Rating Action: Moody's downgrades eustream's and EPIF's ratings andmaintains review for downgrade, confirms SPP-distribucia's ratingsGlobal Credit Research - 23 Mar 2022Frankfurt am Main, March 23, 2022 -- Moody's Investors Service ("Moody's") has today downgraded to Ba1 from Baa2 the ratings on thesenior unsecured notes issued by eustream, a.s. (eustream) and on the backed senior unsecured notes issued by SPP InfrastructureFinancing B.V. (SPP-IF) and guaranteed by eustream. At the same time, Moody's has assigned a Ba1 long-term Corporate Family Rating(CFR) and a Ba1-PD probability of default rating to eustream and concurrently has withdrawn the company's Baa2 long-term issuerrating, as per the rating agency's practice for corporates transitioning to speculative grade. All of eustream's ratings are onreview for downgrade.At the same time, Moody's has confirmed the Baa2 senior unsecured debt and long-term issuer ratings of SPP-distribúcia, a.s.(SPP-d or SPP-distribucia). The outlook is negative. This rating action concludes the review for downgrade initiated on 3 March2022.Moody's has also downgraded to Ba2 from Baa3 the ratings on the senior unsecured notes issued by EP Infrastructure, a.s. (EPIF). Atthe same time, Moody's has assigned a Ba1 long-term CFR and a Ba1-PD probability of default rating to EPIF and concurrentlywithdrawn the company's Baa3 long-term issuer rating, as per the rating agency's practice for corporates transitioning tospeculative grade. All of EPIF's ratings are on review for downgrade.A full list of affected ratings is provided towards the end of this press release.RATINGS RATIONALEeustreamThe downgrade of eustream's ratings reflects the company's exposure to the risk of negative credit implications from the severesanctions imposed on the Government of Russia (Ca negative) and certain Russian financial institutions by Western countries whichcould disrupt the receipt of payments due to eustream from its main counterparty. While the European Union (EU, Aaa stable)sanctions that have been put in place since the invasion of Ukraine (Caa2 review for downgrade) by Russia exclude energy-relatedpayments and are not directly imposed on the major Russian gas shipper, Moody's considers that the risk that additional EUsanctions and/or countermeasures by Russia may stop the ability of the major Russian gas shipper to make payments under itscontractual obligations to eustream is substantially higher than previously, given the volatile geopolitical situation.eustream, the owner and operator of the gas transmission system in Slovakia (A2 stable), is generating around 95% of its revenuesfrom transporting gas that is primarily sourced from Russia to Central and Southern Europe under long-term gas transit contracts.The Russian company Gazprom Export LLC, a 100% subsidiary of Gazprom, PJSC (Caa2 negative), has the monopoly on pipeline gasexports from Russia. The company's transit contracts are on a ship-or-pay basis, meaning that eustream receives most income fromcapacity payments and independent of actual gas flows. The contract portfolio is highly concentrated in the major Russian gasshipper.Russia's invasion of Ukraine, which started on 24 February 2022, has led to sovereign rating actions, and subsequently downgradesof Russian non-financial corporates, including the Russian gas shipper on 10 March. The weakening of the credit profile of themajor Russian gas shipper reflects Moody's view of a significantly increased risk of default which may include trade-relatedobligations.Up to today, gas flows from Russia have continued uninterrupted and the Russian shipper has honoured its contractual paymentobligations. Given that a part of eustream's gas transportation network serves as a link between Czech Republic (Aa3 stable) andAustria (Aa1 stable), Moody's expects that in a case of cessation of gas flows or capacity payments from Russia, or both, thecompany could replace part but not all of the business with the Russian shipper with alternative bookings, but these are unlikelyto fully compensate the revenues coming from the major Russian gas shipper.The Ba1 ratings also factor in Moody's expectation that EPIF is willing to protect the financial profiles of eustream and SPP-dsince these operating companies are a key source of its income. In a press release dated 10 March [1], EPIF and its shareholdersconfirmed their commitment to maintain an investment grade rating for EPIF, eustream and SPP-d, subject to other factors outsidetheir control. Moody's believes that SPP-d has some capacity to provide support to eustream, if needed, given its current strongfinancial profile.Nevertheless, while an immediate stop of gas imports from Russia into Europe is currently not Moody's baseline scenario, theevolution of the current geopolitical situation is highly uncertain and could have materially adverse implications for the gastrade between Russia and the EU, hence the ratings remain on review for downgrade.The review will focus on (1) the evolution of the geopolitical situation, including decisions, if any, around further of sanctionsand their impact on eustream's cash flow, liquidity and business risk profile; (2) the evolution of the EU's energy policy, inparticular its plans for reducing energy dependence on Russia; as well as (3) any credit enhancing measures that may becomeavailable from shareholders to support the company's credit profile, if required.SPP-distribúciaThe confirmation of SPP-d's ratings reflects Moody's expectation that the company, which as owner and operator of the largest gasdistribution network in Slovakia has no direct exposure to Russia, will remain able to preserve its current strong financialprofile. Should eustream require financial support, Moody's believes that earnings from SPP-d in excess of what is required tomaintain its financial profile; and those from the gas storage companies which only have moderate debt; will likely suffice tosupport eustream over the next 2-3 years. The rating confirmation also reflects Moody's expectation, as noted above, that EPIF iswilling to protect the financial profile of SPP-d since this operating company is a material source of its income. The outlook isnevertheless negative, reflecting the risk of contagion from eustream.EP InfrastructureThe downgrade of EPIF's ratings follows that of eustream's ratings and reflects the credit linkages of EPIF with eustream. EPIF isa pure holding company and owns 49% eustream and SPP-d through a 49% stake in and management control of SPP Infrastructure a.s.(SPP-I) group that includes eustream and SPP-d, which together contribute around 60% of its EBITDA on a proportional basis. Thecompany also has access to the cash flows of some district heating companies in the Czech Republic, whose cogeneration plants havebeen benefitting from high power prices, as well as to the earnings of some gas storage companies, which are partly located withinSPP-I and stand to benefit from the EU's greater focus on strategic gas storage. The Slovak government indirectly owns 51% ofSPP-I, which supports Moody's view that the government has a strong incentive to protect the operating companies within SPP-I.EPIF's Ba1 CFR reflects Moody's assessment of the consolidated credit quality of the EPIF group's operating subsidiaries, whichincorporates the weaker credit profile of eustream, together with the additional debt of EUR2.35 billion at the holding company,albeit partly offset by Moody's expectation of potential support coming from EPIF's majority owner Energetický a prumyslovýholding, a.s. (EPH) in a situation of financial distress. EPIF, which holds 70% of proportionate group debt, is reliant on dividendincome from its subsidiaries, which, in addition to SPP-I and the heating and gas storage subsidiaries, also include a 49% share inthe second-largest power distribution and supply company in Slovakia, Stredoslovenska Energetika group (SSE).Moody's believes that EPIF will be able to service its debt over the next two years without a meaningful contribution from eustreamand SPP-d, given that only interest payments will be due before the next debt maturity of a EUR750 million bond in April 2024. TheBa2 senior unsecured rating of EPIF's outstanding senior bonds is nevertheless one notch below EPIF's CFR, reflecting (1) thestructural subordination of noteholders to the claims of other EPIF group creditors as well as (2) Moody's view that in the currentsituation there is a focus on the protection of the credit profiles of eustream and SPP-d.EPIF's ratings remain on review for downgrade, reflecting the review of eustream's ratings. The review will focus on (1) theevolution and potential effect of sanctions and changes in EU energy policies on EPIF's consolidated credit quality; (2) thecompany's ability and willingness to upstream funds from the operating companies to the holding company; as well as (3) any creditenhancing measures that may become available from shareholders to support the company's credit profile, if required.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSeustreamGiven the review for downgrade, an upgrade of eustream's and SPP-IF's ratings in the near term is unlikely. The ratings could beconfirmed if eustream continues to receive due capacity payments under the long-term transit contracts and uses these to protectits financial profile; or, in case the capacity payments were to be materially reduced, revenues from other bookings could beachieved that support the current credit profile; or if the company obtains adequate support from its owners to offset any furtherdeterioration of its credit profile.eustream's ratings could be downgraded if capacity payments to the company were to be discontinued or materially delayed, forexample due to sanctions, resulting in material pressure on its liquidity and financial profile.SPP-distribúciaGiven the negative outlook, an upgrade of SPP-d's current ratings is unlikely. The ratings could be affirmed with a stable outlookif the credit profile of eustream were to stabilize and there was adequate visibility that any potential financial support needsfrom eustream would not materially affect SPP-d's financial profile.SPP-d's ratings could be downgraded if cash requirements from eustream were to lead to a materially weaker financial profile.EP InfrastructureGiven the review for downgrade, an upgrade of EPIF's ratings is unlikely. The ratings could be confirmed if eustream's ratings wereconfirmed; or if the company obtains adequate support from its owners to offset any further deterioration of its credit profile.EPIF's ratings could be downgraded if eustream's or SPP-d's ratings were downgraded; if dividend flows from subsidiaries wereunlikely to be sufficient to cover the company's operating and interest expenses; or if there was an increased likelihood that thecompany could face difficulties to refinance the next bond maturity.LIST OF AFFECTED RATINGSIssuer: EP Infrastructure, a.s.Assignments:....Probability of Default Rating, Assigned Ba1-PD, Placed On Review for Downgrade....LT Corporate Family Rating, Assigned Ba1, Placed On Review for DowngradeDowngrades:....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Baa3; Placed On Review for further Possible DowngradeWithdrawals:....LT Issuer Rating, Withdrawn, previously rated Baa3, previously Placed On Review for DowngradeIssuer: SPP-distribúcia, a.s.Confirmations:....LT Issuer Rating, Confirmed at Baa2....Senior Unsecured Regular Bond/Debenture, Confirmed at Baa2Outlook Actions:....Outlook, Changed To Negative From Rating Under ReviewIssuer: eustream, a.s.Assignments:....Probability of Default Rating, Assigned Ba1-PD, Placed On Review for Downgrade....LT Corporate Family Rating, Assigned Ba1, Placed On Review for DowngradeDowngrades:....Senior Unsecured Regular Bond/Debenture, Downgraded to Ba1 from Baa2; Placed On Review for further Possible DowngradeWithdrawals:....LT Issuer Rating, Withdrawn, previously rated Baa2, previously Placed On Review for DowngradeIssuer: SPP Infrastructure Financing B.V.Downgrades:....Backed Senior Unsecured Regular Bond/Debenture, Downgraded to Ba1 from Baa2; Placed On Review for further Possible DowngradeThe principal methodology used in rating EP Infrastructure, a.s. and SPP-distribucia, a.s. was Regulated Electric and Gas Networkspublished in March 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1059225. The principalmethodology used in rating eustream, a.s. and SPP Infrastructure Financing B.V. was Natural Gas Pipelines published in July 2018and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1113727. Alternatively, please see the RatingMethodologies page on www.moodys.com for a copy of these methodologies.eustream a.s., is the owner and operator of the natural gas transmission and transit pipeline that runs through Slovakia. In thefinancial year 2020/21 the company reported EUR622 million of revenues and EBITDA of EUR544 million.SPP-distribúcia, a.s. is the monopoly provider of regulated gas distribution services in Slovakia. In the financial year2020/21 the company reported EUR443 million of revenues and an EBIT of EUR178 million.EP Infrastructure, a.s. is a Czech holding company with shareholdings in core Slovak gas and electricity infrastructure, including(1) eustream a.s.; (2) SPP-distribúcia, a.s.; and (3) Stredoslovenska Energetika group. The group also holds stakes inregional gas storage entities SPP Storage, NAFTA, NAFTA Speicher and Pozagas, as well as a number of district heatinginfrastructure providers in the Czech Republic. EP Infrastructure, a.s. is ultimately owned 69% by Energetický a prumyslovýholding, a.s. and 31% by a number of specialist investment funds managed by Macquarie Infrastructure and Real Assets.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions andSensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at:https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatorydisclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, securityor pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's ratingpractices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to thecredit rating action on the support provider and in relation to each particular credit rating action for securities that derivetheir credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certainregulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assignedsubsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to theassignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratingstab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit ratingaction, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be thoseof the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: AncillaryServices, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with amendment resulting from thatdisclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available onits website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook orrating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found athttp://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and isendorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to creditrating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit ratingis available on www.moodys.com.REFERENCES/CITATIONS[1] EPIF press release 10-Mar-2022(https://www.epinfrastructure.cz/en/tiskove-zpravy/epif-and-its-shareholders-restate-commitment-to-investment-grade-credit-rating/)Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued therating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each creditrating.Mark RemshardtVice President - Senior AnalystInfrastructure Finance GroupMoody's Deutschland GmbHAn der Welle 5Frankfurt am Main, 60322GermanyJOURNALISTS: 44 20 7772 5456Client Service: 44 20 7772 5454Paul MartySenior Vice President/ManagerInfrastructure Finance GroupJOURNALISTS: 44 20 7772 5456Client Service: 44 20 7772 5454Releasing Office:Moody's Deutschland GmbHAn der Welle 5Frankfurt am Main, 60322GermanyJOURNALISTS: 44 20 7772 5456Client Service: 44 20 7772 5454© 2022 Moody's Corporation, Moody's Investors Service, Inc.,Moody's Analytics, Inc. and/or their licensors and affiliates(collectively, "MOODY'S"). 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