ENGIE SA

The stable outlook is based on our view that ENGIE will continue reducing its merchant-exposed activities, focusing on infrastructure growth, decarbonizing its generation mix, asset-based services, as well as a more focused geographic footprint. The new strategic plan should help ENGIE achieve sustainable growth and maintain predictable cash flow. Over 2019-2021, we also anticipate improved performance of the group's nuclear operations, reflecting a higher availability of its plants, supporting earnings growth. We believe that this--together with the proceeds from announced and planned disposals--will support improving credit metrics over the next three years. We expect FFO to debt of about 20% for 2019, increasing beyond this level from 2020, which we deem as commensurate with an 'A-' rating under this business

...2019-2021 strategic plan is pursuing the transformation of the group. ENGIE's updated strategic plan reiterates ENGIE's focus on infrastructure (including regulated gas networks and district heating and cooling) and long-term contracted activities (including renewables), away from merchant power generation. The group also has ambitions to grow and diversify its client solutions portfolio, providing a wide array of services to industrials and territories, potentially bolstered by large acquisitions. Growing share of regulated activities following Brazilian gas network acquisition. ENGIE-led consortium won the bid for the Brazilian transmission pipeline Transportadora Associada de Gßs S.A. (TAG) on April 8, 2019, with a resulting noncontrolling stake for ENGIE of 49.3%. While with this acquisition ENGIE increases its exposure to stable infrastructure-based cash flow streams (because TAG network revenue is protected by contracts with 12-year average remaining life) it is also increasing its...

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