EconomyFinancialMoody's downgrades CFE's rating, but upgrades its outlook to...

Moody's downgrades CFE's rating, but upgrades its outlook to "stable"

The rating agency Moody’s reduced the rating of the Federal Electricity Commission (CFE) to ‘Baa2’ from ‘Baa1’, although it changed its outlook to ‘stable’ from ‘negative’, after its decision to downgrade Mexico’s sovereign rating.

Last Friday, the agency cut Mexico’s rating to ‘Baa2’ from ‘Baa1’, citing economic and fiscal trends that it expects will continue to undermine the credit profile. In addition, on Monday the note of the state oil company Pemex fell to ‘B1’ from ‘Ba3’.

Moody’s has said the company’s downgrade is largely explained by the close financial relationship between the state-owned company and the Mexican government. The rating agency has “very strong” expectations of extraordinary support from the federal administration to the national electricity company in case of financial difficulties.

“The company will continue to rely on government support through direct transfers or subsidies for higher rate increases. These pressures come on top of an already weakened CFE as a result of the impact of natural gas price volatility that occurred due to the polar vortex event in February 2021,” the agency explained in a note.

The close relationship between the finances of the state CFE and Pemex have been a constant criticism of the rating agency. Yesterday too

Moody’s expects the state power company to have a weak financial performance in the next 12 to 24 months, mainly due to high international prices for natural gas, a hydrocarbon on which the company depends for more than 50% for electricity production. The agency estimates that the prices of the molecule will remain above historical prices until at least 2023.

CFE, says Moody’s, has some inability to adjust rates to its customers, which weakens its financial position at a time when the price of fuels, especially natural gas, are constantly increasing.

Where is Mexico? The cheapest gasoline and electricity rates in Latin America

Mexico has one of the cheapest electricity rates in the region, although it does not have the cheapest gasoline. In Europe, meanwhile, they suffer from high prices and seek to reform the electricity market.

CFE is a client of the coal region of Sabinas, Coahuila

In October 2020, the State production company formalized the purchase of 2 million tons of coal from 60 producers

From the United States to Mexico. Dog that barks does bite

A defiant act, such as the approval of the reforms to the Law of the Electricity Industry, goes against what we agreed in the T-MEC, points out Miriam Grunstein.

Moody's lowers CFE's rating, but upgrades its outlook to "stable"

The adjustment of the rating agency occurs a few days after reducing the credit rating of Mexico and Pemex.

Moody's lowers the CFE's rating, but improves its outlook to "stable"

The adjustment of the rating agency occurs a few days after reducing the credit rating of Mexico and Pemex.