Overview and Key Players
The Mexican state-owned company, the Comisión Federal de Electricidad (CFE), plans to issue a bond worth $650 million in the international market. Fitch Ratings has assigned a rating of BBB- with a stable outlook to this bond issuance.
Iván Cajeme Villarreal Camero, the general director of CFE Capital, explained that the bond will have a 15-year term with an average life of 7.3 years. The decision to approach the international market stems from its depth, despite being more demanding than the Mexican market.
Citi and Bank of America will act as the underwriters for this bond issuance. CFE Fibra E previously raised capital in 2018 and is now set to make its first debt issuance.
Rationale and Objectives
Villarreal Camero stated that the bond market is more active than the capital market, and investors are more demanding, less volatile, and more accessible. He emphasized that the debt market is preferred due to its stability and lower volatility.
Regarding the dollar-denominated bond, Villarreal mentioned that they are working on establishing hedges to mitigate currency risk. He also expressed optimism about securing funds at a lower cost, as the bond is expected to be attractive with long-term yields and raise international awareness of CFE’s projects.
CFE Fibra E and its Significance
CFE Fibra E is a vehicle designed to attract private financial market resources for the development of Mexico’s strategic electricity transmission asset, which is operated and owned by the state through the CFE.
Fitch Ratings views CFE Fibra E as the sole transmission vehicle in Mexico and a natural monopoly through CFE. This benefits the business profile by providing predictable and reliable income streams, often backed by government protection policies, regulated tariffs, and long-term contracts.
Fitch expects CFE Fibra to receive dividends of around 3,800 million pesos in 2025, rising to 6,300 million pesos by 2027.
Historical Context and Future Plans
CFE Fibra E was established in 2018 to attract investor resources from financial markets. In its inaugural year, it raised 21 billion pesos, with investors capturing 15 billion and CFE retaining 5 billion.
The trust holds transmission rights until 2048, and the certificates have paid investors generous dividends, often exceeding other instruments by 500 basis points.
Villarreal Camero highlighted positive meetings with potential investors and strong appetite for the instrument from financial institutions. However, he acknowledged that it’s a demanding market where resources’ allocation is questioned, and investors are assured of investment in a strategic national asset—electricity transmission.
CFE Fibra E’s decision to bypass the Mexican market was due to high resource requirements, necessitating multiple issuances locally. Nevertheless, they won’t seek more resources in the domestic market for the rest of the year, though local capital or debt options remain open.
25% of Fibra E’s issued certificates belong to CFE, while the remaining are held by institutional investors, primarily Administrators of Retirement Savings Funds (Afores).
According to CFE’s Transmission Network Strengthening and Expansion Plan, $8.177 billion are needed for the 2025-2030 period.
CFE has announced various initiatives and has an extensive expansion program in energy generation and distribution, including renewables in remote areas. This may lead to further debt or capital issuance through CFE Fibra E.
Though no specific interest rate for the bond issuance has been disclosed, Villarreal Camero emphasized the goal of reaching the target amount at a favorable price in international markets.
The announcement of the bond placement and interest rate is expected in the coming days.
Key Questions and Answers
- What is CFE Fibra E? CFE Fibra E is a vehicle established in 2018 to attract private financial market resources for the development of Mexico’s strategic electricity transmission asset.
- Why is CFE Fibra E issuing a bond in the international market? The international market is chosen due to its depth and stability, despite being more demanding than the Mexican market.
- What is the bond’s term and average life? The bond has a 15-year term with an average life of 7.3 years.
- What are Fitch Ratings’ expectations for CFE Fibra E? Fitch expects CFE Fibra E to receive dividends of around 3,800 million pesos in 2025, rising to 6,300 million pesos by 2027.
- Why bypass the Mexican market? The decision to avoid the Mexican market was due to high resource requirements, necessitating multiple issuances.
- What are the future plans for CFE’s transmission network? CFE has announced various initiatives and an extensive expansion program in energy generation and distribution, potentially leading to further debt or capital issuance through CFE Fibra E.
