The Federal Electricity Commission (CFE) is selling sustainable bonds in foreign debt markets for the first timeamid mounting criticism for doing little to protect the environment.
The state-owned power producer “is looking to tap into the US investment-grade market with a benchmark two-part sustainability bond,” according to a person familiar with the matter.
“The one with the longest term, a 30-year bond, could yield four percentage points more than comparable Treasuriessaid the person, who asked not to be identified because the details are private. That would equate to about 6.25 percent, according to Treasury yields on Tuesday.
This is the first time the company has sold bonds linked to environmental issuessocial and governance or environmental, social and corporate governance (ESG), in international markets, according to data compiled by Bloomberg.
“CFE plans to use the proceeds to finance new or existing projects ranging from renewable energy to access to free or subsidized essential services,” according to a document issued by Sustainalytics, which assesses ESG factors in note issuances.
Global sales of sustainability bonds, which can be used to finance environmental and social projects, soared last year, reaching a record $181 billion and rising sharply from the $82 billion issued in 2020, according to data compiled by Bloomberg. Moody’s ESG Solutions expects sales to reach $225 billion this year.
The State production company has been criticized by environmental groups and investors for burning highly polluting fuel in its plants and not investing in cleaner renewable energy sources. Additionally, the controversial reform of the law in Congress proposed by the president, Andrés Manuel López Obrador, seeks to cancel the existing electricity generation permits of some private companies and give priority to the old CFE hydroelectric plantsfollowed by its nuclear and gas plants, which also burn fuel oil.
Repeatedly, the president has promised that a more nationalized energy sector will revive Mexico’s economy by enabling the country to become self-sufficient in energy and wean itself off its dependence on volatile foreign markets. But nevertheless, critics argue that the proposed reform would reverse years of advances in renewable energy at a time when the rest of the world is moving in the opposite direction.
A study published earlier this month by the US National Renewable Energy Laboratory (NREL) found that, If the energy reforms are approved, the total cost of operating Mexico’s national electricity system would increase by up to 52.5 percent.while annual carbon dioxide (CO2) emissions could rise up to 65.2 percent in the most extreme scenario.
However, as part of its business plan, CFE “intends to reduce its carbon emissions intensity by more than 18 percent by the end of 2021 and will work with independent power producers to achieve the goal,” according to Sustainalytics. .
Bank Of America Corp, HSBC Holdings Plc, JPMorgan Chase & Co., Banco Santander and Barclays Plc are among the banks managing the bond sale, the person said.