Mexico plans to launch in September a new low-tax investment vehicle aimed at tapping markets to fund energy infrastructure in Latin America's second biggest economy, four people familiar with the matter told Reuters. The new vehicle comes at a time of oil market oversupply that has depressed prices and reduced oil companies' capacity to invest, but Mexico's newly opened power market could still prove an attractive near-term destination.
The sources said finance authorities are putting the finishing touches on rules for the vehicles, which will be similar to American "Master Limited Partnerships" (MLP) and modelled on Mexico's successful real estate investment trusts (REIT) which are locally called FIBRAS. One person familiar with the plan said it would likely be announced in conjunction with the finance ministry's budget proposals for 2016 on September 7.
"A structure is being reviewed to allow energy assets to be put in MLPs and comply with (energy) sector regulations," said one of the sources, who declined to be named because the terms are not yet public. Mexico's finance ministry declined immediate comment, as did a spokesman for the country's banking regulator, the CNBV. REITS issue certificates that function like shares, allowing investors to participate in Mexico's property market without owning buildings. The trusts are required to disperse 95 percent of their income to investors and don't pay corporate tax, although investors face levies on their dividends.
The new vehicles would boast many similar perks but allow investors to take stakes in mature energy sector assets with stable cash flow, two sources said. Analysts say the assets could include natural gas pipelines, storage facilities and power generation plants. One of the final sticking points in the rules has been the vehicle's tax structure, two sources said.
The move follows an energy reform that went into effect last year, which created a new wholesale power market and aims to lure private investment into the ailing oil and gas sector. Crude oil output has been slumping for over a decade. "This is the right time to do this," said Jorge Arce, Chief Executive of Deutsche Bank Mexico. "It's a very big catalyst for growth in the energy infrastructure industry in Mexico."
Currently, the only publicly traded Mexican energy company is US-based Sempra Energy's local unit IEnova, which has seen its stock price double since its 2013 IPO. Before IEnova's debut, investors could only take financial stakes in energy projects by buying the debt of national oil company Pemex or national electricity utility CFE. Mexico also has a small but growing number of private equity funds focused on infrastructure and energy projects that use a relatively new investment instrument known as CKDs.