S&P shifts EnBW view to negative

S&P said it revised its outlook for EnBW Energie Baden-Wuerttemberg AG to negative from stable and affirmed the A- issuer rating.

EnBW’s majority-owned subsidiary VNG requested state aid after a build-up of costs to buy missing gas volumes in August on the larger of its two contracts currently being hurt by Russian gas disruptions. S&P said it estimates total re-procurement losses could reach €1.6 billion in 2022.

“The negative outlook reflects our view that VNG is incurring unexpected losses, illustrating the decreasing predictability of Germany's gas supply sector, which weighs on participants' business risk profiles. We understand that EnBW, VNG, and the German government are negotiating a solution, although it will likely result in higher consolidated net debt and further pressure already tight credit metrics. In addition, we now believe these losses are less likely to be mitigated by strong performance in EnBW's sustainable generation infrastructure segment due to the risk of windfall taxes on coal and renewable generation,” S&P said in a press release.

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