Introduction to CFE Fibra E and its Significance
The Comisión Federal de Electricidad (CFE), led by Emilia Calleja, is preparing to seek funding for the expansion of the National Transmission Network. This will be CFE Fibra E’s first bond issuance in its history, marking the creation of Mexico’s first Energy and Infrastructure Investment Trust.
Background on CFE Fibra E and its Importance
CFE Fibra E is a newly established investment trust created by the Mexican government to finance infrastructure projects within the energy sector. The trust will have exclusive access to the National Transmission Network (RTN), allowing it to raise capital for crucial expansion projects.
Emilia Calleja, as the head of CFE, plays a pivotal role in this initiative. Her leadership is essential for securing the necessary funding and ensuring the successful execution of the expansion plan.
Details of the Bond Issuance
Yesterday, CFE Fibra E began meetings with potential investors to promote the issuance of an international bond in the coming days. The expectation is that two prominent credit rating agencies will assign the same rating to this bond as Mexico’s government bonds and CFE’s, due to the strong performance of the National Transmission Network, its unique business model, and confidence in the current government’s energy plan.
Bond Ratings and Implications
Standard & Poor’s (S&P) and Moody’s, two leading credit rating agencies, have recently upgraded Mexico’s credit ratings. S&P maintained CFE’s long-term foreign currency debt rating at ‘BBB’, two notches above the minimum investment-grade threshold, and kept its local currency rating at ‘BBB+’. Moody’s upgraded Pemex’s rating from B3 to B1 with a stable outlook.
These upgrades reflect the government’s increased commitment to supporting state-owned enterprises like CFE and Pemex in meeting their financial obligations, which positively impacts their credit risk perception.
CFE’s Expansion Plan: Strengthening Transmission Infrastructure
CFE Fibra E’s bond issuance aims to bolster and extend the transmission infrastructure, a vital service for all economic activities. The planned investments include:
- USD 8,177 million (approximately MXN 163,540 million) for reinforcing the transmission network.
- Construction of 275 new transmission lines and 524 new works in electrical substations from 2025 to 2030.
- Increase generation capacity by 29,074 megawatts (MW): CFE – 22,674 MW and an additional 6,400 MW from private investment.
These investments will benefit 50 million users across Mexico, addressing the previous neglect of transmission and distribution infrastructure during the past administration.
Other Noteworthy Developments
Potential Increase in Taxes on Sugary Drinks
Ahead of the Economic Package presentation, conflicting opinions emerged regarding a possible increase in taxes on sugary beverages.
- Reset México’s national survey suggests 83% of the population supports healthy taxes on alcoholic beverages, tobacco, and sugary drinks if the revenue is directed towards health or education.
- Infopoint’s survey indicates that 73% of participants oppose the tax increase on soft drinks, while only 27% support it.
Health Secretary Dr. David Kershenobich Stalnikowitz has recently criticized sugary beverages, sparking intense debate in the legislative branch. The outcome remains uncertain.
AHMSA: Imminent Rescue?
During her recent working visit to Saltillo, Coahula, President Claudia Sheinbaum mentioned “we will recover the Coahuila steel plant” in reference to the struggling Altos Hornos de México (AHMSA).
Speculation has arisen regarding the federal government’s potential rescue plan for AHMSA, which affects around 20,000 workers and 400 small to medium-sized businesses. The Mexican government’s solution to this complex AHMSA issue remains to be seen.
Positive Credit Rating Upgrades
Standard & Poor’s and Moody’s, two significant credit rating agencies, have recently improved Mexico’s credit ratings.
- S&P maintained CFE’s long-term foreign currency debt rating at ‘BBB’ and its local currency rating at ‘BBB+’.
- Moody’s upgraded Pemex’s rating from B3 to B1 with a stable outlook.
These upgrades reflect the government’s increased commitment to supporting state-owned enterprises like CFE and Pemex in meeting their financial obligations, positively impacting their credit risk perception.
