The Mexican government is not currently considering giving state oil company Petroleos Mexicanos a capital injection this year to help pay upcoming debt, said Deputy Finance Minister Gabriel Yorio in an interview with Bloomberg News.
(Bloomberg) — The Mexican government is not currently considering giving state oil company Petroleos Mexicanos a capital injection this year to help pay upcoming debt, said Deputy Finance Minister Gabriel Yorio in an interview with Bloomberg News.
The government’s decision to cut Pemex’s profit sharing rate to the current 40% from 65% before President Andres Manuel Lopez Obrador took office in late 2018 gives the oil producer enough cash to pay down its maturities coming due, Yorio said.
“It’s very important for Pemex to have the flexibility that any company has, and that implies the reduction of its tax burden,” he said, adding that Pemex still has $2.5 billion of outstanding debt amortizations after having paid $6 billion already this year.
The company’s bonds due in 2032 rose half a cent to 76.9 cents on the dollar, according to Trace data. Trading jumped to more than twice the average, according to data compiled hourly by Bloomberg, ahead of first-half earnings to be released later on Wednesday.
Pemex is the world’s most indebted oil company and is facing the worst liquidity crunch in its 85-year history. The government would need to provide on average of $10 billion a year to Pemex for the next three to five years to improve its financial situation, said Saverio Minervini, head of Latin America energy at Fitch Ratings, in a Bloomberg interview.
Iberdrola Plans
The government is also looking to use a special purpose vehicle, or SPV, with a mix of debt and equity to finance its purchase of Iberdrola SA assets after the deal closes, Yorio, a key member of Lopez Obrador’s economic team, said in a separate interview with Bloomberg Television.
Mexico will be a bridge lender in the first stage of the transaction to purchase $6 billion worth of power plants and a wind farm, Yorio said. The government aims to transition into an SPV vehicle as soon as three months after the deal closes, he added. It’s one of the biggest recent energy deals during the current administration.
“There are different ways to do the purchase, and since we have to close the transaction as soon as possible, in the first phase we’ll have a system of funding to serve as a bridge in the transaction,” Yorio told Bloomberg Television’s Shery Ahn.
Read More: AMLO Widens State’s Reach With $6 Billion Iberdrola Deal (1)
After the transaction with Iberdrola is complete, the government will seek to “partially exit” it and involve local and international market participants through an alternative local instrument that could include Fibras, Cecades or Cerpis, he added on the sidelines of the interview. The deal will be listed in the local markets, he said, ruling out a private placement.
The country’s development bank trust Fonadin will receive a 45 billion-peso ($2.5 billion) contribution from the Finance Ministry to purchase a 51% stake in the deal, Finance Minister Rogelio Ramirez de la O previously announced. Bloomberg News reported Banco Bilbao Vizcaya Argentaria, Banco Santander SA and Bank of America Corp. have expressed interest in backing Mexico on the deal.
Here are other key points from the Bloomberg Television interview:
- Mexico’s government has “strong” commitment to supporting Pemex financing
- “2023 will be the year when we are piloting the new refineries”
- The Mexican peso is doing well due to remittances and macro fundamentals, the peso is expected to stay strong
- Mexico is seeing “a lot of commitment” from ESG investors
–With assistance from Maya Averbuch and Philip Sanders.
(Updates with Pemex bond moves in fourth paragraph)
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