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IFC’s China-Mexico Fund Invests US$140m in Citla Energy

20 April 2016

(Financial Times) Citla Energy, a Mexican oil exploration and production company backed by ACON, has received equity commitments of US$60m and US$140m from the IFC and IFC Asset Management’s China-Mexico Fund, respectively.

Nearly 18 months after its inception, a US$1.2b China-Mexico private equity fund (CMF) managed by a World Bank unit has made its first investment.

The $140m investment, in US-backed Citla Energy, is the latest private equity foray into the Mexican oil and gas sector, which is being opened up to private investment after eight decades under state control in a bid to get capital flooding in and ramp up Mexican oil production that has been sliding sharply since a 2004 peak, writes Jude Webber in Mexico City.

“With this first investment, in Citla, we are fulfilling the CMF’s objective to bring substantial risk capital to support attractive investment projects,” Cesar Urrea, head of the CMF, said in a statement. “We look forward to continuing to invest in new equity or mezzanine in projects that help maximise the impact of the reforms and their impact on the country’s social and economic growth.”

The CMF, which will target manufacturing, agribusiness, services and banking in Mexico as well as energy, is managed by IFC Asset Management Company, the fund management wing of the World Bank’s financial arm, the IFC.

The IFC, in turn, is itself making a $60m equity investment in Citla. Set up in December 2014, the China-Mexico Fund has a total of five years to commit its $1.2bn, the vast majority of which was put up by Beijing, the IFC says. After that period, the IFC hopes the Fund will be renewed for another $1.2bn.

Citla, an exploration and production company set up in 2015 and led by the former deputy head of BP’s upstream business in Mexico, is controlled by affiliates of US private equity firm, Acon Investments and aims to grow its portfolio through winning tenders, acquisitions, farm-ins and partnerships. The financing from the China-Mexico Fund and the IFC is part of a larger equity financing package provided by Acon, the size of which the statement did not disclose.

“As Mexico opens its oil and gas sector to private competition, IFC’s goal is to support new players that combine strong sector expertise, local and global know-how, and adequate capitalisation,” Ary Naïm, the IFC’s Mexico country manager said. The IFC has $1.4bn invested in 57 companies in Mexico.