* Hinkley Point decision could mean further downgrade
* Areva, carbon tax, asset sales also risk to credit status
* 10 bln euros of hybrid debt would be hard to refinance as junk
By Geert De Clercq
PARIS, May 13 (Reuters) - Moody’s one-notch downgrade of EDF debt has pushed the utility’s 10 billion euros worth of hybrid debt uncomfortably close to non-investment grade, posing a risk to its refinancing.
Late Thursday, Moody’s downgraded EDF’s senior debt to A2 from A1, leaving it in upper-medium investment grade, but EDF’s perpetual junior subordinated (hybrid) debt was cut to Baa2, just two levels above junk.
Moody’s kept the outlook on EDF ratings negative and warned it could downgrade further if EDF goes ahead with its 18 billion pound (23 billion euro) nuclear reactor project in Britain.
CEO Jean-Bernard Levy on Thursday told shareholders EDF plans to decide on Hinkley Point in the coming months.
Standard and Poor’s warned in October it may lower EDF’s rating if it presses ahead with the project.
Last month Levy said the hybrid debt is an “Achilles heel”, making EDF’s balance sheet more fragile.
Former EDF CFO Thomas Piquemal - who left EDF in March over worries about Hinkley Point’s financial risk - said last week EDF must do all it can to avoid a major downgrade, which could push the hybrids into junk status, making their refinancing from 2020 difficult.
EDF has net debt of more than 37 billion euros, excluding the hybrids. Hybrid debt has equity-like characteristics, such as the ability of the issuer to defer coupon payments.
Credit analysts say Hinkley Point is one of many risks to EDF ratings and that low power prices weigh heavily on the firm.
Moody’s said it could downgrade further if EDF fails to make progress on its plan to cut costs, sell assets and boost capital, or if French carbon tax plans do not materialise.
A carbon tax would boost EDF’s low-carbon nuclear plants’ competitiveness, but it is unclear when it could take effect.
Moody’s warned it could also downgrade further if EDF were to be exposed to the liabilities of Areva, whose nuclear reactor arm EDF plans to buy.
Areva has claims totalling several billion euros hanging over it related to a much-delayed Finland reactor project. EDF says it will not take these on, but talks between Areva and its Finnish client are stalling and any state help could be seen as an illegal subsidy.
Moody’s also warned more pressure could arise if French government bonds were downgraded of if EDF’s relationship with the government changed.
As EDF is 85 percent state-owned, Moody’s rates EDF’s senior debt two notches and its hybrid debt one notch higher than it would based on its standalone credit quality. (Reporting by Geert De Clercq, editing by David Evans)