NEW YORK, July 21 (IFR) - Green bonds, debut local loan
syndications and Samurais are some of the financing options on
the table for Mexican state-run oil company Pemex as it seeks to
become a more profitable entity in the wake of the country's
Several bills passed by the Mexican Senate this weekend put
the country one step closer to opening up an energy sector
closed to foreign investment for decades, while chipping away at
Pemex's oil exploration and production monopoly.
The new legislation also gives Pemex more budgetary
independence and a new tax regime as it tries to boost oil
production to three million barrels per day by 2018.
"Our mandate will change little by little," said Rodolfo
Campos, the company's treasurer. "We will be more like a company
instead of a government agency. We are changing DNA so
that success will be measured by our ability to generate value."
Part of the process requires Pemex to change the way it
allocates capital expenditures as it focuses on what it thinks
are its most productive assets.
Depending on the ultimate wording of the secondary laws
currently moving through the lower house, and foreign investors'
response to them, the frequent issuer could feel some added
financial pressures as it rushes to increase investments, at
Once Pemex's chosen assets have been approved by government
authorities in "round zero" later this year, the quasi-sovereign
then has a relatively short three-year window to make them
productive - with an additional two-year extension if required.
Otherwise it risks loses them.
"At the beginning could exert pressure to keep those
assets in the portfolio," said Campos. "We have to invest in all
of them, and that is something we didn't used to do."
On the other hand, financing needs may ease somewhat as
foreign investors bid and fund the assets that Pemex decided to
This is important for a company that has been reliant on
external borrowing, because a good chunk of its internally
generated funds have been siphoned off by the central
With the aim of creating value, Pemex will focus on what is
sees as its most productive shallow-water fields.
"The cost of production in shale and deepwater is twice or
three times higher than the cost in shallow water," said Campos.
"To maximize the value of the company it makes sense to develop
assets where the cheap oil is located."
This comes as the company narrows its funding strategy by
sticking only to bond markets, which offer sufficient depth to
raise at least USD1bn each year and maintain a regular presence
"This leaves us with few markets," said Campos, who notes
that, aside from dollars, Pemex will consider raising funding in
euros, sterling and the yen market - where the government
recently sold its first ever 20-year Samurai without any support
from the Japan Bank for International Cooperation (JBIC).
"We think that with the successful transaction of the
government in that market, we could also be a player there," he
Pemex has already covered a good portion of the
USD4bn-USD6bn it said it would raise in the international
capital markets this year - a USD4bn multi-tranche dollar trade
in January and another EUR1bn 3.75% 2026 in April.
Another USD1bn in US Ex-Im bank guaranteed bonds are also
expected to be sold this year, while green bonds are also on the
Timing is unclear, as more work has to be done in providing
experts in sustainability investments such as Sustainalytics and
Robecosam with more information, Campos said.
"It is a way to explain our commitment to social
responsibility and sustainability," he said. "The idea is also
to broaden our investor base. Investors are more and more taking
a look at these issues."
The company also wants to raise up to USD4bn equivalent in
an increasingly deep domestic bond market, where it has already
sold about USD1.3bn in debt to both locals and foreign investors
in the form of global depositary notes.
Pemex is also preparing Mexico's first locally syndicated,
peso-denominated loan in an effort to raise up to
The company has traditionally tapped the bank market in
dollars, but has never done so in local currency.
Banks have yet to be mandated for the 10-year loan, but four
financial institutions with a strong domestic presence are
expected to be selected to take lead positions. Japanese banks
have also shown a strong appetite for the loan and are expected
to participate once leads are mandated.
(Reporting By Paul Kilby)