Fitch downgrades RWE, debt

Fitch Ratings said it downgraded RWE AG's long-term issuer default rating and senior unsecured rating to BBB from BBB+, and the subordinated notes' rating to BB+ from BBB- while maintaining them on Rating Watch Negative (RWN).

The agency also downgraded the rating of RWE Finance BV's notes, which are guaranteed by RWE, to BBB from BBB+, and maintained it on RWN. The short-term issuer default rating was also downgraded to F3 from F2 and remains on RWN.

Fitch said the downgrades reflects a further deterioration of RWE's operating environment not only from lower generation spreads, which the agency expected, but also from recurring system problems in UK supply leading to a loss of customers and tighter margins.

Problems with delivering the bills and the lack of adequate operations controls led to a write down in expected revenues, higher bad debt provisions but also increased IT costs, which make the U.K. Supply division unprofitable in the medium-term.

Management's guidance for 2016 group EBITDA of €5.2 billion to €5.5 billion is 24% down year-over-year, which is slightly worse than Fitch’s expectations.

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