I need to estimate the Net Debt / EBITDA ratio for 2022 using S&P methodology. First, let me identify the key components needed: - Net Debt - EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) **Step 1: Calculate Net Debt** Net Debt = Total Debt - Cash and Cash Equivalents Total Debt includes: - Long-term borrowings - Current borrowings and current portion of non-current borrowings From the data (2023-01-01 balances, which represent end of 2022): - Longterm Borrowings: 28,083,000,000 EUR - Current Borrowings And Current Portion Of Noncurrent Borrowings: 12,508,000,000 EUR - Cash And Cash Equivalents: 15,570,000,000 EUR Total Debt = 28,083,000,000 + 12,508,000,000 = 40,591,000,000 EUR Net Debt = 40,591,000,000 - 15,570,000,000 = 25,021,000,000 EUR **Step 2: Calculate EBITDA using S&P methodology** S&P methodology typically uses: EBITDA = Current Operating Income + Depreciation & Amortization + Other adjustments However, for S&P methodology, we need to be careful about what constitutes "operating" EBITDA. Let me use a more standard approach: From the income statement for 2022 (2022-01-01 to 2023-01-01): - Current Operating Income Including Operating Mtm: 4,309,000,000 EUR - Depreciation Amortization And Provisions: 5,187,000,000 EUR But wait - "Depreciation Amortization And Provisions" includes provisions, not just D&A. For EBITDA, we typically want just depreciation and amortization. Let me think about this more carefully. S&P Global Ratings methodology for EBITDA: - Start with operating profit (EBIT) - Add back depreciation and amortization Looking at the structure: - Current Operating Income Including Operating Mtm = 4,309,000,000 EUR But we need to adjust this. S&P typically adjusts for non-recurring items and uses a "normalized" EBITDA. Actually, let me look at this differently. S&P methodology for Net Debt/EBITDA: EBITDA can be approximated from: - Profit Loss From Operating Activities: 1,127,000,000 EUR + Finance Costs: 3,700,000,000 EUR + Income Tax Expense (we need to be careful here) Actually, let me use a cleaner approach. S&P typically calculates EBITDA as: - Operating income before depreciation and amortization From the cash flow statement approach: - Cash Flows From Used In Operations Before Changes In Working Capital: 12,415,000,000 EUR This includes: - Operating income + D&A and other non-cash items - Taxes paid - Interest paid/received Actually, let me try a different approach more aligned with S&P methodology: EBITDA = Current Operating Income Including Operating Mtm + Depreciation & Amortization (excluding provisions) But we don't have clean D&A separated from provisions. Let me use: EBITDA = Profit Loss From Operating Activities + Finance Costs + Tax Expense + Depreciation Amortization And Provisions Wait, that's double counting. Let me think more carefully. Looking at standard calculation: EBIT = Profit before tax + Finance costs - Finance income = -1,793,000,000 + 3,700,000,000 - 697,000,000 (this gets messy with losses) Let me use the operating profit approach: Profit Loss From Operating Activities = 1,127,000,000 EUR This is EBIT essentially. To get EBITDA, add back D&A: EBITDA = 1,127,000,000 + 5,187,000,000 = 6,314,000,000 EUR But wait - "Depreciation Amortization And Provisions" includes provisions. For S&P, we might need to adjust. Actually, let me look at what S&P typically does. They often use "Funds From Operations" (FFO) and related metrics. For EBITDA, S&P uses: EBITDA = Operating income + D&A + other non-cash items But looking more carefully at the income statement structure: Current Operating Income Including Operating Mtm: 4,309,000,000 EUR This is before interest and taxes, but after D&A. So: EBITDA = Current Operating Income Including Operating Mtm + Depreciation Amortization And Provisions = 4,309,000,000 + 5,187,000,000 = 9,496,000,000 EUR But this includes provisions, which S&P might adjust. Actually, let me check if "Current Operating Income Including Operating Mtm" is pre or post D&A. Given the structure of income statements, operating income is typically after D&A. So: EBITDA = 4,309,000,000 + 5,187,000,000 = 9,496,000,000 EUR However, S&P methodology makes specific adjustments. They typically adjust for non-recurring items, and they use "adjusted EBITDA." Looking at the S&P approach more carefully - they often calculate from the bottom up: - Net income + Interest + Taxes + D&A + Other non-cash items and adjustments Let me try: Profit Loss = 390,000,000 EUR + Net Financial Income Loss (absolute, so add back the loss): 3,003,000,000 EUR + Income Tax Expense: We have -83,000,000 (benefit) for continuing, but need total Actually, for S&P, let me use a cleaner approach with the operating items: S&P Adjusted EBITDA typically includes: - Operating profit before depreciation and amortization - Adjusted for non-recurring items - Including dividends from equity investments (sometimes) From the data, let me use: Current Operating Income Including Operating Mtm And Share In Net Income Of Equity Method Entities: 5,367,000,000 EUR But this includes share of profit of associates. S&P sometimes includes this, sometimes not. For a more standard S&P EBITDA: = Current Operating Income Including Operating Mtm + D&A = 4,309,000,000 + 5,187,000,000 = 9,496,000,000 EUR But I need to think about whether to include "provisions" in the add-back. "Depreciation Amortization And Provisions" is 5,187,000,000. This likely includes: - Depreciation and amortization - Net change in provisions For pure EBITDA, we want just D&A. The net change in provisions is already reflected in operating income. Actually, looking at the cash flow statement: "Net Depreciation Amortization Impairment And Provisions" = -8,057,000,000 EUR (negative means add-back to get to cash) This is used in the cash flow reconciliation. The negative sign indicates it's added back to profit to get operating cash flow before working capital. Wait - let me re-read: "Net Depreciation Amortization Impairment And Provisions" 2022-01-01 - 2023-01-01: -8057000000 EUR This is in the cash flow statement as an adjustment. So the total add-back for D&A, impairment, and provisions is 8,057,000,000 EUR. But in the income statement, "Depreciation Amortization And Provisions" is 5,187,000,000 EUR. This seems to be the expense line. Hmm, these are different. Let me think... The income statement line "Depreciation Amortization And Provisions" at 5,187,000,000 is likely the expense recognized in operating income. The cash flow adjustment "Net Depreciation Amortization Impairment And Provisions" at 8,057,000,000 includes impairment losses (2,774,000,000 from the income statement) plus possibly other items. For S&P EBITDA, we typically want: EBITDA = EBIT + D&A (excluding impairment) Or more precisely, S&P uses "adjusted EBITDA" which normalizes for certain items. Let me try a different approach using S&P's typical formula: S&P Adjusted EBITDA = Current Operating Income Including Operating Mtm + Depreciation and Amortization (not including impairment or provisions) + Adjustments for non-recurring items But we don't have clean separation. Let me use what we have. Actually, for practical purposes with this data, let me use: EBITDA = Current Operating Income Including Operating Mtm + Depreciation Amortization And Provisions = 4,309,000,000 + 5,187,000,000 = 9,496,000,000 EUR But I need to check if Current Operating Income Including Operating Mtm is before or after this expense. Looking at typical income statement structure, operating income is after D&A expense. So this should be correct. Wait - let me verify by looking at the income statement structure more carefully: Revenue: 93,865,000,000 - Purchases And Operating Derivatives: 74,535,000,000 - Employee Benefits Expense: 8,078,000,000 - Depreciation Amortization And Provisions: 5,187,000,000 - Tax Expense Other Than Income Tax Expense: 3,380,000,000 + Other Income: 1,624,000,000 = Current Operating Income Including Operating Mtm: 4,309,000,000 Let me verify: 93,865 - 74,535 - 8,078 - 5,187 - 3,380 + 1,624 = 4,309 93,865 - 74,535 = 19,330 19,330 - 8,078 = 11,252 11,252 - 5,187 = 6,065 6,065 - 3,380 = 2,685 2,685 + 1,624 = 4,309 ✓ So Current Operating Income Including Operating Mtm is after D&A and provisions. Therefore, EBITDA = 4,309,000,000 + 5,187,000,000 = 9,496,000,000 EUR But S&P methodology might adjust this. They typically make adjustments for: - Non-recurring items - Provisions (if not truly operating) - Share of equity earnings (sometimes included, sometimes not) For S&P Global Ratings, their "adjusted EBITDA" typically includes: - Reported EBITDA +/- adjustments for non-recurring items + dividends from equity investments (if equity method) Actually, S&P has specific criteria. Let me think about what they'd use. S&P typically calculates Debt/EBITDA where: - Debt includes borrowings, finance leases, pension deficits, etc. - EBITDA is adjusted operating profit plus D&A For a quick estimate with available data, let me use: Net Debt = 25,021,000,000 EUR (as calculated) For EBITDA, S&P might use a figure closer to: - Start with Current Operating Income Including Operating Mtm: 4,309,000,000 - Add back D&A portion of "Depreciation Amortization And Provisions" But we can't separate D&A from provisions cleanly. Alternatively, S&P might look at cash flow based measures. Let me check the cash flow: Cash Flows From Used In Operations Before Changes In Working Capital: 12,415,000,000 EUR This includes: - Operating cash flows before working capital changes - Which is roughly: EBITDA - taxes paid + other adjustments Actually, this 12,415,000,000 includes interest and taxes. Let me think... From cash flow statement: Cash Flows From Used In Operations Before Changes In Working Capital = 12,415,000,000 - Income Taxes Paid = 1,504,000,000 - Increase Decrease In Working Capital = 2,424,000,000 (positive means cash inflow) = Cash Flows From Used In Operating Activities Continuing Operations = 8,488,000,000 Hmm, the signs are tricky. Let me re-read: "Cash Flows From Used In Operations Before Changes In Working Capital" - the "From Used In" suggests this could be positive or negative. The value is positive 12,415,000,000. Actually, looking more carefully at typical cash flow presentation: - Cash generated from operations before working capital changes = EBIT + D&A - taxes + other adjustments For S&P EBITDA, a common approach is: EBITDA ≈ Cash Flows From Used In Operations Before Changes In Working Capital + Taxes Paid + Interest Paid - Other non-cash adjustments But this gets complicated. Let me try a simpler approach. Actually, I realize I should look at this more carefully. The S&P methodology for Net Debt/EBITDA: 1. Net Debt: Total debt minus cash and cash equivalents - Total debt = Long-term + Short-term borrowings - Sometimes includes other debt-like items 2. EBITDA: S&P adjusted EBITDA - Typically based on operating profit + D&A - Adjusted for non-recurring items, acquisitions, etc. For ENGIE, with the data available, let me use: **Net Debt calculation:** Longterm Borrowings (2023-01-01): 28,083,000,000 Current Borrowings And Current Portion Of Noncurrent Borrowings (2023-01-01): 12,508,000,000 Total Debt: 40,591,000,000 Cash And Cash Equivalents (2023-01-01): 15,570,000,000 Net Debt = 40,591,000,000 - 15,570,000,000 = 25,021,000,000 EUR **EBITDA calculation:** Using S&P's typical approach, let me calculate from the income statement: Method 1: Operating income based Current Operating Income Including Operating Mtm: 4,309,000,000 + Depreciation Amortization And Provisions: 5,187,000,000 = 9,496,000,000 EUR But this includes "provisions" which may not be pure D&A. Method 2: Using cash flow add-backs From cash flow: "Net Depreciation Amortization Impairment And Provisions" = 8,057,000,000 This is the total add-back. But this includes impairment (2,774,000,000) and is net of certain items. If we add back total D&A, impairment, and provisions to operating profit: Profit Loss From Operating Activities: 1,127,000,000 + 8,057,000,000 = 9,184,000,000 EUR But this is based on a different operating profit measure. Actually, let me think about what S&P does. They typically use "adjusted EBITDA" which is closer to: EBITDA = Revenue - Cash Operating Costs (excluding D&A) Or: EBITDA = EBIT + D&A For S&P specifically, they have a methodology document. Key points: - They use "adjusted EBITDA" - This typically excludes non-recurring items - Includes normalized D&A Given the data, let me use a practical approach: EBITDA = Current Operating Income Including Operating Mtm + Depreciation Amortization And Provisions = 4,309,000,000 + 5,187,000,000 = 9,496,000,000 EUR But wait - I need to check if S&P would include "Other Income" or make other adjustments. Also, should I use pre or post "Other Non Recurring Items"? Looking at the income statement more carefully: Current Operating Income Including Operating Mtm: 4,309,000,000 + Share Of Profit Loss Of Associates: 1,059,000,000 = Current Operating Income Including Operating Mtm And Share In Net Income: 5,367,000,000 Then various adjustments to get to Profit Loss From Operating Activities: - Impairment: -2,774,000,000 - Restructuring: -230,000,000 - Other items: various Profit Loss From Operating Activities: 1,127,000,000 For S&P EBITDA, they might start from a "cleaner" operating profit. Let me think... Actually, S&P Global Ratings typically uses "EBITDA" as reported by the company, adjusted for their methodology. For European utilities, they often use: EBITDA = Operating income before depreciation and amortization The closest in the data is: Current Operating Income Including Operating Mtm + Depreciation Amortization And Provisions = 4,309,000,000 + 5,187,000,000 = 9,496,000,000 But I need to consider if "Current Operating Income Including Operating Mtm" is the right starting point. This includes mark-to-market on operating derivatives, which S&P might adjust. Alternatively, some analysts use "Funds From Operations" (FFO) which is closer to cash flow. But for Debt/EBITDA, it's the earnings-based EBITDA. Let me also consider: should I use average debt or year-end debt? S&P typically uses year-end debt for the ratio (point in time), while EBITDA is trailing 12 months. For 2022 ratio, using 2022 year-end (2023-01-01) balances and 2022 full year EBITDA. One more consideration: S&P Net Debt includes more than just borrowings minus cash. It can include: - Pension deficits - Asset retirement obligations - Provisions for nuclear decommissioning (for utilities) - Less: equity investments (sometimes) For ENGIE, as a utility, there might be significant nuclear provisions or pension items. But with the data given, I'll use simple Net Debt. Let me also check if there are other debt-like items: - Noncurrent Derivative Financial Liabilities: 39,417,000,000 - Current Derivative Financial Liabilities: 11,859,000,000 These are derivative liabilities, not debt. S&P might include some derivative liabilities if they are debt-like, but typically not operating derivatives. Actually, looking more carefully at S&P methodology, they do include certain items in "Total Debt": - Borrowings - Finance lease obligations - Pension deficits - Sometimes operating liabilities if they are debt-like But for a quick estimate, let me use standard Net Debt. However, I realize I should double-check my EBITDA calculation. Let me verify by another approach: From the bottom up: Profit Loss: 390,000,000 + Net Financial Income Loss: 3,003,000,000 (since it's a loss, add back) + Income Tax Expense: -83,000,000 (this is a benefit, so subtract?) = EBIT: ? Actually, let me be careful: Profit Loss From Continuing Operations: -1,793,000,000 + Profit Loss From Discontinued Operations: 2,183,000,000 = Profit Loss: 390,000,000 For EBIT from continuing operations: Profit Loss From Continuing Operations: -1,793,000,000 + Net Financial Income Loss: 3,003,000,000 (add back the loss, i.e., subtract negative) + Income Tax Expense Continuing Operations: -83,000,000 (this is negative, meaning tax benefit) Wait, the sign convention is tricky. "Income Tax Expense Continuing Operations" is -83,000,000. Negative expense means benefit. So EBIT (continuing) = -1,793,000,000 + 3,003,000,000 - (-83,000,000)? No wait... Actually: Profit before tax = Profit after tax + Tax expense -1,793,000,000 = Profit before tax - 83,000,000? No, -1,793 = PBT + tax benefit... Let me think: If tax expense is negative (benefit), then: Profit after tax = Profit before tax - Tax expense -1,793,000,000 = PBT - (-83,000,000) = PBT + 83,000,000 So PBT = -1,793,000,000 - 83,000,000 = -1,876,000,000 Then EBIT = PBT + Finance Costs - Finance Income = -1,876,000,000 + 3,700,000,000 - 697,000,000 = 1,127,000,000 This matches "Profit Loss From Operating Activities"! So Profit Loss From Operating Activities = EBIT = 1,127,000,000 EUR Then EBITDA = EBIT + D&A = 1,127,000,000 + 5,187,000,000 = 6,314,000,000 EUR? Wait, but this is different from my previous calculation. Let me check... Earlier I used Current Operating Income Including Operating Mtm = 4,309,000,000 as starting point. The difference: 4,309,000,000 vs 1,127,000,000 = 3,182,000,000 This difference is explained by the items between Current Operating Income and Profit From Operating Activities: - Share Of Profit Of Associates: 1,059,000,000 - Impairment Loss: -2,774,000,000 - Restructuring: -230,000,000 - Other items: various Current Operating Income Including Operating Mtm And Share: 5,367,000,000 + Impairment Loss Reversal (actually expense): -2,774,000,000 + Restructuring: -230,000,000 + Other Income Expense From Subsidiaries: 91,000,000 + Other Non Recurring Items: -1,328,000,000 = Profit Loss From Operating Activities: 1,127,000,000? Let me verify: 5,367 - 2,774 - 230 + 91 - 1,328 = 1,126 ≈ 1,127 ✓ So which EBITDA should I use for S&P? S&P typically uses "adjusted EBITDA" which often starts from a normalized operating profit. They might: 1. Start from Current Operating Income (before non-recurring items) and add D&A 2. Or start from reported EBIT and add D&A, then adjust For S&P Global Ratings specifically, they have a defined "adjusted EBITDA" that: - Excludes non-recurring items (impairment, restructuring, etc.) - Includes D&A - May include dividends from equity investments If we use Current Operating Income Including Operating Mtm (which is before impairment, restructuring, etc.) plus D&A: = 4,309,000,000 + 5,187,000,000 = 9,496,000,000 EUR But this includes "provisions" in the D&A line. Alternatively, if we use the cash flow based approach where "Net Depreciation Amortization Impairment And Provisions" = 8,057,000,000, this is the actual add-back to get from profit to cash flow. Actually, I think for S&P, a common approach is: Adjusted EBITDA = Current Operating Income Including Operating Mtm + Normalized D&A But "Depreciation Amortization And Provisions" includes changes in provisions, not just D&A. The pure D&A might be different. Hmm, let me think about this differently. For a utility like ENGIE, S&P might use "Funds From Operations" (FFO) which is closer to cash flow, and then convert to EBITDA. Actually, let me look at what data we have more carefully. The cash flow statement shows: Cash Flows From Used In Operations Before Changes In Working Capital: 12,415,000,000 This is roughly: EBITDA - Cash taxes + Other adjustments If Cash Flows From Used In Operations Before Changes In Working Capital = 12,415,000,000 And Income Taxes Paid = 1,504,000,000 And working capital is separate Then roughly: EBITDA - Interest - Taxes ≈ Cash Flow From Operations before WC changes Actually, Cash Flows From Used In Operations Before Changes In Working Capital typically equals: Net Income + D&A + Other non-cash items - Gain/Loss on sales + Other adjustments For ENGIE, from the cash flow reconciliation: Profit Loss: 390,000,000 + Adjustments for undistributed profits of equity method: 1,059,000,000 + Adjustments for dividend income: -713,000,000 + Net Depreciation Amortization Impairment And Provisions: 8,057,000,000 + Impact of changes in scope and non-recurring: -74,000,000 + Adjustments for gains/losses on fair value of derivatives: -3,661,000,000 + Other adjustments for non-cash items: -157,000,000 + Adjustments for income tax expense: -83,000,000 + Adjustments for finance income/cost: -3,003,000,000 = 12,415,000,000? Let me check: 390 + 1,059 - 713 + 8,057 - 74 - 3,661 - 157 - 83 - 3,003 = 1,815? That doesn't equal 12,415. Let me recalculate... 390 + 1,059 = 1,449 1,449 - 713 = 736 736 + 8,057 = 8,793 8,793 - 74 = 8,719 8,719 - 3,661 = 5,058 5,058 - 157 = 4,901 4,901 - 83 = 4,818 4,818 - 3,003 = 1,815 Hmm, that's 1,815, not 12,415. So either my understanding of the signs is wrong, or these adjustments work differently. Actually, I think the issue is that "Adjustments For Finance Income Cost" at -3,003,000,000 means we're adding back a loss (so the cash flow adjustment is positive 3,003,000,000). Let me re-read... In cash flow statements, adjustments to net income are typically: - Add back expenses (positive adjustment) - Subtract income (negative adjustment) So "Adjustments For Finance Income Cost" = -3,003,000,000 means we subtract 3,003,000,000 from net income. But finance cost is an expense, so we should add it back... Wait, "Net Financial Income Loss" is -3,003,000,000, meaning a loss of 3,003,000,000. In the cash flow, we add back this loss. But the adjustment is shown as -3,003,000,000? I think the sign convention in the data might be: negative values for adjustments mean "add back" (i.e., the adjustment is a positive add-back to cash flow). Actually, looking at the label "Adjustments For Finance Income Cost" with value -3,003,000,000 - this likely means the adjustment to cash flow is +3,003,000,000 (adding back the finance cost). Let me try with opposite signs for the adjustments: 390 + 1,059 - 713 + 8,057 - 74 + 3,661 - 157 + 83 + 3,003 = ? Wait, I need to be more careful. Let me think about which adjustments are positive or negative. Standard cash flow reconciliation: Start with Net Income + D&A (positive add-back) + Impairment (positive add-back) - Gain on sale (negative, i.e., subtract) + Loss on sale (positive add-back) - Increase in working capital (negative for cash flow) etc. For "Adjustments For Dividend Income" at -713,000,000: Dividend income is included in net income but is investing cash flow, so we subtract it from operating cash flow. So -713,000,000 means subtract 713,000,000. For "Net Depreciation Amortization Impairment And Provisions" at -8,057,000,000: This is an expense in P&L, so we add it back. The negative sign might mean "add back" or the value represents the expense amount which gets added. Actually, I think in this data format, the negative value indicates the nature of the adjustment (expense = negative = add back). Hmm, this is getting confusing with the sign conventions. Let me just use a simpler approach. For S&P Net Debt/EBITDA, I'll use: **Net Debt** = Total Debt - Cash = 40,591 - 15,570 = 25,021 million EUR **EBITDA** = I'll use two approaches and see which makes more sense: Approach 1: Current Operating Income + D&A = 4,309 + 5,187 = 9,496 million EUR Approach 2: EBIT + D&A = 1,127 + 5,187 = 6,314 million EUR The difference is whether we start from "Current Operating Income" (before non-recurring items) or "Profit From Operating Activities" (after non-recurring items). For S&P, they typically use "adjusted EBITDA" which excludes non-recurring items like impairment and restructuring. So Approach 1 is more appropriate, but we need to use "adjusted" operating income. Actually, "Current Operating Income Including Operating Mtm" at 4,309 already seems to be the "current" or "recurring" operating income, before non-recurring items. The non-recurring items (impairment, restructuring, etc.) are below this line. So EBITDA = 4,309 + 5,187 = 9,496 million EUR seems reasonable for S&P adjusted EBITDA. But wait - I need to check if "Depreciation Amortization And Provisions" is already included in "Current Operating Income Including Operating Mtm". From my verification earlier: Revenue - Purchases - Employee Benefits - D&A and Provisions - Tax Other + Other Income = Current Operating Income Yes! D&A and Provisions is subtracted to get to Current Operating Income. So adding it back gives EBITDA. Therefore: EBITDA = 9,496,000,000 EUR Net Debt / EBITDA = 25,021 / 9,496 = 2.63x But let me reconsider if S&P would make other adjustments. They might: - Exclude "Tax Expense Other Than Income Tax" from EBITDA calculation? No, this is an operating expense. - Include share of equity earnings? Sometimes yes, sometimes no. Actually, looking at S&P methodology more carefully, they often calculate "adjusted EBITDA" as: - Reported EBITDA +/- adjustments for non-recurring items + dividends from equity investments (if not already included) For ENGIE, if we use "Current Operating Income Including Operating Mtm And Share In Net Income Of Equity Method Entities" = 5,367, then: EBITDA = 5,367 + 5,187 = 10,554 million EUR But this includes equity earnings pre-tax, which might not be appropriate for EBITDA. Actually, S&P sometimes includes dividends received from equity investments in EBITDA, not the full equity earnings. Let me check: "Dividends Received Classified As Investing Activities" = 18,000,000 EUR. This is small. And "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method" = 1,059,000,000 EUR. This is the equity earnings included in net income. I think for S&P, using the standard operating income (excluding equity earnings) is more appropriate for EBITDA. Let me also consider: should I use "commuting" or reported EBITDA? S&P typically adjusts for mark-to-market (MTM) on derivatives. "Current Operating Income Including Operating Mtm" includes MTM. S&P might adjust this to exclude MTM. But without more detail, I'll use what's available. One more check: Net Debt calculation. Should I include current portion of long-term debt? Yes, already included. Should I include lease liabilities? Not separately identified. Should I include other debt-like items? For ENGIE, looking at the balance sheet, there might be: - Noncurrent Contract Liabilities: 121,000,000 - Current Contract Liabilities: 3,292,000,000 These are contract liabilities (deferred revenue), not debt. - Noncurrent Derivative Financial Liabilities: 39,417,000,000 - Current Derivative Financial Liabilities: 11,859,000,000 These are derivatives. S&P might include some if they are "debt-like" but typically exclude operating derivatives. For a conservative S&P estimate, I'll include only borrowings. Net Debt = 28,083 + 12,508 - 15,570 = 25,021 million EUR Actually, let me also check if there are other borrowings not captured. The data shows: - Longterm Borrowings: 28,083 - Current Borrowings And Current Portion Of Noncurrent Borrowings: 12,508 These seem to be the complete debt figures. Now for EBITDA, let me also consider an alternative: S&P sometimes uses "EBITDA before non-recurring items" more strictly. If we look at "Profit Loss From Operating Activities" = 1,127, this includes: - Impairment: -2,774 - Restructuring: -230 - Other non-recurring: -1,328 To normalize: 1,127 + 2,774 + 230 + 1,328 = 5,459 (approximate, ignoring other items) Then EBITDA = 5,459 + 5,187 = 10,646? But this doesn't match the 4,309 + 5,187 = 9,496 because of the share of equity earnings and other items. Actually, let me trace through: Current Operating Income Including Operating Mtm: 4,309 + Share Of Profit Of Associates: 1,059 = 5,368 (with rounding) - Impairment: 2,774 - Restructuring: 230 + Other Income Expense From Subsidiaries: 91 - Other Non Recurring Items: 1,328 = 5,368 - 2,774 - 230 + 91 - 1,328 = 1,127 ✓ So if S&P wants "adjusted operating income" excluding non-recurring items, they might use: 4,309 (Current Operating Income) + adjustments for any non-recurring items within this line Or they might use: 1,127 (Reported Operating Profit) + 2,774 (impairment) + 230 (restructuring) + 1,328 (other non-recurring) - 91 (other) = 5,368 before share of equity earnings, then adjust for equity earnings... This is getting complicated. Let me use a simpler S&P approach: S&P Adjusted EBITDA typically = Reported EBITDA adjusted for non-recurring items and certain other items. If reported EBITDA (from Current Operating Income) = 9,496, and there are no major non-recurring items in this figure (impairment is below this line), then 9,496 might be close to S&P EBITDA. But actually, looking more carefully, "Current Operating Income Including Operating Mtm" is meant to be the "current" or recurring operating income. The non-recurring items are shown separately below it. So 9,496 is already a good measure of "current" EBITDA. However, S&P might make additional adjustments for: - Provisions (if they view them as non-recurring or non-cash in nature) - MTM on derivatives (to normalize) For a utility with commodity derivatives, S&P often adjusts MTM to a "normalized" or "realized" basis. Without more information, let me use EBITDA = 9,496 million EUR as my best estimate. Net Debt / EBITDA = 25,021 / 9,496 = 2.635 Let me also check using the other EBITDA measure: If EBITDA = 6,314 (from EBIT + D&A), then ratio = 25,021 / 6,314 = 3.96 This is quite different. Which is more appropriate for S&P? I think S&P would prefer the "adjusted" measure that excludes impairment and other non-recurring items. So 9,496 is more appropriate. But let me reconsider: "Depreciation Amortization And Provisions" - the "Provisions" part might include changes in operating provisions (like warranty, litigation, etc.) which are part of normal operations, or it might include large one-time provisions. For S&P, if they want "clean" EBITDA, they might try to separate D&A from provision changes. Looking at the cash flow: "Net Depreciation Amortization Impairment And Provisions" = 8,057 This is larger than 5,187, suggesting there are additional items in the cash flow reconciliation (like impairment of 2,774). If pure D&A = 5,187 - (provision changes), and provision changes are say 1,000, then D&A = 4,187, and EBITDA = 4,309 + 4,187 = 7,496. But we don't have this breakdown. Given the uncertainty, let me use a range or pick the most reasonable estimate. Actually, I realize I should check if there's a better way to estimate pure D&A. From the income statement, "Depreciation Amortization And Provisions" = 5,187 From cash flow, "Net Depreciation Amortization Impairment And Provisions" = 8,057 The difference: 8,057 - 5,187 = 2,870. This roughly equals impairment (2,774) plus some other items. Actually, the cash flow add-back is 8,057, which includes: - D&A: ? - Impairment: 2,774 - Provisions: ? And the income statement expense is 5,187 for D&A and Provisions. I think for practical purposes, using 9,496 as EBITDA is reasonable. But wait - I want to double check one thing. In some presentations, "Current Operating Income" is already EBITDA-like (before D&A). Let me re-verify my income statement reconstruction. Revenue: 93,865 - Purchases And Operating Derivatives: 74,535 = Gross Margin: 19,330 - Employee Benefits: 8,078 - D&A And Provisions: 5,187 - Tax Expense Other Than Income Tax: 3,380 + Other Income: 1,624 = Current Operating Income: 4,309 Yes, D&A is subtracted. So EBITDA = 4,309 + 5,187 = 9,496. Actually, I want to make sure about "Tax Expense Other Than Income Tax" - this is likely things like property taxes, payroll taxes, etc. that are operating expenses. Yes, they should be in operating income and EBITDA. Now, one more consideration for Net Debt: S&P sometimes includes "noncontrolling interests" adjustments or other equity items. But typically not for basic Net Debt. Also, S&P might gross up cash for restricted cash or include short-term investments. The data shows "Cash And Cash Equivalents" at 15,570. I'll use this. Final calculation: Net Debt = 40,591 - 15,570 = 25,021 million EUR EBITDA = 9,496 million EUR Net Debt / EBITDA = 2.635 Rounding to reasonable precision: 2.6x or 2.63x Let me also consider if I should use average debt or year-end debt. S&P typically uses point-in-time (year-end) debt for leverage ratios. Actually, I want to check one more thing. Is there any "debt" in the held-for-sale items? "Noncurrent Assets Or Disposal Groups Classified As Held For Sale" - these are assets, not debt. "Liabilities Included In Disposal Groups Classified As Held For Sale" = 371,000,000 EUR Should I include this in debt? If these are disposal groups, the liabilities might include debt. But typically for Net Debt, S&P includes all debt-like items. However, 371 is small relative to total debt. Also, I should check if there are other financial liabilities that are debt-like: - Other Noncurrent Financial Liabilities: 90,000,000 - Other Current Financial Liabilities: not separately stated These seem small. Let me finalize with: Net Debt = 25,021 million EUR EBITDA = 9,496 million EUR Ratio = 2.63 Actually, I want to do one more sanity check. Let me see if I can derive EBITDA from the cash flow statement in a different way. Cash Flows From Used In Operating Activities = 8,586 million + Income Taxes Paid = 1,504 million + Interest Paid (financing) = 822 million - Interest Received (investing) = -37 million? - Dividends Received (investing) = -18 million? Actually, this gets messy with the classification of interest and dividends. Let me try: Cash Flows From Used In Operations Before Changes In Working Capital = 12,415 million This equals roughly: EBITDA - Cash Interest - Cash Taxes + Other items If Cash Taxes = 1,504 (from "Income Taxes Paid Refund Classified As Operating Activities" - positive means paid) And Cash Interest is part of the financing or operating cash flows... Actually, "Interest Paid Classified As Financing Activities" = 822 million "Interest Received On Cash And Cash Equivalents" = -194 million (negative, so received?) Hmm, the sign conventions are tricky. Let me not go down this path. I'll stick with my calculation: Net Debt / EBITDA = 25,021 / 9,496 = 2.63 But wait - I want to reconsider one thing. Should I use "Current Operating Income Including Operating Mtm" or "Current Operating Income Including Operating Mtm And Share In Net Income Of Equity Method Entities"? The latter includes 1,059 million of equity earnings. For EBITDA, S&P typically does NOT include equity earnings in EBITDA (they include dividends from equity investments in FFO, but not EBITDA). However, some practitioners add back the equity earnings to get a "total" EBITDA. But standard S&P practice is to exclude equity earnings from EBITDA. So using 4,309 (before equity earnings) is correct. Actually, let me verify: is 4,309 before or after equity earnings? Looking at the labels: - "Current Operating Income Including Operating Mtm" = 4,309 - "Current Operating Income Including Operating Mtm And Share In Net Income Of Equity Method Entities" = 5,367 So 4,309 is BEFORE equity earnings. Good. One final check: should I adjust for the "Operating Mtm" component? S&P might adjust MTM on derivatives to a normalized level. But without information on what "normalized" would be, I'll use the reported figure. My final answer: Net Debt / EBITDA = 25,021 / 9,496 = 2.63 Actually, let me recalculate more precisely: 25,021 / 9,496 = 2.63479... I'll round to 2.6 or provide 2.63. Given the estimation nature, 2.6 seems appropriate, but let me provide 2.63 for more precision. Wait, I want to double-check my arithmetic: 25,021 / 9,496 25,021 / 9,496 = ? 9,496 × 2 = 18,992 9,496 × 2.5 = 23,740 9,496 × 2.6 = 24,689.6 9,496 × 2.63 = 24,974.48 9,496 × 2.635 = 25,021.96 So 2.635 is very close. Let me use 2.63 or 2.64. Actually, let me be more precise: 25,021 / 9,496 = 2.63479... I'll provide 2.6 as a rounded figure, or perhaps 2.63. Let me think about what's most appropriate... Given this is an estimate based on available data, I'll provide 2.6 as my best estimate, or perhaps be more precise with 2.63. Actually, looking at this again, I realize I want to check one more thing. The S&P methodology might treat "provisions" differently. If "Depreciation Amortization And Provisions" includes significant changes in operating provisions, S&P might want to exclude these from EBITDA (since they're more related to working capital or accruals). But without a breakdown, I can't adjust for this. Let me also consider an alternative EBITDA calculation: using the "Net Depreciation Amortization Impairment And Provisions" from cash flow. If I start from Profit Loss From Operating Activities (1,127) and add back the cash flow adjustment (8,057), I get 9,184. But this includes impairment and other items, and the starting point is different. Actually, 1,127 + 8,057 = 9,184, which is close to 9,496. The difference is 312, which might be due to different treatment of certain items. For S&P, using the "Current Operating Income" based EBITDA (9,496) seems more appropriate since it's based on recurring operating income. I'll finalize with 2.6 as my estimate. Hmm, but let me reconsider one more time. Should I use end-of-year or average debt? For leverage ratios, S&P typically uses year-end debt. But some practitioners use average debt for the year. If I use average debt: (40,591 + 41,048) / 2 = 40,819.5, where 41,048 = 30,458 + 10,590 (2021 year-end debt). Average Net Debt = 40,819.5 - average cash. Cash at 2022-01-01 = 13,890, 2023-01-01 = 15,570. Average = 14,730. Average Net Debt = 40,819.5 - 14,730 = 26,089.5 Ratio with average Net Debt = 26,089.5 / 9,496 = 2.75 But S&P typically uses point-in-time debt, not average. So I'll stick with 2.63. Final answer: 2.6 (rounded) or 2.63 (more precise). I'll provide 2.6 given the estimation uncertainty. Actually, I want to check one more thing. Let me see if there's any other debt I should include. Looking at balance sheet 2023-01-01: - Noncurrent Derivative Financial Liabilities: 39,417,000,000 - Current Derivative Financial Liabilities: 11,859,000,000 These are quite large! Are these "debt" for S&P purposes? For energy companies, commodity derivatives can be significant. S&P's methodology states: - Debt includes borrowings, finance leases, and certain other obligations - Derivative liabilities are typically NOT included in debt unless they are "debt-like" (e.g., interest rate swaps, cross-currency swaps used to hedge debt) Commodity derivatives (which "Purchases And Operating Derivatives" suggests) are operating items, not debt-like. So I'll exclude them. But wait - the label is "Noncurrent Derivative Financial Liabilities" and "Current Derivative Financial Liabilities". These could include both commodity and financial derivatives. For ENGIE, given the large size (39.4 billion noncurrent + 11.9 billion current = 51.3 billion total), these are likely mostly commodity derivatives related to their energy trading and hedging activities. These are operating, not debt. S&P would typically exclude these from debt. However, if there are interest rate or currency derivatives that are debt-like, S&P might include them. But we can't separate these from the data. I'll exclude derivative liabilities from debt. Final answer: Net Debt / EBITDA = 25,021 / 9,496 = 2.63 Let me provide this as 2.6 rounded, or be more precise. I think for this exercise, I'll provide 2.63 or about 2.6. Actually, rethinking - I want to make sure about the EBITDA one more time. Let me see if S&P would use a different measure. S&P Global Ratings has a specific definition: "EBITDA is generally operating profit before depreciation and amortization, adjusted for nonrecurring items, dividends from unconsolidated affiliates, and other items." For ENGIE, "dividends from unconsolidated affiliates" might be included. But we only have "Dividends Received Classified As Investing Activities" = 18 million, which is small. Also, S&P adjusts for "nonrecurring items." The impairment, restructuring, and other non-recurring items total about 4.3 billion (2,774 + 230 + 1,328 - 91 = 4,241). If we start from reported operating profit (1,127) and add back non-recurring items (4,241), we get 5,368. Then add D&A (5,187) = 10,555. But this includes equity earnings. Actually, 5,368 includes equity earnings of 1,059. So pre-equity earnings = 4,309. Then EBITDA = 4,309 + 5,187 = 9,496. This matches! So "Current Operating Income Including Operating Mtm" at 4,309 is essentially the "adjusted operating income" before non-recurring items and before equity earnings. So my EBITDA = 9,496 is consistent with S&P's approach of adjusting for non-recurring items. I'm comfortable with this estimate. One more very small check: should I include the 91 million "Other Income Expense From Subsidiaries Jointly Controlled Entities And Associates" as non-recurring? It's small and hard to classify. I'll leave it as is since it's already reflected in the operating income figures. Final calculation: Net Debt = 40,591 - 15,570 = 25,021 EBITDA = 9,496 Ratio = 2.63 I'll round to 2.6 or provide 2.63. Given the data precision (billions), I'll provide 2.6. Actually, let me see if I should express this differently. The ratio is typically expressed as a multiple, so "2.6x" or just "2.6". For the final answer format, I need to provide just the number between tags. Let me go with 2.6 as a reasonable rounded estimate. Hmm, but I want to be a bit more careful. Let me see if there's any reason to use a slightly different EBITDA. Alternative: Some practitioners calculate EBITDA as: Revenue - Cash Operating Expenses (excluding D&A) = 93,865 - 74,535 - 8,078 - 3,380 + 1,624 = 9,496 Same result! Good. Or: Gross Margin - OpEx (excluding D&A) + Other Income = 19,330 - 8,078 - 3,380 + 1,624 = 9,496 Wait, that's not right. 19,330 - 8,078 - 3,380 + 1,624 = 9,496? 19,330 - 8,078 = 11,252 11,252 - 3,380 = 7,872 7,872 + 1,624 = 9,496 ✓ But this is EBITDA excluding D&A add-back? No wait, I didn't subtract D&A. Let me re-think. Gross Margin = Revenue - Purchases = 93,865 - 74,535 = 19,330 Then subtract: Employee Benefits (8,078), Tax Other (3,380) Add: Other Income (1,624) = 19,330 - 8,078 - 3,380 + 1,624 = 9,496 But where is D&A? I didn't include it! So this 9,496 is... wait, that's the same as my EBITDA? No, I think I made an error. Let me re-check: Revenue: 93,865 - Purchases: 74,535 - Employee Benefits: 8,078 - D&A And Provisions: 5,187 - Tax Other: 3,380 + Other Income: 1,624 = 4,309 (Operating Income) So if I don't subtract D&A: 93,865 - 74,535 - 8,078 - 3,380 + 1,624 = 9,496 Yes! This is EBITDA = 9,496. Because I didn't subtract the 5,187 D&A expense. So EBITDA = 9,496 is correct. Final answer: 25,021 / 9,496 = 2.63 I'll provide this as 2.6 rounded to one decimal place, or 2.63. I think 2.6 is appropriate for an estimate. Actually, looking at typical S&P presentations, they often show one decimal place. So 2.6x. But let me also check if I should use 2022 year-end or 2021 year-end for debt. The 2022 annual report covers 2022-01-01 to 2023-01-01, so 2023-01-01 is year-end 2022. Yes, using 2023-01-01 balances is correct for "2022 year-end". Final answer: 2.6 Wait, I want to do one more verification of my Net Debt. Let me check 2021 year-end debt: Longterm Borrowings 2022-01-01: 30,458 Current Borrowings 2022-01-01: 10,590 Total Debt 2021 year-end: 41,048 Cash 2022-01-01: 13,890 Net Debt 2021 year-end: 41,048 - 13,890 = 27,158 Net Debt 2022 year-end: 25,021 So net debt decreased from 27,158 to 25,021, which makes sense given the cash flow profile. For 2021 EBITDA (rough check): Current Operating Income 2021: 6,116 + D&A 2021: 4,840 = EBITDA 2021: 10,956 Net Debt / EBITDA 2021 = 27,158 / 10,956 = 2.48 So the ratio went from 2.48 to 2.63, which is plausible given revenue increased but operating income decreased. Actually, this makes me wonder if I should check my 2021 numbers too. But the question asks for 2022, so I'll focus on that. Given all this analysis, my final answer is 2.6 (or more precisely 2.63). I'll provide 2.6 as a reasonable rounded estimate. 2.6