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French utilities’ pensions still unsure – report

FRANCE – Despite the recent approval of the French energy law, there are still uncertainties over the pension arrangements of Electricité de France and Gaz de France, Moody’s says.

“Although the recently passed French energy law goes some way towards clarifying the future development of Electricité de France in terms of the structure of the domestic electricity market and its legal framework, several uncertainties remain such as the amount of unfunded pension obligations,” said Moody's Investors Service.

It said: “One key issue impacting EDF's financial risk profile is that of how much of the company's pension obligations will be retained under its new legal status.

“While aspects of this were addressed in the legislation, the new law did not quantify the ultimate obligation. The final determination will be made later this year.”

Moody’s said it recognises that the new law is a “major step” in setting up a new legal and policy framework for France’s power sector.

“Despite the recent legal clarifications, we believe that there still remains uncertainty as to whether such initiatives and other measures to improve the company's operating and financial profile will have the required effect," said Moody’s senior vice president David Staples.

The comments follow an earlier Moody’s report which said its current negative outlook on Gaz de France’s credit ratings “could be resolved, once more precise allocation of GdF's pension obligations is known”.

The final resolution of the pension issue is not expected until it is implemented by decree later in the year.

The rating agency said the final pension allocations will be determined as a result of negotiations between GdF and the social security entities on the basis of the decree.

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