Government to unveil Energy investment vehicle in September

Mexico plans to launch in September a new low-tax investment vehicle aimed at tapping markets to fund energy infrastructure in Latin America’s second biggest economy.

The new vehicle comes at a time of oil market oversupply that has depressed prices and reduced oil companies’ capacity to invest, but Mexico’s newly opened power market could still prove an attractive near-term destination.

Mexico’s finance authorities are putting the finishing touches on rules for the vehicles, which will be similar to American “Master Limited Partnerships” (MLP) and modeled on Mexico’s successful real estate investment trusts (REIT) which are locally called FIBRAS.

The plan would likely be announced in conjunction with the finance ministry’s budget proposals for 2016 on Sept. 7.

The new vehicles would allow investors to take stakes in mature energy sector assets with stable cash flow. Analysts say the assets could include natural gas pipelines, storage facilities and power generation plants.

The move follows an energy reform that went into effect last year, which created a new wholesale power market and aims to lure private investment into the ailing oil and gas sector. Crude oil output has been slumping for over a decade. Mexico also has a small but growing number of private equity funds focused on infrastructure and energy projects that use a relatively new investment instrument known as CKDs.