Wednesday, November 18, 2015

Nuclear liabilities could hurt utilities' credit ratings-S&P | Agricultural Commodities | Reuters

PARIS Nov 16 (Reuters) - Provisions for decommissioning nuclear power plants and disposing of nuclear fuel waste over the next two decades could weigh on European utilities' credit ratings, Standard & Poor's said in a report published on Monday.
S&P said that at the end of 2014, nuclear liabilities of the largest eight nuclear plant operators in Europe totaled 100 billion euros ($107 billion), representing 22 percent of their aggregate debt as adjusted by the rating agency.
The eight utilities are France's EDF and Engie , Germany's E.ON, RWE and EnBw , Sweden's Vattenfall, Finland's Fortum and the Czech Republic's CEZ.
"Given the tight headroom in the credit ratings of European utilities with heavy nuclear exposures, and that they generally operate with a high adjusted financial leverage, any changes in the valuation of their provisions could drag on their credit metrics and liquidity, and ultimately their credit ratings," said S&P credit analyst Pierre Georges.
He added that the value of nuclear provisions is more difficult to calculate than other debt-like obligations, such as pensions, and are also harder to compare between peer companies, because accounting methods are not standardised.
S&P said actuarial assumptions pose a potential risk that provisions may rise, notably the real discount rate used to compute the present value of the liability.
Beyond the financial risks stemming from nuclear liabilities, the agency sees potential for operational difficulties, which are still difficult to assess, and added it is uncertain whether companies' dedicated assets will perform as planned to cover decommissioning costs, given the uncertain returns on these investments.

Consultancy Capgemini said this month Europe needs to bring more transparency to utilities' nuclear liabilities as gross provisions for decommissioning and long-term spent fuel management range from 4.7 billion euros per reactor in Germany to just 1.2 billion in France. ($1 = 0.9331 euros) (Reporting by Geert De Clercq; Editing by David Holmes)

Nuclear liabilities could hurt utilities' credit ratings-S&P | Agricultural Commodities | Reuters

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