TXU Europe History Could Repeat Itself

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Byline: Piers Townsend

The withdrawal of parental support that has led to asset sales by TXU Europe could potentially become an issue for other European utilities, according to BNP Paribas.Marc Watton, a utilities analyst in high-grade credit research at the French bank, warned on Monday that investors should watch relationships such as Electricite de France/London Electricity Group, E.On/Powergen and RWE/Innogy closely.

In a note to investors, Watton said: "As these larger European groups move down the rating scale, we shall need to remain focused on the relative credit position of both parent and subsidiary, and the ongoing economic incentive for the parent to provide support." He added that parents at higher rating levels, such as those mentioned above, are currently in a much better position to provide support.

TXU Europe lost the support of TXU Corp, its US parent, after weak profitability prompted a profits warning at group level. TXU Corp, which is rated Baa1/BBB+ by Moody's and Standard & Poor's respectively, decided to suspend financial support to protect its own ratings. …