On June 28, 2019, Paraguay enacted Act No. 6324/19. The Act grants sovereign guarantee to debt related with certain projects for the distribution and transmission of electric power by the Administración Nacional de Electricidad, the government´s utility company. This is a major shift in the way ANDE has been structuring bidding processes´ and will allow greater participation of the private sector, especially on the financing side of the transaction.
The Act includes the following:
- The authorization for a package of specific projects detailed in the Law with an estimated total value of up to USD 300,000,000. However, ANDE, with the authorization of the Executive Branch, may include other projects which considers necessary.
- The Projects must be carried out under the complementary modalities contained in Law 2051/03 “Of Public Procurement”, which includes financing by the supplier or contractor.
- The sovereign guarantee will be instrumented according to a regulatory decree to be issued by the Executive Branch. As of today, this is pending.
- Paraguay will issue titles acknowledging the payment obligation for the Projects and evidencing the sovereign guarantee. Such tittles will be assignable, unconditional, irrevocable, and autonomous of any underlying contracts. In view of this, it is probable that the future regulation will reflect terms similar to the regulations applied to the Certificates of Recognition of the Obligation of Payment (CROPs), that are currently issued under Act 5.074/13, for turnkey projects.
- The bidders must have secured the financing for the complete execution of the Project, including, consultancies and audits.
- The Executive Branch may submit Paraguay to the laws and jurisdiction of the State of New York or London.
- In case of breach of the contract or the guarantee by Paraguay, and in case of litigation, Paraguay will not be able to raise defenses based on sovereign immunity.
- Credits may be approved with the guarantee of the Multilateral Investment Guarantee Agency of the World Bank (MIGA) or other similar agencies.
Although the reglementary decree is pending, the Act is already in force from July 4, 2019. The Ministry of Finance is in charge of its regulation.