Fitch Rates Comision Federal de Electricidad's USD 750MM Proposed 30-Year Notes 'BBB(exp)'

Fitch Ratings has assigned a 'BBB(exp)' rating to Mexico's Comision Federal de Electricidad's (CFE) proposed issuance of USD 750MM in 30-year notes. Proceeds are expected to be used to prepay a portion of the USD 2 billion syndicated term loan agreement and to increase working capital.

Fitch currently rates CFE as follows:

--Foreign Currency Issuer Default Rating (IDR) 'BBB';

--Local Currency IDR 'BBB+';

--National scale long-term rating 'AAA(mex)';

--National scale short-term rating 'F1+(mex)';

--USD 1 billion senior notes due 2021 'BBB';

--Local Certificados Bursatiles Issuances 'AAA(mex)';

--Senior unsecured short-term peso program 'F1+(mex)'.

The Rating Outlook is Stable.

CFE is a decentralized public entity of the Mexican federal government. Its foreign and local currency IDR ratings are at the same level as those of Mexico. The ratings reflect implicit support of the Mexican government, as well as its position as the largest electricity generator in the country. The company also has exclusive rights for the transmission and distribution of electricity, which makes it strategically important for the country. The ratings of CFE incorporate the risk of political interference.

CFE generates about 90% of the electricity generated in Mexico. The company's right to be the exclusive transmitter and distributor in Mexico was established by the Mexican constitution and Electric Energy Public Service law. As a result, CFE's budget is incorporated into Mexico's federal government budget, which requires the approval of the Mexican Congress. While CFE's monopoly position decreases competitive risks and other risks related to business operations, the company's financial performance is highly correlated with that of the Mexican federal government, which does not provide an explicit debt guarantee.

The company's rates are set annually by the Ministry of Finance and the Ministry of Energy and approved by Secretaria de Hacienda y Credito Publico, which exposes the company to regulatory risk and political interference. The fee structure includes subsidies to agricultural and residential sectors. CFE is partially exposed to fuel prices and fluctuations in production costs, since the fee structure does not transfer 100% of the changes in fuel costs to the end users of electricity.

As of September 2011, CFE's EBITDA (LTM) was MXN $24.2 billion, similar to its 2010 results. In the nine-month period ending September 2011, CFE's sales reflected an 8% increase in sales volume and 4.4% increase in prices compared to September 2010. Total debt was MXN $215.4 billion which increases to MXN $504.8 billion when including pensions liabilities.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 12, 2011);

--'Parent and Subsidiary Rating Linkage' (Aug. 12, 2011).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647210

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.