Moody’s: Vattenfall on downgrade review

Moody’s Investors Service said it placed on review for downgrade the A3 issuer and senior unsecured ratings of Vattenfall AB.

Moody’s also said it placed the Baa2 junior subordinated debt ratings on review for downgrade.

The prime-2 rating also was affirmed, the agency said.

The review reflects Vattenfall’s exposure to the weakening power-price environment, Moody’s said.

Forward base-load prices in Germany have declined by more than 20% in the last three months due to a decline in commodity prices, the agency said.

Prices have also fallen in the Nordic region by about 22% in the last three months, affected by similar commodity drivers and exacerbated by high hydrology levels, Moody’s said.

Vattenfall’s generation fleet is primarily fixed-cost in nature with about 60% of total capacity coming from lignite, nuclear and hydro, making the company particularly exposed to movements in wholesale power prices, the agency explained.

As Vattenfall’s hedges roll off, lower prices will likely result in a further reduction in its operating cash flow in the next two- to three-years, Moody’s said.

The company additionally remains challenged by high costs on its nuclear plants due to nuclear capacity taxes, which increased in 2015, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.