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BREAKING: Goldman Sachs and HSBC are in talks with Pemex for $1 billion ESG financing

State-owned Pemex is seeking financing from HSBC and Goldman Sachs Group in a deal that will link the funds to the oil company’s reduction of greenhouse gas emissions.

The banks have agreed to provide Pemex with financing tied to carbon emission reduction targets, as the Mexican state-owned producer struggles with a liquidity crisis and faces mounting pressure from investors to improve its environmental record, according to people with knowledge of the situation. . Banks will provide about $1 billion, one of the people said.

The deal has not yet been finalized, the people noted. Neither Pemex nor Goldman Sachs responded to a request for comment. HSBC declined to comment.

The government of Andrés Manuel López Obrador has stopped paying the company’s debt service so far this year, amid the rise in crude oil prices. Investors are demanding an additional 6.3 percentage points to hold Pemex dollar bonds due 2050 over Mexican sovereign debt with a similar maturity date.

The spread is the highest since the company issued the bonds two years ago. The company is still struggling to pay suppliers after the sale of new bonds from a debt swap failed, highlighting concerns about its liquidity.

Pemex said in a results video call in late July that it would invest $2 billion of its own resources and international credits to reduce methane emissions by 2% by 2024. Pemex’s flaring of gas, which generates carbon dioxide emissions carbon, increased 9.7% in the second quarter compared to the previous one. Last year, its scope 1 carbon emissions—those generated directly by the company—increased 8% over the previous year.

Researchers at the Polytechnic University of Valencia in Spain discovered — the second largest contributor to global warming after carbon dioxide — from a Pemex offshore oil platform. Each of the leaks, in December and August, contributed about 40,000 tons of methane released into the atmosphere, making them some of the largest emissions ever detected by new satellite technology, according to Itziar Irakulis-Loitxate, lead researcher. of the studies.

Pemex downplayed the size of the December methane leak, saying in a statement that the study’s authors misinterpreted nitrogen as methane gas and said the gases escaped over several hours, not weeks. Irakulis-Loitxate told Bloomberg in an interview that Pemex’s statement “has no basis,” since the satellite technology specifically detects methane and would not confuse it with another substance such as nitrogen.

Pemex has struggled to take advantage of crude prices to cover its capital spending needs. A trade debt swap with suppliers for new bonds in July was seen as a failure as Pemex raised less than planned. A refinery project with a price tag topping $18 billion is also weighing on the company’s bonds.

In July, Moody’s Investors Service down one notch four notches below investment grade. The company fell to speculative grade after downgrades from major rating agencies in 2020 and 2019.

Pemex’s debt is the highest of any oil company, at $108.1 billion at the end of June. Since the beginning of the López Obrador presidency in 2018, Pemex has received more than 20 billion dollars in capital injections and tax exemptions.

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