S&P Global Ratings and Moody's on Feb. 21 downgraded Electricité de France SA and its subsidiaries, following the French utility's Feb. 18 announcement that it will issue €2.5 billion of new shares to shore up its balance sheet as it addresses technical problems with its nuclear reactors. Both ratings agencies' outlooks on EDF are negative.

"The downgrade reflects the prolonged operational weakness of the group's French nuclear fleet and negative regulatory measures for 2022," Ratings noted in a Feb. 21 report.

Ratings estimates EDF's 2022 EBITDA will deteriorate to between €5 billion to €7 billion, resulting from the projected low nuclear output, suspicions of defects in the company's nuclear reactors, and the government's directive to limit price increases for EDF's customers. The agency's EBITDA estimate before the announcement was €18 billion.

In early February, EDF also issued new output estimates, reducing expectations for 2022 by about 3% and cutting 2023 projections by about 11%.

Ratings downgraded EDF's long-term issuer credit and issue rating to BBB from BBB+, as well as the long-term rating on EDF Energy PLC and EDF Energy Customers Ltd. to BB from BB+.

Meanwhile, the downgrade of EDF by Moody's also takes into account "the lack of visibility around the form and timing of nuclear reform in France, at a time when negotiations with the European Commission are suspended; the nature of assets which will be sold by 2024; and the potential consequences for energy policy and EDF of the upcoming French elections."

Moody's lowered EDF's long-term issuer rating and senior unsecured ratings to Baa1 from A3. Moody's also downgraded to Baa3 from Baa2 the long-term issuer ratings for subsidiaries EDF Trading Ltd., Edison SpA and EDF Energy Holdings Ltd.

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