Hinkley Point C risks prompt Moody’s to downgrade EDF’s credit rating

Ratings agency Moody’s has downgraded EDF’s ratings to A3/P-2 with a stable outlook.

The rating related to EDF’s long-term issuer and senior unsecured ratings, which were formerly A2. The company’s perpetual junior subordinated debt ratings were downgraded to Baa3 from Baa2 and its short-term ratings to Prime-2 from Prime-1. The outlook on all ratings is stable.

Moody’s started reviewing its ratings of EDF debt on 16 September 2016. The agency said: “Today’s rating downgrade reflects Moody’s view that the action plan announced by EDF in April 2016, which includes government support, will not be sufficient to fully offset the adverse impact of the incremental risks associated the Hinkley Point C (HPC) project on the group’s credit profile.”

The agency continued: “Moody’s believes that the significant scale and complexity of the HPC project will affect the group’s business and financial risk profiles. This is because the HPC project will expose EDF and its partner China General Nuclear Power Corporation (CGN, A3 negative) to significant construction risk as the plant will use the same European Pressurised reactor (EPR) technology that has been linked with material cost overruns and delays at Flamanville in France and Olkiluoto 3 in Finland. In addition, none of the four plants using the EPR technology currently constructed globally is operational yet.”

The agency said that the new rating “reflects Moody’s expectation that the Government of France (Aa2 stable), EDF’s majority shareholder, would continue to provide financial relief if needed”. Moody’s suggested this would be potentially necessary after 2019.

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