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Mexican FIBRA-E: An Update On The Investment Opportunities

Author:Mr Ricardo Rendon Pimentel and Carlos Enrique Naime Haddad
Profession:Chevez Ruiz Zamarripa

As a follow-on from the energy reform, the infrastructure and energy sector has witnessed a new-found interest from participants who want to invest in publicly traded securities. Ricardo Rendón and Carlos Enrique Naime from law firm Chévez, Ruiz, Zamarripa look at the developments.

More than two years after the secondary package became law in Mexico, the energy sector has experienced a newfound interest from potential participants who are seeking to invest in publicly-traded securities. The vehicles indirectly allow them to hold interests in projects that generate qualified sources of income in a similar manner in which US master limited partnerships (MLPs) operate in foreign stock exchanges.

In this line of thought, in view of the increasing need of maintaining the competitiveness of state-owned companies and seeking to draw new sources of financing for infrastructure and energy-related projects, in the third quarter of 2015 the Mexican government announced the creation of a new security to be quoted in the stock markets in the form of certificates to be issued by a Mexican infrastructure and energy trust or Fideicomiso de Inversión en Energía e Infraestructura (FIBRA-E).

In broad terms, through a FIBRA-E, sponsors are able to securitise some of their mature assets related to oil and gas (excluding upstream activities), energy and/or infrastructure projects, while allowing investors to benefit from the returns generated by such projects.

In September 2015, the Mexican tax authorities published the first set of administrative rules containing the specific regulatory framework applicable to a FIBRA-E, to their certificate holders and to asset holders selling their projects. These rules entered into effect on October 1 2015.

Some months later, in April 2016, the aforementioned administrative rules were modified. According to the Mexican tax authorities, the modifications aimed to clarify some points of the originally issued rules, as well as setting forth a more appealing regime for all the participants in a FIBRA-E.

As of today, the rules that constitute the legal framework for a FIBRA-E and that will be observed by investors, sponsors and fund managers participating in this kind of vehicle are contained exclusively in administrative rules and not in the Mexican Income Tax Law.

The purpose of this article is to describe, in general terms, the most important features of the tax regime in force today.


Contribution of qualified assets

Several reorganisation rules have been put into...

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