Petroleos Mexicanos, Its Subsidiaries, And Comision Federal de Electricidad Outlooks Revised To Stable From Negative

Stocks and Financial Services Press Releases Wednesday July 19, 2017 09:27
MEXICO CITY--19 Jul--S&P Global Ratings

MEXICO CITY (S&P Global Ratings) July 18, 2017--S&P Global Ratings said today that it had revised its outlook on government-related entities (GRE) Comision Federal De Electricidad (CFE) and Petroleos Mexicanos (PEMEX) and its subsidiaries (P.M.I. Trading Ltd., PMI NASA, and Mex Gas Supply, S.L.) to stable from negative. At the same time, we affirmed our 'BBB+' foreign currency ratings and 'A' local currency ratings and issue-level ratings on both companies.

The outlook revision on these companies follows a similar rating action on Mexico (please see "Outlook On Mexico Revised To Stable From Negative On Improved Debt Prospects; 'BBB+/A-2' Ratings Affirmed," published July 18, 2017 ). The ratings and outlook on PEMEX and CFE reflect our view that there is an almost certain likelihood of extraordinarysupport from the government to both issuers in case 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.

The stable outlook on Mexico reflects our expectation of continuity in economic policies in the coming two years, along with fiscal policy that contains the general government debt burden. We expect broad continuity in economic policy following the July 2018 national elections and continued implementation of recent economic reforms.

The stable outlook on CFE and Pemex also reflects our view that the relationship between both entities and the sovereign will remain unchanged in the next couple of years.

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