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From Mexico In Brief Newsletter
The Mexican power sector is expected to continue last year’s growth trend during 2017, as new players emerge and consolidate in its newly opened sub-markets, particularly the long-term and the short-term markets. Last month, the National Center of Energy Control, or CENACE, awarded the contracts to the winners of Mexico’s second long-term power auction, and announced that the third long-term power auction will be officially launched on April 28 and held on October 16, 2017. These long-term auctions have added 5 gigawatts of new clean energy to the country’s existing capacity, representing a 170% growth in generation for wind and solar energy over the last 18 years. A winner of the second long-term auction, Spain-based Acciona, in a joint venture with Mexican Tuto Energy, recently announced their plan to expand Mexico’s largest solar plant, located in the Mexican state of Sonora. Similarly, Spain-based Iberdrola started its operations last month in the country’s short-term power market, directly selling electricity to the participants of the wholesale electricity market. Regulations on the medium-term power auctions and the financial transmission rights auctions are expected to be published in the upcoming months.
China-Mexico Fund, or CMF, is betting approximately U.S.$560 million in Round 2 of the Mexican energy reform to convert Citla Energy in one of the largest companies in the energy industry and participate in the three phases of year 2017’s Open Season. CMF is interested in fertilizer and electricity projects, as well as water and mining infrastructure, in addition to health, education, manufacture and services sectors.
Despite the cancellation of the plan to construct a small car production plant in the Mexican State of San Luis Potosi, U.S.-based auto-manufacturer Ford is going ahead with its plans to open two auto parts production plants in the Mexican States of Guanajuato (a transmission plant) and Chihuahua (an engine plant). Ford will invest approximately U.S.$2.5 billion on construction and will hire among 3,800 workers once the plants are ready for full operation.
The Mexican fund Fondo de Infraestructura Macquiarie Mexico is planning to raise between US.$350 million and U.S.$500 million to invest in energy projects in Mexico during the second quarter of this year: projects such as wind and photovoltaic parks for large consumers stand out within their plans.
Germany-based Siemens will invest approximately U.S.$200 million within the next 10 years in Mexico in a plan to transform the Mexican cities into more intelligent ones, through the introduction and application of new technologies that will make them more efficient and sustainable.
Ferromex-Ferrosur and Kansas City Southern will invest approximately U.S.$410 million in the maintenance of roads, rehabilitation of bridges and tunnels and other infrastructure and telecommunications areas, among other sectors. Railway investment in Mexico grew 50% between years 2013 and 2016 and according to the Ministry of Communications and Transportation (Secretaria de Comunicaciones y Transportes), 65% of foreign trade goods are shipped by rail.
China-based automotive company Jac Motors will invest approximately U.S.$200 million to manufacture vehicles in the Mexican State of Hidalgo in alliance with Giant Motors, a branch of Mexican conglomerate Inbursa. The venture will be supported through a collaboration with Moldex, a subsidiary of the world’s largest bakery, Mexican Bimbo, and the Monterrey Institute of Technology, or ITESM, a private coeducational multi-campus university based in Monterrey, Mexico.
Mexico’s national oil company Pemex placed an historic issuance of euro-denominated bonds for an amount of approximately U.S.$4.5 billion, in the biggest euro deal seen by any emerging market issuer. Pemex’s transaction received a total demand of nearly U.S.$19 billion. Also in the European bond market, Monterrey-based food processing and distribution company Sigma Alimentos issued 7-year bonds for a total amount of U.S.$644 million, placed with a 2.625% coupon, which will be used to refinance the company’s debt. Additionally, Mexican tequila maker Jose Cuervo, raised more than U.S.$790 million with the sale of shares of the company, being the largest dollar-denominated IPO in Mexico since 2013.
U.S.-based Delta is looking to buy a 32% stake in Aeromexico, of which it already owns a 4.2% stake. The transaction would be made through the Mexican Stock Exchange and involves a value of approximately U.S.$595 million. If the acquisition is completed, Delta’s total stake in Aeromexico would be of 49%.
© Copyright 2017 J.A. Treviño Abogados S.A. de C.V.