S&P pulls EP Infrastructure from watch

S&P said it affirmed its BBB- ratings on EP Infrastructure (EPIF) and its debt and removed them from CreditWatch where they were placed with negative implications on May 10. The outlook is negative.

EPIF's Slovak subsidiary eustream's (49% share) exposure to Russia makes it vulnerable to ongoing and heightened geopolitical risks. A sudden cut in Russian gas could slice its EBITDA (€34% of EPIF's proportionate EBITDA in 2021) in half due to lost Gazprom payments and short market positions from its gas hedging.

“However, the flexible and supportive financial policy from parent EP Holding (EPH), combined with strong performance expected in 2022 and 2023 for the wider group, mitigate contagion of financial risks from eustream, while the resiliency and diversification of EPIF's regulated gas, power, and heat activities (about 70% of group EBITDA) support its credit quality,” S&P said in a press release.

S&P said it forecasts “leverage to stay under 4.5x in 2022-2023, amid higher volatility, and estimates a sudden cut in Russian gas flows over the next 12 months would cost €300 million-€400 million in 2023, but liquidity buffers remain ample to cover future debt repayments.”

However, if there are setbacks at eustream or increased uncertainties on its future cash flows, along with a lower willingness to support from EPIF's parent EPH, S&P warned it could lower EPIF’s ratings by at least a notch.

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