Pemex to Overhaul ESG, Safety Policies to Lure Bank Financing

Petroleos Mexicanos is revamping its environment and safety procedures, with a rollout expected in the second half of the year, in the latest bid to attract much-needed financing as the Mexican state-owned oil producer’s debt soars, according to people familiar.

(Bloomberg) — Petroleos Mexicanos is revamping its environment and safety procedures, with a rollout expected in the second half of the year, in the latest bid to attract much-needed financing as the Mexican state-owned oil producer’s debt soars, according to people familiar. 

The plan, which aims to improve the company’s environmental, social and governance track record, is needed in order to secure lending from international banks including HSBC Holdings Plc, people familiar with the matter said, asking not to be named because they are not authorized to speak publicly on the issue.

A Pemex representative didn’t respond to a request for comment. An HSBC representative declined to comment.

Pemex is under pressure to step up its ESG efforts and improve its reputation after three fires last month at its facilities resulted in five deaths and many more injuries. The company’s accident frequency rate soared by 40% last year and follows two major offshore explosions, including one that set the Gulf ocean ablaze in 2021.

“Though the company is engaging on ESG and providing disclosure on its earnings presentation, these trends and recent events are certainly concerning and weaken the credibility of any plan the company may disclose,” JPMorgan Chase & Co. analyst Alejandra Andrade said in a Wednesday research note.

Pemex also acknowledged in its latest five-year business plan that it faces “limitations” in receiving ESG financing and should improve its environmental and safety metrics.

Read more: Pemex Lines Up Goldman, JPMorgan for $1 Billion in Financing

Pemex is under growing pressure to find new sources of funding, with $107.7 billion in outstanding debt as of the end of 2022. About $8 billion coming due this year, according to a Jan. 31 note from Moody’s Investors Service. The government has provided nearly $45 billion to Pemex in capital injections, tax breaks and other assistance since 2019, and indicated it could step in if necessary.

The debt-laden state driller has been asking banks since late last year for innovative solutions to help manage its debt, with the most recent including a deal with JPMorgan and  Goldman Sachs Group Inc. to provide at least $1 billion in collaterized loans. Bloomberg Newspreviously reported Pemex has been in talks with Goldman Sachs and HSBC for financing linked to reducing greenhouse gas emissions.

–With assistance from Maria Elena Vizcaino.

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