S&P lowers Electricite de France subsidiaries

S&P said it lowered its long-term corporate credit rating on Electricite de France SA (EDF) to A from A+ and removed it from CreditWatch, where it was placed with negative implications on Feb. 26.

The A-1 short-term rating was affirmed.

The outlook is negative.

The agency also lowered EDF's senior unsecured debt to A from A+ and junior subordinated hybrid securities to BB+ from BBB.

S&P also took the following related actions:

• Downgraded the long-term corporate credit ratings on EDF's U.K. subsidiaries EDF Energy plc and EDF Energy Customers plc to BBB from A- and short-term corporate credit rating on EDF Energy plc to A-2 from A-1. The outlook on these two entities is negative;

• Downgraded the ratings on EDF's Italian subsidiary Edison SpA to BBB-/A-3 from BBB+/A-2. The outlook is negative; and

• Downgraded the long-term counterparty credit and financial strength ratings on EDF's captive insurance subsidiary, Wagram Insurance Co. Ltd., to BBB from A-. The outlook is negative.

S&P said the action primarily reflects its view that EDF's exposure to volatile commodity prices is greater than we previously anticipated, and the recent marked deterioration in fuel commodities prices and European energy prices will deteriorate the group's earnings and free operating cash flow generation.

The agency therefore believes that operating fundamentals have weakened for EDF.

S&P nevertheless believes that EDF's recently announced measures, including a €4 billion capital increase, scrip dividends paid to the French state, asset disposals, and a cost-cutting plan, will help reduce EDF's adjusted debt over the next three years, which is a key supporting factor for the rating.

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