stations started operating. Since then, the private stakeholders decided to evaluate the different solutions to the Project and to take the additional investment risks involved in order to finish the works they had engaged in, as well as those related to the operation, by contributing their own capital and considering in their profitability analysis the economic benefits stemming from the Project´s application to the CDM.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 22 Step 1. Identification of alternatives to the project activity consistent with current laws and regulations Sub-step 1a. Define alternatives to the project activity:

Sub-step 1a Alternative Description Option 1

To finish construction of the Project facilities and operate them without CDM

With this alternative, the electric power generated by the Potrerillos Project is included in the grid and, thus, it displaces an equivalent amount of energy from other generation sources.

Option 2

To continue as in the present, without the operation of the new hydropower stations Álvarez Condarco and Cacheuta �ueva

In the absence of the Potrerillos Project, the electricity it would potentially generate would be replaced by generation from other sources.

Sub-step 1b. Consistency with mandatory laws and regulations: Option 1: To finish construction of the Project facilities and operate them without CDM Both the proposal and the concession agreement signed between CEMPPSA and the Government of Mendoza provided for construction and operation of the dam, as well as for enlargement and construction of the Álvarez Condarco and Cacheuta Nueva stations respectively. Therefore, to continue with the Project operation without it being considered a CDM activity was considered within the regulation. Option 2: To continue as in the present, without the operation of the new hydropower stations Álvarez Condarco and Cacheuta �ueva With relation to the Concession Agreement signed with the Provincial Government, certain circumstances have arisen which might eventually result in the termination of the agreement. Thus, it would be a possibility, and a viable alternative, not to operate the dam or finish the enlargement works of both hydropower stations. It is worth mentioning that the Project Status Update Report drawn up by De Leuw Cather International Limited in November 2001 points out that “A little over 90% of the works have been carried out after nearly three years of work.” In this respect, as stated in the document requested to the Marval, O’Farrel & Maizal law firm dated January 15, 2001, “The Province may have breached important aspects of the Agreement and of the legal framework applicable thereto inasmuch as:

i. They failed to comply with the Topics in their charge; ii. They did not sign the Concession Agreement; iii. They did not appoint a specialized field inspection team to decide on the non-objection to the

definitive Project and to certain improvements to be introduced to the Project; iv. They did not reestablish the economic-financial equation affected by changes in tax legislation; v. The payment of the funds committed for the financing of the Potrerillos Project was belated and

incomplete; and


vi. They did not abide by the adjustment formula agreed in the Bidding Conditions and the Agreement for the payment of the referred funds.”9

The document, after a detailed analysis of each of the issues listed, points out that “even though the Province has contributed a fair amount of their part of the funding, it is not possible to assert that their failure to fulfill said obligations will not have adverse effects on CEMPPSA in its attempt to obtain a reasonable financing plan for the Potrerillos Project. This is also detrimental as regards the uncertainty caused on CEMPPSA and any eventual financiers about the timely fulfillment of the Topics incumbent upon the Province, since one of the milestones of the Project will depend on said fulfillment: the filling up of the Dam and the realization of the cash flow estimated and arranged by the parties to the Agreement.” The report concludes: “by virtue of the stated situation, it is possible to maintain, with serious arguments, that CEMPPSA is presently in a position to exercise the legal protection of its rights by stopping the Project works or by terminating the Agreement because of the Province´s failure to meet their obligations.10 The analysis carried out by the law firm mentioned above is prior to the end of the Argentine system of currency Convertibility. Therefore, in addition to the failure of the Province to fulfill their obligations, a series of administrative actions have taken place at the National level from January 2002 to this date which have altered the Electricity Regulatory Framework (MRE) and thus affected the parties involved therein. The most representative of such actions are the non-updating of Seasonal Prices since the year 2002 according to the provisions of the Electricity Regulatory Framework and Resolutions S.E. 246/02, S.E. 240/03, S.E. 406/03 and S.E. 1281/0611 (by the Energy Secretariat), which affected the different parties of the MEM as explained below:

− The Generator Agents are not properly remunerated.

− Generator Agents are not paid for great part of what they sell.

− Freedom of contract among MEM Agents has been restricted.

− The different parties of the MEM do not receive proper price signals.

− The Stabilization Fund (Fondo de Compensación), managed by CAMMESA, is presently undergoing a deficit of over three thousand million pesos ($3,000,000,000).

− Demand: differential charges and crossed subsidies have been generated.

− These administrative actions have generated a legal instability which does not favor new investments on the electric sector. This, without doubt, affects the growing demand of energy required from the MEM by the different sectors of the economy.

9 Each of the items listed is developed in the above mentioned document. 10 Both alternatives are explained in detail in said document. 11 Each of the Resolutions mentioned is explained with greater detail in the Sensitivity Analysis.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 24 Step 2. Investment analysis Sub-step 2a. Determine appropriate analysis method Renewable electric power is generated by the Potrerillos Project which is delivered to the Argentine Interconnection System (SADI), generating earnings from the sale of said power. Therefore, the first option, a simple analysis of costs, is not appropriate to prove additionality. Between the other two options, Investment Analysis (Option II) and Benchmark Analysis (Option III), the latter is considered more appropriate. In the year 2002, in view of the economic and sectorial changes occurred in the country, CEMPPSA´s private stakeholders -IMPSA and JCCC-, requested an economic-financial analysis to assess the impact of regulatory changes on the cash flow originally estimated. A benchmark is used in said document to analyze the economic-financial viability of the Project and determine a new action plan according to its results. Said benchmark was also used by the private stakeholders at the moment of submitting the economic proposal corresponding to the bidding process. Therefore, the referred study, carried out by consultants Mercau and Ontiveros, is a document of reference for this PDD, since it includes an analysis of the impact of the Argentine crisis on the internal rate of return of the Project, in comparison with a benchmark representing standard returns in the market for projects such as the Potrerillos Project, with great initial investments, all of them necessarily valued in strong currencies (U$S, Euros), and considerable repayment periods. The report also calculates the impact that the revenues added from the sale of CERs has on the IRR (Internal Return Rate). Sub-step 2b – Option III. Apply benchmark analysis

� Selection of the financial indicator

The indicator selected is the Project´s internal rate of return (IRR). This rate makes it possible to observe whether the Project´s returns are sufficient for the involved companies and other investors to earmark funds to the initial investment and bear the costs related to the operation. The Project´s IRR is then compared to a benchmark, which behaves as a barrier which any project with characteristics similar to the Potrerillos Project must exceed in order to be considered financially viable and, consequently, assign funds to its construction and operation. In other words, the considered benchmark implies a return to the cash flow of the Project capable of making it sustainable in the long term, so as not to affect the continuity of the existing businesses of the companies undertaking it and, besides, capable of obtaining the necessary funding in order for the Project to be financially self-sustaining and to allow the companies to undertake projects in the future and keep a reasonable debt pattern.

� Benchmark to be used: an IRR of 14% On the basis of different data and analyses carried out during the preparation of the proposal for this business, and according to standards for this type of BOT projects (Build-Operate-Transfer) in Argentina,

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 25 the Potrerillos private stakeholders, at the moment of the bid, had requested for it a minimum return equivalent to an internal rate of return of 14%12. In this respect, Mercau and Ontiveros point out in their 2002 report that “This is known as ‘hurdle’, or the barrier which a project must overcome in order to be considered by an investor. In the particular case of CEMPPSA, such ‘hurdle’ involved the condition that the Project have a profitability greater than 14% in order to obtain the participation of the qualified private stakeholders.” The referred hurdle, used to value the project in the course of time and analyze its sustainability in the long term, constitutes the Benchmark. Likewise, the above mentioned analysis is complemented by the Risk Assessment Report presented by Humphreys Argentina Calificadora de Riesgo S.A.13 on February 5th, 2001. An assistance in the sum of approximately U$S70,000,000 (seventy million US dollars) is evaluated in said report. This sum represented the amount outstanding to complete the total financing of the works at such moment. Among the main characteristics of the loan under evaluation, the risk assessment company states that the interest rate is 14%. The report constitutes clear evidence that the returns demanded from the investment in the Potrerillos Project had to at least equal the market rate of 14% in order to make possible the repayment of the assistance under evaluation14. It is worth mentioning that, if an IRR had to be considered at the present time for the development of this type of activity in Argentina, such IRR would surely be considerably higher than 14%15. The cutoff IRR for this type of projects is usually valued to be 50% to 100% superior to the credit cost. Thus, in the present-day circumstances, an IRR in U$S of between 21% and 28% should be considered. This consideration shall be included in the sensitivity analysis. It is also worth pointing out that the fact that the rate used as benchmark has remained the same in the course of time and against different contexts and conditions, with impacts of various kinds on the operator of the Potrerillos Project, constitutes sufficient evidence of the connection of the referred “hurdle” with the specific conditions of the Project and not with the characteristics of its private investors. Sub-step 2c. Calculation and comparison of financial indicators Flows of the original Project at the moment of Proposal (1995) Folio 1898 of CEMPPSA´s economic proposal in 1995 is presented below in which the flows related to the Obligatory Variant – Principal Alternative are registered.

12 This is stated in the contract documents. See CEMPPSA´s economic proposal year 1995 – Obligatory Variant – Principal Alternative – Folio 1898. 13 The company Humphreys Argentina Calificadora de Riesgo S.A. is affiliated to Moody’s Investor Service. 14 Even though the Additionality Tool points out that the Benchmark must be representative of standard market returns, considering the specific risk of this type of project, but not the subjective profitability prospects or risks of a particular investor, the information presented in this paragraph is considered to be relevant since it makes it possible to verify the adequacy of the benchmark to a project such as Potrerillos. 15 During the nineties the interest rate for working capital loans made by banks for this type of projects in Argentina and carried out by Argentine companies fluctuated around a 9% annual rate. During the crisis it rose to 20% and it is presently approximately 12%.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 27 Chart references Variante obligatoria –Alternativa principal: Obligatory variant –Principal alternative ESTADO DE RESULTADOS: PROFIT A�D LOSS ACCOU�T Año: Year Facturación: Turnover Otros ingresos: Other revenues Facturación neta: �et turnover Inversión total: Total investment Costos por operación y mantenimiento: Operation and maintenance costs CAMMESA: Wholesale Electric Market Managing Company Transportista independiente: Independent carrier E�RE: �ational Electric Regulatory Organism F�RP: �ational Public Broadcasting Fund ORSEP: Dam Safety Regulatory Organism Irrigación: Irrigation Department Regalías provinciales: Provincial royalties Ingresos brutos: Gross revenue tax Sellado de contratos: Contract stamp tax duties Garantías – Operación y mantenimiento: Securities – Operation and maintenance Costos operativos: Operating costs Excedente de explotación: Earned surplus Intereses deuda a largo y corto plazo: Interests long and short-term debt Intereses activos: Interest receivable Saldo financiero: Financial balance Depreciación de activos: Depreciation of assets Resultado bruto: Gross margin Impuesto a las ganancias: Income tax Otros impuestos: Other taxes Resultado neto: �et margin FLUJO DE FO�DOS: CASH FLOW Año: Year Aportes de la provincia: Province contributions Excedentes de explotación: Earned surpluses Capital de trabajo: Working capital Inversiones: Investments Impuesto a las ganancias: Income tax Flujo de fondos: Cash flow Tasa interna de retorno (TIR): Internal rate of return (IRR) Valor presente neto: �et present value

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 28 � Brief reference to macroeconomic changes occurred and their impact on the originally estimated

flows � Political, Economic and Financial Crisis

After a recession period which began during the third quarter of 1998, the Argentine Government declared, in December 2001, default on the country´s ninety-five thousand million dollar debt, which led to the most severe crisis of sovereign debt in history16. The default came together with the end to the system of currency Convertibility which had been in force in Argentina since 199117. The default and the subsequent devaluation of the currency dramatically reverted investments and capital inflow, which, having averaged 6% of the GDP in 1997-1998, were reduced to half in the year 2000, and reverted completely in 200118. Likewise, the impact on the financial market brought about the freezing of the bank deposits of the Argentine people. The credit market was thus paralyzed. In view of these measures, the default and the great uncertainty about the long term, the financing possibilities both in the domestic and the foreign market were seriously restricted. In this context, public services were not exempt from regulatory changes, which had a strong impact on their expected revenues. The Public Emergency Law and the Foreign Exchange Regime Reform stipulated not only the end to the Convertibility system but also the ‘pesification’ to AR$1:US$1 of public service rates, as well as their ‘freezing’ through a prohibition to readjust or index them, which caused a profound crisis in this sector. The referred macroeconomic changes resulted in a significant instability, reflected in a country risk rate which fluctuated between 4000 and 6600 basic points between the beginning of 2002 and June 2005, reaching a peak of 7199 basic points at the beginning of June of 200219.

� End to the System of Currency Convertibility One of the characteristics of the political and economic context at the commencement of the Project was the Convertibility Law. This Law ensured the Peso-Dollar parity in 1:1, that is to say, there did not exist a free fluctuation of the value of the national currency. On the other hand, its value was fixed by law. On the basis of this scenario, considerations as to whether to contract debt in dollars or pesos became vague, since the parity between both currencies seemed guaranteed under the protection of a law. At that time, to speak of pesos or dollars was equivalent, which is why in a Project such as CEMPPSA, requiring an important investment, often in imported products, such a consideration was made, many times without considerable distinction between items in pesos or dollars, since this type of investments –even independently of whether items are of national or foreign origin- are valued in the currency in which the market ultimately operates for this type of business, whether U$S or another strong currency such as the Euro. 16 “Crisis financieras internacionales: ¿Qué rol le corresponde al gobierno?” (International Financial Crisis: What Is the Role of the Government?) The Cato Institute, FIEL. 2003. 17 The regime of currency Convertibility was replaced with a dirty flotation regime, with recurrent interventions by the Central Bank. 18 “Crisis financieras internacionales: ¿Qué rol le corresponde al gobierno?” (International Financial Crisis: What Is the Role of the Government?) The Cato Institute, FIEL. 2003. 19 Source: EMBI (Emerging Markets Bond Index). Indicator calculated by J.P. Morgan

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 29 The situation changed radically in the year 2001, when in the month of December the National Government decided to put an end to Convertibility, decision which led to a series of disastrous consequences in the short term, and other worse consequences in the long term. With the parity peso-dollar gone, the initial estimations made by CEMPPSA, especially those related to the return flow, were dramatically modified. With the general crisis the country was going through, came governmental restrictions for the regulation of items necessary to the country´s development, such as the price of fuels and electric power, among others. Thus, CEMPPSA found themselves facing a very adverse scenario, with bleak prospects of recovery. In this respect, Mercau and Ontiveros point out that “Estimates take into account variations in the value of the dollar and their irregular effect on the evolution of electricity rates, which is significantly lower than the return of costs, which (the latter) tend to increase faster”. The referred variation is an important point of consideration for companies which make a substantial initial investment. As benefits are postponed in time, their value is reduced due to the effects of inflation and uncertainty. National state policies with regard to the evolution of the electric power market and its regulation present a future scenario in which recovery may become a reality.

� Currency Mismatch The Annual Report on CEMPPSA´s accounting statements corresponding to the fiscal year ended on December 31st, 2002 points out that “It is important to highlight the impact of the new economic measures taken by the National Government, which decreed the end to Convertibility by means of different procedures according to the status of assets and/or liabilities”.

“These measures affected us directly as regards the composition of the Company´s liabilities, since the agreement subscribed by our Company with the companies in charge of construction of the facilities has remained in its original currency, that is to say, US dollars”.

“With regard to liabilities toward financial institutions, originally contracted in US dollars, they have been pesified at AR$1 for each U$S 1, plus the corresponding update according to the CER coefficient*, plus an interest rate”.

“These new measures of the National Government included the ‘freezing’ of public service rates, which affected the evolution of the price of electric power”.

“Non-current assets are being financed with the Company´s own equity and, to a lesser degree, with long term liabilities, mainly through the financing of the private stakeholders”.

More than 98% of current liabilities is toward the private stakeholders, caused by the update of debit balances”.

* Translator´s :ote.”CER” (Reference Stabilization Coefficient) One of the two indexes used to adjust pesified debts for inflation. CER adjusts debts according to inflation in the prices of goods and services (as opposed to CVS, which adjusts debts according to the growth in salaries). Part of a package of laws intended to shield debtors who borrowed in dollars from the collapse of the peso.


� Changes in the rates of the Electric Power Sector Within the context of general crisis, one of the most significant changes occurs in relative prices. Those prices which were indexed to dollars during the Convertibility period, underwent a dramatic transformation. Profitability for CEMPPSA´s stakeholders is closely linked to the generation and sale of electric power. In this respect, any change in rates has a direct impact on the profitability of the private stakeholders. The rates used in the estimate drawn up during the bidding process of this Project were especially calculated for the purposes of said estimate by Lapeña Consultancy Agency. The MARGO weekly dispatch model was used, and weighted average prices were obtained from the fifty seven available hydrologies. The fluctuations considered in this series consolidated halfway through the Project in approximately U$S 31 per MWh generated. This estimate was, at the time, presented with supporting documentation, and made emphasis on the economic reality of the time and on the exact market conditions in which the estimate had been drawn up. Along these lines, after the regulatory changes, such estimates of rates were no longer representative for the sector. In comparison with the new 2002 estimate, not only are the new rates lower, but also, since the year 2002, the rates originally estimated in dollars are received in pesos at a rate of AR$1:US$1. Such changes in the estimate of rates result in a greater financial effort for power generation companies like CEMPPSA, and create an economic stress with potential relief in the medium and long term. The following graph shows the difference between prices expected in the year 1995 and those estimated in 2002.

Rate Estimated in 1995 vs. Rate Estimated in 2002 (US$/MWH)

0

5

10

15

20

25

30

35

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029

Monomial Rate (without inflation) estimated in 1995

Monomial Rate (without inflation) estimated in 2002

As observed in the foregoing graph, the new post-devaluation rate scenario, presented in the report drawn up in the year 2002 by Mercau Ontiveros, shows a clear divergence with respect to the figures originally estimated, since the prices estimated in the said 2002 report will at no point converge with those estimated in the proposal documents of the year 1995. It is worth mentioning that the Potrerillos Project is the first case in the country of a project implemented under the BOT (Build-Operate-Transfer) System, by

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 31 which CEMPPSA finances, constructs, operates the concession and transfers the Project to the State at the end of the concession period. Thus, considering that CEMPPSA´s benefits depend completely on the profits obtained from the sale of electric power, it is extremely sensitive to short-term changes, especially of a political-economic nature. Radical changes like those occurring at the end of 2001 and, subsequently, at the beginning of 2002 greatly affect the capacity of obtaining return and satisfying financial obligations previously assumed, with a more stable scenario and less restrictive estimates. In fact, the additionality of this Project is demonstrated on the basis of such facts.

� Discount Rate Evidently, the risk conditions of this new scenario have changed; reason why there might even be a new discount rate required for energy projects with State participation. Even though a change in the required profitability has not been considered in the analysis carried out, it is clear that the risk inherent to projects of the magnitude and nature of CEMPPSA´s, after the changes occurred in Argentine economy during 2001-2002, is much higher than previously estimated.

� Adjusted Flow: Calculation of the IRR against the changes in economic and rate conditions (beginning de 2002)

The Mercau and Ontiveros Report “Application of Green Credits to the Potrerillos Project” estimates once again the original flows and the IRR, taking into consideration the above mentioned changes.

Project IRR (2002)

Benchmark

10.5% < 14% The report concludes that “Clearly, it can be demonstrated that the nature of the Project, from the economic point of view, has changed dramatically. The “new” Potrerillos Project would not have exceeded the “hurdle” to be seriously regarded by private investors in a pre-devaluation scenario. They suddenly found themselves included in a project which, had those conditions been exposed beforehand, they would not have taken part in.” “In this context, it is necessary to use tools which can re-establish –at least partially- the initially estimated profitability, and make this Project sustainable in the long term, both for society as a whole and for those who committed themselves to this undertaking.” In other words, since the Project´s IRR is lower than the considered Benchmark, the CDM Project activity may not be considered viable without the revenues obtained from the sale of CERs. Adjusted Project Cash Flow (2002) Below is the estimated adjusted cash flow for the Project, used to calculate the IRR: 10.5%


Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Generation 245.6 249 182.5 405 515 845 845 845 845 845 845 845 845 845 845 845 845Monomial rate (without inflation) 24.8 29.5 27.3 7.6 6.9 9.7 11.3 13.5 16.4 17.9 19.3 22.6 25.4 28.2 28.2 28.2 28.2Turnover (a) 6.1 7.3 5.0 3.1 3.6 8.2 9.5 11.4 13.9 15.1 16.3 19.1 21.5 23.8 23.8 23.8 23.8Other revenues (b) 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9NET TURNOVER (c=a+b) 7.3455 7.4 4.9823 3.078 3.5535 11.1 12.4 14.3 16.7 18.0 19.2 22.0 24.1 26.5 26.5 26.5 26.5Total investment 71.8 102.1 73.2 12.6 0 0 0 0 0 0 0 0 0 0 0 0 0Operation and maintenance costs (30%) (2.2) (1.7) (1.4) (0.7) (1.6) (1.4) (2.4) (3.0) (3.3) (3.4) (3.4) (3.4) (3.4) (3.4) (3.4) (3.4) (3.4)CAMMESA (0.4%) (0.0) - (0.0) (0.0) (0.0) (0.0) (0.0) - (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)Independent carrier (2.4%) - - - (0.1) (0.1) (0.3) (0.3) (0.3) (0.4) (0.4) (0.5) (0.5) (0.6) (0.6) (0.6) (0.6) (0.6)Nat Electric Regulatory Com (ENRE) (0.4%)(0.0) - (0.0) (0.0) (0.0) (0.0) (0.0) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)Nat Public Broadcasting Fund (FNRP) (1%) - - - - - (0.1) (0.1) (0.1) (0.2) (0.2) (0.2) (0.2) (0.2) (0.3) (0.3) (0.3) (0.3)ORSEP (0.5%) (0.0) - (0.0) (0.0) (0.0) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)Irrigation Department (2.5%) (0.2) 0.2 (0.1) (0.1) (0.1) (0.3) (0.3) (0.4) (0.4) (0.5) (0.5) (0.5) (0.6) (0.7) (0.7) (0.7) (0.7)Provincial royalties (0%)Gross revenue tax (0%)Contract stamp tax duties (0%)Securities–Operation and maint. (0.9%) - - - (0.0) (0.0) (0.1) (0.1) (0.1) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2)Administrative expenses(6.57%) (0.5) (0.4) (0.4) (0.2) (0.2) (1.1) (0.8) (0.9) (1.0) (1.0) (1.0) (1.0) (1.0) (1.0) (1.0) (1.0) (1.0)OPERATING COSTS (d) (2.4) (2.5) (2.1) (1.1) (2.1) (3.3) (4.2) (5.0) (5.7) (5.9) (5.9) (6.1) (6.3) (6.5) (6.5) (6.5) (6.5)

Earned surplus (e = c-d) 3.6 4.9 2.9 2.0 1.5 7.5 8.2 9.3 10.9 12.0 13.0 15.6 17.8 19.9 19.9 19.9 19.9

Financial balance (f) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Depreciation of assets (g) -2.8 -3.9 -3.8 -3.8 -3.8 -14.4 -14.4 -14.4 -14.4 -14.4 -14.4 -14.4 -14.4 -14.4 -14.4 -14.4 -14.4

Gross margin (e+f+g=h) 0.8 1.0 (0.9) (1.8) (2.3) (6.9) (6.3) (5.3) (3.5) (2.4) (1.3) 1.2 3.4 5.6 5.6 5.6 5.6

Calculation of Profits (35%) (0.30) (0.30) 0.30 0.60 0.80 2.40 2.20 1.90 1.20 0.80 0.50 (0.40) (1.20) (2.00) (2.00) (2.00) (2.00)Carry-forward 0.30 1.00 1.80 4.20 6.40 8.30 9.50 10.30 10.80 10.40 9.20 7.20 7.20 7.20 7.20Income tax (i) (0.30) (0.30) - - - - - - - - - - - - - - -Other taxes (j) - - - - - - - - - - - - - - - - -

NET MARGIN (H+I+J=K) 0.5 0.6 (0.9) (1.8) (2.3) (6.9) (6.3) (5.3) (3.5) (2.4) (1.3) 1.2 3.4 5.6 5.6 5.6 5.6

CASH FLOW

Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Province contributions 81.4 91.3 2.2 - - - - - - - - - - -Earned surplus 3.6 4.9 2.9 2.0 1.5 7.5 8.2 9.3 10.9 12.0 13.0 15.6 17.8 19.9 19.9 19.9 19.9Working capital (9.9) (14.7) (10.6) (1.4) 0.7 2.3 2.6 3.0 3.5 3.8 4.0 4.6 5.1 5.6 1.2 - -Investments (71.8) (102.1) (73.2) (12.6) - - - - - - - - - -Income tax (0.3) (0.3) - - - - - - - - - - - - - - -Cash Flow 3.1 (20.8) (78.7) (12.0) 2.2 9.8 10.8 12.3 14.4 15.8 17.0 20.2 22.9 25.5 21.1 19.9 19.9

Sub-Step 2d. Sensitivity Analysis In this section an analysis is made of the variation of the Internal Rate of Return when faced with variations of key parameters. This analysis has two objectives: on the one hand to demonstrate that the Potrerillos Project does not exceed the considered benchmark when faced with changes in key parameters and, on the other hand, that the changes occurred after 2002, year for which the Project´s additionality is analyzed, far from having improved the Project´s status, have imposed new obstacles on its development. The so-considered key parameters in the cash flow and the variations to be applied are summarized in the following table:

Variable Values to be used for the sensitivity analysis Monomial Rate Realized values until 2006 and +/- 10% with respect to

values estimated in year 2002 for the period between 2007–2033.

Generation Realized values until 2006 and +/- 10% for the period between 2007–2033.

Operation and Maintenance Costs Realized values until 2006 and +/- 10% for the period between 2007–2033.

Discount Rate 21%

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 33 Below is a brief listing of the series of administrative actions which lead to consider a change in rates.

� Variations in the monomial rate The rates estimated in 1995 and those estimated in 2002 differ from the realized rates due to successive modifications in the MRE (Electricity Regulatory Framework). Modifications introduced until the beginning of the year 2002 have already been commented on in previous sections. Therefore, below is a commentary on the modifications introduced after said period which had an impact on the rates collected by CEMPPSA. In this respect, from the year 2002 up to this date, various administrative actions have taken place which have altered the MRE and therefore affected the parties involved therein. The most representative of them are:

• �o update of Seasonal Prices since the year 2002 according to the MRE stipulations. During the first years no increase was approved. Then, in contravention of the principle of equality and prohibition held by the MRE with regard to the generation of crossed subsidies, differential increases were approved depending on the requesting agent. The non-approval of seasonal prices according to the MRE stipulations has generated harmful impacts on the parties of the Wholesale Electric Market (MEM) and distortive transferences of richness among different actors of the national economy.

• Resolution S.E. 246/02. It stipulated the pesification of payments per KW to generator agents, and such payments have remained fixed since August 2002 in the sum of AR$12. Payment per KW was designed to set off investments. Its pesification is one of the factors that has turned non-viable the return of investments and the commitment to perform new works.

• Resolution S.E. 240/03. This resolution distorts the marginalist concept defined by the MRE for approval of the price of the electric power offered by generator agents. This resolution, which limits the price of electric power, affects to a superlative degree the economic-financial equation of generator agents.

• Resolution S.E. 406/03. This resolution stipulated the need to fix temporary mechanisms for the assignment of scarce resources from the Stabilization Fund, which have been exhausted due to the Government´s decision to maintain seasonal prices (the electric power prices paid by distributors) lower than the Spot price paid to generators (who, at the same time, suffered pesification and the freezing of certain costs). The origin of this Resolution was the lack of resources of the Stabilization Fund due to the non-approval of a new Seasonal Price on the part of the Energy Secretariat with the purpose of adjusting the deficit of said Fund (difference between the seasonal rate paid by Distributors/Demand versus the Spot price approved for Generators). To these effects, it stipulated a mechanism for the distribution of the money collected by CAMMESA, setting a series of priorities. The balances outstanding payment each month were consolidated to be paid when the Fund had sufficient money. Besides, Resolution S.E. 943/03 stipulated that financial claims consolidated against the Stabilization Fund, with due date conditioned to further definition, did not constitute liquid and receivable debt and would be adjusted according to later arrangements, taking as reference the returns which the Stabilization Fund would have had if it had had sufficient resources. Besides, Resolution SE 406/03 introduces an order of priority for the payment of returns from sales in the Spot Market. Payments outstanding are consolidated monthly. This ‘temporary’ resolution is still in force.

• Resolution S.E. 1281/06. This resolution defines supply priorities depending on the restrictions which might arise. It stipulates an increase in rates for big consumers on any difference in their consumption above their 2005 demand. It defines the so-called Energy Plus, which must be


contracted for in order to satisfy the demands of: (i) big users above their 2005 demand and (ii) the total consumption of a new big demanding agent. This energy will have a price higher in a 50% to 100% than the one defined for the seasonal price approved for big consumers. Finally, Resolution S.E. 1281/06 deepens the restriction to the freedom of contract granted by the MRE to generator agents.

This way, the impact of these resolutions on CEMPPSA´s economic-financial equation may be summarized as follows: A) Reduction of the rates which pay for the energy sold CEMPPSA constructed the Potrerillos facilities investing a sum superior to U$S 312,000,000 (three hundred and twelve million US dollars), including contributions from the Province and capital contributions and financing from the private investors. The Project expected the repayment of the contributions made by CEMPPSA´s private stakeholders via the funds generated from the sale of energy produced by the Project itself throughout the concession period, which is 25 years. For this to happen, the energy produced was supposed to be sold in a de-regulated market, which would ensure that final prices and rates would fluctuate according to the norms of supply and demand, and keeping a reasonable coherence with the generation rates of other countries in the region. Once the main investments had been made, at the beginning of 2002, pesification of contracts came about and, from that moment on, a management of rates which was not according to the investments made. Rates actually remunerated represent for the period 2002–2006 only 25% to 65% of the rate estimated in the proposal. B) Retentions brought about by the application of Resolution S.E. 406/03. Due to CEMPPSA´s type of power stations and the manner in which their energy was contracted for at the moment this and other related norms were introduced, this concessionaire is one of the most affected by their effect. The application of the referred resolution would cause the firm to collect only approximately from 20% to 40% of their sales in the MEM. This percentage was increased to the 60% thanks to a preventive measure lodged by CEMPPSA. In spite of this, the application of this resolution, which was originally introduced on a temporary basis, has caused the Stabilization Fund managed by CAMMESA to owe CEMPPSA, in February 2007, a sum of about fifty four million pesos (which would amount to, at an exchange rate of $3,10/U$S, about U$S 17,400,000 (seventeen million four hundred US dollars) plus the corresponding interest. In addition to all this, if we take into consideration that (i) there is no certain date as to when the application of this ‘temporary’ resolution will be annuled, that (ii) there is no guarantee as to the commencement date of payment of the debt consolidated by this resolution and that (iii) the prices collected are much lower than those originally proposed, it is clear that CEMPPSA´s revenues have had a marked unbalance. C) Impossibility to make contracts in the Forward Market (MAT) Finally, the impossibility to make contracts in the Forward Market deprives CEMPPSA of a right the MRE did grant them, under the regulations, to enter into such contracts as they deemed appropriate, convenient or palliative of the damage caused by, for example, the existence of resolutions such as 406/03 and 1281/06.

� Sensitivities The chart below shows the results of the sensitivities:


14.0%10.5%

Parameters Variation IRRRealized values up to2006

Realized rates and costs up to 2006 andFlows estimated in 2002 for the rest of the period 10.98%

Realized values up to 2006+10% with respect to values estimated in 2002 11.74%

Realized values up to 2006-10% with respect to values estimated in 2002 10.27%





Realized values up to 2006Rate and Generation: +10%O & M Costs: -10%

12.65%

Realized values up to 2006Rate and Generation: -10%O & M Costs: +10%

9.15%

Discount Rate 21% (VAN) (44.88)$

Original Flow 1995: IRRAdjusted Original Flow (2002): IRR

Operation and Maint.Rate, Generationand Costs

Rate

Generation

Operation and Maint.Costs

What emerges from the foregoing analysis is that the assertion that the project is not financially viable is a sound one when faced with variations in different key parameters and that, therefore, revenues derived from the sale of emission reductions are fundamental to achieve the sustainability of operations in the long term. Step 4. Common practice analysis

Sub-step 4a. Analyze other activities similar to the proposed Project activity

a) Argentine Energy Matrix

Figure 5 shows the components of the Argentine Energy Matrix (2005): Natural Gas (50% of the total matrix), Oil (38%), Renewable Energies (8%), Nuclear Energy (3%) and Mineral Coal (1%).

The hydraulic power is within Renewable Energies accounts for 5% of the total Energy Matrix of the country.


Matriz Energética Argentina - 2005 -

Fuente: Secretaría de Energía

Figure 6. Argentine Energy Matrix (2005) References Figure 6: - Petróleo: Oil - Gas �atural: �atural Gas - Carbón Mineral: Coal - Renovables: Renewable Energies - �uclear: �uclear Energy - Energía Hidráulica: Hydraulic Energy - Leña: Firewood - Bagazo: Bagasse - Otros Primarios: Other Commodities - Fuente: Secretaría de Energía - Source: Energy Secretariat As regards electric power generation in particular, figure 6 shows the distribution of the electric power generation in the country, where thermal energy represents 54%, hydro power, 39%, and nuclear energy, 7%. These data gives and idea of the tendency to generate more thermal energy these days, something which not only represents a significant source of atmospheric pollution, but also creates higher operation and maintenance costs in the initial stages of the project, compared with a hydroelectric power station.


Participación de la Generación de la Energía - 2005 -

Fuente: CAMMESA

Hidráulico39%

Nuclear7%

Térmico54%

Figure 7. Distribution of Power Generation (2005) References Figure 7: - Térmico: Thermal - Hidráulico: Hydraulic - �uclear: �uclear - Fuente: Source

b) Geographic division and main hydroelectric power stations in the country

As shown on CAMMESA20`s 2004 annual report, 42% of the country´s hydro power is generated at the Comahue River Basin which comprises Argentine geographic areas of the provinces of La Pampa, Neuquén and Río Negro. 37% is generated at the Yacyretá hydroelectric plant and 9% at the Salto Grande Joint Technical Committee. Fourth comes the Cuyo region –which this project belongs to—and finally, the Northeast Argentine region and the Central region.

Figure 7 summarizes the distribution of hydraulic generation among the main hydroelectric power stations in the country:

20 CAMMESA´s 2004 Annual Report


Fuente: CAMMESA*Incluye: Alicurá, Piedra del Águila, Pichi Picún Leufú, El Chocón, Arroyito, Planicie Banderita, El Chañar

Participación de la Generación Hidráulica - 2004 -

Cuenca Comahue*

42%

CTM Salto Grande

9%

Yacyretá37%

Cuyo8%

Centro2%

NOA2%

Yacyretá37%

Salto Grande Arg

9%

P del Águila17%

El Chocón11%

Alicurá7%

P. Banderita3%

P.P. Leufú4%

Otros7%

Nihuil3%

Diamante2%

Figure 8. Distribution of Hydraulic Generation (2004) References Figure 8: - �OA: �orthwest Argentina - Centro: Central Region - Cuenca Comahue: Comahue River Basin

c) Historical Background of Argentine hydroelectric power stations

Unlike the Potrerillos Project, the rest of the hydroelectric power stations in Argentina were built by the State, mostly by the National State. However, the exploitation rights of a large part thereof have been granted to private agents. Salto Grande and Yacyretá are examples of hydroelectric power stations that are still operated directly by the State.

The historical evolution of the sources of electricity supply in Argentina shows a reasonable balance between thermal and hydraulic generation until the mid 90s, as a result of large hydroelectric exploitation undertakings promoted by the National State through the companies “Agua y Energía” and “Hidronor” during the 60s, 70s, 80s and part of the 90s.

As of 1995, the construction of new hydro power stations came to a halt and power generation with gas turbines increased. During the period from the 60s to the first part of the 90s, the State´s efforts made it possible to finance hydro projects including dams, in some cases through the investment of funds from the National Treasury, and in other cases, especially during the second half of said period, through the aid of international funding organizations.21 The market policies of the 1990s brought about the privatization of a large number of hydroelectric plants located within the national territory.

21 Ernesto Ortega, Eng. “Financing Dam Engineering in Argentina”, IV Argentine Conference on Dams and Hydroelectric Exploitation Projects. Province of Misiones. August 17-19, 2006.


Sub-step 4b. Discuss any similar options that are occurring

There are two factors differentiating the Potrerillos Project from the rest of the hydroelectric power stations in Argentina:

1. The moment when it is built, and then, the moment when it starts receiving revenues.

2. The type of Private-State Participation selected.

Both factors are explained below:

1. The moment when it is built, and then, the moment when it starts receiving revenues.

The concessions of the hydroelectric power stations mentioned in Sub Step 4a began –in general and differently from the Concession of the Potrerillos Project—during the first years of the 1990s. Without doubt, starting up in a period when the Argentine economy was experiencing genuine growth allowed those concessionaires to get acceptable return on their investments (whether in the form of new projects or through the payment of the initial charges to accede to the referred concessions). The context was different for the Potrerillos Project since the building works began in a pre-crisis period but Project started generating returns (to meet its obligations) in a post-crisis period. It is clear that we are comparing projects with very different context conditions.

Thus, after the Argentine crisis of December 2001, the new emerging economic regulations, and the situation of electricity rates in the country prevented the construction of new hydroelectric power stations until 2005.

After the passing of Law 25.561 in January 2002 regarding Public Emergency and the Foreign Exchange Regime Reform, the country was declared to be under public emergency in relation to social, economic, administrative, financial and foreign exchange matters. Under Section 8 of the referred law, adjustment clauses in dollars or in other foreign currencies, indexation clauses based on foreign price indexes and any other indexation mechanism contained in contracts entered into by the Public Administration under public legal regulations, including those contracts involving public works and services, became null and void.

The study Hydroelectricity in Argentina22 undertaken by the Carlos Bohoslavsky, (Engineer from ACE –Foreign Trade Consultants), Eduardo Liaudat (Engineer from Proa S.R.L. –Associated Professionals) and Ernesto Ortega (Engineer from ORSEP –Dam Safety Regulatory Organism) and presented at the IV Argentine Conference on Dams and Hydroelectric Exploitation Projects held in the Province of Misiones in 2006 states that the “freezing” of public service rates by the State, whose aim has gone far beyond the control of inflation or the transition from convertibility to devaluation, has distorted the economic situation, discouraging genuine investments in power generation (both thermal and hydraulic).”23

Therefore, after the crisis, no investments have been made in power generation due to the absence of an economic context and a legal and institutional framework that would provide security to this type of initiatives.

According to the report mentioned above, at present and broadly speaking, there are not any building companies capable of facing significant power generation projects. The companies that currently supply

22 http://www.cadp.org.ar/congreso/docs/trabajos/T_A10.pdf 23 Carlos Bohoslavsky, Eng., Eduardo Liaudat, Eng. and Ernesto Ortega, Eng. Hydroelectricity in Argentina. IV Argentine Conference on Dams and Hydrolectric Exploitation Projects. Province of Misiones. August 17-19, 2006.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 40 hydroelectric and mechanical equipment have survived thanks to their supply to foreign projects. The country has not developed its own control mechanisms at the national level, consultancy in Argentina has resorted to other areas that are not related to dams, and the State´s role has been reduced to regulator. Said document points out that “It must be considered that at present the MEM (Argentine Wholesale Electric Market) generators are granted a monomial rate of around 0.020 U$S/KWh and the average costs of thermal and hydro generation are over 0.025 to 0.030 U$S/KW”.

Consequently, due to this reduction observed in the sector, dealing with funding issues does not only require a lot of creativity to make each project individually profitable but it must also provide the resources for the creation of a dam industry in Argentina through a sound financial plan that promotes investment in training, research and capitalization of fixed assets, including the new sustainability and security requirements demanded by society.

To conclude, in Argentina´s present context, human resources, capital, companies, suppliers and financial resources are insufficient to help recover the sector devoted to dam construction and operation and their corresponding hydroelectric power stations.

2. The type of Private-State Participation selected

As the Ernesto Ortega (Engineer, ORSEP member)24 sustains, “Many formulas have been attempted worldwide to solve the problem of funding public initiatives, particularly dam construction. Each context is different, so it is not always possible to apply a model from one latitude to another, no matter how successful it may have been. It is important to know about previous experiences in the application of a model in order to learn from them.”

In the case of the Potrerillos Project, the BOT system (Build-Operate-Transfer) was chosen whereby a private company finances, builds, operates the concession and transfers the Project to the State at the end of the concession period. It is worth mentioning that this is the first case in the country with this type of financing.

It is common practice worldwide in BOT-type projects, that the developer, in this case, CEMPPSA, gather the necessary sources to make the initial investment by using a combination of equity and project finance (long-term credit taken and repaid by the Project itself). Commonly a 20% to 30% of the necessary total in equity and the rest in project finance.

In this way, CEMPPSA drew up the business plan submitted to the Province of Mendoza during the corresponding bidding process. Due to the national economic crisis which affected this Project and considering that after the end to convertibility in 2002, the essence of the Project changed, CEMPPSA struggled to obtain the referred “Project Finance”. Without doubt, this new and initially unexpected situation had a profound negative impact on CEMPPSA´s economy, and that of its creditors and sponsors.

24 Ernesto Ortega, Eng. Financing Dam Engineering in Argentina, IV Argentine Conference on Dams and Hydroelectric Exploitation Projects. Province of Misiones. August 17-19, 2006. This document can be accessed at http://www.cadp.org.ar/congreso/docs/trabajos/T_A9.pdf

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 41 Step 5. Impact of CDM registration This Project, as mentioned on Mercau and Ontiveros´s report “Application of Green Credits to the Potrerillos Project”, due to its nature and inherent characteristics, contributes to the reduction of carbon dioxide emissions since electricity generated from fossil fuels is displaced by electricity generated from a renewable source.

It is important to remember that more than half of the power stations in the country operate using thermal sources. They are more attractive in so far as the return on investment is concerned, but their operation costs are high and they are considerable sources of emission of CO2 and other gases. This way, with the Potrerillos Project in operation, CO2 emissions are reduced since demand is met and it is not necessary to resort to the operation of thermal stations. Step 2 developed in this section described how the changes that the political, economic and financial crisis caused in CEMPPSA´s cash flows would turn the Potrerillos Project into a financially unviable undertaking in the long term, resulting in a lower IRR than that required by investors in order to finance the Project. As explained before, in this context, it is necessary to find mechanisms which can restore –at least, partially—the Project´s initially estimated profitability in order to make it a sustainable undertaking in the long term, both for society as a whole and for those who committed themselves to it.

� Adjusted flow and CERs in 2002

Mercau and Ontiveros used the following data in 2002 to calculate the benefits of green credits:

� As explained in previous sections, the differential generation obtained by the CDM project equals 454.291MWh per year.

� The emission factor of the Argentine electric grid is estimated to be approximately 450-500 tons of equivalent CO2 /GWh.

� U$S 13 is the average net price estimated per ton of equivalent CO2. This price is set taking into account the present market price of green credits, minus possible limitations as regards the acceptance thereof by the countries in Annex 1 that are in a position to acquire them.

The combination of these three values results in an annual flow from the sale of green credits of U$S2,885,987.

Project IRR with CERs (2002) Benchmark 12.80 % < 14%

By incorporating green credits, the Project´s IRR amounts to 12.80%, coming close to the “hurdle” previously mentioned. In this sense, it is clear that the incorporation of green credits is vital to support the Project`s operation and to face the assumed financial commitments.

In this way, the incorporation of additional flows obtained from the sale of CERs improves the viability of the Project by increasing the IRR up to 12.80%. Within this context marked by the end to convertibility, pesified rates and debts run up in dollars, CEMPPSA´s management decided to take additional investment risks to finish the works they had

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 42 engaged in, as well as those risks related to the Project´s operation, using their own funds after considering the benefits associated to a CDM project in their profitability analysis. In this respect, Mercau and Ontiveros´s report concludes that, considering the cash inflow obtained from the sale of CERs, CEMPPSA´s financial and economic situation has taken a more favorable turn, facing a scenario in which there is no need to find new solution alternatives. As a conclusion, the implementation of this Project activity within the framework of the Clean Development Mechanism would enable an increase in the Project´s IRR and would make it viable in the long turn. As it has been explained so far, the Potrerillos Project is considered to comply with the additionality criterion that enables its implementation as a Project activity within the CDM framework.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 43 B.6. Emission reductions:

B.6.1. Explanation of methodological choices: Methodology ACM0002/version 06 is the chosen for this Project (May 19, 2006) This Project activity complies with the applicability conditions established by this methodology for the reasons set forth below: • It applies to electricity generation capacity additions from: − Run-of-river hydro power plants; hydro power projects with existing reservoirs where the volume of

the reservoir is not increased − New hydroelectric power plants with reservoirs having power densities (installed power generation

capacity divided by the surface area at full reservoir level) greater than 4 W/m2 − Wind sources − Geothermal sources − Solar sources − Wave and tidal sources • This methodology is not applicable to project activities that involve switching from fossil fuels to

renewable energy at the site of the project activity, since in this case the baseline scenario would be the continued use of fossil fuels at the site.

• Both the geographic project boundaries and those of the relevant electricity grid must be clearly

identified, and information on the characteristics of the grid must be available. In addition, this section presents a summary of the methodological options chosen for the calculation of the baseline: Step 1: Calculation of the Operation Margin Emission Factor. Method “c”, Dispatch Data Analysis, has been applied. Step 2: Calculation of the Build Margin Emission Factor. Option 1 calculation ex –ante has been chosen.

Option 1. Calculate the Build Margin emission factor (EFBM) ex-ante based on the most recent information available on plants already built for sample group m at the time of PDD submission.

The sample group m consists of: - the five plants most recently built or, - the power plant capacity additions in the electricity system that comprise 20% of the system

generation (in MWh) and that have been built most recently. In this Project, the group of plants m consists of those plants comprising 20% of the most recent capacity additions to the system, since, based on the comparison between both options, this is the one that involves a greater amount of energy (this information is shown in detail in Annex 3).


. Data and parameters that are available at validation: Data / Parameter:

EGhistorical

Data unit: GWh/year Description: The average of historical generation of existing power stations during five years prior

to the implementation of the Project. Source of data used:

on-site measurement

Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied

Power Stations

Years 1996 1997 1998 1999 2000 Average

Álvarez Condarco

128.752 124.398 121.226 121.407 129.612 125.079

Old Cacheuta 59.409 58.358 61.743 57.578 63.677 60.153

Description on-site electricity meter Any comment: The five-year period used to obtain the average of historical generation extends from

1996 to 2000 and constitutes the last and most representative five-year period in the historical generation data of the old Álvarez Condarco and Cacheuta Stations, since as of 2001 the generation began to be affected by the building works of the Potrerillos Project. (For example, there was not electricity generation at the old Cacheuta Station between May and October, nor was there generation at the Álvarez Condarco Station between May and September of the same year).

Data / Parameter: Mineral Coal Emission Factor Data unit: tCO2/t Mineral Coal Description: Mineral Coal Emission Factor Source of data used: IPCC, 1996 Value applied: 2.54 Justification of the choice of data or description of measurement methods and procedures actually applied :

Said value has been chosen following the methodology AMC0002/Version 06 recommendations

Any comment:

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 45 Data / Parameter: Fuel Oil Emission Factor Data unit: tCO2/t Fuel Oil Description: Fuel Oil Emission Factor Source of data used: IPCC, 1996 Value applied: 3.44 Justification of the choice of data or description of measurement methods and procedures actually applied :


Any comment: Data / Parameter: Natural Gas Emission Factor Data unit: tCO2/Dam

3 Natural Gas (cubic dekameter) Description: Natural Gas Emission Factor Source of data used: IPCC, 1996 Value applied: 2.10 Justification of the choice of data or description of measurement methods and procedures actually applied :


Any comment: - Data / Parameter: Gas Oil Emission Factor Data unit: tCO2/t Gas Oil Description: Gas Oil Emission Factor Source of data used: IPCC, 1996 Value applied: 3.36 Justification of the choice of data or description of measurement methods and procedures actually applied :


Any comment: -

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 46 Data / Parameter: Operational lifetime of Unit 1 (Original Maximum Capacity 13.7 MW) of the

Álvarez Condarco Station Data unit: Years Description: Operational lifetime of Unit 1 (Original Maximum Capacity 13.7 MW) of the

Álvarez Condarco Station that has been repowered due to the CDM Project activity

Source of data used: Technical documents Value applied: 45 years Justification of the choice of data or description of measurement methods and procedures actually applied :

Machinery 1 with an Original Maximum Capacity of 13.7 MW that belongs to the Álvarez Condarco Station had started operations in 1955. The unit´s operational lifetime was estimated to be 45 years approximately, so it was supposed to be replaced in 2000 –in absence of the CDM Project—by another of the same characteristics. Due to the CDM Project activity, during the year 2001, this unit was repowered to a Maximum Capacity of 15.2 MW, extending its operational lifetime to 75 years.

Any comment: - Data / Parameter: Operational lifetime of Unit 2 (Original Maximum Capacity 13.7 MW) of the

Álvarez Condarco Station Data unit: Years Description: Operational lifetime of Unit 2 (Original Maximum Capacity 13.7 MW) of the

Álvarez Condarco Station that has been repowered due to the CDM Project activity

Source of data used: Technical documents Value applied: 45 years approximately Justification of the choice of data or description of measurement methods and procedures actually applied :

Machinery 2 with an Original Maximum Capacity of 13.7 MW that belongs to the Álvarez Condarco Station had started operations in 1955. The unit´s operational lifetime was estimated to be 45 years approximately, so it was supposed to be replaced in 2000 –in absence of the CDM Project—by another of the same characteristics. Due to the CDM Project activity, during the year 2001, this unit was repowered to a Maximum Capacity of 15.2 MW, extending its operational lifetime to 75 years.

Any comment: -

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 47 Data / Parameter: Operational lifetime of Unit 1 (Original Maximum Capacity 3 MW) of the old

Cacheuta Station. Data unit: Years Description: Operational lifetime of Unit 1 (Original Maximum Capacity 3 MW) of the old

Cacheuta Station that has been replaced due to the CDM Project activity Source of data used: Technical documents Value applied: 75 years approximately Justification of the choice of data or description of measurement methods and procedures actually applied :

Machinery 1 with an Original Maximum Capacity of 3 MW that belongs to the old Cacheuta Station had started operations in 1926. The unit´s operational lifetime was estimated to be 76 years approximately, so it was supposed to be replaced in 2002 –in absence of the CDM Project—by another of the same characteristics. Due to the CDM Project activity, this machine has been replaced by a new unit situated in the new building of the Cacheuta Nueva Station, with a Maximum Capacity of 31.60 MW.

Any comment: - Data / Parameter: Operational lifetime of Unit 2 (Original Maximum Capacity 3 MW) of the old




Any comment: - Data / Parameter: Operational lifetime of Unit 3 (Original Maximum Capacity 3 MW) of the old




Any comment: -


B.6.3 Ex-ante calculation of emission reductions: Below are shown in detail the equations used in the calculation of emission reduction, as well as the justifications for the use of each of the options set by the methodology ACM0002/Version 06 used in the calculation of the Project emissions, baseline emissions, fugitive emissions and reduction emissions in this Project activity. Baseline emissions STEP 1. Calculate the Operating Margin emission factor(s) (EFOM,y) based on Dispatch Data Analysis OM. The Dispatch Data OM emission factor (EFOM,Dispatch Data,y) is summarized as follows:

Where EGy is the generation of the project (in MWh) in year y, and EOM.y are the emissions (tCO2) associated with the operating margin calculated as:

Where EGh is the generation of the project (in MWh) in each hour h and EFDD,h is the hourly generation weighted average emissions per electricity unit (tCO2/MWh) of the set of power plants (n) in the top 10% of grid system dispatch order during hour h:

Where F i,n, h is the amount of fuel i (in a mass or volume unit) consumed by the set of plants n calculated on an hourly basis h for the set of plants falling within the top 10% of the system dispatch. To determine the set of plants (n), obtain from a national dispatch center:

a) The grid system dispatch order of operation for each power plant of the system; and

b) The amount of power (MWh) that is dispatched from all plants in the system during each hour that the project activity is operating (GE�h). At each hour h, stack each plant’s generation (GE�h) using the merit order. The set of plants (n) consists of those plants at the top of the stack (i.e., having the least merit), whose combined generation (Σ GE�h) comprises 10% of total generation from all plants during that hour (including imports to the extent they are dispatched).

COEFi,n is the CO2 emission coefficient of fuel i (tCO2 / mass or volume unit of the fuel), taking into account the carbon content of the fuels used by the set of plants falling within the top 10% of the system dispatch and the percent oxidation of the fuel in year(s) y, and ΣGE�n,h comprises 10% of total generation from all plants during that hour (MWh)

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 49 The CO2 emission coefficient COEFi is obtained as:

Where:

NCVi Is the net calorific value (energy content) per mass or volume unit of a fuel i, OXIDi Is the oxidation factor of the fuel (see page 1.29 in the 1996 Revised IPCC

Guidelines for default values), EFCO2,i Is the CO2 emission factor per unit of energy of the fuel i.

STEP 2. Calculate the Build Margin emission factor (EFBM,y) as the generation-weighted average emission factor (tCO2/MWh) of a sample of power plants m, as follows:

Where

Fi ,m y Is the amount of fuel i (in a mass or volume unit) consumed by relevant power sources m in year(s) y, m refers to the power sources delivering electricity to the grid, not including low-operating cost and mustrun power plants, and including imports to the grid,

COEFi,m Is the CO2 emission coefficient of fuel i (tCO2 / mass or volume unit of the fuel), taking into account the carbon content of the fuels used by relevant power sources m and the percent oxidation of the fuel in year(s) y, and

GE�m,y Is the electricity (MWh) delivered to the grid by source m. As it was explained in section B.4, Option 1 has been chosen for this Project, where the Build Margin Emission Factor is calculated ex ante based on the available information from the most recently built plants for a group of plants m at the moment of submitting the project document. STEP 3. Calculate the baseline emission factor EFy as the weighted average of the Operating Margin emission factor (EFOM,y) and the Build Margin emission factor (EFBM,y):

Where the weights wOM and wBM, by default, are 50% (i.e., wOM = wBM = 0.5), and EFOM,y and EFBM,y are calculated as described in Steps 1 and 2 above and are expressed in tCO2/MWh. The following chart shows the results obtained from the previous equations (Annex 3 shows the calculations in detail):


Step 1 = EFOM tCO2/MWh Step 2 = EFBM Tco2/MWh Step 3 = EF tCO2/MWh 0.60023029 0.37711000 0.48867015

Emission Reduction (ERy) Once the emission factor of the electricity grid to which this Project belongs has been calculated, the emission reductions associated to the Project can be calculated. According to equation 11, the emission reductions of the Project activity during year y (ERy in tCO2) is the same as the baseline emissions during year y (BEy in tCO2) minus the Project emissions during year y (PEy in tCO2 ) and the fugitive emissions in year y (Ly in tCO2).

Where the baseline emissions (BEy in tCO2) are the product of the baseline emissions factor (EFy in tCO2/MWh) calculated in Step 3, times the electricity supplied by the project activity to the grid (EGy in MWh) minus the baseline electricity supplied to the grid in the case of modified or retrofit facilities (EG baseline in MWh), as follows:

Equation 12 is only applied to the already existing units at the Álvarez Condarco and the old Cacheuta Stations (baseline scenario 2, see section B.4). The following chart shows the generation units and the power generation involved in the calculation. It is worth pointing out that in the particular case of the Álvarez Condarco Station, the energy considered as the CDM Project energy (EGy) is that resulting from the repowering of Units 1 and 2.

This means that, for said units, the energy involved in the baseline is greater than that of the Project (as the Project energy only consists in the difference produced by the repowering).

According to equation 12, the baseline emissions (BEy) result from the difference between the energy generated by the CDM Project (EGy) and the baseline energy (EGbaseline), all of it depending on the emission factor. As the first term will always be lower than the second, the result obtained for these units is negative, as observed in the first cell of the last column of the table below:

Hydroelectric Power Station

EGbaseline MWh/year

Egy MWh/year

Emission Factor CO2/MWh

BEy MWh/year

Álvarez Condarco Power Station Units 1 and 2

125.079 116.497 0.4886701 -4.194

Cacheuta Power Station Units 1, 2 and 3

60.153 294.694 0.4886701 114.613

Total 185.232 411.191 110.419

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 51 In the case of the new generation units corresponding to baseline scenario 1 (see section 4.B). The following chart shows the generation units and the power generation involved in the calculation:


EGy MW/h Emission Factor CO2/MWh

BEy MWh/year

Álvarez Condarco Power Station Unit 3

113.115 0.4886701 55.276

Cacheuta �ueva Power Station Unit 4

115.217 0.4886701 56.303

Total 228.332 111.579

Below is shown the total BEy value of the Potrerillos Project resulting from the addition of EGy between both scenarios:

Year EG y MWh EGbaseline MWh

Emission Factor CO2/MWh

BE y Tco2

2007 639.523 185.232 0.4886701 221.999

2008 639.523 185.232 0.4886701 221.999

2009 639.523 185.232 0.4886701 221.999

2010 639.523 185.232 0.4886701 221.999

2011 639.523 185.232 0.4886701 221.999

2012 639.523 185.232 0.4886701 221.999

2013 639.523 185.232 0.4886701 221.999

2014 639.523 185.232 0.4886701 221.999

2015 639.523 185.232 0.4886701 221.999

2016 639.523 185.232 0.4886701 221.999

2017 639.523 185.232 0.4886701 221.999

2018 639.523 185.232 0.4886701 221.999

2019 639.523 185.232 0.4886701 221.999

2020 639.523 185.232 0.4886701 221.999

2021 639.523 185.232 0.4886701 221.999

2022 639.523 185.232 0.4886701 221.999

2023 639.523 185.232 0.4886701 221.999

2024 639.523 185.232 0.4886701 221.999

2025 639.523 185.232 0.4886701 221.999

2026 639.523 185.232 0.4886701 221.999

2027 639.523 185.232 0.4886701 221.999


The following table shows the values resulting from applying equation 11, by means of which the emission reductions of the Project are calculated (ERy).

Year BE y tCO2 PE y Tco2eq/year Ly tCO2/MWh ER y tCO2/MWh 2007 221.999 0 0 221.999

2008 221.999 0 0 221.999

2009 221.999 0 0 221.999

2010 221.999 0 0 221.999

2011 221.999 0 0 221.999

2012 221.999 0 0 221.999

2013 221.999 0 0 221.999

2014 221.999 0 0 221.999

2015 221.999 0 0 221.999

2016 221.999 0 0 221.999

2017 221.999 0 0 221.999

2018 221.999 0 0 221.999

2019 221.999 0 0 221.999

2020 221.999 0 0 221.999

2021 221.999 0 0 221.999

2022 221.999 0 0 221.999

2023 221.999 0 0 221.999

2024 221.999 0 0 221.999

2025 221.999 0 0 221.999

2026 221.999 0 0 221.999

2027 221.999 0 0 221.999

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 53 Project Emissions (PEy) Although most of the renewable power generation projects can be considered to have zero emission, the methodology ACM0002/Version 06 states in item II that the new hydroelectric power projects with a reservoir must take into account the project emissions on the basis of its power density. Said density is calculated through the coefficient between the installed generation capacity and the surface area at full reservoir level. The steps of this calculation as well as the data of this Project activity are summarized in the following table:


Baseline Scenario (without CDM Project)

Maximum Installed Capacity MW

Potrerillos Project Maximum Installed

Capacity MW

CDM Project Maximum Installed

Capacity MW

Cacheuta 9 126.40 117.40 Álvarez Condarco 27.4 54.94 27.54 Total 36 181 144.94 Maximum Capacity (W) 144.940.000 Full Reservoir Level (m2) 13.000.000 Power Density 11.1492 According to methodology stipulations, only when the power density of the Project is greater than 4 W/m2 and lower or equivalent to 10 W/m2 the project emissions must be calculated (according to equation 15b). What emerges from the previous calculations carried out for the Potrerillos Project is that the its power density is 11.1492 W/m2. Thus, according to item b section II, if the power density of the project is greater than 10 W/m2 then the project emissions must be considered zero.

Equations (13), (14) and (15a) of the methodology ACM0002/Version 06 are only used for project activities that involve geothermal power generation and therefore, do not apply to this Project activity. Fugitive Emissions (Ly) Finally, according to methodology ACM0002/Version 06, the project participants do not need to consider fugitive emissions. Then:

Project activities using this baseline methodology shall not claim any credit for the project on account of reducing these emissions below the level of the baseline scenario.

PEy = 0 tCO2eq/year

Ly = 0 tCO2/MWh


B.6.4 Summary of the ex-ante estimation of emission reductions: This Project´s annual average of emission reductions has been estimated in approximately 221,998.53 tCO2eq. The following chart summarizes the emission reductions estimate for the Potrerillos Project during a crediting period of 7 renewable years (21 years altogether):

Year Baseline Emission

(tCO2/year) Project

Emission (tCO2/year)

Leakage (tCO2/year)

Emission Reduction (tCO2/year)

2007 221.998,53 0 0 221.998,53 2008 221.998,53 0 0 221.998,53 2009 221.998,53 0 0 221.998,53 2010 221.998,53 0 0 221.998,53 2011 221.998,53 0 0 221.998,53 2012 221.998,53 0 0 221.998,53 2013 221.998,53 0 0 221.998,53 2014 221.998,53 0 0 221.998,53 2015 221.998,53 0 0 221.998,53 2016 221.998,53 0 0 221.998,53 2017 221.998,53 0 0 221.998,53 2018 221.998,53 0 0 221.998,53 2019 221.998,53 0 0 221.998,53 2020 221.998,53 0 0 221.998,53 2021 221.998,53 0 0 221.998,53 2022 221.998,53 0 0 221.998,53 2023 221.998,53 0 0 221.998,53 2024 221.998,53 0 0 221.998,53 2025 221.998,53 0 0 221.998,53 2026 221.998,53 0 0 221.998,53 2027 221.998,53 0 0 221.998,53 Total 4,661,969.14

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 55 B.7 Application of the monitoring methodology and description of the monitoring plan: The Monitoring Plan of the Potrerillos Project has been developed according to the parameters stipulated by the Monitoring Methodology ACM0002/Version 06 “Consolidated monitoring methodology for zero-emissions grid-connected electricity generation from renewable sources”. Version: 06 Sectorial Scope: 01 Date: May 19, 2006 The Potrerillos Project uses this methodology because it complies with the applicability conditions mentioned below: • It applies to electricity capacity additions from:

− Run-of-river hydropower plants; hydropower projects with existing reservoirs where the volume of

the reservoir is not increased. − New hydroelectric power projects with reservoirs having power densities (installed power generation

capacity divided by the surface area at full reservoir level) greater than 4 W/m2. − Wind sources; − Geothermal sources; − Solar sources; − Wave and tidal sources.

• This methodology is not applicable to project activities that involve switching from fossil fuels to

renewable energy at the site of the project activity, since in this case the baseline may be the continued use of fossil fuels at the site;

• The geographic and system boundaries for the relevant electricity grid can be clearly identified and

information on the characteristics of the grid is available; and As it was stated by the Monitoring Methodology ACM0002/Version 06, the main variables to be determined are: • Electricity generation from the proposed project activity; • Necessary data to recalculate the emission factor, based on the calculation of the Operating Margin

and the Build Margin, consistent with the selected option according to the calculation methodology “Consolidated baseline methodology for grid-connected electricity generation from renewable sources” (ACM0002);

• For new hydroelectric power projects, the surface area of reservoir at the full reservoir level shall be monitored.

Project Boundary 1) Consistent with the “Consolidated baseline methodology for grid-connected electricity generation from renewable sources” (ACM0002/v06) the project boundary includes the following emissions sources:

• For new hydroelectric projects with reservoirs, the project boundary includes the physical site of

the plant as well as the reservoir area.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 56 For the baseline determination, project participants shall only account CO2 emissions from electricity generation in fossil fuel fired power that is displaced due to the project activity. 2) The spatial extent of the project boundary includes the project site and all power plants connected physically to the electricity system that the CDM project power plant is connected to. The Monitoring Plan of the Potrerillos Project –which is part of the CDM Project—provides the systematic procedures for the continuous measurement of all the parameters stated by the applied monitoring methodology.

B.7.1 Data and parameters monitored: Data / Parameter: EGh Data unit: MWh Description: Electricity supplied to the grid by the project Source of data to be used:

Measured by CAMMESA

Value of data applied for the purpose of calculating expected emission reductions in section B.5

Year 2005 Álvarez Condarco Cacheuta �ueva

Group 1 59.827

95.849

Group 2 56.671 79.081 Group 3 113.115 119.764 Group 4 - 115.217 Total per station

229.612 409.912

Total Potrerillos

639.523

Description of measurement methods and procedures to be applied:

Hourly measurement and monthly recording Electricity supplied by the project activity to the grid. Double check by receipt of sales.

QA/QC procedures to be applied:

These data will be directly used for calculation of emission reductions. Sales records to the grid and other records are used to ensure the consistency.

Any comment: This data must be kept during the crediting period and two years after

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 57 Data / Parameter: EFy Data unit: tCO2 /MWh Description: CO2 emission factor of the grid Source of data to be used:

Calculated with ACM0002/versión 6 Source: CAMMESA


0.48861015


Calculated as a weighted sum of the OM and BM emission factors


Default data (for emission factor) and IEA statistic (for energy data) are used to check the local data.

Any comment: This data must be kept during the crediting period and two years after Data / Parameter: EFOM,y Data unit: tCO2 /MWh Description: CO2 Operating Margin Emission Factor of the grid Source of data to be used:

Calculated with ACM0002/version 6 Source: CAMMESA


0.60023029


Calculated as indicated in the relevant OM baseline method above




PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 58 Data / Parameter: EFBM,y Data unit: tCO2 /MWh Description: CO2 Build Margin emission factor of the grid Source of data to be used:

Calculated with ACM0002/version 6 Source: CAMMESA


0.37711000


Calculated as [∑i Fi,y*COEFi] / [∑m GENm,y] over recently built power plants defined in the baseline methodology



Any comment: This data must be kept during the crediting period and two years after Data / Parameter: Fi,y Data unit: Mass or volume Description: Amount of each fossil fuel consumed by each power source / plant Source of data to be used:

CAMMESA


Please, see Annex 3


Obtained from the dispatch center (CAMMESA)




PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 59 Data / Parameter: COEFi Data unit: tCO2 /mass or volume unit Description: CO2 emission coefficient of each fuel type i Source of data to be used:

Calculated with ACM0002/version 6 Source: CAMMESA and IPCC


Please, see Annex 3


Plant or country specific values to calculate COEF are preferred to IPCC default values.



Any comment: This data must be kept during the crediting period and two years after Data / Parameter: GENn/h Data unit: MWh

Description: GENn,h comprises 10% of total generation from all plants during that hour Source of data to be used:

Calculated with ACM0002/versión 6 Source: CAMMESA and IPCC


Please, see Annex 3


Obtained from the dispatch center (CAMMESA).




PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 60 Data / Parameter: Area Data unit: m2 Description: Surface area at full reservoir level Source of data to be used:

On-site measurement


13.000.000


On-site measurement



Any comment: At start of the project This information must be kept during the crediting period and two years after

Data / Parameter: Plant name

Data unit: Text Description: Identification of power source / plant for the OM Source of data to be used:

CAMMESA


Please, see Annex 3


Identification of plants to calculate Operating Margin emission factors



Any comment: This information must be kept during the crediting period and two years after

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 61 Data / Parameter: Plant name Data unit: Text Description: Identification of power source / plant for the BM Source of data to be used:

CAMMESA


Please, see Annex 3


Identification of plants (m) to calculate Build Margin emission factors



Any comment: This information must be kept during the crediting period and two years after Data / Parameter: Merit order Data unit: Text Description: The merit order in which power plants are dispatched by documented evidence Source of data to be used:

CAMMESA


Please, see Annex 3


The Order of Merit for the dispatch of the electric units of the Argentine Wholesale Electric Market (MEM) is established by the Wholesale Electric Market Managing Company. The information is publicly available through the company´s web site www.cammesa.com



Any comment: This information must be kept during the crediting period and two years after

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 62 B.8 Date of completion of the application of the baseline study and monitoring methodology and the name of the responsible person(s)/entity(ies) Detailed information on the baseline scenario is presented in Annex 3. Detailed information on the Monitoring Methodology and Plan is presented in Annex 4. The analysis of the baseline and monitoring methodology was finished on March 31, 2007. The baseline analysis was carried out by PricewaterhouseCoopers Argentina. PricewaterhouseCoopers does not take part in the Project. Consortium of Mendocinian Companies for Potrerillos Business Corporation (CEMPPSA) Martín Del Pópolo. Engineer Commercial Manager + 00 54 261 155 114851 + 0054 261 4819030 + 0054 261 4819167 [email protected] [email protected] PricewaterhouseCoopers – Buenos Aires - Argentina Sustainable Business Solutions – Climate Change Services Marcelo Iezzi [email protected] + 54 11 48506827 www.pwc.com/ar The Monitoring Plan was developed by PricewaterhouseCoopers Argentina. PricewaterhouseCoopers – Buenos Aires - Argentina Sustainable Business Solutions – Climate Change Services Marcelo Iezzi [email protected] + 54 11 48506827 www.pwc.com/ar

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 63 SECTIO� C. Duration of the project activity / crediting period C.1 Duration of the project activity:

C.1.1. Starting date of the project activity: April 2002 C.1.2. Expected operational lifetime of the project activity: The machinery of the Álvarez Condarco and Cacheuta Nueva Power Stations, taking into consideration their technical characteristics, is estimated to have an operational lifetime longer than seventy- five years. C.2 Choice of the crediting period and related information: C.2.1. Renewable crediting period C.2.1.1. Starting date of the first crediting period: January 2007 C.2.1.2. Length of the first crediting period: 7 years C.2.2. Fixed crediting period: C.2.2.1. Starting date: Not applicable C.2.2.2. Length: Not applicable

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 64 SECTIO� D. Environmental impacts D.1. Documentation on the analysis of the environmental impacts, including transboundary impacts: The Project “Exploitation of the Mendoza River – Potrerillos Project” has complied with the Environmental Impact Evaluation Procedure in accordance with the provisions of Provincial Law No.5961 and of Regulatory Decree Law No.2109/94. The corresponding Environmental Impact Statement has also been submitted according to the provisions thereof and satisfying the necessary requirements in order to undergo the statutory technical report and public hearing.

Resolution No.1784/AOP/98 of the Ministry of Environment and Public Works of the Province of Mendoza authorizes and grants environmental feasibility for construction of the facilities included in the Project.

The Environmental Impact Report for the Potrerillos Project was carried out by the consultancy firm Ambiental S.A. with great scientific and technical rigor in every one of the areas under consideration. Both CEMPPSA and the competent environmental authorities can be assured that the report has complied with the most rigorous analyses of engineering techniques and shows complete identification with the national and provincial legal frameworks applicable to the Project. The report confers on the Project organizers certain rights and prerogatives but also certain obligations in defense of the constitutional right to a clean and balanced environment which everyone is entitled to.

The most relevant conclusions from the Environmental Impact Statement are listed below:

− The Project of multiple exploitation of the Potrerillos water resources will involve substantial environmental benefits for the area under study and the reference framework. To start with, the regulation of the Mendoza River entails a contribution to the supply of potable water, water for industrial use, for the supply of the Luján de Cuyo Station, and for irrigation. It will also help mitigate the potential flooding of the Mendoza River valley, and it is a new contribution of non-polluting energy to the Provincial Electric Market.

− The availability of clear water will contribute to improve irrigation technologies, since the water will be fit for use in drip or sprinkler irrigation, for example.

− The dam has been built to resist the region´s seismicity conditions and observing all the construction safety criteria.

− The view of the dam once it was built represents the basis for the evolution of a significant tourist development.

Development, creation of a tourist center and an additional source of employment and income This undertaking will contribute to the planned growth of the area and to the efficient use of the water, which will ensure the economic and social development of the North Oasis. The fact that it is located at only 45 km from the city of Mendoza as well as its exceptional geographic surroundings provide the artificial lake resulting from the dam superb possibilities to become a tourist attraction, which will no doubt foster longer stays on the part of tourists, thus generating an additional source of income for the Province. At the same time, this will bring about the emergence of new hotels, restaurants, tourist agencies, new job opportunities and a great many activities that will contribute to strengthen the regional economy and the welfare of the Mendoza people.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 65 Electric safety The Potrerillos Project has enabled an increase in the local generation of electric power through the exploitation of a local source of renewable resources, and with the reduction of the extreme dependence of the Province for the supply of electricity. Besides, the Project increases the value of other future hydroelectric projects on the Mendoza River, which will be able to operate more freely as the Project will act as a ‘compensator’ of the reservoirs located upstream. The generation of the Cacheuta Nueva and Álvarez Condarco hydroelectric power stations represents 25% of the province´s consumption. A Boost to Mendoza´s farming and employment The regulation of the Mendoza River and the greater availability of water in the required time not only prevent losses in agriculture but they also make it possible to enlarge cultivated areas. Fluctuations in the streamflow of the Mendoza River –determined by the melting of the snow at the higher peaks and, partly, of the glaciers- which have caused years of extreme drought (with only 800 Hm3) and years of water abundance (with flows greater than 3,400 Hm3). Even though the average volume registered in the last 85 years has been slightly over 50 m3/second, that is to say, some 1,600 Hm3

a year, which comes close to the current demand of potable water, and water for irrigation and industrial use, yearly fluctuations in the availability of water are still a priority issue in Mendoza. During a dry year, the Mendoza suburban area may not have enough water for gardens, street trees and roads; the watering of non-asphalted streets of the marginal neighborhoods at the foothill is not possible; long hours of pumping are needed to irrigate crops and prevent the loss of harvests or plantations in areas without water wells to complement surface irrigation. Regulating the water of the Mendoza River means being able to have a better control of the possibilities of the river, by preventing great losses of water during the ‘rich’ years, and reducing the deficit during the ‘poor’ years. The construction of the Potrerillos Project gave employment to 1,200 people directly, 800 people were subcontracted, and it had a multiplying effect on economy as a whole. Tourism, recreation activities and services constitute a source of future employment. Irrigation Thanks to this Project, irrigation has been supplied to 75,000 Has, and the necessary water to cover the irrigation needed for the agricultural development of the region will be efficiently guaranteed and sustained. Regulation will enable to plan and readjust the irrigation network. The replacement of underground water reduces pumping costs for the benefit of growers and the State. Besides, the irrigation infrastructure operational and maintenance costs have been reduced as the tasks of cleaning and sand removal from the network have not been required, which at the same time cause the cut off of the water service for days. The Project also allows the implementation of more modern irrigation technologies such as drip and micro-sprinkler irrigation. Potable water supply A supply of potable water is ensured for the population of the Mendoza River Oasis. An estimation of said supply anticipates daily requirements superior to the minimum volumes registered in the river. The dam constitutes a ‘barrier’ to periodic and extraordinary flooding. D.2. If environmental impacts are considered significant by the project participants or the host Party, please provide conclusions and all references to support documentation of an environmental impact assessment undertaken in accordance with the procedures as required by the host Party: No significant environmental impacts have been identified.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 66 SECTIO� E. Stakeholders’ comments E.1. Brief description how comments by local stakeholders have been invited and compiled: CEMPPSA has performed an assessment of internal and external stakeholders of the firm, who could be affected by the Project registration in the Clean Development Mechanism. For such purpose, the different categories of stakeholders, both direct and indirect, of the CDM Project were identified. The categories analyzed were: community, employees, associate firms, clients and capital contributors. Subsequently, a classification of the identified stakeholders was done according to their interest toward and influence on the CDM Project, setting levels of priority: high, medium and low by assessing how much interested, concerned or affected they are. As a result of the foregoing procedure, the following were considered priority actions:

• To make public the Potrerillos Project registration in the CDM through the mass media in order to make the project known and, at the same time, provide a consulting source for anyone who is interested in contacting the Project organizers. To this end, an article was published on March 10th, 2007 in Los Andes, the most important newspaper in Mendoza. The referred article is attached in Annex 5, and can also be accessed through the Los Andes Newspaper website (http://www.losandes.com.ar/nota.asp?nrc=365312) As the publication had significant local circulation, CEMPPSA´s Commercial Manager, Mr Juan Martín Del Pópolo (Engineer), offered a radio interview on March 14th at the Infinita Radio Station in Mendoza (FM 98.5 Mhz), on the program hosted by Mr Darío Gallardo, a well-known journalist and economist from Mendoza. During the interview, Mr Del Pópolo presented the main aspects of the inclusion of the Potrerillos Project in the context of the Clean Development Mechanism.

• Likewise, comments by the Board of Directors and Auditors have been considered a priority. Therefore, the formal presentation of the Project before the stakeholders took place during one of CEMPPSA´s monthly Meetings of the Board of Directors as the latter is made up of representatives of each of the stakeholders. Present at the meeting were:

- Director on behalf of Class “A” shareholders (Province): María Elina Ouet - Director on behalf of Class “B” shareholders (JCCC) (Chairman of the Board of

Directors): Sergio A. Vestfrid - Director on behalf of Class “D” shareholders (JCCC): José Raúl Bistué - Director on behalf of Class “E” shareholders (IMPSA): Hernán Guiñazú - Deputy Director on behalf of Class “C” shareholders (JCCC) and CEMPPSA´s General

Manager: Antonio Torre - Auditor on behalf of Class “A” shareholders: Humberto Blanco - Auditor on behalf of Class “C” shareholders: Sergio A. Trípoli - Auditor on behalf of Class “D” shareholders: Carlos Nallib

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 67 Present were also:

- Sebastián Sánchez, Attached to CEMPPSA´s Administrative and Financial Management - Diego A. Nebot, Legal advisor - CEMPPSA - J.M. Del Pópolo, Commercial Manager - CEMPPSA

On April 12, 2007, the formal presentation of the Project before CEMPPSA´s Board of Directors was made, in the presence of representatives of the private stakeholders and of the Government of Mendoza. The presentation was in charge of Mr Martín Del Pópolo, CEMPPSA´s Commercial Manager. At its conclusion, invitation was made to those present to make questions or comments. The main issues dealt with are summarized below:

• General aspects of the CDM • Characteristics of the CDM Potrerillos Project • Estimated emission reduction • Aspects related to the Project additionality • Contribution to the local and national sustainable development

E.2. Summary of the comments received: No adverse comments were received during the presentation of the Project. In general, the public has made inquiries in relation with the CDM, as well as some about this Project in particular. Some of them are listed below:

− Which local and international authorities evaluate the Project? − Who are the parties involved in the CDM activity? − What are the benefits of this CDM activity? − What is the revenue estimated from the sale of CERs? − What characteristic of the Project activity will contribute to its introduction into the CDM? − What is the process of acquisition of CERs for countries aiming at emission reduction?

All inquiries were replied to during the process of communication of the CDM activity. E.3. Report on how due account was taken of any comments received: The comments received during the activities of presentation of the Project were replied to at the time. The comments received did not give rise to changes in this PDD.


Annex 1

CO�TACT I�FORMATIO� O� PARTICIPA�TS I� THE PROJECT ACTIVITY Organization: Consorcio de Empresas Mendocinas para Potrerillos S.A. (CEMPPSA) Street/P.O.Box: Carril Rodríguez Peña 4447 Building: City: Coquimbito, Maipú. State/Region: Provincia de Mendoza Postfix/ZIP: 5513 Country: Argentina Telephone: 0054 261 4819167 FAX: 0054 261 4819030 E-Mail: [email protected] URL: Represented by: Commercial Manager Title: Industrial Engineer – MBA Salutation: Mr. / Sr. Last Name: Del Pópolo Middle Name: Martín First Name: Juan Department: Commercial Management Mobile: 0054 261 155 114851 Direct FAX: Direct tel: Personal E-Mail: [email protected]


Annex 2

I�FORMATIO� REGARDI�G PUBLIC FU�DI�G

There is no public funding involved in the Project.

Annex 3

BASELI�E I�FORMATIO�

Calculation of operation Margin emission factor

As specified in option (c) established in the approved methodology ACM0002/version 06, the operating margin emission factor based on the dispatch data analysis is employed. The “Dispatch Data Analysis” is based on the hourly emission calculation of the set of plants (n) falling within the top 10% of the system dispatch. In general, these (n) plants are the least efficient ones. This Analysis has been made for the generation in the Wholesale Electric Market (in Spanish, MEM), 2005. The Potrerillos Project units are connected to the MEM. In order to determine the set of (n) plants to be assessed the following data, provided by the Wholesale Power Market Operator (CAMMESA), have been used:

1. The hourly energy produced by each generating unit.

2. The variable generation cost of each generating unit with which the merit order or dispatch is realized.

3. Fuel consumed per hour.

Generation dispatched as well as imports are included.

Data Used

CAMMESA Board is composed by every electric market agent (consumers and suppliers). The Board is presided by the National Energy Secretariat. Thus we count with public and official data provided by CAMMESA. These data are available in the web site: www.cammesa.com.ar The information needed about each generating unit was obtained from reports published by CAMMESA:

1. “Parte de Control Post-Operativo”. This is a post - operative control report which is issued every day, from which we obtained the data of energy production and fuel consumed by each unit. These post-operative control reports for 2005 period can be found in the "Posoperativos” directory.

2. “Costos Variables de Producción (CVP)”. Fortnightly declaration of Variable Cost Production. These costs, declared by each generator, include operation and maintenance costs.

Production costs of hydro units “Valor del Agua (VA)”, “water value” were supplied by CAMMESA. The “water value” of each reservoir is half-yearly declared by hydro units in the seasonal planning. In the case of run-of river hydropower plants the “water value” equals zero.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 70 Calculating Procedures

− Elaboration of variable cost matrix

With the information taken from CVP reports about each thermal generating unit (for each feasible fuel) and with the VA of each hydroelectric generator, a CVP matrix containing a daily CVP for each fuel has been made.25 Below there is an extract of the CVP matrix where the following headings must be considered:

• CGN: Natural Gas

• CGO: Gas Oil

• CFO: Fuel Oil

• CCM: Mineral Coal

Dispatch CVP Matrix Extract [$/MWh] Date 29/04/05 30/04/05 01/05/05 02/05/05 03/05/05 04/05/05

FILOTG01_CGN 18.6 18.6 20.3 20.3 20.3 20.3

FILOTG02_CGN 18.6 18.6 20.3 20.3 20.3 20.3

FILOTG03_CGN 18.6 18.6 20.3 20.3 20.3 20.3

LDCUTG23_CGN 20.1 20.1 19.9 19.9 19.9 19.9

LDCUTG24_CGN 20.0 20.0 19.9 19.9 19.9 19.9

EMBANUCL 18.0 18.0 21.1 21.1 21.1 21.1

ATUCNUCL 22.9 22.9 27.4 27.4 27.4 27.4

SMTUCC01_CGN 29.0 29.0 29.1 29.1 29.1 29.1

SMTUCC02_CGN 29.0 29.0 29.1 29.1 29.1 29.1

LDCUCC25_CGN 27.8 27.8 31.6 31.6 31.6 31.6

LDCUTG24_CGO 143.0 143.0 143.0 143.0 143.0 143.0

LDCUTG23_CGO 143.1 143.1 143.0 143.0 143.0 143.0

DSUDCC09_CGO 169.2 169.2 169.2 169.2 169.2 169.2

DSUDCC10_CGO 169.2 169.2 169.2 169.2 169.2 169.2

CEPUCC11_CGO 163.4 163.4 163.4 163.4 163.4 163.4

CEPUCC12_CGO 163.4 163.4 163.4 163.4 163.4 163.4

COSTCC08_CGO 165.6 165.6 165.6 165.6 165.6 165.6

COSTCC09_CGO 165.6 165.6 165.6 165.6 165.6 165.6

COSTTV06_CFO 160.1 160.1 182.1 182.1 182.1 182.1

COSTTV07_CFO 162.8 162.8 185.2 185.2 185.2 185.2

PNUETV09_CFO 174.7 174.7 193.4 193.4 193.4 193.4

SNICTV15_CFO 154.0 154.0 199.6 199.6 199.6 199.6

ADTOHI 60.0 60.0 60.0 60.0 60.0 60.0

ALICHI 60.0 60.0 60.0 60.0 60.0 60.0

CCORHI 60.0 60.0 60.0 60.0 60.0 60.0

CHOCHI 60.0 60.0 60.0 60.0 60.0 60.0

LREYHB 29.7 29.7 29.7 29.7 29.7 29.7

NIH1HI 60.0 60.0 60.0 60.0 60.0 60.0

…….

25 Detailed information on the CVP and the VA are available for validation on spreadsheet format:

• Fortnightly CVP reports can be found in “Costo Variable Producción Térmica” directory.

• Water value VA can be found in “Valor del Agua” directory.


− Hourly dispatch of each generating unit

Information on the energy produced and the fuel consumed by each generating unit has been taken from the daily post-operative reports supplied by CAMMESA. The following charts are extracts of this information:

Hourly dispatch of each generating unit on 25/04/2005 GRUPO HORA ARL ESTADO_OPE PI_SOTR ARL_ECON EST_REMUN ENERGIA

25MAHI 1 1 lib - 1 lib -ACAJTG01 1 1 lib - 1 lib -ACAJTG02 1 1 === 52.0 1 === 49.3ACAJTG03 1 1 === 51.0 1 === 49.8ACAJTG04 1 1 === 52.0 1 === 50.6ACAJTG05 1 1 === 52.0 1 === 50.7ACAJTG06 1 1 === 136.8 1 === 136.8ACAJTV07 1 1 === 136.7 1 === 136.7ADTOHI 1 1 lib - 1 lib -AESPTG01 1 1 === 233.0 1 === 234.0AESPTG02 1 1 === 233.0 1 === 232.8AESPTV01 1 1 === 253.0 1 === 254.2ALICHI 1 1 lib - 1 lib -ALICHITR 1 1 lib - 1 lib -APARTV A 1 1 lib - 1 lib -ARGETG01 1 1 i-i - 1 i-i -ARROHI 1 1 === 60.7 1 === 60.4ATUCNUCL 1 1 === 123.0 1 === 100.5AVALTG21 1 1 i-c - 1 i-c -AVALTG22 1 1 === 26.0 1 === 25.7AVALTG23 1 1 === 26.0 1 === 25.8AVALTV11 1 1 === 11.0 1 === 10.9AVALTV12 1 1 === 11.0 1 === 11.3AZAPTV A 1 1 lib - 1 lib -BARRTG21 1 1 i-i - 1 i-i -BARRTG23 1 1 i-i - 1 i-i -BARRTG24 1 1 i-i - 1 i-i -BARRTG25 1 1 i-i - 1 i-i -BARRTV 1 1 i-i - 1 i-i -BATLTV03 1 1 i-i - 1 i-i -

Table References: -Grupo: Group -Hora: Hour -Arl.: Local Area -Estado Ope.: Operating Condition (Lib: Free, i.i.: not available, i.c.: not available due to lack of fuel) -Pi. Sotr.: Instantaneous Power Capacity -Arl. Econ.: Local Economic Area -Est. Rem.: Remunerative Condition -Energía: Energy


Hourly Fuel consumption of each generating unit on 25/04/2005 GRUPO COMB UNIDAD H01 H02 H03 H04 H05

EMBANUCL_UE UE GUEMTV11 GN DM3 3.9 3.9 3.9 3.9 3.9 ENSETG01_GN GN GUEMTV12 GN DM3 13.1 12.9 12.9 13.0 12.9 FILOTG01_GN GN GUEMTV12 GN DM3 3.8 3.8 3.8 3.8 3.8 FILOTG02_GN GN GUEMTV13 GN DM3 34.1 33.6 33.8 33.8 33.7 LDCUTG23_GN GN MDPATG20 GN DM3LDCUTG24_GN GN MDPATG21 GN DM3LDCUTG25_GN GN MDPATV08 GN DM3 8.8 8.8 8.8 8.8 8.8 SMTUTG01_GN GN BBLATV29 FO T 61.8 37.4 34.0 34.0 33.8 SMTUTG02_GN GN BBLATV30 FO T 59.4 35.1 33.5 33.7 33.4 SNICTV13_FO FO COSTTV01 FO T 18.5 11.9 12.3 12.4 12.4 SNICTV13_GN GN COSTTV04 FO T 16.0 11.8 11.6 11.5 11.5 SNICTV14_FO FO COSTTV07 FO T 42.1 35.8 35.8 35.8 35.9 SNICTV14_GN GN MDPATV08 FO TSNICTV15_CM CM NECOTV04 FO TSNICTV15_FO FO NPUETV05 FO T 25.8 15.0 11.3 11.4 11.4 SNICTV15_GN GN NPUETV06 FO T 51.7 51.7 48.7 41.3 41.3 SORRTV13_FO FO PNUETV08 FO T 44.0 37.9 23.7 20.8 20.8 SPEDTG21_GN GN PNUETV09 FO T 54.3 53.6 31.1 22.4 22.4 TUCUTG01_GN GN SNICTV13 FO TTUCUTG01_GN GN SNICTV14 FO TTUCUTG02_GN GN SNICTV15 FO TTUCUTG02_GN GN SORRTV13 FO TVMARTG01_GN GN SNICTV15 CM T 124.1 124.6 127.0 130.5 123.7 …….

Table References: -Grupo: Group -Comb.: Fuel (G�: �atural Gas, FO: Fuel Oil, CM: Mineral Coal) -Unidad: Unit -Ho1/2/3/4/5: Hour 1/2/3/4/5

− Hourly Dispatch of each generating unit. 10% method.

The CVP of each unit is determined according to the data of energy produced and fuel consumed using the CVP matrix. Then, the CVPs are rated using the merit order from the most expensive to the cheapest. Eg. first hour on 25/04/2005:

Dispatch merit order on 25/04/2005 hour 1

Energia x Combustible Consumo Comb Cons Comb AcumuladoGRUPO Energia Energia

Acum Energia

Total CVP CCM CFO CGN CGO % Energia

AcumCM FO GN GO CM FO GN GO

NPUETV05 100 100 8,888 186.3 - 100 - - 1% - 25.8 - - - 25.8 - -

PNUETV08 165 265 8,888 185.6 - 165 - - 3% - 44.0 - - - 69.8 - -

BBLATV30 246 511 8,888 176.4 - 246 - - 6% - 59.4 - - - 129.1 - -

BBLATV29 256 767 8,888 176.4 - 256 - - 9% - 61.8 - - - 191.0 - -

PNUETV09 226 993 8,888 174.7 - 226 - - 11% - 54.3 - - - 245.3 - -

COSTTV01 73 1,066 8,888 167.3 - 73 - - 12% - 18.5 - - - 263.8 - -

COSTTV04 63 1,130 8,888 165.8 - 63 - - 13% - 16.0 - - - 279.8 - -

NPUETV06 231 1,360 8,888 163.7 - 231 - - 15% - 51.7 - - - 331.4 - -

COSTTV07 169 1,529 8,888 162.8 - 169 - - 17% - 42.1 - - - 373.5 - -

SFRATG01 14 1,544 8,888 62.4 - - 14 - 17% - - 6.2 - - 373.5 6.2 -

RCUATG01 11 1,555 8,888 61.2 - - 11 - 17% - - 5.3 - - 373.5 11.5 -

DFUNTG02 13 1,568 8,888 60.7 - - 13 - 18% - - 5.7 - - 373.5 17.2 -

RGDEHB - 1,568 8,888 60.0 - - - - 18% - - - - - 373.5 17.2 -

Table References: -Grupo: Group -Energía: Energy -Energía Acum: Accumulated energy -Energía por combustible: Energy per Fuel Type

-% Energía Acum: % Accumulated energy -Consumo comb: Fuel Consumption -Cons Comb Acumulado: Accumulated Fuel Consumption

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 73 Thus, it can be seen that on the first hour of 25/04/2005, 10% of the total energy generated (889 MWh) was provided by the following units:

• NPUETV05: 100 MWh, using 25.8 tons of Fuel Oil

• PNUETV08: 165 MWh using 44.0 tons of Fuel Oil

• BBLATV30: 246 MWh using 59.4 tons of Fuel Oil

• BBLATV29: 256 MWh using 61.8 tons of Fuel Oil

• PNUETV09: 54% of the 226 MWh using 54% of 54.3 tons of Fuel Oil.

Therefore, during that hour 220.3 tons of Fuel Oil were used to supply the top 10% of the demand. The following chart shows a summary of the results for 25/04/2005:

Fuel consumption to supply the top 10% of the demand on 25/04/2005

Consumo Combustible AcumuladoHora CCM

[Tn]CFO[Tn]

CGN[1000 m3]

CGO[m3]

Energía10%

1 - 220.3 - - 889

2 - 204.3 - - 815

3 - 196.7 - - 790

4 - 197.0 - - 783

5 - 199.7 - - 793

6 - 203.9 - - 819

7 - 241.4 - - 974

8 - 265.7 - - 1,082

9 - 269.8 - - 1,101

10 - 281.7 - - 1,132

11 - 286.3 - - 1,151

12 - 289.0 - - 1,153

13 - 282.1 - - 1,126

14 - 272.8 - - 1,103

15 - 270.8 - - 1,095

16 - 269.7 - - 1,091

17 - 273.1 - - 1,104

18 - 279.5 - - 1,131

19 - 301.5 - 2.1 1,239

20 - 330.6 18.5 - 1,413

21 - 338.3 15.2 - 1,424

22 - 325.7 9.8 - 1,362

23 - 302.9 6.7 - 1,264

24 - 276.0 0.1 - 1,141

Table References: -Consumo Combustible Acumulado: Accumulated Fuel Consumption -Hora: Hour -CCM: Consumption with Mineral Coal -CFO: Consumption with Fuel Oil -CG�: Consumption with �atural Gas -CGO: Consumption with Gas Oil -Energía: Energy


- Calculation of the Building Margin emission Factor

As stated in option (1) of the approved methodology ACM0002 version 06 the ex-ante build margin emission factor is the weighted average emissions (in tonCO2equiv/MWh) of the recent capacity additions to the system (sample of m power plants), whose additional capacities (in MW) are defined as the more recent 20% of the existing plants or the 5 more recent plants. The greater annual generation should be taken out of these two options. The emissions are the product between the fuel volume used for the conventional thermal generation and the emission factors respectively. The chart below shows the generation added to the system until completing the 20% of the energy generated by the system in 2005. If 20% falls on part capacity of a plant, that plant is included in the calculation. It can be seen that the last 5 plants represented a contribution of less than 1% of the generation in 2005. It was considered as Start Date when the unit was commercially authorized. This data was obtained from the data published by CAMMESA.

# Commercial

Authorization Power Plant Type Accumulated Generation

Accumulated Participation

in respect to generation 2005 Year Month [MWh year]

1 2005 Nov Arcor M Seveso CC 28.945 0,03%

2 2004 Jun Consorcio Potrerillos (Cacheuta N) Hydro 403.682 0,47%

3 2004 Apr CT San Nicolás TG - 0,47%

4 2003 Nov Autogenerador Shell TG 99.183 0,58%

5 2003 Jun CT Pluspetrol Norte TG 86.137 0,67%

6 2002 Aug Consorcio Potrerillos (El Carrizal) Hydro 80.034 0,76%

7 2002 Nov Petrolera Chevron San Jorge MTG - 0,76%

8 2002 Jun CT Pluspetrol Norte TG 86.137 0,85%

9 2002 Aug CT San Miguel de Tucumán CC 757.409 1,67%

10 2001 Nov C.T. AES Paraná CC 4.182.800 6,21%

11 2001 Aug Ave Fénix Energía SA TG - 6,21%

12 2001 Jun Dock Sud CC 3.809.281 10,34%

13 2000 Sep Autogenerador Entre Lomas TG 12.922 10,36%

14 2000 May CT Puerto Nuevo CC 2.790.569 13,38%

15 2000 Feb CT Tucumán CC 859.635 14,32%

16 2000 Jan Agua del Cajón CC 1.303.922 15,73%

17 1999 Dec Pichi Picún Leufú Hydro 1.177.263 17,01%

18 1999 Sep Central Dique TG 6.320 17,02%

19 1999 Jul CT Costanera (*) CC 1.890.205 19,07%

20 1999 Jan CT Costanera (**) TG 1.561.782 20,76%Source: CAMMESA Monthly report. Own elaboration (*) C. COSTANERA. Steam Turbine TV10 of 320 MW entry, with which combined cycle is completed This unit is connected to bars of 220 kV. Commercially authorized on 01/07/99.

(**) C. COSTANERA. Gas Turbine TG9 of 264 MW commercially authorized on 15/01/99. Second TG that will later form the combined cycle of the central.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 75 Emission Factor of Operating Margin, Build Margin and Combined Margin

2005 Accumulated fuel consumption for the top 10% (of the n plants for calculating the Operating Margin)GO 825 kg/m3

Month

CCM[ton]

CFO[ton]

CGN[1000 m3]

CGO[m3]

CGO[ton]

10% Energy [GWh]

1 - - 105,234 929 766 823 2 5,817 7,166 76,606 860 710 751 3 13,785 85,522 58,257 281 232 795 4 913 151,700 34,936 160 132 757 5 57,293 141,839 24,947 2,267 1,870 779 6 48,498 130,374 18,453 8,716 7,190 775 7 41,183 146,855 17,406 4,731 3,903 819 8 53,535 144,631 15,285 3,609 2,977 804 9 51,185 90,619 24,552 3,886 3,206 753

10 15,077 13,915 105,498 433 357 739 11 - 37,828 110,055 469 387 792 12 - 9,384 148,693 62 51 829

287,287 959,832 739,922 21,782 9,416.990

Factor 2.54 3.44 2.10 3.36

TotalResultant Emissions 728,836 3,299,421 1,550,986 73,120 5,652,362.60 ton CO2

Operating Margin 0.60023 ton CO2/MWh

Build Margin 0.37711 ton CO2/MWh

Combined Margin 0.48867 ton CO2/MWh

Unit: The Factor corresponds to the CO2 Emission factor (in tons) per ton of fuel


Thermals Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 totalAGUA DEL CAJON 315,796 274,362 298,180 302,784 337,880 254,642 239,430 251,372 264,623 270,809 167,812 214,502 3,192,194ALTO VALLE 47,207 40,089 50,034 49,794 40,706 5,440 5,775 8,429 9,970 5,006 26,381 16,142 304,973AES PARANA 500,051 468,069 542,328 513,622 331,529 239,696 259,321 273,262 239,266 258,536 251,106 306,013 4,182,800C.DE PIEDRA - - 24 - 2,702 1,031 126 1,406 1,822 356 40 132 7,639CTSM DE TUCUMAN 92,393 150,170 193,051 235,942 224,129 193,530 172,893 127,442 167,995 179,378 206,237 235,848 2,179,007COSTANERA 183,987 190,267 269,699 287,976 148,271 216,886 211,135 347,992 154,833 1,258 51,223 - 2,063,527C.COMB.COSTANERA 553,411 494,913 518,418 441,777 445,019 275,448 310,649 388,394 361,600 288,515 483,594 452,033 5,013,769DEAN FUNES 16,216 10,203 11,586 5,219 2,174 1,460 2,301 3,380 1,408 1,902 1,948 1,584 59,382DIQUE 823 945 1,135 837 1,831 2,339 1,977 290 6 - 15 25 10,223DOCK SUD C.COMB 470,489 419,827 519,547 426,473 322,931 148,524 - 117,464 97,893 403,363 418,574 464,196 3,809,281DOCK SUD 2,761 2,539 575 653 4,370 101 - - - 30 472 792 12,293FILO MORADO 25,247 25,330 22,756 22,393 26,408 26,095 22,638 21,114 23,038 24,501 24,417 26,779 290,715FRIAS - 85 - - - 121 71 - - - - - 278GEBA 449,098 407,927 449,441 215,346 446,782 431,498 434,522 456,981 455,467 389,074 346,256 454,823 4,937,215GOYA - - - - - - - - - -GUEMES 111,065 114,892 163,218 143,251 154,717 119,108 145,788 154,076 125,150 113,908 132,727 138,706 1,616,607INDEPENDENCIA 28 - 49 - 9 51 56 - - - 51 - 244LA BANDA 667 - - - - 18 13 - - 161 795 759 2,413LA RIOJA 2,750 34 428 1,332 25 1 80 - 4 122 818 912 6,505LUJAN DE CUYO 210,117 207,630 204,959 224,186 218,669 223,985 232,390 225,553 203,581 219,330 230,199 230,992 2,631,592MAR DE AJO 1,686 889 - - 108 595 122 18 117 - 2 308 3,845MAR DEL PLATA 31,247 29,078 22,213 21,121 18,511 23,394 22,157 20,012 15,798 27,408 27,587 17,985 276,512MARANZANA 46,445 41,786 48,618 47,317 44,754 37,504 23,922 13,298 20,243 - - - 323,887NECOCHEA 60,624 71,711 47,466 37,235 41,116 28,336 42,278 41,186 41,104 22,769 28,485 22,121 484,430LOMA DE LA LATA 221,765 200,608 121,176 114,494 150,798 51,526 62,764 78,173 77,725 14,129 116,018 43,347 1,252,523NUEVO PUERTO 90,026 131,188 148,057 204,760 54,970 99,046 141,221 149,040 105,818 75,319 94,883 95,346 1,389,674PUERTO NUEVO 57,883 36,709 118,116 217,877 243,772 154,258 181,404 198,623 119,165 47,706 117,288 81,136 1,573,936C.COMB.PUERTO 438,062 386,521 399,992 200,647 199,149 109,738 105,389 145,374 168,137 195,484 222,277 219,797 2,790,569PALPALA - - - 47 - 84 - - - - 586 44 761PIEDRABUENA 196,732 74,296 252,540 361,036 225,919 209,014 229,016 105,975 89,718 11,034 105,863 96,972 1,958,116PILAR 105,310 89,140 83,774 82,558 97,842 106,367 114,661 130,924 82,182 76,920 106,366 105,439 1,181,481PLUS PETROL NORTE 17,542 61,676 41,063 22 3,005 2,192 1,486 3,667 7,886 91 26,753 6,890 172,273LEVALLE 8,209 7,384 7,991 3,785 3,177 3,140 3,541 3,378 2,980 3,921 7,421 9,236 64,163VILLA MARIA 8,874 7,945 9,511 3,873 2,708 2,744 2,871 2,137 2,263 3,380 5,244 6,909 58,458RIO CUARTO 7,988 5,388 7,604 4,402 2,070 2,618 3,634 4,901 825 1,421 3,158 2,035 46,045S.NICOLAS 129,969 129,429 186,377 87,523 198,858 186,010 195,048 214,446 153,151 32,740 31,788 38,744 1,584,083SAN FRANCISCO 20,096 15,941 16,995 10,957 2,075 1,405 1,746 1,972 1,142 1,071 1,539 1,485 76,423SAN PEDRO 1,165 - 54 891 771 779 881 747 649 661 1,126 1,493 9,216SARMIENTO CUYO 1,561 1,467 1,145 1,292 1,206 1,049 764 127 515 889 350 911 11,277SARMIENTO NOA - - - - 14 78 49 - - - 29 - 170SORRENTO 55,430 49,351 39,598 69,335 54,346 35,400 29,957 - 14,989 8,301 28,195 38,744 423,648

Build Margin (2005)

Net Generation by Power Station 2005 (MWh)

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 77 SARMIENTO NOA - - - - 14 78 49 - - - 29 - 170 SORRENTO 55,430 49,351 39,598 69,335 54,346 35,400 29,957 - 14,989 8,301 28,195 38,744 423,648 SUR OESTE 11,713 10,826 11,500 1,881 3,415 2,791 4,360 4,860 2,530 2,064 2,207 3,667 61,812 TERMOELECTRICA BS AS 93,251 137,550 189,549 187,764 123,889 60,183 21,990 49,053 - 110,467 165,881 184,859 1,324,435 TERMOROCA - - - - - - 16,512 15,023 4,981 4,311 11,264 10,460 62,550 VILLA GESELL 5,352 4,926 2,655 774 113 892 242 44 94 64 667 405 16,229 C.T.TUCUMAN 253,348 128,764 147,354 210,094 257,534 193,942 224,317 271,688 203,832 252,684 257,563 246,558 2,647,677 SUB-TOTAL 4,843,333 4,435,906 5,162,556 4,763,956 4,484,739 3,484,219 3,493,117 3,831,822 3,241,853 3,049,083 3,706,291 3,741,787 48,238,663 Self-generators - - - ACEROS PARANA 5 28 - - - - - 15 33 1,393 1,021 704 3,199 ACEROS ZAPLA - - - - - - - - - - - - - LEDESMA 1,180 2,211 2,094 429 38 236 213 316 413 689 989 2,703 11,511 SEMINO 1 - - - - 4 - - 1 - - - 6 P.HERNANDEZ YPF 1,011 320 500 398 224 671 104 49 108 5 62 39 3,491 NIDERA - 14 - 35 15 - 2 1 3 - - - 71 SHELL DOCK SUD 9,539 8,400 10,634 10,565 10,966 9,751 7,348 9,247 6,550 8,490 2,978 4,716 99,183 TRAPIAL - - - - - - - - - - - - - ENTRE LOMAS 742 760 838 1,173 1,361 1,431 999 1,087 1,270 1,158 1,065 1,040 12,922 ARCOR M. SEVESO 13,724 15,222 28,945 YPF PLAZA HUINCUL 17,792 16,250 18,548 18,866 19,847 19,591 20,342 19,374 19,029 18,918 18,218 18,026 224,802 SUB-TOTAL 30,269 27,982 32,614 31,467 32,451 31,683 29,008 30,089 27,407 30,653 38,057 42,450 384,130

- - - Co-generators - - - CMS ENSENADA 78,187 38,569 72,749 75,032 86,060 84,943 84,951 89,508 86,529 80,415 51,619 84,150 912,712 ARGENER - - - - - - - - - 44,583 108,803 112,997 266,382 SUB-TOTAL 78,187 38,569 72,749 75,032 86,060 84,943 84,951 89,508 86,529 124,998 160,422 197,147 1,179,094 - - - Total ThermalsTotal ThermalsTotal ThermalsTotal Thermals 4,951,789 4,502,458 5,267,919 4,870,454 4,603,250 3,600,845 3,607,076 3,951,420 3,355,789 3,204,734 3,904,771 3,981,383 49,801,886 - - - HidraulicsHidraulicsHidraulicsHidraulics - - - AGUA DEL TORO 30,835 37,854 22,771 17,904 10,040 19,233 13,568 22,897 26,489 26,296 37,847 68,545 334,279 ALICURA 107,682 207,696 77,023 53,313 31,479 211,262 327,569 307,603 236,111 212,650 282,530 334,133 2,389,052 ARROYITO 51,286 39,969 40,484 39,807 57,255 69,546 83,547 85,741 68,601 41,094 66,571 83,750 727,651 CABRA CORRAL 5,312 7,464 8,347 7,800 7,900 14,933 15,413 18,270 17,198 13,609 10,408 7,810 134,463 CASSAFFOUSTH 8,773 7,101 9,522 6,778 5,105 4,019 5,429 5,936 2,872 1,375 1,157 2,326 60,392 CACHEUTA NUEVA 42,750 31,964 31,162 27,290 25,219 14,969 16,381 33,923 34,878 46,588 42,744 55,814 403,682

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 78 CASSAFFOUSTH 8,773 7,101 9,522 6,778 5,105 4,019 5,429 5,936 2,872 1,375 1,157 2,326 60,392CACHEUTA NUEVA 42,750 31,964 31,162 27,290 25,219 14,969 16,381 33,923 34,878 46,588 42,744 55,814 403,682CARRIZAL 6,003 4,651 4,259 8,289 3,734 - 1,694 6,444 8,947 11,597 12,258 12,158 80,034CHOCON 230,166 154,199 162,136 150,677 223,648 307,375 417,028 373,212 291,500 156,184 300,219 436,748 3,203,090C.H.PICHI PICUN LEUFU 65,497 55,328 55,557 52,199 47,723 115,714 168,295 137,517 114,323 86,276 149,542 129,292 1,177,263CRUZ DEL EJE 97 102 63 171 203 228 204 222 156 98 142 215 1,900EL CADILLAL 1,280 49 3 155 2,007 2,219 2,491 2,787 3,353 3,745 4,270 3,986 26,344EL TIGRE 6,341 4,087 4,176 3,443 3,683 109 1,708 4,850 6,533 7,466 7,494 8,210 58,099EL TUNAL 3,478 2,884 2,908 2,604 2,623 2,897 3,356 3,656 3,933 3,839 3,687 2,617 38,481ESCABA 5,473 3,743 571 2,614 5,920 4,886 4,123 3,769 4,756 7,467 5,836 6,187 55,347FITZ SIMON 7,366 7,090 7,782 6,945 5,326 4,218 5,686 5,917 2,772 1,205 1,100 2,248 57,655LA CALERA - 257 1,500 1,139 1,292 999 762 1,230 1,267 1,116 824 1,019 11,405LA VIÑA 2,207 2,321 1,868 3,516 2,921 1,523 1,310 1,935 2,252 2,790 1,723 1,712 26,077LAS MADERAS 1,897 1,484 1,111 1,310 1,056 1,473 1,373 1,148 1,085 1,224 1,457 1,037 15,655LOS MOLINOS I 7,448 7,150 7,939 7,825 8,907 8,610 9,974 9,597 10,698 9,597 8,804 10,413 106,965LOS MOLINOS II - - - - - 819 1,347 1,528 1,853 726 1,369 1,782 9,423LOS REYUNOS 24,637 18,937 20,059 20,293 21,468 8,525 10,937 19,771 26,857 30,941 30,642 40,072 273,139NIHUIL 1 25,611 40,578 40,795 36,651 22,612 16,314 16,765 42,445 48,754 40,084 48,066 44,162 422,836NIHUIL 2 24,150 40,544 40,710 36,691 22,794 16,056 16,638 42,680 56,329 40,869 51,774 47,672 436,906NIHUIL 3 9,577 15,634 15,828 13,994 8,891 6,343 6,470 16,282 21,671 15,573 19,720 18,584 168,566NIHUIL 4 14,408 8,526 9,967 9,169 4,125 - 1,996 18,396 21,317 20,209 18,936 18,038 145,088P.BANDERITA 91,157 65,617 69,892 66,693 69,529 213,386 260,461 275,561 236,273 255,670 220,477 161,733 1,986,449P.DEL AGUILA 323,523 265,078 264,989 246,504 216,997 563,348 843,676 672,852 565,586 431,605 808,297 887,591 6,090,046PIEDRAS MORAS 4,346 3,966 4,400 4,258 4,344 3,752 3,894 3,651 514 1,084 602 1,709 36,521PUEBLO VIEJO 6,692 5,844 9,249 9,327 5,453 3,795 3,024 2,458 2,455 2,259 2,403 4,422 57,381QUEB.DE ULLUM 13,973 7,778 6,904 8,478 8,084 4,746 3,708 11,433 13,013 19,747 25,216 31,797 154,877QUIROGA 1,211 1,174 965 994 60 339 1,214 1,411 1,296 1,321 1,136 950 12,071REOLIN 9,481 6,908 10,334 5,534 3,739 3,009 4,186 4,878 2,187 807 767 1,474 53,305RIO HONDO 11,090 9,527 7,978 9,936 12,472 11,470 5,919 7,257 11,617 11,526 10,646 10,925 120,364RIO GRANDE 73,875 38,734 68,831 49,532 30,747 41,625 38,346 12,101 9,831 11,752 48,538 35,458 459,371SALTO GRANDE 73,358 100,941 66,158 262,507 514,737 519,274 414,006 217,195 472,212 613,878 375,097 159,024 3,788,387SAN ROQUE 8,894 11,026 9,932 5,144 5,387 4,374 2,850 5,256 5,001 4,517 4,305 4,439 71,125ULLUM 19,573 15,785 16,796 14,197 15,277 11,226 16,745 15,485 17,304 26,163 29,498 31,154 229,203YACYRETA 1,107,832 983,320 924,204 944,862 1,000,744 1,050,964 975,970 933,130 1,071,282 1,118,896 1,062,880 1,125,068 12,299,152CASA DE PIEDRA 26,409 23,136 20,371 16,526 13,206 3,737 13,585 24,945 32,106 33,328 33,445 37,258 278,050

SUB-TOTAL 2,453,688 2,238,447 2,047,541 2,155,068 2,426,706 3,267,314 3,721,647 3,355,371 3,455,183 3,315,171 3,732,426 3,831,536 36,000,096- - -

NUCLEAR - - -ATUCHA I 198,610 96,285 - 28,093 142,270 211,885 250,421 236,799 167,658 218,063 207,027 244,767 2,001,876RESERVOIR 442,538 399,749 442,303 429,384 436,761 433,440 447,407 446,305 432,349 307,986 - 154,261 4,372,482SUB-TOTAL 641,148 496,033 442,303 457,477 579,030 645,326 697,828 683,104 600,007 526,048 207,027 399,028 6,374,359

Import 157,575 248,183 170,187 76,738 169,395 235,567 156,737 35,477 102,885 308,856 35,251 39,342 1,736,194

TOTAL Monthly 8,204,200 7,485,121 7,927,949 7,559,738 7,778,381 7,749,051 8,183,287 8,025,371 7,513,863 7,354,809 7,879,474 8,251,290 93,912,535Source: Wholesale Electric Market Managing Company (CAMMESA) based on its own data

Energy generated [MWh]. Source: Economic Transactions Document (DTE)Unit Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 TOTAL

SNICTG01 1,256 1,720 607 741 1,163 511 - - - - - - 5,998Source: Wholesale Electric Market Managing Company (CAMMESA) based on its own data. Published in the Economic Transactions Document (DTE).


Fuel consumptions by station

2005 TotalJan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 [ton]

AES PARANA - - 33 1,862 4,920 2,834 3,084 - 253 - 12,986C.COMB.COSTANERA - - 46 1,888 970 1,191 - - - - 4,095DOCK SUD C.COMB - 0.9 7 - 836 1,854 - 2.75 - - 2,700 798DOCK SUD - 0.1 1 - 75 167 - 0.25 - 244 72DIQUE - - - - 7 4 6 17 61.8%C.COMB.PUERTO - - - 912 1,191 3,536 375 - - - - 6,014


Power in MEM 23,372 MW Source: October 2005 Monthly Report - CAMMESA GOEnergy generation 2005: 92,176,341 MWh GO

Admission Type Consumption

# Year Month Adit. Final Adit. [%] machine Acum Acum %

MW MW kcal/kWh MWh MWh %

1 2005 Nov Arcor M Seveso CC 31 31 100% 2,436 28,945 28,945 0.03%2 2004 Jun Consorcio Potrerillos (Cacheuta N) Hydraulic 122 122 100% - 403,682 432,627 0.47%

3 2004 Apr CT San Nicolás GT 24 24 100% 3,176 5,998 438,625 0.48%4 2003 Nov Autogenerador Shell GT 25 25 100% 3,040 99,183 537,808 0.58%5 2003 Jun CT Pluspetrol Norte GT 116 233 50% 2,552 86,137 623,945 0.68%6 2002 Aug Consorcio Potrerillos (El Carrizal) Hydraulic 17 17 100% - 80,034 703,979 0.76%7 2002 Nov Petrolera Chevron San Jorge MGT 26 26 98% 3,500 - 703,979 0.76%8 2002 Jun CT Pluspetrol Norte GT 116 233 50% 2,552 86,137 790,115 0.86%9 2002 Aug CT San Miguel de Tucumán CC 130 374 35% 1,725 757,409 1,547,524 1.68%

10 2001 Nov C.T. AES Paraná CC 830 830 100% 1,508 4,182,800 5,730,324 6.22%Gtion with GO 1,508

11 2001 Aug Ave Fenix Energía SA GT 7 47 15% - - 5,730,324 6.22%12 2001 Jun Dock Sud CC 773 773 100% 1,528 3,809,281 9,539,605 10.35%

Gtion with GO 1,52813 2000 Sep Autogenerador Entre Lomas GT 15 15 100% 3,252 12,922 9,552,527 10.36%14 2000 May CT Puerto Nuevo CC 798 798 100% 1,487 2,790,569 12,343,096 13.39%

Gtion with GO 1,48715 2000 Feb CT Tucumán CC 150 462 32% 1,757 859,635 13,202,731 14.32%16 2000 Jan Agua del Cajón CC 270 661 41% 1,808 1,303,922 14,506,653 15.74%

17 1999 dec Pichi Picún Leufú Hydraulic 261 261 100% - 1,177,263 15,683,916 17.02%18 1999 Sep Central Dique GT 34 55 62% 3,600 6,320 15,690,236 17.02%

Gtion with GO 3,600

19 1999 Jul CT Costanera CC 320 849 38% 1,428 1,890,205 17,580,441 19.07%Gtion with GO 1,428

19 1999 Jan CT Costanera GT 264 849 31% 2,272 1,561,782 19,142,223 20.77%

Gtion with GO 2,27220 1998 dec CT Costanera GT 264 849 31% 2,272 1,561,782 20,704,005 22.5%

Gtion with GO 2,272

Station

Power 2005 Generation

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 81 GO Low heating value 10,200 Kcal/kg NG Low heating value 8,300 kCal/m^3

GO Emission factor 3.357 tonCO2/ton NG Emission factor 2.10 tonCO2/dam^3

Gas Oil Natural Gas

Gas OilEstimated Generation Emissions

Estimated Natural Gas Emissions unitario Acum System

ton MWh 10^3 ton CO2 10^3 dam3 10^3 ton CO2 ton CO2/MWh 10^3 ton CO2 kg CO2/MWh

8,495 17,807 0.615 17,807 615.21

- - - - -

2,295 4,811 0.802 4,811 10.97

36,327 76,147 0.768 80,958 150.53

26,484 55,515 0.645 136,473 218.73

- - - 136,473 193.86

- - - 136,473 193.86

26,484 55,515 0.645 191,989 242.99

157,413 329,961 0.436 521,950 337.28

744,001 1,559,535 0.373 2,081,485 363.24

12,986 87,836 43,592 - 2,125,077 370.85

- - - 2,125,077 370.85

697,956 1,463,019 0.384 3,588,096 376.13

2,700 18,026 9,065 - 3,597,161 377.08

5,063 10,613 0.821 3,607,773 377.68

492,558 1,032,474 0.370 4,640,248 375.94

6,014 41,253 20,188 - 4,660,436 377.57

181,973 381,443 0.444 5,041,879 381.88

284,035 595,379 0.457 5,637,258 388.60

- - - 5,637,258 359.43

2,721 5,703 0.902 5,642,961 359.65

17 47 56 - 5,643,017 359.65

323,309 677,703 0.359 6,320,721 359.53

1,544 11,027 5,182 - 6,325,903 359.83

425,947 892,847 0.572 7,218,750 377.11

1,276 5,727 4,282 - 7,223,032 377.34

425,947 892,847 0.572 8,115,879 392.00

1,276 5,727 4,282 - 8120160.8 392.20

Emissions by fuel Total Emissions

Power in MEM 23,372

Energy generation 2005: 92,176,341

Admission Type

# Year Month

1 2005 nov Arcor M Seveso CC

2 2004 jun Consorcio Potrerillos (Cacheuta N) Hidráulica

3 2004 abr CT San Nicolás TG

4 2003 nov Autogenerador Shell TG

5 2003 jun CT Pluspetrol Norte TG

6 2002 ago Consorcio Potrerillos (El Carrizal) Hidráulica

7 2002 nov Petrolera Chevron San Jorge MTG

8 2002 jun CT Pluspetrol Norte TG

9 2002 ago CT San Miguel de Tucumán CC

10 2001 nov C.T. AES Paraná CC

Gción con GO

11 2001 ago Ave Fenix Energía SA TG

12 2001 jun Dock Sud CC

Gción con GO

13 2000 sep Autogenerador Entre Lomas TG

14 2000 may CT Puerto Nuevo CC

Gción con GO

15 2000 Feb CT Tucumán CC

16 2000 ene Agua del Cajón CC

17 1999 dic Pichi Picún Leufú Hidráulica

18 1999 Sep Central Dique TG

Gción con GO

19 1999 Jul CT Costanera CC

Gción con GO

19 1999 ene CT Costanera TG

Gción con GO

20 1998 dic CT Costanera TG

Gción con GO

Central

Table References: -Central: Power Station -CC: Combined-Cycle Generation

-Hidráulica: Hydraulic Generation -TG: Gas Turbine

-MTG: Micro Gas Turbine -Gción con GO: Generation with gas oil


GO Low heating value 56.10 tonne CO2/TJ

NG Emission factor 56.10 tonne CO2/TJ

Mario Seveso : 1st November, 2005

CONSORCIO DE EMPRESAS MENDOCINAS PARA POTRERILLOS (CEMPPSA). – CENTRAL HIDRÁULICA CACHEUTA NUEVA.- Unit 3 26/11/02.-Unit 4 11/12/02.

C.T. SAN NICOLÁS [AES SAN NICOLÁS]: 12/04/04.

Shell Capsa - 5/11/03

PLUSPETROL S.A – C.T. PLUSPETROL NORTE.- 6 Jun 2003.

CH. El Carrizal: 1/08/2002.Petrolera ChevrónSan Jorge SA,

PLUSPETROL S.A. (Ex PLUSPETROL EXPLORACIÓN Y PRODUCCIÓN S.A]– C.T. PLUSPETROL NORTE.- 5/06/02

PLUSPETROL ENERGY S.A – C.T. SAN MIGUEL DE TUCUMÁN.-9/05/02 - 27/08/02

Update to AVE FÉNIX ENERGÍA S.A..- 31/08/01.

CENTRAL DOCK SUD S.A..- 20/01/01-13/06/01

AUTOGENERADOR ENTRE LOMAS: (Pérez Companc S.A:) 21/09/00

CENTRAL PUERTO SA.- 5 de May 2000

PLUSPETROL ENERGY S.A – C.T. TUCUMÁN.-10/02/00

HIDROELÉCTRICA PICHI PICÚN LEUFU S.A. Unit 1 30/08/99. Unit 2 9/99. Unit 3 20/12/99

CENTRAL DIQUE S.A. (AES-Américas) 6/09/99.

C.COSTANERA. 1/07/99



Comments (start operation)


Unitary consumption: when alternative fuel is used to the natural gas - as the gas oil - the unitary consumption is major.Assuming a conservative criterion, the same unitary consumption takes for oil gas and natural gas.

Generationof energywith Gas Oil: the generationof electricalenergy from gas oil, is calculatedfrom the released fact of thevolume of GO consumed by agent and assuming the same unitary consumption as when natural gas is used.

CommentsEmission factors:IPCC

Generation autoproducers: (Autogenerator Shell; Petroleum Chevron and Autogenerator Between Hillocks) Assuming aconservative criterion, the exchange takes only with the network and not the clear generation of the unit, since only publicinformation of the exchanges is had with the national network.

CT San Nicolás: Unit only operateswith gas. Thought as starter in black of the CC. His generationwas obtainedof the DTE ofthe agent.

CentralDique:Since there is not had public informationof the productionof the units enabledcommerciallyin September,1999(2TG's of 17MW), there takes of the energy dedicated to the network for the head office the proportion of these 34 MW withregard to his installed potency.


Hidraulic 0Mineral Coal 2.54

Fuel Oil 3.44Natural Gas 2.10

Gas Oil 3.36Petroleum Residual Gas 2.38

Asphalt 3.24

Uranium 0.00

*a) coal, fuel oil y gas oil in tonnesb) natural gas, in cubic decametersc) Emission factor: CO2 (in tonnes)by tonnes of fuel (coal, fuel oil o gas oil) or cubic decameter of natural gas

Source: IPCC, 1996 and Argentine Emissions Inventory, 1999(For Petroleum Residual Gas and asphalt)

High Low ton C / Tjoule6200 26.56

10500 9261 21.259300 8400 14.63

10900 19.998500 18.29000 22

Source (*) Emission Factor

Heat kcal/kg or m3Auxiliar calculations


Indexes

ton C / TjouleHydro 0 High Low

Mineral Coal 2.54 6200 26.56Fuel Oil 3.44 10500 9261 21.25

Natural Gas 2.10 9300 8400 14.63Gas Oil 3.36 10900 19.99Uranium 0.00

a) coal, fuel oil and gas oil in tonsb) natural gas in cubic decametresc) The Factor corresponds to the CO2 Emission factor (in tons)per ton of fuel (coal, fuel oil or gas oil) or cubic decametre of natural gas.

Source: IPCC, 1996 and Argentine Emissions Inventory, 1999

Auxiliar CalculatedHeat

Source (*) Factorkcal/kg ó m3


Annex 4

MO�ITORI�G I�FORMATIO�

The emission factor of the MEM (Argentine Wholesale Electric Market) has been determined ex ante. Therefore, the electricity delivered to the grid by the Potrerillos Project, through its Hydroelectric Stations Cacheuta Nueva and Álvarez Condarco, is the key element to be monitored during the CDM Project. The monitoring plan of this Project has been developed on the basis of the monitoring methodology ACM0002/version06 “Consolidated monitoring methodology for zero-emissions grid-connected electricity generation from renewable sources”, and it focuses especially on monitoring the electricity generated by the Project.

1. Monitoring of the electricity delivered to the grid Monitoring of the electricity generated by the Project will be carried out through CEMPPSA´s Telecontrol and Communications System, which includes the following characteristics: The system includes two (2) processing units in Hot/Stand-by mode (Front-End) which enable the communication interface between the digital control level and the local control level (the latter including unit boards and auxiliary services of the turbine-generator group and related equipment). The digital control system is made up of two (2) operating stations, each of which has a processor, a color monitor, a keyboard and a color graphic printer. Apart from the operating stations, the digital control system includes an engineering station, which consists of a processor, a color monitor, a keyboard and a color printer. A telecontrol processor (gateway) is also included. The software is of the multitask type, and it is fit for control and telecontrol systems. This application program is installed in the required processors. There is a remote terminal unit (RTU) in the local control level, which constitutes the interface between the local control and the digital control. The Remote Terminal Unit (RTU) includes the control software for command automatism at the local level. The local control boards include all the data acquisition and control elements necessary for the plant´s exploitation, that is to say, transducers, auxiliary relays, switches, alarm charts, etc. The Carrier Wave and Radio Link system enables communication between the central control and the remote centers for the planned telecontrol operations . A telephone system is included which will make internal communication possible all over the facilities and with the telephone public network according to the MEM specifications.

CEMPPSA will ensure that the official reports (from CAMMESA in the case of the Cacheuta Nueva Station and EDEMSA in the case of the A. Condarco Station), containing the amount of energy delivered by the Project to the grid, are available during the process of validation and verification of the Project by the D.O.E.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 88 Cacheuta Nueva Station Monitoring System of the electricity delivered to the Grid CAMMESA, the organism in charge of dispatch, founded under the current legislation, by means of on line systems and equipment that operate according to the MEM procedures, monthly draws up the so-called MEM Economic Transactions Document (DTE). The Document contains, among other data, in the chapter called “A1.1 Payment to generator agents for their energy production in the SPOT market”, the energy that each group of each Generator Agent has delivered monthly to the SPOT Market.

As explained before, the procedure with relation to the energy delivered by CEMPPSA to the MEM´s SPOT Market, administered by CAMMESA, is the following:

1) CAMMESA sends CEMPPSA the corresponding ETD by electronic means. It is worth mentioning that the said Document is public information;

2) Then, CEMPPSA verifies that the data on this register coincide with their own data; 3) In the third place, CAMMESA issues the corresponding Settlement of Sales (Credit); 4) Finally, CAMMESA proceeds to pay the said invoice to the account of CEMPPSA.

Álvarez Condarco Station Monitoring System of the electricity delivered to the Grid The totality of the energy generated by this Station, from the beginning of the concession held by CEMPPSA, is sold to one of the local distributors, EDEMSA. To this end, an Agreement of Electric Power Supply (Convenio de Abastecimiento de Energía Eléctrica) was signed between EDEMSA and CEMPPSA. Even though this Agreement falls outside CAMMESA´s commercial sphere, CAMMESA does act as Dispatch Agent (OED); therefore, it has access to the generation data of each of the groups which make up the Álvarez Condarco Hydroelectric Power Station, which data CAMMESA makes public. Moreover, there is another supervision agent to the energy supplied by CEMPPSA to EDEMSA, the Provincial Electricity Regulatory Commission (EPRE). The EPRE is an interested party with regard to the energy supplied by CEMPPSA under the referred Agreement, since this provincial entity charges CEMPPSA a supervision and control fee on the basis of the energy supplied by CEMPPSA and generated at the Álvarez Condarco Power Station. It is worth pointing out that, in the hypothetical case of this Supply Agreement being terminated, no matter whether the energy provided by CEMPPSA went to the SPOT Market or to the Forward Market ( MAT), both of which are part of the MEM, the energy would continue to be controlled by CAMMESA. Having the foregoing specifications been made, the following is the monthly procedure with relation to the sale of the energy generated at the Álvarez Condarco Hydroelectric Power Station:

1) CEMPPSA, on the basis of internal information on the measurement of the supplied energy during a certain period, as well as of the information provided by EDEMSA, issues an invoice corresponding to the energy supplied during such period.

2) EDEMSA verifies the generation values and rates invoiced and proceeds to the payment thereof.

3) The EPRE verifies the generation data provided in CEMPPSA´s affidavit and compares them with the information also provided by EDEMSA with regard to the characteristics


of their purchase of electric power, in which the energy bought from CEMPPSA´s Álvarez Condarco Power Station is discriminated.

The Consortium of Mendocinian Companies for Potrerillos S.A. has designed a document called “Potrerillos Project Monitoring Plan”. It has been designed to be a guide during the implementation of the monitoring activities of the information compiled, as well as during the verification of emission reductions, and a reference document, which is aligned with the usual operating procedures of both Stations.


Annex 5

Stakeholders´ Comments

Article published in Los Andes Newspaper

ECO�OMY SECTIO� THE PULSE OF BUSI�ESS “Potrerillos Goes for Green Credits” The Consortium of Mendocinian Companies for Potrerillos S.A. (CEMPPSA), concessionaire of the “Exploitation of the Mendoza River – Potrerillos Project”, is in the process of presenting this Project before the Clean Development Mechanism (CDM) under the Kyoto Protocol. This is possible because the Cacheuta Nueva and Álvarez Condarco Hydroelectric Power Stations generate energy from a renewable source and do not produce Greenhouse Gas (GHG) emissions. The Project´s registration in the CDM will be a step toward obtaining the so-called “Carbon Credits or Green Credits”, which can be understood as a recognition to projects that contribute to the reduction of GHG.

PROJECT DESIGN DOCUMENT FORM (CDM PDD) - Version 03.1. CDM – Executive Board page 91 In this case, the Potrerillos Project reduces GHG emissions through the displacement of other polluting generation sources. The emergence of non-polluting projects is extremely important, since the concentration of carbon dioxide, methane, nitrous acid and other polluting gasses in the atmosphere is daily increasing as a result of different activities carried out by man. Especially those which require the burning of fossil fuels, such as petroleum and its derivatives. This undertaking constitutes one more contribution of the Potrerillos Project to the sustainable development of the region.


Annex 6

Photographs of project

Photo 2 Potrerillos Dam


Photo 1 Building of the old Cacheuta Station



Photo 8 - Generation Equipment - Cacheuta �ueva Station Photo 7 - Generation Equipment – Old Cacheuta Station

Photo 5 Control Board – Old Cacheuta Station Photo 6 Generation Equipment – Old Cacheuta Station


Photo 9 Building Cacheuta �ueva Station Photo 10 �ew Generation Equipment – Alvarez Condarco Station

pdd potrerillos traducci n version finalparatv200706012

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