S&P downgrades E.ON

S&P said it lowered to BBB from BBB+ the long-term corporate credit and senior unsecured issue ratings on E.ON SE and its subsidiaries, E.ON U.K. plc, E.ON Energy Solutions Ltd., E.ON Beteiligungen GmbH and E.ON International Finance BV.

The agency also said it affirmed the short-term corporate credit rating at A-2.

The outlook is stable.

The downgrades reflect an assessment that E.ON's announced capital measures are less supportive of credit metrics than previously assumed, S&P said.

De-leveraging will therefore take longer than expected, the agency said.

The company’s adjusted debt-to-EBITDA ratio has hovered at about 4.4x to 4.3x, levels that are considered in line with a BBB rating, S&P said.

While the agency said it expects EBITDA to remain flat over 2017 through 2019 at about €5 billion per year, operating cash flows will benefit from lower interest costs.

The legal framework for the transfer is almost finalized, S&P said, and the payment of the premium will remove a material area of uncertainty for E.ON.

E.ON's credit metrics are highly sensitive to changes in the pension discount rate, the agency noted.

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