Debtwire Mexico 2017
July 6, 2017 | St. Regis Mexico City
According to InfraDeals data, 35 financial closings totaling over USD 11bn for various infrastructure projects were reached in 2016 throughout Mexico. This was split between transportation (USD 6.143bn) and power and renewables (USD 5.192bn) assets and represented a growth of 32% from 2015. This data comes as no surprise considering reforms made to the energy and transportation sectors. For instance, relatively new “P3” legislation has enabled officials to embark on 18 infrastructure projects requiring MXN 36.5bn in investment for later this year. Additionally, lucrative energy/power asset opportunities will spring up following the establishment of a wholesale electricity market under an independent system operator.
Minding risk and distressed strategies, investors will hear about the restructuring efforts of infra operator Empresas ICA, oil drillers and pipeline company Arendal. Also, panelists will address proposed US government tariffs and corresponding impact on Mexican auto part makers, such as Nemak and Rassini.
This year's Mexican Debt and Infrastructure Forum will provide greater perspective on the evolution of infrastructure projects and opportunities in distressed assets that weigh largely on the minds of institutional investors.
Distressed Opportunities Continue in Energy, Other Sectors Throughout Mexico
A rising rate environment, lower commodity prices and contentious trade relations with the US are creating a challenging environment for balance sheet restructurings. Oil drillers, such as Oro Negro, are still struggling to cope w/ market equilibrium while the auto industry confronts possible tariffs from its neighbor to the north and companies, like Empresas ICA, turnaround efforts with creditors remain difficult thanks to the 2014/16 commodities bust’s lingering effects.
However, opportunities in credit remain. Gas pipelines are at the center of project finance activity in Mexico following the country’s 2014 energy reforms. Sponsors of Mexican pipelines are negotiating credit facilities to fund midstream projects, but covering working capital needs with their balance sheets. Securing rights of way – a lengthier process under the country’s new hydrocarbons law - is key to convincing lenders to take on construction risk. Regardless of challenges, Mexican midstream assets remain promising, and are attractive to investors.
Delegates will hear panelists take on the following issues:
- How are auto parts manufacturers, such as Nemak, Rassini and others, reacting to US tariff threats from the new administration? What will this mean for revenues and costs?
- Assessing legal developments in Abengoa Mexico, Oro Negro, CP Latina and others while considering backdrop of rising rates, commodity price swings, and MXN/USD exchange rate.
- Examining what hinges on a successful Empresas ICA turnaround.
- Discussing outlook for oil asset privatizations over next 12 months.
Re-Energized Mexican Infrastructure Takes Off
Infraestructura Energetica Nova’s US$852m bid for the Ventika Wind Power Project represented 38% of M&A value in 3Q16 and the largest renewable transaction in 2016, valued at USD 852m, signaling a thriving alternative energy market in Mexico. Savvy investors are excited about the prospect of Mexican renewables, which generates about 20% of its electricity while the sector has goals of raising it to 35% by 2024. Interestingly, a significant portion of toll roads are still in public hands, which bodes well for brownfield infrastructure investors while the 2017 P3 pipeline includes new Federal highways.
As the Mexican infrastructure market becomes more dynamic and lucrative challenges remain, such as a volatile exchange rate with hard currencies and a rising rate environment, could disrupt project development.
Panelists will discuss the Mexican greenfield and brownfield prospects and risks including:
- Assessing size, scope, and risks of highway and hospital 2017 P3 pipeline.
- What are the prospects of brownfield and greenfield midstream projects?
- Will the market see growth in the telecom sector after witnessing the Altan consortium strike a deal with the government to build the Red Compartida project?
- Examining the new regulatory scheme and micro-economics driving renewable energy projects and utilization throughout Mexico.
- What can public budgets get accomplished with oil prices hovering around USD 50/bbl rather than USD 100/bbl?
- Discussing if P3 projects will be able to pick up where government capital allocations to infrastructure fall short in light of recent budget cuts.
- How is the entrance of foreign investors and construction firms changing the market?
Conclusion of Event