Credit ratings agency Moody’s has put 10 European utilities companies on negative watch, as they must contend with a harsher business environment amid tumbling commodity prices and ultra-low wholesale power prices.
It includes London-listed Centrica, which the ratings agency said is vulnerable to low prices through its exposure to gas production and electricity generation.
Big six energy company E.ON was also placed on negative watch, reflecting expectations that its earnings will fall more greatly when hedges against low prices begin to run off after 2016 and 2017.
Similarly, hedges rolling off over the next two to three years will affect French energy giant EDF's credit metrics. Moody's added this could exacerbate the risks associated with Hinkley Point C and the planned acquisition of French nuclear developer Areva.
It follows the rating agency's review of the European utility companies' exposure to a weakening commodity and power price environment.
Wholesale gas prices have crumbled over the last year. This came as milder temperatures ate into demand, crude oil prices to which seasonal gas contracts are indirectly linked fell and pressure mounted on power companies to pass on savings to customers.
Other companies placed on negative watch include the Czech Republic’s CEZ, Denmark’s Dong Energy, Estonia’s Eesti Energia, France’s ENGIE, Germany’s RWE, the UK’s Vattenfall and Austria’s Verbund.