May 14, 2016 / 2:31 PM / 4 years ago

Moody's cuts RWE debt to one notch above junk

FRANKFURT, May 14 (Reuters) - RWE is just one notch above junk status after Moody’s downgraded the Germany utility’s debt to Baa3 from Baa2, citing weak power prices, Germany’s nuclear exit and the company’s exposure to coal.

Germany’s traditional power firms have been hammered by a surge in renewable energy, plunging wholesale electricity prices and the country’s decision to close nuclear plants by 2022.

“Today’s rating action reflects a weak power price environment, which is likely to maintain pressure on RWE’s operating cash flows from generation,” the credit rating agency said in a statement late on Friday.

“(And) The risk that the recent recommendation by the government-appointed nuclear commission that a significant premium should be paid by the German nuclear generators will be an additional financial burden for RWE,” it said.

Germany is phasing out nuclear power by 2022 and a government-appointed panel has recommended that the responsibility for the costs of decommissioning power plants and of handling nuclear waste should be separated.

It has asked the four operators, including RWE, to transfer provisions for storage sooner than expected, starting with a 17.2 billion instalment in 2017 and demanding they pay a further 6.1 billion euros by 2022.

Both RWE and E.ON have said this would worsen the companies’ credit positions.

Moody’s has confirmed its ratings for E.ON and Vattenfall , the other top-three utilities in Germany, though it has a negative outlook for both.

The agency said the outlook for RWE’s rating was stable, saying, “RWE should be able to sustain a financial profile in line with guidance for the Baa3 rating.” (Reporting by Harro ten Wolde; editing by David Clarke)

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