LatinFinance - March/April 2016 - 41

in the Mexican exchange, but now we're
going to open up these opportunities to
investors that have been waiting for years."
Pemex and CFE will still operate the
assets in a Fibra-E trust.
"The goal for the government is to
attract investors to the energy sector. This
was its original intention," he says. "The
Fibra-E is the Mexican version of the MLP.
So in Pemex and CFE, the government is
choosing two of the country's best-known
companies."
Convincing investors to participate
in Mexico's first Fibra-E still presents
challenges, however.
"Fibra-E is linked to energy and, right
now, the energy world is not in the best
shape, due to depreciating oil prices," says
Jorge Pigeon, vice president of investor
relations at Fibra Uno.
In addition, if a company moves assets
from its balance sheet to a new structure,
such as a Fibra-E, the trust is listed as
a new entity that incurs its own taxes
under Mexican law, Vázquez-Ahued says.
Congress is said to be considering a revision
to the law, but if that stumbling block is not
removed, the debut of the Fibra-E could be
significantly delayed, he says.
Local importance
Mexico's pension funds, afores, are an
integral part of structuring the Fibra-E.
Before Fibras went public, afores helped
to iron out corporate governance issues
and ensure that the vehicle was aligned
with investor interests, Orvañanos says.
"You need a strong board of advisors and
committee members to avoid conflicts
of interest," he says. "It's our intention to
participate in the design, so we get our
clients ideal risk returns."
Afores were anchor investors in Fibra
Uno's March 2011 initial public offering.
Fibras and Fibra-Es will be grouped
together in a separate investment
category by securities regulator Comisón
Nacional Bancaria y de Valores (CNBV).
Previously, the CNBV had placed Fibras in
the structured products group, alongside
certificados de capital de desarollo and
asset-backed securities. The grouping
meant afores had less money to invest
in Fibras because they were mandated
to spread capital evenly among the asset
classes, Pigeon says.
With Fibras and Fibra-Es in a standalone category, Pigeon is confident that
afores can free up more funds for energy
and infrastructure investments. "This is

beneficial for afores," he says. "It increases
the amount that afores have available to
them for investment into either real estate
or energy infrastructure plans."
The sword
Equity investors are excited about the
Fibra-E, in part because it illustrates the
progress that Mexico has made in its
structural reforms, says Santiago Gilfond,
managing director and head of Latin
America equity capital markets at Credit
Suisse. Videgaray says Mexico's most
significant foreign direct investments will
be into the energy sector.
"Investors might be bearish on energy
right now," Vázquez-Ahued says. "But

Pemex financing program, 2016
Pemex 2016 financing plan - $21.1bn total
ECAs (5%)

Other (16%)
International markets (34%)

Bank loans (13%)

Domestic markets (31%)

Source: Pemex

RODOLFO CAMPOS, PEMEX

"THE ENERGY SECTOR
IS UNDERREPRESENTED IN THE MEXICAN
EXCHANGE, BUT NOW
WE'RE GOING TO
OPEN UP THESE
OPPORTUNITIES TO
INVESTORS THAT
HAVE BEEN WAITING
FOR YEARS"

if you really want to invest in energy
opportunities in Mexico, Fibra-E opens
the door."
Breaking ground in a new asset class,
particularly in turbulent market conditions,
can dredge up myriad issues. However, a
familiar and reputable company such as
Pemex with some significant midstream
assets and a history in the capital markets,
comforts investors, says Pigeon.
"You are the first one doing something
so the market may not fully understand all
the value potentially on the table," he says.
"On the other hand, no precedent has been
set, so setting a trend can sometimes be
extremely good. In the end, it is a doubleedged sword." LF
Additional reporting by Sara Rosner
March/April 2016 - L ATINFINA NCE.COM 41
http://www.LATINFINANCE.COM
Table of Contents for the Digital Edition of LatinFinance - March/April 2016
