Carolina Millan and Michael O’Boyle, Bloomberg News
MEXICO CITY
EnergiesNet.com 08 19 2024
A majority of Mexican pension funds agreed to take part in a $852 million placement to help President Andres Manuel Lopez Obrador’s administration finance the purchase of Iberdrola SA assets.
Seven out of 10 pension funds, known locally as Afores, committed to a placement of private equity certificates to fund part of a government deal to buy power plants and a wind farm from the Spanish energy giant, according to Roberto Lazzeri, chief of staff at the Finance Ministry.
The largest committed contributions — $250 million by Afore Profuturo and $200 million by Afore Banamex — are pending final approval from the antitrust regulator Cofece, which is expected in late August, he said. The other participants were: Afore XXI with $150 million, Afore Coppel with $120 million, Afore InverCap with $40 million, Afore Inbursa with $22 million and Pensionissste with $20 million. Government-backed mortgage lender Infonavit also participated with $50 million.
“It’s a landmark transaction for the Finance Ministry, because it marks a step in what we believe could be done in the future to boost government resources without stressing public finances,” Lazzeri said. The structure allows for partnering with the private sector “with a level of transparency that can’t be achieved through the budget” and “should be the norm of major future investment projects,” he added.
AMLO, as the outgoing president is known, announced an agreement to purchase a majority stake in 13 of Iberdrola’s assets in Mexico for $6.2 billion in April 2023. It’s part of his administration’s push to strengthen state energy companies, and it brings government-run utility Comision Federal de Electricidad’s share of power generation to more than 55% of the national market.
The Spanish giant agreed to sell its stake in 12 natural gas-fired power plants and a wind farm — with a total generation capacity of 8.5 gigawatts.
AMLO’s successor, Claudia Sheinbaum, who will take office Oct. 1, pointed in an April interview to the structure of the Iberdrola deal as an option to fund future energy investments. Its format could be used for joint ventures, public-private partnerships, concessions and other infrastructure projects, Lazzeri said. “It’s a broad field. Any project with known cash flows with certainty could be financed in this way.”
The deal with Iberdrola had a complex structure. The purchase was made by a type of trust known locally as a CKD, which in this case is administered by infrastructure asset manager Mexico Infrastructure Partners.
Some $2.4 billion of the total was equity taken by Mexico’s sovereign infrastructure fund, Fonadin — a state entity overseen by the Finance Ministry. The remaining $3.8 billion debt portion was split into two, Lazzeri said. State development banks Banobras, Nafin and Bancomext lent $2.2 billion for 15 years and $1.6 billion was a loan by SMBC, Santander, BBVA and Barclays that the trust will have to pay back with the proceeds of a future bond issuance.
The sale of CKD certificates — under the ticker FIECK — by Mexico Infrastructure Partners was announced in a January filing, which noted it would be split into two series.
Return Rate
The deal with the pension funds means that 35% of the $2.4 billion equity portion held by Fonadin will be owned by the Afores that participated. The government wants to boost that to 49% in a future stage after it issues certificates in a local REIT-like structure known as a Fibra E, which receives certain tax breaks, Lazzeri said. That transaction will likely take place next year.
The internal rate of return is 10.3% in dollar terms, he said. That’s expected to grow to as much as 14.5% when the structure becomes a Fibra E, which provided an incentive for pension funds to enter at this stage, he added.
When the pension funds reach the 49% equity ownership target, the government stake will be equivalent to $1.2 billion. Given Iberdrola is expected to pay up to $700 million in taxes for the sale, that will mean the government made a $6 billion acquisition with about $510 million.
Local business columnist Dario Celis first reported the transaction.
–With assistance from Alex Vasquez and Scott Squires.
bloomberg.com 08 16 2024
