Fitch Affirms CFE’s Rating at ‘AAA(mex)’ With Stable Outlook

Fitch Ratings has reaffirmed the long and short-term national ratings of CFE at ‘AAA(mex)’ and ‘F1+(mex)’ respectively, maintaining a Stable Outlook. The rating agency also upheld CFE’s international issuer default ratings (IDRs) at ‘BBB-’, consistent with Mexico’s sovereign rating.

The decision reflects CFE’s strategic importance to Mexico’s electricity system and its government ownership. Fitch upgraded its support assessment from the Mexican government to “Almost Certain” from “Extremely Likely.” This adjustment aligns CFE’s credit profile directly with the sovereign rating.

CFE’s long-term expansion plan from 2025 to 2030 includes investments totaling approximately US$23.4 billion. Of this, 53% is allocated to electricity generation, 32% to transmission, and 15% to distribution. The company aims to add 2,731MW of combined-cycle capacity by 2028.

Under the country’s mixed participation energy model, CFE is set to develop four renewable energy projects totaling 4,404MW by 2027. These projects will maintain CFE’s minimum 54% ownership in generation assets and ensure it retains the right of first refusal to purchase generated power.

Fitch maintained CFE’s standalone credit profile at ‘bb-’, citing continued dependency on federal financial support. Government subsidies represent around 40% of CFE’s EBITDA, with expected transfers of approximately MX$85 billion in 2025 and MXN87 billion in 2026. These funds help offset electricity tariffs for residential and agricultural users.

CFE’s adjusted total debt-to-EBITDA ratio is projected to remain below 3x by the end of 2025. This trend is attributed to stronger EBITDA, lower fuel costs, favorable foreign exchange movements, and increased government transfers. However, Fitch expects negative free cash flow in the next two years due to high capital expenditures likely to be financed through debt.

Over 65% of CFE’s installed capacity relies on natural gas, of which Mexico imports nearly 70% from the United States. This exposes the company to price and supply volatility. CFE reported a 59.1% coverage of its annual gas needs by the end of 2024 through its commodities hedging program, aiming to keep coverage levels between 50% and 60%.

Fitch noted that any downgrade of Mexico’s sovereign rating or a weakening of CFE’s ties to the federal government could result in a negative rating action. Conversely, positive rating actions are not possible at the national level, given CFE’s current ‘AAA(mex)’ rating.