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Moody's eyes gas companies for cut
Moody's Investors Service said it placed on review for downgrade the Baa3 senior unsecured debt and long-term issuer ratings of EP Infrastructure, as (EPIF), the Baa2 senior unsecured debt and long-term issuer ratings of eustream, as (eustream), SPP-distribucia as (SPP-d), as well as the Baa2 backed senior unsecured debt rating of the notes issued by SPP Infrastructure Financing BV (SPP-IF) and guaranteed by eustream. The outlooks have been changed to under review from stable for all issuers.
“The review for downgrade of eustream's ratings is triggered by the company's exposure to the heightened geopolitical risk for gas transit from Russia (B3 review for downgrade) to Europe via Ukraine (B3 review for downgrade), resulting from Russia's military assault of Ukraine which started on Feb. 24, 2022. The review for downgrade of SPP-d's and EPIF's ratings reflects the credit linkages of these companies with eustream,” Moody’s said in a press release.
Eustream, the owner and operator of the gas transmission system in Slovakia, generates about 95% of its revenues from carrying gas that is primarily sourced from Russia to Central and Southern Europe under long-term gas transit contracts.
“The review of SPP-d's ratings follows that of eustream. While the company as owner and operator of the largest gas distribution network in Slovakia has no direct exposure to Russia, it is a member of a cash pooling arrangement of the SPP Infrastructure a.s. (SPP-I) group that includes eustream. Given that there is no ring-fencing in place which would insulate SPP-d's credit risk profile from that of SPP-I group, Moody's views SPP-d's credit quality as linked to SPP-I group entities and therefore exposed to the risk of contagion from eustream,” the agency said.
The review will focus on the potential effect of the sanctions on the companies’ cash flows and liquidity and the possibility of shareholder support if needed.
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