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Rating Action:

Moody's places ENGIE's A2/Prime-1 ratings on review for downgrade

02 May 2019

London, 02 May 2019 -- Moody's Investors Service ("Moody's") has today placed on review for downgrade the A2/Prime-1 issuer and commercial paper ratings, the (P)A3 subordinated rating and the Baa1 junior subordinated debt ratings of ENGIE SA ("ENGIE" or "the group"), and the A2/Prime-1 ratings of ENGIE Alliance. Moody's has also placed on review for downgrade the A3 issuer rating of ENGIE Invest International S.A. ("EII"), a subsidiary of ENGIE. At the same time, Moody's has affirmed the Baa1/(P)Prime-2 ratings of Electrabel SA (Electrabel) and the Baa1 issuer rating of ENGIE CC, both subsidiaries of ENGIE, stable outlook maintained.

A full list of affected ratings is provided towards the end of this press release.

RATINGS RATIONALE

ENGIE SA and ENGIE Alliance -- REVIEW FOR DOWNGRADE

The rating action follows the progress made towards adoption in French law of the Loi PACTE which, among several measures, would allow the French government (Aa2 positive) to dispose of its shareholding in ENGIE. If enacted, the Loi PACTE would signal a change in the relationship between ENGIE and the French government, and a high likelihood that government will bring down its stake. Even if a disposal may be delayed, and potentially phased, enactment of the legislation would prompt a reappraisal of Moody's assessment of the French government's support for ENGIE. The review for downgrade reflects that such a reassessment would likely lead to the removal of the one notch uplift for government support currently factored into ENGIE's A2 rating.

The Loi PACTE ('Plan d'Action pour la Croissance et la Transformation des Entreprises') is designed, inter alia, to redefine the state's role in France's economy. In that context it identifies state shareholdings in three companies, including ENGIE, which are considered non-core to the state's fundamental mission, and which are suitable for disposal. Amongst a range of measures it provides for the removal of the current 33.33% minimum threshold for government ownership at ENGIE and for the change of full to majority ownership by ENGIE and French public entities at GRTgaz, the ENGIE-owned French gas transmission grid. Upon enactment, the government would be free to sell its stake in ENGIE in line with its stated intent, and to use the proceeds to boost its Fund for investment in innovation and industry. However the government will continue to hold a golden share in ENGIE and rights to oppose any sale of ENGIE gas infrastructure assets.

Following an extended debate in France's legislature the National Assembly approved the final draft of the Law on 11 April, after which it was referred on 16 April to Le Conseil Constitutionnel. Le Conseil is considering the Law's legality and enforceability and has up to one month to consider its verdict.

Given the French government's ownership of 23.64% of ENGIE's share capital and 34.79% of its voting rights, Moody's currently defines ENGIE as a government related issuer, according to its rating methodology 'Government-Related issuers', which generally requires 20% as the minimum government ownership level. Accordingly, and based on an assessment of strong support from the government in case of financial distress, ENGIE's A2 rating factors in one notch of uplift from the group's underlying credit strength, which is reflected in a baseline credit assessment (BCA) of a3.

In its proposal of the Law, the French government has indicated its intent in principle to reduce its ENGIE shareholding in the event that the Loi PACTE removes the existing ownership restriction. Although there is currently no indication of the timing of any future share sales, the rating review is prompted by Moody's view that passage of the Law would nevertheless crystallise a change in the ownership intentions of the state, and by implication a weakening of France's willingness to provide financial support to ENGIE in case of need.

The review for downgrade of ENGIE Alliance's ratings follows that of ENGIE. That reflects that as a Groupement d'Interet Economique (GIE), ENGIE Alliance's ratings are aligned with ENGIE's which as a member of the GIE has unlimited joint and several liability for the debt and liabilities incurred by it.

The review (1) will monitor the progression of the Law onto the statute book; and (2) given Moody's view that the group's BCA is adequately positioned at a3, will focus on a reassessment of government support factored into the rating. Moody's would expect to conclude the review shortly after the Law is enacted.

ENGIE INVEST INTERNATIONAL S.A. -- REVIEW FOR DOWNGRADE

The review of EII's A3 rating follows that of its ultimate parent and reflects that its obligations and liabilities are guaranteed by ENGIE under a Declaration of Responsibility.

WHAT COULD CHANGE THE RATINGS UP/DOWN

The ratings could be confirmed in the event that the Loi PACTE were not to pass into law.

The ratings could be downgraded if the Loi PACTE were to pass into law, and a reassessment of the French government's support for ENGIE were to lead to the removal of one notch uplift in the rating.

ELECTRABEL S.A. AND ENGIE CC - AFFIRMATION

The affirmation of Electrabel's Baa1/(P)Prime-2 ratings is based upon (1) its stand-alone credit strength, reflecting its scale and diversification, and its sound capital structure with average funds from operations/net debt of approximately 30% over 2016-2018; and (2) that its rating incorporates a degree of support from its core position within, and importance to, the broader ENGIE group.

The affirmation of ENGIE CC's Baa1 rating follows that of Electrabel and reflects the implied support from ENGIE through Electrabel SA and EII as intermediate holding companies.

The stable outlook is based on Moody's expectation of a recovery in Electrabel's operating performance and continued strong capitalisation in 2019.

WHAT COULD CHANGE THE RATINGS UP/DOWN

A ratings upgrade is not considered likely in the context of the review for downgrade of ENGIE SA.

Electrabel's ratings could be downgraded in the event that (1) Electrabel's operating performance or capitalisation were to deteriorate; or (2) Electrabel was no longer considered to be financially and operationally integrated within the group as a result of a change in ENGIE's strategy or financial policy.

LIST OF AFFECTED RATINGS

On Review for Downgrade:

..Issuer: ENGIE SA

.... Commercial Paper, Placed on Review for Downgrade, currently P-1

LT Issuer Rating, Placed on Review for Downgrade, currently A2

....Junior Subordinated Regular Bond/Debenture, Placed on Review for Downgrade, currently Baa1

.... Subordinate MTN Program, Placed on Review for Downgrade, currently (P)A3

.... Senior Unsecured MTN Program, Placed on Review for Downgrade, currently (P)A2

....Other Short Term, Placed on Review for Downgrade, currently (P)P-1

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently A2

..Issuer: ENGIE Alliance

....LT Issuer Rating, Placed on Review for Downgrade, currently A2

....ST Issuer Rating, Placed on Review for Downgrade, currently P-1

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently A2

..Issuer: ENGIE Invest International S.A.

....LT Issuer Rating, Placed on Review for Downgrade, currently A3

Affirmations:

..Issuer: Electrabel SA

....LT Issuer Rating, Affirmed Baa1

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

..Issuer: ENGIE CC

....LT Issuer Rating, Affirmed Baa1

Outlook Actions:

..Issuer: ENGIE CC

....Outlook, Remains Stable

..Issuer: ENGIE SA

....Outlook, Changed To Rating Under Review From Stable

..Issuer: Electrabel SA

...Outlook, Remains Stable

..Issuer: ENGIE Alliance

....Outlook, Changed To Rating Under Review From Stable

..Issuer: ENGIE Invest International S.A.

....Outlook, Changed To Rating Under Review From Stable

The principal methodologies used in rating ENGIE SA, ENGIE Alliance and ENGIE Invest International S.A. were Unregulated Utilities and Unregulated Power Companies published in May 2017, and Government-Related Issuers published in June 2018. The principal methodology used in rating Electrabel SA and ENGIE CC was Unregulated Utilities and Unregulated Power Companies published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Headquartered in Paris, France, ENGIE SA is one of the world's leading energy providers. It reported group turnover of EUR 60.6 billion and EBITDA of EUR 9.2 billion in 2018. It is 23.64% owned by the French government.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

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.

Niel Bisset
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Neil Griffiths-Lambeth
Associate Managing Director
Infrastructure Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454

No Related Data.
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