Last September, a Mexican government-backed trust issued the largest ever single-tranche project bond in Mexico’s energy sector and one of the largest project bonds in Latin America to date – a transaction noteworthy not just for its size but also for its significance.
Fideicomiso de Inversión en Energía México (FIEMEX), a special purpose trust sponsored by Mexico’s National Infrastructure Fund (Fonadin) and managed by Mexico Infrastructure Partners (MIP) issued a landmark $1.49 billion bond in the international capital markets to repay a bridge loan that backed the Mexican state’s $6.2 billion acquisition earlier last year of 13 power plants from Spain’s Iberdrola. That transaction was the largest M&A by the Mexican sovereign and the largest ever transaction in Mexico’s energy sector.
The September offering – part of an acquisition-financing strategy undertaken in close coordination with the Mexico’s finance ministry – which wins the award for Structured Financing of the Year, received an investment-grade rating from the three largest rating agencies, underscoring market confidence in the financing structure and in Mexico more generally.
“This was a very big and very important transaction,” says Pablo Perezalonso, a partner at the Ritch Mueller law firm. “We are hopeful that there will be more opportunities in the energy sector in the new government [of President Claudia Sheinbaum].”
The notes were secured by the power assets acquired by Fiemex, their real estate and their cashflows. Fitch Ratings highlighted in a report the fact that Fiemex benefits from power purchase agreements (PPAs) with off-takers that include the Federal Electricity Commission (CFE). “Exposure to dispatch risk is low, as contracted margins demonstrate high resilience to dispatch changes,” the report says.
Another innovative aspect of the deal is a cash-sweep mechanism that kicks in if revenues fall below 90% of the contracted PPAs. If this were to happen, the bond’s 17-year tenor could drop to ten years.
Edgar Amador, undersecretary for finance and public credit, says the bond showed the government’s commitment to ensuring energy security for Mexico by achieving long-term energy generation target of 54% by the public sector, while also demonstrating the government’s strategic use of private capital to support public policy priorities.
He says the government headed by President Sheinbaum is deepening the state’s relationship with investors, an effort that began with her predecessor, Andrés Manuel López Obrador. Sheinbaum replaced López Obrador on October 1, 2024.
“The previous administration and this one speak the same language as investors, the language of market,” Amador says. “This bond shows that the state knows how to do business and talk business too.”
Advisors: GME; Ernst & Young; KPMG; Black & Veatch
Facility Agent’s Counsel: Holland & Knight
Global Coordinators & Joint Bookrunners: Barclays; BBVA; Santander; SMBC
Facility agent: UMB
Joint bookrunners: BNP Paribas; Scotiabank
Issuer’s Counsel: Cleary Gottlieb; Greenberg Traurig (M&A); Ritch Mueller
Underwriters’ Counsel: Galicia; Milbank
Trust manager: MIP
Issuer: FIEMEX Energia
Sponsor: Fonadin
Trust Operator: Quantum Energia
All supporting financial institutions and law firms were transmitted to LatinFinance by the award category winners. For updates please email awards@latinfinance.com