Comision Federal de Electricidad, PEMEX, And Subsidiaries Local Currency Ratings Cut To 'A-' On Change In S&P Criteria
- On Dec. 18, 2017, S&P Global Ratings lowered its local currency long-term and short-term sovereign credit ratings on the United Mexican States to 'A-/A-2' from 'A/A-1'. At the same time, affirmed its 'BBB+/A-2' foreign currency long-term and short-term sovereign credit ratings on the United Mexican States. The outlook on the long-term ratings remains stable.
- As a result, we're lowering our local currency rating, on state-owned companies Comision Federal De Electricidad (CFE), Petroleos Mexicanos (Pemex), and Pemex's subsidiaries PMI Trading, PMI NASA, and MEX GAS SUPPLY S.L. to 'A-' from 'A'. We're also lowering all Pemex's issue-level ratings to 'A-' from 'A'. Additionally, we're lowering the local currency senior unsecured rating assigned to CFE to 'A-' from 'A'.
- At the same time, we are affirming our 'BBB+' foreign currency long-term ratings on CFE and Pemex.
- The stable outlook on both companies mirrors that on the sovereign.
MEXICO CITY (S&P Global Ratings) Dec. 18, 2017--S&P Global Ratings lowered its local currency ratings on government-related entities (GRE) CFE and Pemex and its subsidiaries (PMI Trading, PMI NASA, and Mex Gas Supply, S.L.) to 'A-' from 'A'. We're also lowering all Pemex's issue-level ratings to 'A-' from 'A'. At the same time, we affirmed our 'BBB+' foreign currency ratings on CFE and Pemex. The outlook remains stable. The rating action does not reflect any deterioration of our view of Mexico's sovereign creditworthiness. Instead, it reflects recent revisions to S&P Ratings' methodology for sovereign ratings. On Dec. 18, 2017, S&P Global published a revised Sovereign Rating Methodology to replace the previous version published on Dec. 23, 2014. The revised methodology modifies our existing criteria for sovereign ratings. Among the modifications, we have reduced the potential gap between foreign and local currency ratings to only one notch from two. Following the new methodology, we have lowered the local currency rating on Mexico to reflect a gap of one notch with the foreign currency rating. The ratings on CFE and Pemex reflect our view that there is an almost certain likelihood of extraordinary support from the government to both issuers in the event of financial distress. We believe that PEMEX plays a critical role for Mexico because it provides about 16% of Mexico's public-sector revenues through taxes and duties, and it has an integral link to the government, given the latter's full ownership of the company. The ratings on PMI Trading, PMI NASA, and Mex Gas Supply, S.L. mirror those on PEMEX, given that we view them as core subsidiaries and that they would benefit indirectly from the Mexican government's potential extraordinary support to PEMEX. CFE plays a critical role for the government, given its monopoly over the transmission and distribution of electricity in the country. We also expect the company to be the leading player in the power generation business for the foreseeable future. CFE has an integral link with the government, as Mexico is CFE's sole owner and will continue to have tight control over it.
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Related Research
- Mexico 'BBB+/A-2' Foreign Currency Ratings Affirmed; Local Currency Ratings Lowered To 'A-/A-2' On Change In Methodology, Dec. 18, 2017
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on the S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.
| Primary Credit Analyst: | Marcela Duenas, Mexico City (52) 55-5081-4437; marcela.duenas@spglobal.com |
| Secondary Contacts: | Fabiola Ortiz, Mexico City (52) 55-5081-4449; fabiola.ortiz@spglobal.com |
| Jose Coballasi, Mexico City (52) 55-5081-4414; jose.coballasi@spglobal.com |
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