The Mexican Federal Electricity Commission (CFE) recently formalized a long-term loan of US$333.6 million with the endorsement of the Multilateral Investment Guarantee Agency of the World Bank Group (MIGA). This development aligns with the objectives outlined in the CFE's Business Plan from 2023 to 2027, aiming to enhance operational and financial capabilities and contribute to sustainable development.
With a market share of 54% in electricity generation within Mexico, CFE continues to make strides in improving its environmental impact. As part of its commitment to reduce GHGs emissions, CFE implemented an Integral Program for the Rehabilitation and Modernization of Hydroelectric Power Plants.
The core objective of the Integral Program is to replace obsolete electromechanical and auxiliary equipment with more efficient state-of-the-art technology. The upgrade will increase hydroelectric power plants' physical and operational capacity, extend their lifespan and improve efficiency and reliability. CFE aims to boost the total generation capacity by 113MW and increase electricity generation by 1,426GW/h per year.
The long-term loan endorsed by MIGA aims to finance the rehabilitation and modernization works of five hydroelectric power plants: Hydroelectric Power Plant (CH) La Villita, CH Infiernillo, CH Ing. Fernando Hiriart Balderrama, CH Humaya and CH Ángel Albino Corzo, which are located in Michoacan, Guerrero, Hidalgo, Sinaloa and Chiapas. It will also be used to renew two partial hydroelectric plants: CH Mazatepec and CH Malpaso, in Puebla and Chiapas.
This loan marks the first instance where MIGA has issued a Non-Honoring guarantee for a State-Owned Enterprise in Mexico and worldwide. CFE had to conduct a strict and exhaustive due diligence process in social, environmental, economic and financial matters following World Bank standards, procedures and criteria to obtain this loan.
The financing has a 15-year term, including a five-year grace period and a 10-year amortization period, granted by J.P. Morgan Chase Bank, N.A. and HSBC Limited. Banco Santander México played a crucial role as the coordinator and arranger of the loan. The financing was made possible through CFE's Clean Energy Trust Fund (FIEL) 10670, specifically designed to fund electricity generation projects based on clean and renewable technologies.