The Mexican energy industry will probably raise at least $10 billion a year through the sale of investment trusts once they’re approved by the government, according to Bank of America Corp.
That pace of sales for master limited partnerships, known as MLPs, could be reached as soon as 2016, Emilio Romano, 49, Bank of America’s top official in Mexico, said in an interview. On the upside, sales could exceed $20 billion, he said.
Bank of America, the second-biggest U.S. lender by assets, is working to help design the structure for MLPs, Romano said. The securities allow energy companies to sell assets such as mature oil fields to shareholders, which in turn get rights to the cash flow. Energy companies could then use the money to drill new wells or finance other projects. Bank of America hasn’t received any mandate to work on the securities, he said.
“This is the proper time for this type of vehicle to come into market,” Romano said in an interview at Bloomberg’s offices in Mexico City. “Currently we have a lot of liquidity in the world markets.”
The hunt for assets with higher yields than can be found in developed countries comes as the Mexican government ends the state-controlled oil producer’s monopoly over the domestic oil industry, opening the way for private investors to come in. It also coincides with government-imposed budget cuts at Petroleos Mexicanos, known as Pemex.
Like real-estate investment trusts, MLPs can be listed on exchanges and traded like stocks. They’re common in the U.S.
Bolsa Mexicana de Valores SAB, operator of the nation’s stock exchange, said in January it was in talks with Pemex over the introduction of MLPs to the market.
Charlotte, North Carolina-based Bank of America’s Romano said MLPs could be listed on the Mexican exchange as well as on foreign bourses.
The Mexican unit plans to double the size of its overall business in the next three years, he said.
(A previous version of this story contained an inaccurate age for Romano.)