S&P downgrades Electricite de France

S&P said it lowered the long-term corporate credit ratings on Electricite de France SA to A- from A and its short-term corporate credit rating to A-2 from A-1.

This balances the agency’s downward revision of the company’s stand-alone credit profile assessment to BBB- from BBB and the continued three-notch uplift due to high likelihood of extraordinary state support.

The outlook is stable.

The agency also said it lowered the company’s long-term corporate credit ratings on Electricite de France's U.K. subsidiaries, EDF Energy plc and EDF Energy Customers plc, to BBB- from BBB.

The outlooks on EDF Energy and EDF Energy Customers are stable.

S&P also said it lowered the short-term corporate credit rating on EDF Energy to A-3 from A-2.

The agency also lowered the long-term counterparty credit and financial strength ratings on EDF's captive insurance subsidiary, Wagram Insurance Co. Ltd., to BBB- from BBB.

Wagram’s outlook is stable.

Electricite de France's senior unsecured debt also was downgraded to A- from A and the rating on its junior subordinated hybrid securities was lowered to BB from BB+.

The downgrades primarily reflect a view that Hinkley Point C, which is a very large and highly complex nuclear new build project, will imply increased execution and contingency risks for Electricite de France, S&P explained, while hampering its large additional investments at a time when it already generates negative free cash flow.

The company also faces still high risks related to the construction of its nuclear new build in Normandy, which will not be operational until late 2018, the agency said.

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