Approximately EUR20 billion rated debt securities affected
London, 04 February 2011 -- Moody's Investors Service has today downgraded to A1 from Aa3 senior unsecured
ratings of GDF SUEZ SA ('GDF SUEZ' or 'the Group'),
and the ratings of GIE GDF SUEZ Alliance which is guaranteed by GDF SUEZ.
Moody's also downgraded to A3 from A2 the issuer ratings of its
subsidiaries Electrabel SA (Electrabel) and GDF SUEZ CC, which incorporate
a degree of uplift from membership of the Group. Electrabel's
unguaranteed short-term rating was lowered to (P)Prime-2
from (P)Prime-1. The Prime-1 ratings of GDF SUEZ,
GIE GDF SUEZ Alliance and the guaranteed (P)Prime-1 rating of Electrabel,
which were not on review, were affirmed. These rating actions
conclude the review initiated in August 2010.
The following ratings were downgraded:
- GDF SUEZ SA: the senior unsecured issuer and debt ratings
to A1, from Aa3; the subordinated debt rating to (P)A2,
from (P)A1
- GIE GDF SUEZ Alliance: the senior unsecured issuer and
debt ratings to A1, from Aa3
- GDF SUEZ Finance SA: the guaranteed senior unsecured debt
rating to (P)A1, from (P)Aa3
- Belgelec Finance SA: the guaranteed senior unsecured debt
rating to A1, from Aa3
- Electrabel SA: guaranteed senior unsecured debt rating
to A1, from Aa3; the senior unsecured issuer rating to A3,
from A2; the short-term debt rating to (P)Prime-2,
from (P)Prime-1
- GDF SUEZ CC: the senior unsecured issuer rating to A3,
from A2
The following ratings were affirmed:
- GDF SUEZ SA: Prime-1 short-term debt rating
- GIE GDF SUEZ Alliance: Prime-1 short-term
issuer rating
- Electrabel SA: (P)Prime-1 guaranteed short-term
debt rating
RATINGS RATIONALE
The rating downgrades follow the recent completion of GDF SUEZ's
acquisition of International Power plc (IPR, rated Baa3, see
separate press release) which was effected through the combination of
IPR and GDF SUEZ's Energy International Business Areas (outside
Europe) and certain assets in the UK and Turkey (collectively 'GDF
SUEZ Energy International'). Under the terms of the combination
GDF SUEZ has acquired 70% of IPR through the contribution of GDF
SUEZ Energy International into IPR in exchange for newly issued IPR shares.
The transaction also provides for the payment of a GBP1.4 billion
(approximately EUR1.7 billion) special dividend to IPR's
existing shareholders, which is to be paid on 25 February.
While recognizing the acquisition is consistent with GDF SUEZ's
strategy, the downgrade reflects primarily the negative impact of
the additional EUR8.2 billion net debt that GDF SUEZ will be assuming
with the transaction (roughly a quarter of estimated consolidated net
financial debt at end-2010) as a result of consolidation of IPR's
EUR6.5 billion net debt, and the special dividend payment.
The downgrade also takes account of the deterioration in the Group's
business risk profile which Moody's considers is implied by the
higher proportion of IPP and development activities within its business
mix, notwithstanding the benefits of scale, broader geographical
diversification, and a strengthened position in certain markets.
On a proforma basis the contribution from these activities will rise from
approximately 14% to 23% of Group EBITDA as a result of
consolidating IPR.
The A1 rating factors in that the negative impact on GDF SUEZ's
financial profile should be partially offset by targeted synergies of
ca EUR200 million pa, and assumes that the Group will take action
to contain debt through a series of measures including, potentially,
asset disposals. The downgrade reflects Moody's view,
nevertheless, that the Group's credit metrics are likely to
remain below guidelines for the Aa3 rating for the foreseeable future.
In assigning a stable outlook Moody's views the rating as solidly
positioned at A1, on the assumption that GDF SUEZ delivers on its
guidance of an increase in EBITDA of 15% or more over 2010 and
2011, and takes action to manage its leverage such that it remains
well positioned against the following guidelines: FFO/net debt in
the twenties per cent range, retained cashflow (RCF)/net debt in
the upper teens and FFO interest cover in excess of 5x.
The rating could move up if the company's earnings outlook and leverage
profile were to strengthen such that FFO/net debt were to be consistently
at around 30%, RCF/net debt comfortably in excess of 20%,
and FFO interest cover above 6x. The rating would come under pressure
in the event that credit metrics were to weaken to below guidance for
the A1 rating, whether because earnings fall short of expectations,
or higher than expected debt levels.
On the basis of its 35.9% ownership by the French Government,
GDF SUEZ is considered a Government Related Issuer under Moody's
Methodology. Given Moody's assumptions of strong support
and moderate dependence, the A1 rating incorporates one notch of
rating uplift.
The downgrade to A3/Prime-2 of Electrabel 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.
It also reflects that Electrabel will hold the Group's 70%
stake in IPR, and takes account of the deterioration in its business
risk profile which this implies, and whose effect is proportionately
higher than for the larger GDF SUEZ Group. From the financial risk
perspective, the A3 rating assumes that GDF SUEZ will continue to
capitalize Electrabel at current solid levels. In that context
Moody's notes that the incremental debt incurred by Electrabel as
a result of the transaction will be in part offset by a EUR3.5
billion capital increase. The downgrade of GDF SUEZ CC follows
that of GDF SUEZ and Electrabel. Moody's adds that since
the rating of GDF SUEZ CC is based primarily on the implied support from
GDF SUEZ through Electrabel as intermediate holding company, it
is likely to follow the ratings of GDF SUEZ, while remaining effectively
constrained by the rating of Electrabel.
The principal methodologies used in this rating were Global Unregulated
Utilities and Power Companies, published in August 2009, and
Revised Methodology for Government Related Non-Bank Financial Institutions,
published in August 2006.
Headquartered in Paris, GDF SUEZ SA is one of the world's
leading energy providers. It reported group turnover of EUR42.3
billion and EBITDA of EUR8.2 billion in the first half of 2010.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics information.
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on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
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Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
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Please see ratings tab on the issuer/entity page on Moodys.com
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London
Niel Bisset
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
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London
Monica Merli
MD - Infrastructure Finance
Infrastructure Finance Group
Moody's Investors Service Ltd.
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Moody's downgrades GDF SUEZ to A1; outlook stable
