Moody's downgrades Verbund

Moody's Investors Service said it downgraded the senior unsecured ratings of Verbund AG and its fully guaranteed subsidiary Verbund-International Finance GmbH to A3 from A2.

Concurrently, Moody's downgraded the long-term provisional rating on Verbund International Finance's euro medium-term note program to provisional A3 from provisional A2.

The outlook on all ratings is negative.

Moody's said the downgrade of Verbund's ratings follows the recent announcement of the company's annual results and reflects the continued weakness in its key credit metrics.

The weakness is despite the beneficial impact on Verbund of exceptionally high hydro availability in 2012 and locked-in prices for the company's owned electricity generation for the year, which remained substantially in line with those of 2011 (€53.6 per megawatt hour (MWh)).

In this context, the rating downgrade also reflects Moody's expectation that, although the recently announced transaction between Verbund and the German utility E.ON will have a beneficial impact on Verbund's cash flow generation, the company's credit metrics will remain weak for the previous A2 rating category, the agency said.

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