Standard & Poor (S&P Global) has downgraded the credit rating of giant utility EDF from ‘A-1’ to ‘A-2’ on the back of a detailed rating report – which includes potential up- and down-side scenarios – that takes into account the risks associated with the Hinkley Point C nuclear project.
Key point highlighted by the report are that the execution risks linked to this project are high and heavy investments will weigh on EDF’s already weak cash flow; and that EDF will receive proceeds of €1 billion from a sale of 35% stake to Chinese partner CGN, yet the bulk of these investments will only be dispersed at the beginning 2019.
The stability of the outlook is reflected in EDF’s ‘remedy plan’ in partnership with the French government that is expected to reduce the group’s adjusted debt over the next two years, supporting credit stabilisation.
But despite ongoing challenges that hurt EDF’s credit quality, key strengths of the project remain in the company’s significant size, contributions from regulated network activities in France, and its low carbon generation – which may benefit from a higher carbon price and environmental aims over time.
