Deals of the YEar awards
Mexico’s state-owned Federal Electricity Commission (CFE) has embarked on its most ambitious initiative since it began construction of its first hydroelectric plant nearly 85 years ago.
That plant, Ixtapantango, had the capacity to generate 28 megawatts of electricity for Mexico City. The new plan, which is only in a first phase, will add 120 megawatts by next year and thousands of megawatts in five years.
CFE was the first company in Latin America to operate commercial geothermal and wind plants. It will have the largest solar plant, generating more than 1,000 megawatts of electricity, when the new plan is finished.
The seed funds for these plans came from CFE’s first ESG-linked bond, a dual tranche offering placed in February 2022 that raised a combined $1.75 billion, including $1.25 billion with a 7-year maturity and 4.688% coupon, and $500 million with a 30-year maturity and 6.264% coupon.
“The bond was very well received,” says Carlos Guevara, CFE’s deputy finance director. “It represents the sustainable bond with the longest maturity in Latin America to date and also the largest sustainable corporate bond.”
The proceeds from the bond, which wins the award for Quasi-Sovereign Bond of the Year, will be used to help offset the major investment CFE has planned on the environmental and social fronts. In addition to supplying power to Mexico’s 130 million people, CFE also provides internet to the country’s rural areas where private service is unavailable.
“As a public company we are committed to offering electricity and internet, especially in remote areas, and doing this while protecting our natural riches in a sustainable way. This is why we opted for an ESG bond over a traditional placement,” says Guevara.
Money raised from the bond will be used to partially finance several power projects, including modernization of 16 hydroelectric plants and revamping geothermal plants. The most ambitious component is construction of a 1,000 megawatt solar plant in the northern Sonora state. It will be the largest solar plant in Latin America, but that is only the tip of the iceberg.
The current project is seen as the cornerstone of the “Sonora Plan,” a joint effort of Mexico and the United States that intends to add 5,000 megawatts of green power that would connect to grids through thousands of miles of transmission lines. It would not only connect Mexican states, providing power to new near-shoring enclaves, but link into the Western Interconnected System that includes the western United States, and Alberta and British Columbia in Canada.
In the meantime, CFE’s goal is to increase to 35% energy generation from renewable technologies by 2026, saving the company money and helping Mexico comply with its targets for reducing greenhouse gas emissions.
On the social side, the plan will contribute to the company’s efforts to increase electrification in rural areas. Electrification in Mexico is 99.2%, but that means that around 1 million still lack power. Guevara said CFE wants to slash this by half by 2024.
The digital gap is wider. While coverage in the capital is 100%, national internet coverage is only 68%. The goal is to provide internet service to 130,000 rural communities by 2025 through the “Internet for Everyone” program.
Guevara says the bond is part of a broader effort toward energy transition and social inclusion.
“We understand the importance of sustainability and believe that this milestone issuance was not only necessary, but highly valuable for our company and our future endeavors,” he says. LF
Global Coordinators: BofA Securities; HSBC; J.P. Morgan; Santander
Joint Bookrunners: Barclays; BofA; Scotiabank; SMBC Nikko
ESG Structurers: J.P. Morgan; Santander
Issuer's Legal Advisors: Cleary Gottlieb; Creel, García-Cuéllar, Aiza and Enríquez
Underwriters' Legal Advisors: Galicia; Simpson Thacher
All supporting financial institutions and law firms were transmitted to LatinFinance by the award category winners. For updates please email email@example.com