Gov’t pledges unprecedented energy incentives

The bill provides that legal entities with production licenses that pledge to invest in the energy sector through the end of 2012 will be included in government incentives regardless of location. Companies that plan to invest in the energy sector by 2008 will benefit from a 100 percent tax exemption on investments; those that participate in the sector between 2008 and 2013 will benefit from this allowance at a reduced rate (95 percent exemption in 2009, 90 percent exemption in 2010, etc.). If they intend to use transmission lines, currently state owned, for distributing the electricity they generate, they will be exempt from all taxes and charges related to equipment imports. They will also be exempt from the excise tax if they use fuel oil.

Furthermore, they will benefit from related provisions of Law No. 5084 on the Encouragement of Investment and Employment for five years starting in 2008, and they will be exempt from taxes if they use transmission lines through the end of 2013 beginning from the date they start investing in the sector.

The Cabinet will announce additional incentives if necessary. The bill foresees adding an article addressing “supply security” to the Electricity Market Law that will make both the ministry and licensees responsible for supply security. Each year the ministry will draw up annual schemes for electricity generation and supply as well as projections of demands for electricity. The ministry will prepare and submit to the Cabinet a fact-finding survey on the electricity market and supply security for electrical energy by Dec. 31 of every year.