Research Update: ENGIE Rating Placed On CreditWatch Negative Amid COVID-19 Outbreak Due To Tight Financial Headroom And Governance Change

Given a likely European economic slowdown in the context of the COVID-19 pandemic, we believe that ENGIE S.A.'s earnings could be pressured by lower contributions from its more cyclical Clients Solution business, and by lower power prices on unhedged positions growing from 2021. ENGIE's financial headroom has tightened following an acquisitive 2019 and upward revisions of its nuclear provisions. We believe that the group's current rating cannot withstand any operational underperformance without credit-protective measures. This is in the context of uncertainty around the group's strategic direction and organization, as the search for ENGIE's CEO's replacement started in February 2020. We are placing the 'A-/A-1' long- and short-term issuer credit ratings on CreditWatch with negative implications to reflect growing operating pressures

...- Given a likely European economic slowdown in the context of the COVID-19 pandemic, we believe that ENGIE S.A.'s earnings could be pressured by lower contributions from its more cyclical Clients Solution business, and by lower power prices on unhedged positions growing from 2021. - ENGIE's financial headroom has tightened following an acquisitive 2019 and upward revisions of its nuclear provisions. We believe that the group's current rating cannot withstand any operational underperformance without credit-protective measures. - This is in the context of uncertainty around the group's strategic direction and organization, as the search for ENGIE's CEO's replacement started in February 2020. - We are placing the 'A-/A-1' long- and short-term issuer credit ratings on CreditWatch with negative implications to reflect growing operating pressures at a time when the company's governance is more vulnerable. - We plan to resolve the CreditWatch placement after we assess the extent of the downside...

Research Update