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France: pensions hit EdF's credit rating

FRANCE – French utility Electricite de France has seen its long-term credit rating downgraded by S&P as a result of its unfunded pensions liabilities.

Standard and Poor’s ratings agency has lowered EdF’s long-term corporate credit rating from AA to AA-, and has retained an negative outlook. The short-term rating of A1+ remains the same.

Says Standard & Poor's credit analyst Jean-François Véron: "The downgrade reflects Standard & Poor's expectation that a material share (in comparison with EDF's debt level) of the company's very significant unfunded pension liabilities will be incurred by EDF itself, while the majority will nonetheless be transferred to third parties." At the beginning of the year EdF faced 60-70 billion euros in pension liabilities.

This year the French government announced amendments to the pensions systems of both EdF and Gaz de France as a result of the partial-privatisation. A newly created fund with contributions in line with those paid by employees in the standard state-sponsored system was proposed.

Standard and Poor’s also announced today a downgrade on the Swiss city of Lausanne from AA- to A+, based on its debt and pensions liabilities.

"The rating action reflects weakening budgetary performance, an increasing debt burden, expenditure pressure from the canton, and decreasing coverage ratios in its pension fund CPCL," said Standard & Poor's credit analyst Christian Esters.

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