• Upgrading
    the Mexican energy market to international standards
  • Juan Manuel González and Pedro J. Reséndez
    Partner and Of Counsel at Greenberg Traurig
  • Recent reforms that Mexico has made to its electrical, oil and natural gas sector has the function to update our Country compared with the regulation and openness that exists to invest in these sectors in other countries that have reached levels of development such as Mexico aspires

    We affirm the aforementioned due to such reforms achieve the following:

    (I) Simultaneous creation of a wholesale electric market;

    (II) Release of oil import (gas, diesel and tubosine) and its selling on private service stations (retail);

    (III) The most important transfer of natural gas transport system through pipelines in the country with length of 9000 km to an independent manager - National Natural Gas Control Center (CENAGAS ) - to ensure interconnection and contracting on equal circumstances and open access;

    (IV) The creation of a secondary market for gas selling and transportation capacity;

    (V) The possibility of expansion of electrical transmission networks through private investment (both private and public networks in partnership with State enterprises)

    (VI) Network management through National Power Control Center (CENACE ) Independent Organization (Independent Power System Operator ISO ) to ensure interconnection and contracting on equal and open access;

    (VII) Bids for various rounds of contracting oilfields with an independent National Hydrocarbons Commission through production sharing contracts or licenses;

    (VIII) Creation of Clean Energy Certificates (CELs) and a market for listing and exchange along with a gradual acquisition commitment of renewable energies for consumers;

    (IX) The tenders organized by CENACE for CELs purchase, power, energy and financial transmission rights for basic supply;

    (X) The transformation and disaggregation of the Mexican State utility Federl Electricity Commission (CFE);

    (XI) The transformation and disaggregation of the oil company of the Mexican State (PEMEX) and the removal of the monopoly held previously of all activities related to the oil industry (geology, exploration, production, import, first-hand sales, refining, transportation, processing, petrochemical, marketing and supply to service stations that could only exclusively operate with its brand under a franchise scheme).

    This with the aim of (i) treating gas, oil, electricity, petroleum products and transport capacity, transmission and associated storage, as true “commodities”, just as happens in other markets, and (ii) have rates for such products and services that make Mexico a competitive market in its manufacturing and operation costs. As to financing schemes to modernize existing infrastructure to expand or build it, it requires new and creative mechanisms to deal with the great challenges of investment. For that purposes, the recent regulation creates two new investment vehicles: FIBRAs E and CERPIS, which will allow to capture in an effective, agile and with the best international standards in terms of corporate governance and transparency, important flows of domestic and foreign investment in all the economic sectors, especially in the electricity, oil and natural gas sectors. With the introduction of these vehicles, Mexico updates its investment instruments to generate greater flow to important strategic public projects and those of private interest.

    CERPI´s will allow pension funds, insurance companies and other domestic institutional and foreign investors, to invest in any kind of project in all productive sectors of the Mexican economy.

  • CerPI
    Certificates of Investment Projects (CerPI) are a complement of the Certificates of Capital Development (CKDs) they have a modern design of corporate governance and flexible in its operation, will allow pension funds, insurance companies and other domestic institutional and foreign investors, to invest in any kind of project in all productive sectors of the Mexican economy.

    Through FIBRA E, the large investing public will have access to mature projects in the sectors of energy and infrastructure through vehicles that generate stable and predictable flows under a specific tax regime. These instruments gather the experience of national and international instruments that have proved to be successful.
    In Mexico, as a precedent of the FIBRAs E, we have a real estate FIBRAS. To date, there are more than 10 issuers which together have issued about $ 150 billion pesos in real estate FIBRAS.
    From an international point of view, in the United States there are similar instruments to finance energy and infrastructure projects that require a great amount of resources and long terms, such as Master Limited Partnerships (MLPs) and YieldCo (Company Performance). The first ones emerged in early eighties and the end of 2014, its market capitalization amounted more than $500 billion dollars. The MLPs operate as transparent vehicles for tax purposes and generally, the tax is paid to the level of the individual investor at the time of receiving distributions and these contribute fiscally according to their particular tax rate. Moreover, the YieldCos, alternative vehicle from the MLPs arise in 2013, in order to segregate mature assets with predictable flows.
    Despite its relatively short history, the capitalization value of this vehicle now exceeds $30 billion dollars.
    Considering the above, it is expected that FIBRAs E have an important positioning not only for the appetite but for the scholarships of various projects usually were not open to all types of investment, such as the electric, oil and natural gas sectors, and also, petroleum products, gas pipelines, roads, highways, railways, transport systems, ports, public security, social rehabilitation and water, among others.
    Given all that international experience, we applaud the initiative for the creation of investment vehicles, that by having corporate governance rules, will grant greater transparency and confidence to the investing public, besides by increasing that range of assets, the market will be stronger by the financing capacity that will be generated. In the securities industry, we celebrate and reaffirm our commitment and support to promote the development of these instruments and the new operational modalities in order to meet the financing needs for infrastructure required by our Country.