Moody’s Rates CFE Local Issue

Moody’s has given a Baa1 global and Aaa national scale ratings to the upcoming local bond issue from Mexican state-owned energy provider Comision Federal de Electricidad. The CFE has filed to sell up to MXP4bn in peso and UDI-denominated bonds with tenors of up to 12 years, and is awaiting regulatory approval. Moody’s expects CFE to use the proceeds from the notes issuance to refinance public works investments. The CFE has a dominant market position and strong cash generation, the agency says, with risks including important long-term investment needs, significant subsides for residential and agricultural rates, and political interference. Although the government does not guarantee CFE’s obligations, Moody’s would expect a “high” likelihood of government support in the case of distress. BBVA is managing the transaction. It hopes to follow fellow state-owned entity Pemex in reopening Mexico’s market for corporate issuers. April 2, Pemex sold MXP6bn in 2012 bonds at TIIE plus 100bp and MXP4bn in 2016 bonds at a fixed 9.15% in a well-oversubscribed issue that sets price points for CFE.