I need to calculate the Net Debt / EBITDA ratio for 2022 using S&P methodology. First, let me understand the S&P methodology for Net Debt/EBITDA: - Net Debt = Total Debt - Cash and Cash Equivalents - EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization Let me identify the relevant figures from the data. **For 2022 (period 2022-01-01 to 2023-01-01):** **Debt components:** - Noncurrent Financial Liabilities (Long-term borrowings + Other noncurrent financial liabilities): 5,543,755,000 EUR - Longterm Borrowings: 5,491,124,000 EUR - Other Noncurrent Financial Liabilities: 52,631,000 EUR - Current Financial Liabilities: 1,705,277,000 EUR - Current Borrowings And Current Portion Of Noncurrent Borrowings: 721,845,000 EUR - Other Current Financial Liabilities: 983,432,000 EUR Total Debt = 5,543,755,000 + 1,705,277,000 = 7,249,032,000 EUR **Cash and Cash Equivalents:** - Cash And Cash Equivalents at 2023-01-01: 794,824,000 EUR - Current Financial Assets At Amortised Cost: 752,505,000 EUR (this is typically included as cash-like instruments) However, for S&P methodology, we need to be careful. Let me check what should be included. Actually, looking more carefully at S&P methodology: - Net Debt = Short-term debt + Long-term debt - Cash and cash equivalents - Marketable securities From the balance sheet at 2023-01-01 (end of 2022): - Current Financial Liabilities (short-term debt): 1,705,277,000 EUR - Noncurrent Financial Liabilities (long-term debt): 5,543,755,000 EUR - Cash And Cash Equivalents: 794,824,000 EUR For cash-like items, I should also consider: - Current Financial Assets At Amortised Cost: 752,505,000 EUR (these are typically liquid financial assets) But wait - let me re-read. The S&P methodology typically uses: - Debt = Interest-bearing debt (both short-term and long-term borrowings) Let me look at what's clearly debt: - Longterm Borrowings: 5,491,124,000 EUR - Current Borrowings And Current Portion Of Noncurrent Borrowings: 721,845,000 EUR - Other Noncurrent Financial Liabilities: 52,631,000 EUR - Other Current Financial Liabilities: 983,432,000 EUR Total Financial Liabilities = 7,249,032,000 EUR For Net Debt, we subtract cash and cash equivalents: - Cash And Cash Equivalents: 794,824,000 EUR Net Debt = 7,249,032,000 - 794,824,000 = 6,454,208,000 EUR Wait, I need to check if there are other cash-like items. The "Current Financial Assets At Amortised Cost" of 752,505,000 EUR might also be liquid. However, in strict S&P methodology, this might not always be subtracted unless it's clearly cash equivalents or marketable securities. Actually, looking more carefully at standard practice, for S&P Global Ratings methodology: - Net debt = Total debt (short-term + long-term) minus cash and cash equivalents minus liquid investments Let me check: "Current Financial Assets At Amortised Cost" = 752,505,000 EUR. This could include deposits, short-term investments, etc. But without more detail, I'll be conservative and only subtract Cash and Cash Equivalents. Actually, re-thinking: in many European annual reports, "Cash And Cash Equivalents" is the main liquid item, and "Current Financial Assets At Amortised Cost" might include things like short-term deposits. Let me check if this is clearly liquid. For S&P methodology, I'll use: Net Debt = Total Debt - Cash and Cash Equivalents Total Debt = Current Borrowings + Noncurrent Borrowings + Other financial liabilities that are debt-like Actually, let me be more precise. "Current Financial Liabilities" and "Noncurrent Financial Liabilities" are the broad categories. Total Debt = 1,705,277,000 + 5,543,755,000 = 7,249,032,000 EUR Net Debt = 7,249,032,000 - 794,824,000 = 6,454,208,000 EUR **Now for EBITDA:** From the income statement 2022-01-01 to 2023-01-01: - Profit Loss From Operating Activities (EBIT): 961,554,000 EUR - Depreciation And Amortisation Expense: 544,992,000 EUR EBITDA = EBIT + Depreciation and Amortization = 961,554,000 + 544,992,000 = 1,506,546,000 EUR Wait, I need to check if "Profit Loss From Operating Activities" is truly EBIT. Looking at the structure: - Revenue: 2,015,036,000 - Various operating items... - Profit Loss From Operating Activities: 961,554,000 This appears to be operating profit before financing costs, so yes, this is EBIT. But wait - I need to check if there are adjustments needed. Let me verify by looking at the components that lead to Profit Before Tax: Profit Loss From Operating Activities: 961,554,000 + Finance Income: 23,161,000 - Finance Costs: 116,468,000 + Gains Losses On Financial Assets: 1,196,000 + Gains Losses On Exchange Differences: 74,000 = Profit Loss Before Tax: 869,517,000 Let me verify: 961,554,000 + 23,161,000 - 116,468,000 + 1,196,000 + 74,000 = 869,517,000 ✓ So EBIT = Profit Loss From Operating Activities = 961,554,000 EUR EBITDA = 961,554,000 + 544,992,000 = 1,506,546,000 EUR **Net Debt / EBITDA ratio:** = 6,454,208,000 / 1,506,546,000 = 4.284 Wait, let me reconsider if I should include "Current Financial Assets At Amortised Cost" as cash-like. In S&P methodology, they often include "cash and liquid investments." Current Financial Assets At Amortised Cost: 752,505,000 EUR - this is a large amount. Let me think... Actually, looking at the structure, this went from 25,401,000 in 2022 to 752,505,000 in 2023. This is a huge increase and likely represents short-term deposits or similar liquid instruments. If I include this as cash-like: Net Debt = 7,249,032,000 - 794,824,000 - 752,505,000 = 5,701,703,000 EUR Net Debt / EBITDA = 5,701,703,000 / 1,506,546,000 = 3.785 But I need to be careful. S&P methodology is specific. Let me think about what "Current Financial Assets At Amortised Cost" typically includes. These could be: - Short-term deposits with banks - Loans to related parties - Other receivables Without knowing exactly what's in there, I should be cautious. However, in many cases, especially when zero is reported for "Current Financial Assets Measured At Fair Value Through Other Comprehensive Income" and "Current Financial Assets At Fair Value Through Profit Or Loss", the amortized cost category likely includes standard bank deposits and similar. Actually, let me re-check. The total Current Assets are 2,947,307,000. This includes: - Inventories: 41,321,000 - Trade And Other Current Receivables: 1,358,657,000 - Current Tax Assets: 182,497,000 - Other Current Financial Assets: 752,505,000 - Cash And Cash Equivalents: 794,824,000 Total = 41,321 + 1,358,657 + 182,497 + 752,505 + 794,824 = 3,129,804,000... Wait, that doesn't match 2,947,307,000. Let me recheck. Actually, looking more carefully: "Other Current Financial Assets" = 752,505,000, and "Current Financial Assets At Amortised Cost" = 752,505,000. These appear to be the same thing (one is the breakdown, one is the total). Let me recalculate: 41,321 + 1,358,657 + 182,497 + 752,505 + 794,824 = 3,129,804. That's not 2,947,307. Hmm, let me check: 2,947,307 - (41,321 + 1,358,657 + 182,497 + 752,505 + 794,824) = negative. Wait, I think I need to re-read. "Trade And Other Current Receivables" = 1,358,657,000. But then there are sub-items: - "Current Trade Receivables" = 75,081,000 - "Other Current Receivables" = 1,101,079,000 75,081 + 1,101,079 = 1,176,160, not 1,358,657. Hmm, these don't add up. Let me not worry about this and just use the main categories. Actually, I think "Trade And Other Current Receivables" might include something else, or there might be different breakdowns. For my calculation, let me stick with the main approach: **Debt:** - Noncurrent Financial Liabilities: 5,543,755,000 - Current Financial Liabilities: 1,705,277,000 Total Debt = 7,249,032,000 **Cash and equivalents:** - Cash And Cash Equivalents: 794,824,000 Net Debt = 7,249,032,000 - 794,824,000 = 6,454,208,000 But wait - I should also check if there are derivative financial assets that are favorable and could offset debt. Looking at: - Noncurrent Derivative Financial Assets: 110,616,000 - Current Derivative Financial Assets: 0 And liabilities: - Noncurrent Derivative Financial Liabilities: 22,016,000 - Current Derivative Financial Liabilities: 7,053,000 Net derivatives = 110,616 - 22,016 - 7,053 = 81,547,000 (asset) In some methodologies, derivative assets are not included in net debt calculations, or are treated separately. For S&P methodology, let me stick to the standard approach: Debt minus Cash. Actually, I want to reconsider whether "Other Current Financial Liabilities" and "Other Noncurrent Financial Liabilities" should be included as debt. These could include things like: - Lease liabilities - Derivative liabilities - Other financial obligations Looking at the breakdown of Noncurrent Financial Liabilities: - Longterm Borrowings: 5,491,124,000 - Other Noncurrent Financial Liabilities: 52,631,000 Total: 5,543,755,000 And Current Financial Liabilities: - Current Borrowings And Current Portion Of Noncurrent Borrowings: 721,845,000 - Other Current Financial Liabilities: 983,432,000 Total: 1,705,277,000 For S&P methodology, "debt" typically includes: - All borrowings (short-term and long-term) - Finance lease liabilities - Derivative liabilities (if negative fair value) - Other financial liabilities that are debt-like But "Other Current Financial Liabilities" of 983,432,000 is quite large. What could this include? Looking at the cash flow statement, there's "Proceeds From Issuing Shares" and "Payments To Acquire Or Redeem Entitys Shares" and "Proceeds From Sale Or Issue Of Treasury Shares." Actually, looking more carefully at the financing activities: - "Cobros Pagos Por Instrumentos De Pasivo Financiero" (Payments for financial liability instruments): -1,141,718,000 This includes: - "Emision YDisposicion Por Instrumentos De Pasivo Financiero" (Issuance): 203,015,000 - "Devolucion YAmortizacion De Instrumentos De Pasivo Financiero" (Repayment): 1,344,733,000 So net is 203,015 - 1,344,733 = -1,141,718,000 ✓ This suggests significant debt repayment activity. For S&P Net Debt/EBITDA, I think the standard approach is: Net Debt = Total Interest-Bearing Debt - Cash and Cash Equivalents Let me assume Total Financial Liabilities represents interest-bearing debt. Net Debt = 7,249,032,000 - 794,824,000 = 6,454,208,000 EUR EBITDA = 1,506,546,000 EUR Ratio = 6,454,208,000 / 1,506,546,000 = 4.284 But let me also consider an alternative: should I include the "Current Financial Assets At Amortised Cost" as cash? If we look at the cash flow statement, the company had significant cash outflows in investing activities (-1,641,325,000), particularly "Purchase Of Financial Instruments Classified As Investing Activities" of 1,532,512,000. This suggests they bought financial instruments. These might be the "Current Financial Assets At Amortised Cost." If these are short-term financial instruments like deposits or commercial paper, they could be considered cash equivalents. But if they're longer-term investments, they shouldn't be. Given the large increase from 25,401,000 to 752,505,000, and the cash flow showing "Purchase Of Financial Instruments Classified As Investing Activities" of 1,532,512,000, these might be longer-term investments rather than cash equivalents. For conservative S&P methodology, I'll exclude these from the cash calculation. Let me also verify my EBITDA calculation. In some methodologies, EBITDA includes: - Operating profit + Depreciation and amortization + Interest (or exclude it, depending on definition) Actually, EBIT is Earnings Before Interest and Taxes. EBITDA adds back Depreciation and Amortization. My EBIT = 961,554,000 (Profit Loss From Operating Activities) + Depreciation and Amortization = 544,992,000 = EBITDA = 1,506,546,000 But wait - I need to check if "Profit Loss From Operating Activities" already includes depreciation or if it's added back separately. Looking at the income statement structure: Revenue: 2,015,036 + Other Work Performed: 62,903 + Participacion En Beneficios: 50,405 - Aprovisionamientos: -37,061 + Miscellaneous Other Operating Income: 77,673 - Employee Benefits: -210,614 - Miscellaneous Other Operating Expense: -467,088 - Depreciation And Amortisation: -544,992 + Imputacion De Subvenciones: 15,780 - Deterioro YResultado: -488 = Profit Loss From Operating Activities: 961,554 Let me verify: 2,015,036 + 62,903 + 50,405 - 37,061 + 77,673 - 210,614 - 467,088 - 544,992 + 15,780 - 488 = 961,554 2,015,036 + 62,903 = 2,077,939 + 50,405 = 2,128,344 - 37,061 = 2,091,283 + 77,673 = 2,168,956 - 210,614 = 1,958,342 - 467,088 = 1,491,254 - 544,992 = 946,262 + 15,780 = 962,042 - 488 = 961,554 ✓ So yes, depreciation is already deducted to get to operating profit. Therefore: EBITDA = 961,554 + 544,992 = 1,506,546 Now, one more consideration: S&P sometimes adjusts EBITDA for certain items. But without specific guidance, I'll use standard EBITDA. Final calculation: Net Debt = 7,249,032 - 794,824 = 6,454,208 EBITDA = 1,506,546 Ratio = 6,454,208 / 1,506,546 = 4.284 Let me round to 4.28 or provide more precision. Actually, let me recalculate more carefully: 6,454,208,000 / 1,506,546,000 = 4.2841... Actually, I want to double-check my debt figure. Should I include all "Other Current Financial Liabilities" and "Other Noncurrent Financial Liabilities"? Looking at the breakdown: - Other Noncurrent Financial Liabilities: 52,631,000 - this includes derivative liabilities? No, those are separate: "Noncurrent Derivative Financial Liabilities" = 22,016,000 Wait, let me re-check. The total Noncurrent Financial Liabilities is 5,543,755,000, which breaks down into: - Longterm Borrowings: 5,491,124,000 - Other Noncurrent Financial Liabilities: 52,631,000 But there's also "Noncurrent Derivative Financial Liabilities" = 22,016,000. Is this included in the 52,631,000 or separate? Looking at the structure, it seems like "Noncurrent Derivative Financial Liabilities" is a separate line item, not part of "Noncurrent Financial Liabilities." Actually, re-reading: "Noncurrent Financial Liabilities" = 5,543,755,000 is the total, and it breaks down into "Longterm Borrowings" and "Other Noncurrent Financial Liabilities." The "Noncurrent Derivative Financial Liabilities" of 22,016,000 might be included in "Other Noncurrent Financial Liabilities" or might be separate. Similarly for current: "Current Financial Liabilities" = 1,705,277,000 breaks down into "Current Borrowings And Current Portion Of Noncurrent Borrowings" and "Other Current Financial Liabilities." The "Current Derivative Financial Liabilities" of 7,053,000 might be included or separate. Looking at the totals: Noncurrent Liabilities = 6,984,202,000 This includes: - Noncurrent Government Grants: 746,498,000 - Other Longterm Provisions: 139,822,000 - Noncurrent Financial Liabilities: 5,543,755,000 - Deferred Tax Liabilities: 417,650,000 - Noncurrent Derivative Financial Liabilities: 22,016,000 - Other Noncurrent Liabilities: 114,461,000 Total: 746,498 + 139,822 + 5,543,755 + 417,650 + 22,016 + 114,461 = 6,984,202 ✓ So "Noncurrent Derivative Financial Liabilities" is NOT included in "Noncurrent Financial Liabilities." It's a separate item. Similarly for current: Current Liabilities = 2,903,042,000 - Current Provisions: 30,536,000 - Current Financial Liabilities: 1,705,277,000 - Trade And Other Current Payables: 1,160,176,000 - Current Tax Liabilities: 13,320,000 - Current Derivative Financial Liabilities: 7,053,000 Total: 30,536 + 1,705,277 + 1,160,176 + 13,320 + 7,053 = 2,916,362... Hmm, that doesn't equal 2,903,042. Let me recheck: 30,536 + 1,705,277 = 1,735,813; + 1,160,176 = 2,895,989; + 13,320 = 2,909,309; + 7,053 = 2,916,362. That's not 2,903,042. There's a difference of 13,320,000. Wait, let me check: 2,916,362 - 2,903,042 = 13,320. That's exactly the Current Tax Liabilities. Maybe Current Tax Liabilities is included in something else? Or maybe I misread. Actually, re-reading: "Current Tax Liabilities" = 13,320,000. But in my sum, I added it. Let me check if "Trade And Other Current Payables" includes tax payables. Looking at "Trade And Other Current Payables" breakdown: - Trade And Other Current Payables To Trade Suppliers: 485,624,000 - Other Current Payables: 661,232,000 Total: 1,146,856,000 But "Trade And Other Current Payables" is stated as 1,160,176,000. Difference = 13,320,000. That's exactly Current Tax Liabilities! So "Current Tax Liabilities" might be included in "Trade And Other Current Payables" or there's an overlap. Actually, looking more carefully, the main category is 1,160,176,000 but subcategories sum to 1,146,856,000. The difference is 13,320,000 which equals Current Tax Liabilities. This suggests "Current Tax Liabilities" might be part of the payables structure, or it's a separate presentation issue. Anyway, for my debt calculation, I need to be clear about what's interest-bearing debt. For S&P methodology, debt typically includes: - Borrowings (short and long term) - Finance lease obligations - Derivative liabilities (when negative) - Other interest-bearing obligations Government grants, deferred tax, trade payables, and tax payables are NOT debt. So my debt figure should focus on: - Financial liabilities (both current and noncurrent) - Potentially derivative liabilities if they're part of hedging/interest management Actually, derivative liabilities might or might not be included depending on the S&P methodology version. Some versions include them, some don't. For standard Net Debt: - Total Debt = Interest-bearing liabilities - Less: Cash and cash equivalents - Less: Liquid investments Let me use: Debt = Longterm Borrowings + Current Borrowings + Other financial liabilities that are debt-like Actually, "Other Current Financial Liabilities" of 983,432,000 and "Other Noncurrent Financial Liabilities" of 52,631,000 - what are these? Looking at cash flows: "Other Inflows Outflows Of Cash Classified As Financing Activities" = -11,806,000. This is small. And "Otros Flujos De Efectivo De Actividades De Financiacion" = 11,806,000 (positive in Spanish format, meaning outflow in standard terms? Actually, the sign convention seems mixed.) Let me not overcomplicate. For S&P Net Debt/EBITDA: **Debt** = All interest-bearing debt = Current Financial Liabilities + Noncurrent Financial Liabilities = 1,705,277 + 5,543,755 = 7,249,032 Some practitioners also include derivative liabilities as part of debt management, but they're already... wait, are derivative liabilities included in "Financial Liabilities"? Looking at the balance sheet structure, "Noncurrent Derivative Financial Liabilities" and "Current Derivative Financial Liabilities" are separate line items, not included in "Noncurrent Financial Liabilities" or "Current Financial Liabilities." For a more comprehensive debt measure, I might add these: Total Debt = 7,249,032 + 22,016 + 7,053 = 7,278,101 But actually, for Net Debt, derivatives can be netted (assets against liabilities). Let me check: - Noncurrent Derivative Financial Assets: 110,616 - Current Derivative Financial Assets: 0 - Noncurrent Derivative Financial Liabilities: 22,016 - Current Derivative Financial Liabilities: 7,053 Net derivative position = 110,616 - 22,016 - 7,053 = 81,547 (asset) If we include derivatives in debt, we'd have: Gross debt with derivatives = 7,249,032 + 22,016 + 7,053 = 7,278,101 Less: Cash = 794,824 Less: Derivative assets = 110,616 Net = 6,372,661 Or if we net derivatives: Debt = 7,249,032 Less: Cash = 794,824 Less: Net derivative asset = 81,547 Net Debt = 6,372,661 But this gets complicated. For standard S&P methodology, I'll use the simpler approach: Net Debt = Total Financial Liabilities - Cash and Cash Equivalents = 7,249,032 - 794,824 = 6,454,208 EBITDA = 1,506,546 Ratio = 6,454,208 / 1,506,546 = 4.284 Let me verify this is in the right ballpark. For a utility/energy infrastructure company like Red Eléctrica (Spanish electricity transmission), a leverage ratio around 4x is reasonable. Actually, I want to double-check one thing. Is "Profit Loss From Operating Activities" truly EBIT? In some European formats, operating profit might include or exclude certain items. Looking at the progression: Profit Loss From Operating Activities: 961,554 + Finance Income: 23,161 - Finance Costs: 116,468 + Gains Losses On Financial Assets: 1,196 + Gains Losses On Exchange Differences: 74 = Profit Loss Before Tax: 869,517 Yes, this is clearly EBIT. Finance income and costs are below the line. So EBITDA = 961,554 + 544,992 = 1,506,546 One final check: should I use average debt or year-end debt? S&P typically uses year-end debt for the ratio, though some use average. The standard is point-in-time (year-end) for Net Debt. Actually, I realize I should double-check if there are any other cash-like items. "Noncurrent Financial Assets At Amortised Cost" = 175,714,000. This is noncurrent, so less liquid. Probably not cash. And "Current Financial Assets At Amortised Cost" = 752,505,000. This is current, so more liquid. But as I discussed, this might have been purchased as investments and may not be readily available cash. For conservative S&P approach, I'll exclude this from "cash" unless clearly indicated as cash equivalents. Final answer: 6,454,208 / 1,506,546 = 4.284 Or more precisely: 6454208000 / 1506546000 = 4.284109... Rounding to two decimal places: 4.28 Actually, let me see if I should present more precision. The data is in whole euros, so I can provide more decimals. 4.2841 or about 4.28 Wait, I want to re-verify my arithmetic one more time: Debt: - Noncurrent Financial Liabilities: 5,543,755,000 - Current Financial Liabilities: 1,705,277,000 Total: 7,249,032,000 Cash: 794,824,000 Net Debt: 7,249,032,000 - 794,824,000 = 6,454,208,000 EBITDA: EBIT: 961,554,000 + D&A: 544,992,000 = 1,506,546,000 Ratio: 6,454,208,000 / 1,506,546,000 = 4.284109... I'll provide 4.28 as the answer. 4.28