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Rating Action:

Moody's affirms GDF SUEZ (ENGIE)'s A1 ratings; changes outlook to negative

11 Jun 2015

London, 11 June 2015 -- Moody's Investors Service ("Moody's") has today affirmed the A1 issuer and senior unsecured ratings, (P)A2 subordinated rating and the A3 junior subordinated debt ratings of GDF SUEZ SA ("GDF SUEZ" or "the group"), whose commercial name is now ENGIE, and the A1 ratings of GIE GDF SUEZ Alliance and Belgelec Finance S.A., which are guaranteed by GDF SUEZ. Moody's has also affirmed the ratings of GDF SUEZ's subsidiaries: (1) the A2 issuer rating of GDF SUEZ Invest International S.A. ("GSII"); and (2) the A3 issuer ratings of Electrabel SA and GDF SUEZ CC. The Prime-1 ratings of GDF SUEZ and GIE GDF Suez Alliance, and the (P)Prime-2 rating of Electrabel SA, were also affirmed. At the same time, Moody's changed the outlook on all ratings to negative from stable.

A full list of rating actions can be found at the end of this press release.

RATINGS RATIONALE

The change in outlook reflects the ongoing weak operating environment and headwinds faced by GDF SUEZ in a number of markets, which could in turn hamper its ability to strengthen its financial metrics on a sustainable basis.

Similar to its European peers, GDF SUEZ's Energy Europe division, which accounted for 16% of 2014 EBITDA, continues to suffer from a weak operating environment characterized by anemic demand for electricity, low power prices and the displacement of thermal plants in the merit order. In addition, the group is currently experiencing operational challenges in a number of geographies, including nuclear outages in Belgium, unfavorable weather conditions in Brazil and unavailability of LNG supply from Yemen as a result of political instability. These pressures have been further exacerbated by lower oil and gas prices since mid-2014 that are notably affecting the profitability of the Global Gas and LNG division, which accounted for 18% of EBITDA in 2014.

These headwinds were apparent in (1) the announcement that first quarter 2015 EBITDA declined by 13% to EUR3.6 billion on an organic basis and by 18% when adjusted for weather impact and (2) a EUR150 million downward adjustment in May 2015 of the full-year EBITDA guidance as a result of a prolonged unavailability of certain nuclear plants in Belgium. Moody's therefore expects that GDF SUEZ's key credit metrics will remain broadly stable in 2015 compared with funds from operations (FFO) / net debt around 21% and retained cash flow (RCF) / net debt around 13% at year-end 2014.

These ratios are below Moody's guidance for the current A1 rating, which includes FFO / net debt in the mid twenties in percentage terms and RCF / net debt in the upper teens in percentage terms. The negative outlook reflects the challenge that GDF SUEZ faces to strengthen those in the absence of an improvement in operating conditions or additional measures to improve the group's financial flexibility.

At the same time, the rating affirmation recognizes the group's scale and business mix, which should continue to help limit the negative effect on earnings from deterioration in any one business line or region. In particular, Moody's notes the stabilizing contribution of GDF SUEZ's infrastructure and energy services businesses, which accounted for 26% and 9%, respectively, of 2014 EBITDA. It also factors in GDF SUEZ's ongoing shift towards contracted or regulated activities as well as its conservative financial risk profile and the measures taken by management to mitigate the adverse effect of lower commodity prices. These include the launch of a "quick reaction plan" over 2015-16 which will combine EUR250 million of opex savings per annum with a EUR400 million reduction in the level of investments dedicated to E&P activities and a re-phasing of EUR1.6 billion earmarked for M&A.

Given GDF SUEZ's 33.3% ownership by the Government of France (Aa1 negative), its A1 rating incorporates a one-notch uplift from its standalone credit quality or Baseline Credit Assessment (BCA) of a2.

RATIONALE FOR AFFIRMATION OF ELECTRABEL SA

The affirmation of Electrabel SA's A3 rating follows that of its 100% parent GDF SUEZ, and reflects that its rating incorporates a degree of uplift because of its strategic importance to the larger group.

RATIONALE FOR AFFIRMATION OF GDF SUEZ INVEST INTERNATIONAL S.A.

The affirmation of GSII's A2 rating follows that of its ultimate parent and is based on the Declaration of Responsibility by GDF SUEZ in favour of GSII. According to this, GDF SUEZ unconditionally guarantees all obligations and liabilities until revocation by GDF SUEZ of the Declaration.

RATIONALE FOR AFFIRMATION OF GDF SUEZ CC

The affirmation of GDF SUEZ CC's A3 rating follows that of GDF SUEZ, Electrabel SA and GSII and is based primarily on the implied support from GDF SUEZ through Electrabel SA and GSII as intermediate holding companies.

RATING OUTLOOK

The negative outlook reflects the risk that credit metrics could stay below Moody's guidance beyond 2015 in the absence of an improvement in operational performance and/or some recovery in commodity and power prices.

WHAT COULD CHANGE THE RATING UP/DOWN

Given the current negative outlook, upward rating pressure is unlikely to arise in the medium term. The outlook could be returned to stable provided that credit metrics strengthen in line with Moody's guidance for the A1 rating.

The ratings could be downgraded (1) if credit metrics fail to recover to levels commensurate with Moody's guidance for the current a2 BCA, including FFO / net debt in the mid twenties in percentage terms and RCF / net debt in the upper teens in percentage terms; or (2) if a change in the group's relationship with the government were to cause Moody's to remove the uplift for potential extraordinary government support, or if there were to be a significant downgrade of France's government rating.

List of affected ratings

Affirmations:

..Issuer: GDF SUEZ SA

.... LT Issuer Rating, Affirmed A1

.... Commercial Paper, Affirmed P-1

....Junior Subordinated Regular Bond/Debenture, Affirmed A3

....Subordinate Medium-Term Note Program, Affirmed (P)A2

....Senior Unsecured Regular Bond/Debenture, Affirmed A1

....Senior Unsecured Medium-Term Note Program, Affirmed (P)A1

....Other Short Term, Affirmed (P)P-1

..Issuer: Belgelec Finance S.A.

....BACKED Senior Unsecured Regular Bond/Debenture, Affirmed A1

..Issuer: Electrabel SA

.... LT Issuer Rating, Affirmed A3

....Other Short Term, Affirmed (P)P-2

..Issuer: GDF SUEZ CC

.... LT Issuer Rating, Affirmed A3

..Issuer: GDF SUEZ Invest International S.A.

.... LT Issuer Rating, Affirmed A2

..Issuer: GIE GDF SUEZ Alliance

.... LT Issuer Rating, Affirmed A1

.... ST Issuer Rating, Affirmed P-1

....Senior Unsecured Regular Bond/Debenture, Affirmed A1

Outlook Actions:

..Issuer: GDF SUEZ SA

....Outlook, Changed To Negative From Stable

..Issuer: Belgelec Finance S.A.

....Outlook, Changed To Negative From Stable

..Issuer: Electrabel SA

....Outlook, Changed To Negative From Stable

..Issuer: GDF SUEZ CC

....Outlook, Changed To Negative From Stable

..Issuer: GDF SUEZ Invest International S.A.

....Outlook, Changed To Negative From Stable

..Issuer: GIE GDF SUEZ Alliance

....Outlook, Changed To Negative From Stable

PRINCIPAL METHODOLOGY

The methodologies used in these ratings were Unregulated Utilities and Unregulated Power Companies published in October 2014, and Government-Related Issuers published in October 2014. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Headquartered in Paris, GDF SUEZ SA, whose commercial name is ENGIE, is one of the world's leading energy providers. It reported group turnover of EUR74.7 billion and EBITDA of EUR12.1 billion in 2014.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The following information supplements Disclosure 10 ("Information Relating to Conflicts of Interest as required by Paragraph (a)(1)(ii)(J) of SEC Rule 17g-7") in the regulatory disclosures made at the ratings tab on the issuer/entity page on www.moodys.com for each credit rating as indicated:

Moody's was not paid for services other than determining a credit rating in the most recently ended fiscal year by the person(s) that paid Moody's to determine this credit rating.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Paul Marty
Vice President - Senior Analyst
Infrastructure Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Monica Merli
MD - Infrastructure Finance
Infrastructure Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's affirms GDF SUEZ (ENGIE)'s A1 ratings; changes outlook to negative
No Related Data.
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