– CFE plans to issue $750 million in senior unsecured notes
due 2042, and to use the proceeds of the notes for prepayment a
portion of its outstanding loans and for other general corporate
purposes.

– We are assigning our ‘BBB’ rating to the notes, while
affirming our ‘BBB’ foreign and ‘A-’ local currency corporate
credit ratings on CFE.

– The stable outlook reflects our expectation that CFE’s
relationship with the government will not change significantly
during the medium-to-long term.

MEXICO CITY (Standard & Poor’s) Feb. 7, 2012–Standard &
Poor’s Ratings Services assigned its ‘BBB’ rating to Comision
Federal De Electricidad’s (CFE) proposed $750 million senior
unsecured notes due 2042. CFE plans to use the net proceeds from
the notes to prepay a portion of the loans outstanding under its
US$2 billion syndicated term loan agreement and to increase its
working capital. We are also affirming our ‘BBB’ foreign
currency ratings on CFE’s senior unsecured notes due 2021 and
our ‘BBB’ foreign and ‘A-’ local currency corporate credit
ratings on CFE. We have affirmed our ‘mxAAA’ national scale
rating on CFE. The outlook on all of the ratings is stable.

Our ratings on CFE reflect our opinion that there is an
almost certain likelihood that the United Mexican States
(foreign currency: BBB/Stable/A-3; local currency:
A-/Stable/A-2) would provide timely and sufficient extraordinary
support to CFE in the event of financial distress. In accordance
with our criteria for government-related entities, we base our
view on our assessment of CFE’s critical role as the only
provider of electric services in Mexico and the entity
responsible for planning and operating the country’s electric
system. In our opinion, this provides a strong economic
incentive for the sovereign to support the issuer during periods
of financial distress. In our assessment, we also take into
account its integral link with the government, given the
governments full and stable ownership of CFE and its
participation in appointing senior management and defining
strategy, as well as the integration of the company in the
federal government’s annual budget.

The stable outlook mirrors our outlook on Mexico, reflecting
our expectation that neither CFE’s role in the Mexican energy
sector nor its links with the federal government will
drastically change. CFE’s ratings move in tandem with our
ratings on the sovereign. Thus, if we raise the ratings on the
sovereign, we would raise our ratings on CFE. If we lower the
ratings on Mexico, we could also lower the ratings on CFE.

RELATED CRITERIA AND RESEARCH

– Methodology And Assumptions: Liquidity Descriptors For
Global Corporate Issuers, Sept. 28, 2011

– Rating Government-Related Entities: Methodology And
Assumptions, Dec. 9, 2010

– Key Credit Factors: Business And Financial Risks In The
Investor-Owned Utilities Industry, Nov. 26, 2008

– 2008 Corporate Criteria: Analytical Methodology, April
15, 2008