Moody's rates CFE debt Baa1

Moody's Investors Service said it assigned Baa1 global and Aaa.mx Mexican national scale ratings to Comisión Federal de Eletricidad's two proposed certificados bursatiles issues, which would be the sixth and seventh draw downs under the company's existing certificados bursatiles program.

The outlook is stable.

The proposed issuance consists of inflation-indexed and nominal fixed-rate senior unsecured notes with tenors of up to 12 years. Individually, the size of each of the two instruments could be up to Ps. 4 billion, with the combined principal not to exceed Ps. 4 billion. Moody's expects CFE to use the proceeds to refinance some public works investments.

The agency said the ratings reflect its estimates of a high level of government support in the case of financial distress, a medium default correlation between CFE and the Mexican government and a standalone credit profile that balances the company's dominant market position and solid financial profile with a number of credit challenges.

According to Moody's, these challenges include the sector's significant longer-term investment needs for satisfying future electricity demand, subsidies for residential and agricultural rates and the risk of political interference with established automatic cost recovery mechanisms, which could affect the company's cash flow and financial profile going forward.

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