French state-owned utility Electricité de France S.A. (EDF) has been downgraded to BBB+ from A- by Fitch. Further, its ratings have been placed on Rating Watch Negative by Fitch, review for downgrade by Moody’s (A3) and CreditWatch Negative by S&P (BBB+). The rating actions are on the back of:

  • Downward revision in its French nuclear output to 300-330 TWh from 330-360 TWh for 2022 as a result of prolonged outages at five of its 56 French nuclear reactors
  • The French government announcing a 20 TWh increase in the volume of regulated access to historic nuclear energy that EDF must deliver to alternative suppliers from April to December 2022 to 120 TWh
  • A cap of 4% announced on regulated customer yearly tariff increases for February 2022 and a postponement of new increases to February 2023

Fitch estimates that the above would have a material adverse impact on EDF’s financials, estimating a Fitch-defined EBITDA for 2022 at €4bn, 75% below its previous estimate. S&P too said that this could lead to a €10-13bn cut in EDF’s 2022 EBITDA from its previous assumption of €17.9bn. As per Fitch, EDF estimates a €8.4bn impact to 2022 cash EBITDA based on market prices at end-2021.

EDF’s EUR 5.375% Perps traded ~0.6 points lower to 108.46 yielding 2.44% currently.

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