I need to estimate the FFO (Funds From Operations) / Net Debt ratio for 2022. First, let me identify the period. The annual report is "at the end of 2022", so I need data for the fiscal year 2022 (2022-01-01 to 2023-01-01). **Step 1: Calculate FFO** FFO is typically calculated as: FFO = Profit/Loss + Depreciation and Amortization + Net Interest Expense + Income Tax Expense - Gains on asset sales + Other non-cash items Or more commonly for utilities: FFO = Cash Flow from Operating Activities before working capital changes, or EBITDA - Interest - Taxes + adjustments Let me use a standard approach: FFO = Net Income + Depreciation & Amortization + Interest Expense + Income Tax Expense - Other non-operating items Actually, a more practical definition for FFO in credit analysis: FFO = Cash Flow from Operating Activities + Interest Paid - Interest Received + Dividends Received (sometimes excluded) - Working capital changes... Let me use: FFO = Profit Loss + Depreciation And Amortisation Expense + Interest Expense + Income Tax Expense - Share Of Profit Loss Of Associates (equity method) + Other adjustments Or simpler: FFO = EBITDA - Interest Expense - Income Tax Expense + Interest Expense (wait, that's circular) Standard FFO formula: FFO = Net Income + Depreciation & Amortization + Deferred Taxes + Other non-cash items - Equity earnings + Interest Expense Let me use: FFO = Profit Loss + Depreciation And Amortisation Expense + Interest Expense + Income Tax Expense - Share Of Profit Loss Of Associates And Joint Ventures For 2022 (2022-01-01 to 2023-01-01): - Profit Loss: 1,948,767,000 EUR - Depreciation And Amortisation Expense: 462,694,000 EUR - Interest Expense: 101,703,000 EUR - Income Tax Expense: 583,352,000 EUR - Share Of Profit Loss Of Associates And Joint Ventures: 4,293,000 EUR (positive = profit, so subtract) FFO = 1,948,767,000 + 462,694,000 + 101,703,000 + 583,352,000 - 4,293,000 FFO = 3,092,223,000 EUR Wait - let me reconsider. The standard FFO definition used by rating agencies (S&P, Moody's) is: FFO = Funds from Operations = Net Income from Continuing Operations + Depreciation & Amortization + Deferred Income Taxes + Other non-cash items - Equity in earnings of unconsolidated affiliates + Fixed charges Or more precisely for utilities: FFO = Net Cash from Operating Activities - Changes in Working Capital (or using direct method) Let me check if I can derive FFO from the cash flow statement. Looking at "Cash Flows From Used In Operating Activities": 2,019,859,000 EUR for 2022. But this includes working capital changes. Let me look at the "Subtotal" which is before working capital changes: 2,516,130,000 EUR for 2022. Actually, "Subtotal" in the cash flow statement typically = EBITDA + other adjustments before working capital. Let me verify: Subtotal 2022: 2,516,130,000 This includes: Depreciation & Amortization adjustments, impairment, etc. added back to operating profit. Looking at the components building to Subtotal: - Depreciation And Amoritisation Of Property Plant And Equipment And Intangible Assets Net Of Reversals Of Impairment Losses: 534,483,000 - Impairment Losses On Investments Net Of Reversals: -11,833,000 - Adjustments For Undistributed Profits: -17,259,000 - Adjustments For Losses Gains On Disposal: 4,914,000 - Change In Noncurrent Provisions And Deferred Tax: 35,247,000 - Change In Contributions To Building Costs: 2,782,000 - Other Adjustments: 31,340,000 And Profit Loss From Operating Activities: 2,626,196,000 Let me verify: 2,626,196,000 + 534,483,000 - 11,833,000 - 17,259,000 + 4,914,000 + 35,247,000 + 2,782,000 + 31,340,000 = ? = 2,626,196,000 + 534,483,000 = 3,160,679,000 - 11,833,000 = 3,148,846,000 - 17,259,000 = 3,131,587,000 + 4,914,000 = 3,136,501,000 + 35,247,000 = 3,171,748,000 + 2,782,000 = 3,174,530,000 + 31,340,000 = 3,205,870,000 Hmm, that doesn't match 2,516,130,000. Let me re-read. The "Subtotal" might be after some adjustments to operating profit. Actually, looking more carefully - "Subtotal" is likely = Profit Loss From Operating Activities adjusted for non-cash items but before working capital and before interest/taxes paid separately. Wait, let me check: EBITDA 2022 = 3,160,679,000 Depreciation 2022 = 462,694,000 So EBIT = 3,160,679,000 - 462,694,000 = 2,697,985,000 But Profit Loss From Operating Activities = 2,626,196,000 Difference = 71,789,000 (could be impairment net of reversals: 197,761,000 - 125,973,000 = 71,788,000) Yes! Profit Loss From Operating Activities = EBIT - net impairment = 2,697,985,000 - 71,788,000 = 2,626,197,000 ≈ 2,626,196,000 ✓ Now, standard FFO definition (S&P): FFO = Net Income + Depreciation & Amortization + Deferred Tax + Other non-cash charges - Equity earnings + Fixed charges (interest) - Capitalized interest... Or: FFO = Funds from Operations = Cash from Operations before working capital changes + Interest Paid From the cash flow statement, "Subtotal" 2022 = 2,516,130,000. This seems to be operating cash flow before working capital changes and before interest/tax payments. Actually, looking at the structure: - Subtotal: 2,516,130,000 - Adjustments for working capital (inventories, receivables, payables, derivatives): various - Cash Flows From Used In Operating Activities: 2,019,859,000 - Then: Income Taxes Paid: 343,100,000 - Interest Paid: 36,100,000 - Interest Received: 6,100,000 - Dividends Received: 29,900,000 Wait, the order suggests taxes and interest paid are AFTER operating cash flow. Let me re-read... Actually in IFRS cash flow statements, interest paid can be classified as operating or financing. Here "Interest Paid Classified As Operating Activities" = 36,100,000. Looking more carefully at the structure, it seems like: - Subtotal (2,516,130,000) - Working capital adjustments - = Cash Flows From Used In Operating Activities (2,019,859,000) - Then interest and tax payments are shown as separate line items? Or are they already included? Actually, the standard format is: Cash flows from operating activities: - Profit before tax - Adjustments for non-cash items - Changes in working capital - = Cash generated from operations - Interest paid - Income taxes paid - = Net cash from operating activities But here "Cash Flows From Used In Operating Activities" = 2,019,859,000, and then "Income Taxes Paid" etc. are listed separately. This suggests they might be additional disclosures or already included. Let me use a cleaner approach. Standard FFO for credit ratios: FFO = Net Income + Depreciation & Amortization + Interest Expense + Income Tax Expense + Other non-cash expenses - Equity earnings Or: FFO = EBITDA - Interest Expense - Taxes + Interest Expense (no, that's wrong) Actually, the most common definition: **FFO = Net Income + Depreciation & Amortization + Deferred Income Taxes + Other non-cash items - Equity in earnings of affiliates + Interest Expense** For 2022: - Net Income (Profit Loss): 1,948,767,000 - Depreciation & Amortization: 462,694,000 - Interest Expense: 101,703,000 - Income Tax Expense: 583,352,000 - Share of Profit of Associates (equity method): 4,293,000 (subtract this) - Other non-cash: need to estimate FFO = 1,948,767,000 + 462,694,000 + 101,703,000 + 583,352,000 - 4,293,000 = 3,092,223,000 But wait - if I add back taxes and interest, this is more like "EBITDA adjusted" not FFO. Let me think again. FFO should be closer to cash flow from operations before working capital changes. FFO = Profit Loss From Operating Activities + Depreciation & Amortization - Interest Expense? No... Actually, let me use the Moody's/S&P definition more carefully: **Moody's FFO** = Net Income + Depreciation & Amortization + Other non-cash items - Capital expenditures on maintenance? No, that's different. **S&P FFO** = Funds From Operations = Net Income from continuing operations + Depreciation & Amortization + Deferred income taxes + Other non-cash items - Equity in earnings of unconsolidated affiliates + Fixed charges But "Fixed charges" = Interest expense. If we add interest expense back, we'd need to subtract it for the ratio... Actually FFO includes interest in the numerator, and then Net Debt is in denominator, so we compare FFO to Net Debt. Actually, standard FFO/Net Debt ratio uses: - FFO = Net Income + Depreciation & Amortization + Interest Expense + Income Tax Expense - Equity earnings +/- Other non-cash items - This is essentially "Cash Flow from Operations before working capital changes" or "EBITDA - Taxes + Interest - Equity earnings + other" Wait, let me verify with EBITDA: EBITDA 2022 = 3,160,679,000 Less: Depreciation = 462,694,000 Less: Interest = 101,703,000 Less: Taxes = 583,352,000 = 2,012,930,000 (approx Net Income before equity and other items) But actual Profit Loss = 1,948,767,000 Difference = 64,163,000 (due to equity earnings, other finance costs, etc.) So FFO = EBITDA - Taxes + Interest - Equity earnings + other adjustments? = 3,160,679,000 - 583,352,000 + 101,703,000 - 4,293,000 + ... Actually, simpler: FFO = Net Income + D&A + Interest + Deferred Taxes - Equity earnings + other non-cash Let me use: FFO = Profit Loss + Depreciation And Amortisation Expense + Interest Expense + Income Tax Expense - Share Of Profit Loss Of Associates And Joint Ventures + Other Finance Income Cost (negative if expense) = 1,948,767,000 + 462,694,000 + 101,703,000 + 583,352,000 - 4,293,000 + (-94,077,000)? Wait, Other Finance Income Cost = -94,077,000 (negative = cost). But this is already in Profit Loss before tax. Let me recalculate from Profit Loss Before Tax: Profit Loss Before Tax = 2,532,119,000 Less: Income Tax = 583,352,000 = Profit Loss = 1,948,767,000 ✓ Profit Loss Before Tax = Profit Loss From Operating Activities + Share Of Profit Loss Of Associates + Other Income Expense From Subsidiaries + Revenue From Interest - Interest Expense + Other Finance Income Cost - Wertminderungen + Wertaufholungen = 2,626,196,000 + 4,293,000 + 8,013,000 + 40,132,000 - 101,703,000 + (-94,077,000 wait no...) Let me check: Other Finance Income Cost 2022 = -94,077,000? No, looking again: "Finance Income Cost" 2022 = -94,077,000 Actually: "Other Finance Income Cost" 2022 = 1,642,000 "Finance Income Cost" 2022 = -94,077,000 So total finance costs = -94,077,000 (which includes interest, other finance, etc.) Let me verify Profit Loss Before Tax: = 2,626,196,000 (operating) + 4,293,000 (equity) + 8,013,000 (other from subs) + (-94,077,000) (finance) - 46,455,000 (Wertminderungen) + 0 (Wertaufholungen) = 2,626,196,000 + 4,293,000 + 8,013,000 - 94,077,000 - 46,455,000 = 2,626,196,000 + 12,306,000 - 140,532,000 = 2,497,970,000 ≠ 2,532,119,000 Hmm, not matching. Let me check if "Finance Income Cost" includes interest and other items. Actually "Finance Income Cost" = Revenue From Interest - Interest Expense + Other Finance Income Cost = 40,132,000 - 101,703,000 + 1,642,000 = -59,929,000 ≠ -94,077,000 Difference = 34,148,000. This might include Wertminderungen/Wertaufholungen. Actually, looking at the structure again, "Wertminderungen" and "Wertaufholungen" might be part of finance costs or separate. Let me just use a standard practical FFO definition: **FFO = Cash Flow from Operating Activities + Interest Paid - Interest Received + Dividends Received (optional) - Working capital changes** Or from the "Subtotal" which is before working capital: Subtotal 2022 = 2,516,130,000 But Subtotal includes adjustments for non-cash items. Is this FFO? Not quite - FFO typically excludes working capital changes but includes interest and taxes as part of operations. Actually, looking at rating agency practice, FFO is often approximated as: **FFO = Net Income + Depreciation & Amortization + Interest Expense + Income Tax Expense - Equity Earnings +/- Other non-cash items** This gives "Cash flow from operations before changes in working capital" or "EBITDA - Cash Taxes + Interest - Equity earnings..." For 2022, using: - Profit Loss: 1,948,767,000 - Depreciation & Amortization: 462,694,000 - Interest Expense: 101,703,000 - Income Tax Expense: 583,352,000 - Share Of Profit Of Associates: 4,293,000 (subtract) FFO = 1,948,767,000 + 462,694,000 + 101,703,000 + 583,352,000 - 4,293,000 = 3,092,223,000 But I need to check if Interest Expense is already deducted to get to Profit Loss. Yes it is. So adding it back gives pre-interest cash flow. Actually, this is essentially: FFO = EBIT + D&A - Cash Taxes + Interest - ... Wait, let me think of this as: Profit Loss = EBIT - Interest - Taxes - Other + Equity earnings So: Profit Loss + Interest + Taxes = EBIT + Taxes - Other + Equity earnings ≈ EBITDA - D&A + Taxes - Other + Equity Hmm, this is getting messy. Let me use a cleaner definition. **Standard FFO = Funds From Operations = Net Income + Non-cash charges - Equity earnings + Interest Expense** Where non-cash charges = D&A + Deferred taxes + other non-cash. For practical purposes: FFO ≈ Operating Cash Flow + Interest Paid - Interest Received - Working capital changes + Dividends received... Or simply use: **FFO = EBITDA - Income Tax Expense + Interest Expense - Equity Earnings** (approximation) = 3,160,679,000 - 583,352,000 + 101,703,000 - 4,293,000 = 2,674,737,000 Let me try another approach: FFO = Cash Flow from Operating Activities before working capital changes. From cash flow statement: "Subtotal" 2022 = 2,516,130,000 This "Subtotal" is after adding back non-cash items to operating profit, before working capital changes. This is close to FFO, but we need to adjust for interest and taxes. Actually, in many European utilities' credit analysis, FFO is calculated as: FFO = EBITDA + Interest Income - Interest Expense - Cash Taxes - Dividends from associates (or plus?) Let me use the most common credit rating approach: **FFO = Net Income + Depreciation & Amortization + Interest Expense + Income Tax Expense - Equity in earnings of affiliates + Other non-cash charges** = 1,948,767,000 + 462,694,000 + 101,703,000 + 583,352,000 - 4,293,000 = 3,092,223,000 But this seems high. Let me verify with another formula: FFO = EBITDA - Cash Taxes + Interest - Equity earnings = 3,160,679,000 - 583,352,000 + 101,703,000 - 4,293,000 = 2,674,737,000 The difference is whether we use "Income Tax Expense" (accrual) or "Cash Taxes". For FFO, we typically use accrual-based adjustments, so the first formula might be more appropriate, but actually for funds from operations, cash taxes are more relevant... but standard FFO uses accrual. Actually, let me check standard definitions. S&P defines FFO as: "Funds from operations (FFO): Net income from continuing operations plus depreciation and amortization, deferred income taxes, and other non-cash items." Moody's defines FFO similarly but adjusts for working capital and capitalized interest. For the FFO/Net Debt ratio, the standard is: - FFO = Net Income + D&A + Deferred Taxes + Other non-cash - Equity earnings + Interest - Or sometimes: FFO = Cash Flow from Operations before working capital changes Let me use **FFO = Subtotal + Interest Paid - Interest Received + Dividends Received** from the cash flow statement, or just use Subtotal as approximation. Actually, looking at the cash flow structure more carefully: - Subtotal: 2,516,130,000 (this is operating profit adjusted for non-cash items, before working capital) - Then working capital adjustments - Then = Cash Flows From Used In Operating Activities: 2,019,859,000 - Then separately disclosed: Income Taxes Paid, Interest Paid, Interest Received, Dividends Received This suggests that "Cash Flows From Used In Operating Activities" might already include interest and taxes, or they are shown as additional information. Actually, in IFRS, interest paid can be classified as operating or financing. Here "Interest Paid Classified As Operating Activities" = 36,100,000, and "Interest Paid Classified As Financing Activities" might be elsewhere. Looking at financing activities: "Payments Of Lease Liabilities" = 11,447,000. This includes interest on leases. For FFO, a practical approach is: FFO = Cash generated from operations before working capital changes = Subtotal + adjustments Or: FFO = EBITDA - Cash Interest - Cash Taxes + Dividends from associates Let me use a simpler and widely accepted formula for utility companies: **FFO = Net Income + Depreciation & Amortization - Equity Earnings + Interest Expense + Income Tax Expense** = 1,948,767,000 + 462,694,000 - 4,293,000 + 101,703,000 + 583,352,000 = 3,092,223,000 Wait, I should double-check. This adds back interest and taxes to get to a pre-interest, pre-tax cash flow measure. But then we'd compare to Net Debt which includes debt. The FFO/Net Debt ratio compares pre-interest cash flow to debt, which makes sense for coverage. Actually, I realize I may be double-counting. Let me use: FFO = Operating Cash Flow + Interest Paid - Interest Received (before working capital changes) Or use the "Subtotal" from cash flow statement: 2,516,130,000 and add back interest paid classified as operating: 36,100,000? No, if interest is already deducted in arriving at operating profit... Actually, "Subtotal" is based on "Profit Loss From Operating Activities" which is pre-interest and pre-tax. So: - Profit Loss From Operating Activities: 2,626,196,000 - Add back non-cash items (D&A net, impairments, etc.): various - = Subtotal: 2,516,130,000 Wait, Subtotal is LESS than Profit Loss From Operating Activities? That doesn't make sense if we're adding back non-cash expenses. Let me recheck: Subtotal 2022 = 2,516,130,000, but Profit Loss From Operating Activities = 2,626,196,000. Subtotal should be higher if we add back D&A. Unless there are cash outflows or negative adjustments. Looking at components: - Depreciation And Amoritisation...: 534,483,000 (positive = add back) - Impairment Losses On Investments Net: -11,833,000 (negative = deduction, meaning reversal) - Adjustments For Undistributed Profits: -17,259,000 - Adjustments For Losses Gains On Disposal: 4,914,000 - Change In Noncurrent Provisions: 35,247,000 - Change In Contributions: 2,782,000 - Other Adjustments: 31,340,000 Sum of adjustments: 534,483,000 - 11,833,000 - 17,259,000 + 4,914,000 + 35,247,000 + 2,782,000 + 31,340,000 = 579,674,000 So Subtotal should be: 2,626,196,000 + 579,674,000 = 3,205,870,000 But reported Subtotal = 2,516,130,000. Difference = 689,740,000. Hmm, there must be other adjustments I'm missing, or the "Profit Loss From Operating Activities" used in cash flow is different. Wait - looking back at the data, there might be a difference between "Profit Loss From Operating Activities" in IS and what's used for CF. Or perhaps there are other items. Actually, let me check if "Subtotal" includes interest and taxes. In some cash flow presentations, the starting point is "Profit Before Tax" not "Operating Profit". Let me recalculate from Profit Loss Before Tax: Profit Loss Before Tax 2022 = 2,532,119,000 Add back: - Depreciation & Amortization: 462,694,000 - Impairment Loss: 197,761,000 - Less: Reversal Of Impairment Loss: 125,973,000 - Interest Expense: 101,703,000 - Other Finance Cost: various Actually, for cash flow from operations, we start with Profit Before Tax, add back non-cash items, adjust for working capital, then subtract taxes paid. Let me try: Subtotal = Profit Loss Before Tax + D&A + Impairment (net) + Interest Expense + Other non-cash finance costs - Equity earnings adjustments... = 2,532,119,000 + 462,694,000 + (197,761,000 - 125,973,000) + ... This is getting too complex. Let me use a simpler approach for FFO. **Practical FFO estimation:** For utility and infrastructure companies, a common approximation is: **FFO = EBITDA - Cash Taxes + Dividends from associates - Interest received (or + Interest paid depending on definition)** Or more standard: **FFO = Net Income + D&A + Interest Expense + Income Tax Expense - Equity Earnings** This gives cash flow before financing and taxes, which is comparable to EBITDA but on a cash basis adjusted for taxes. Actually, I think the most standard definition for the FFO/Net Debt ratio is: **FFO = Funds from Operations = Net Income + Depreciation & Amortization + Deferred Income Taxes + Other non-cash items - Equity in earnings of unconsolidated affiliates** Interest is NOT added back in this definition because FFO is meant to be post-interest cash flow available to service debt. Wait, that makes more sense! FFO is cash flow AFTER interest but before debt principal repayment. So: FFO = Net Income + D&A + Deferred Taxes + Other non-cash - Equity earnings For 2022: - Net Income: 1,948,767,000 - D&A: 462,694,000 - Deferred Tax: need to estimate. Income Tax Expense = 583,352,000. Taxes paid = 343,100,000. So deferred tax provision = 583,352,000 - 343,100,000 = 240,252,000 (approx, ignoring timing) - Other non-cash: various adjustments - Equity earnings: 4,293,000 (subtract) FFO = 1,948,767,000 + 462,694,000 + 240,252,000 - 4,293,000 + other = 2,647,420,000 + other Or simpler, using cash flow approach: FFO = Operating Cash Flow - Working capital changes + Interest Paid (if classified as operating) - Interest Received (if classified as operating) - Dividends Received From 2022: - Cash Flows From Operating Activities: 2,019,859,000 - Interest Paid (operating): 36,100,000 - Interest Received (operating): 6,100,000 - Dividends Received: 29,900,000 If interest paid is already deducted in arriving at 2,019,859,000, then we don't add back. But if it's separate... Actually, looking at the structure, "Cash Flows From Used In Operating Activities" = 2,019,859,000 is likely AFTER interest and taxes. Then the separate line items are additional disclosures. Let me try yet another approach. Moody's defines FFO as: FFO = Net Income + D&A + Other non-cash items - Capitalized interest - Equity earnings For 2022, using: - Net Income: 1,948,767,000 - D&A: 462,694,000 - Other non-cash: let's include deferred tax and other items Actually, I'll use the most widely accepted simple formula: **FFO = Net Income + Depreciation & Amortization + Interest Expense + Income Tax Expense - Equity Earnings** This is sometimes called "Cash Flow from Operations before changes in working capital" or "EBITDA - Cash Taxes + Interest - Equity earnings..." Wait, I keep going back and forth. Let me be decisive. For the FFO/Net Debt ratio used in credit analysis: - **FFO** = Funds From Operations = Cash flow from operating activities before working capital changes, or equivalently: Net Income + D&A + Interest + Taxes - Equity earnings (and other adjustments) Actually, I found a key insight. In European utility credit analysis (where VERBUND is based), FFO is typically: **FFO = EBITDA - Cash Interest - Cash Taxes - Dividends to minorities + Dividends from associates** Or: **FFO = Operating Cash Flow before working capital changes** Let me use: **FFO = Subtotal from cash flow statement = 2,516,130,000** But wait, Subtotal is less than Operating Profit, so it must include some negative adjustments or cash outflows already. Let me recalculate Subtotal from the components given: Starting from Profit Loss From Operating Activities: 2,626,196,000 Plus adjustments: 534,483,000 - 11,833,000 - 17,259,000 + 4,914,000 + 35,247,000 + 2,782,000 + 31,340,000 = 579,674,000 Expected Subtotal: 3,205,870,000 But actual Subtotal: 2,516,130,000 Difference: -689,740,000 This difference might be due to "Finance Income Cost" or other items that are part of operating activities but not in "Profit Loss From Operating Activities". Actually, I think "Profit Loss From Operating Activities" might be after some finance costs. Let me check the income statement structure again. Looking at IS items: - Profit Loss From Operating Activities: 2,626,196,000 - Then: Share Of Profit Loss Of Associates: 4,293,000 - Other Income Expense From Subsidiaries: 8,013,000 - Revenue From Interest: 40,132,000 - Interest Expense: 101,703,000 - Other Finance Income Cost: 1,642,000 - Wertminderungen: 46,455,000 - Wertaufholungen: 0 - Finance Income Cost: -94,077,000 Sum of these after operating profit: 4,293,000 + 8,013,000 + 40,132,000 - 101,703,000 + 1,642,000 - 46,455,000 + 0 - 94,077,000... wait, "Finance Income Cost" might be the total. Let me check: 40,132,000 (interest revenue) - 101,703,000 (interest expense) + 1,642,000 (other finance) = -59,929,000. But "Finance Income Cost" = -94,077,000. Difference = -34,148,000. And Wertminderungen - Wertaufholungen = 46,455,000 - 0 = 46,455,000. Hmm, -59,929,000 - 46,455,000 = -106,384,000 ≠ -94,077,000. Let me try: Revenue From Interest + Other Finance Income Cost - Interest Expense - Wertminderungen + Wertaufholungen = 40,132,000 + 1,642,000 - 101,703,000 - 46,455,000 + 0 = -106,384,000 Still not -94,077,000. There might be other items. Anyway, for practical purposes, let me use a standard FFO definition and calculate. I'll use: **FFO = Net Income + Depreciation & Amortization + Interest Expense + Income Tax Expense - Equity Earnings** = 1,948,767,000 + 462,694,000 + 101,703,000 + 583,352,000 - 4,293,000 = 3,092,223,000 But I want to cross-check. Another common definition excludes interest (since FFO is post-interest): **FFO = Net Income + D&A + Deferred Taxes - Equity Earnings** = 1,948,767,000 + 462,694,000 + (583,352,000 - 343,100,000 approx deferred) - 4,293,000 = 1,948,767,000 + 462,694,000 + 240,252,000 - 4,293,000 = 2,647,420,000 Or using cash taxes paid: 343,100,000 Deferred = 583,352,000 - 343,100,000 = 240,252,000 (accrual vs cash, roughly) Actually, for the FFO/Net Debt ratio, I think the standard is to use FFO BEFORE interest, so we can compare to total debt. This is like EBITDA - Taxes + some adjustments. Let me use a compromise: **FFO = EBITDA - Income Tax Expense + Interest Expense - Equity Earnings + Other adjustments** = 3,160,679,000 - 583,352,000 + 101,703,000 - 4,293,000 = 2,674,737,000 Or simply: **FFO = Operating Cash Flow + Interest Paid - Interest Received + Dividends Received - Working capital changes** From 2022: - Cash Flows From Operating Activities: 2,019,859,000 - Add: Interest Paid (if included in 2,019,859,000 and we want pre-interest): 36,100,000? - Less: Interest Received: 6,100,000 - Add: Dividends Received: 29,900,000 Actually, if 2,019,859,000 is already net of interest paid and dividends received, then: Pre-interest, pre-dividend operating cash flow = 2,019,859,000 + 36,100,000 - 6,100,000 - 29,900,000 = 2,019,959,000? No wait... Let me think: If Interest Paid is classified as operating, it's already deducted. Interest Received is operating income. Dividends Received might be operating or investing. Actually, I'll use the **most standard credit rating definition**: **FFO = Net Income + Depreciation & Amortization + Deferred Income Taxes + Other non-cash items - Equity in earnings of affiliates** For 2022: - Net Income: 1,948,767,000 - D&A: 462,694,000 - Deferred Income Taxes: Need to estimate. Looking at Deferred Tax Liabilities: 486,851,000 (2022) vs 797,055,000 (2021). Decrease = 310,204,000. Deferred Tax Assets: 35,811,000 (2022) vs 0 (2021). Increase = 35,811,000. Net decrease in deferred tax liabilities = 310,204,000 - 35,811,000 = 274,393,000... this is getting complex. Actually, "Change In Noncurrent Provisions And Deferred Tax Liabilities" in cash flow = 35,247,000 for 2022. This is a positive adjustment, meaning decrease in liability or increase in asset. Let me just use a simple approximation: **FFO ≈ EBITDA - Cash Interest - Cash Taxes + Dividends from associates** = 3,160,679,000 - 36,100,000 - 343,100,000 + 29,900,000 = 2,811,379,000 Or using accrual taxes: 3,160,679,000 - 36,100,000 - 583,352,000 + 29,900,000 = 2,571,127,000 Given the complexity, let me use a widely accepted simple formula for FFO in European utilities: **FFO = Profit Loss + Depreciation And Amortisation Expense + Interest Expense + Income Tax Expense - Share Of Profit Loss Of Associates And Joint Ventures** = 1,948,767,000 + 462,694,000 + 101,703,000 + 583,352,000 - 4,293,000 = 3,092,223,000 But this seems too high (higher than EBITDA). Let me check: EBITDA = 3,160,679,000. So FFO = 3,092,223,000 is slightly less than EBITDA, which makes sense if FFO = EBITDA - Taxes + Interest - Equity... wait no, EBITDA already excludes interest and taxes. Actually: EBITDA = 3,160,679,000 Less: D&A = 462,694,000 = EBIT = 2,697,985,000 Less: Interest = 101,703,000 = EBT = 2,596,282,000 But actual Profit Before Tax = 2,532,119,000. Difference = 64,163,000 (due to other items). Then EBT - Taxes = 2,532,119,000 - 583,352,000 = 1,948,767,000 = Net Income ✓ So if FFO = Net Income + D&A + Interest + Taxes - Equity = 1,948,767,000 + 462,694,000 + 101,703,000 + 583,352,000 - 4,293,000 = 3,092,223,000 This is basically: FFO = EBIT + D&A + Taxes - Taxes + Interest - Interest... no wait. Actually: Net Income + Taxes + Interest = EBT + Interest = EBIT (approx) = 2,532,119,000 + 101,703,000 = 2,633,822,000 Plus D&A = 2,633,822,000 + 462,694,000 = 3,096,516,000 Less Equity earnings = 3,096,516,000 - 4,293,000 = 3,092,223,000 This is approximately EBITDA + Interest - Equity earnings = 3,160,679,000 + 101,703,000 - 4,293,000... no, EBITDA already includes no interest. Wait: EBIT = 2,697,985,000 (from above, but actual is different due to other items) EBITDA = 3,160,679,000 So FFO = 3,092,223,000 is close to EBITDA but slightly less. This makes sense as FFO includes cash taxes (not accrued), or rather, it adds back accrued taxes to get pre-tax cash flow. Actually, I think the confusion is whether FFO should be pre-tax or post-tax. Standard FFO is POST-tax (funds available after all expenses except debt principal). So: Correct FFO = Net Income + D&A + Deferred Taxes + Other non-cash - Equity earnings = Post-interest, post-tax cash flow available to service debt principal For 2022: = 1,948,767,000 + 462,694,000 + 240,252,000 (approx deferred tax) - 4,293,000 = 2,647,420,000 Or without deferred tax (just D&A): = 1,948,767,000 + 462,694,000 - 4,293,000 = 2,407,168,000 Let me use a practical approach. I'll estimate FFO as **Operating Cash Flow before working capital changes**, which is approximately: From cash flow: Subtotal = 2,516,130,000 But let me verify this is indeed before working capital. Looking at the sequence: - Subtotal: 2,516,130,000 - Adjustments For Decrease Increase In Inventories: -73,079,000 - Adjustments For Decrease Increase In Trade And Other Receivables: -192,271,000 - Adjustments For Increase Decrease In Trade And Other Payables: 339,687,000 - Adjustments For Decrease Increase In Derivative Financial Assets: 548,678,000 - Adjustments For Increase Decrease In Derivative Financial Liabilities: -1,360,527,000 - Change In Current Provisions And Current Tax Liabilities: 241,241,000 - Cash Flows From Used In Operating Activities: 2,019,859,000 Let me verify: 2,516,130,000 - 73,079,000 - 192,271,000 + 339,687,000 + 548,678,000 - 1,360,527,000 + 241,241,000 = 2,516,130,000 + 339,687,000 + 548,678,000 + 241,241,000 - 73,079,000 - 192,271,000 - 1,360,527,000 = 2,516,130,000 + 1,129,606,000 - 1,625,877,000 = 2,516,130,000 - 496,271,000 = 2,019,859,000 ✓ Great! So Subtotal is indeed before working capital changes. This is essentially "Cash generated from operations" or "FFO before interest and taxes" depending on classification. Now, is Subtotal = FFO? Not quite. FFO typically excludes working capital but is POST interest and taxes. Subtotal here seems to be based on Operating Profit, which is pre-interest and pre-tax. Actually, "Profit Loss From Operating Activities" is typically EBIT or EBITDA-level profit. In IFRS, "Operating Profit" can be before or after interest depending on classification. For VERBUND, "Profit Loss From Operating Activities" = 2,626,196,000. Given that they separately disclose Interest Expense, this Operating Profit is likely pre-interest. So Subtotal = 2,516,130,000 is pre-interest, pre-tax cash flow before working capital. To get FFO (post-interest, post-tax), I'd need to subtract interest and taxes. FFO = Subtotal - Interest Paid - Cash Taxes + Interest Received + Dividends Received... Or: FFO = Cash Flows From Operating Activities + Working capital changes - Interest Paid + Interest Received... this is getting circular. Let me use a clean final approach: **FFO = Net Income + Depreciation & Amortization - Equity Earnings + Other non-cash items** = 1,948,767,000 + 462,694,000 - 4,293,000 + (other non-cash like deferred taxes, impairments net, etc.) Other non-cash from cash flow adjustments (excluding D&A and working capital): - Impairment Losses Net: -11,833,000 (reversal, so negative = cash-like) - Undistributed Profits: -17,259,000 - Gains On Disposal: 4,914,000 (negative for cash flow = gain, so subtract) - Change In Noncurrent Provisions: 35,247,000 - Change In Contributions: 2,782,000 - Other Adjustments: 31,340,000 Sum: -11,833,000 - 17,259,000 + 4,914,000 + 35,247,000 + 2,782,000 + 31,340,000 = 45,191,000 FFO = 1,948,767,000 + 462,694,000 + 45,191,000 - 4,293,000 = 2,452,359,000 Or if we include deferred tax change: Change in Deferred Tax Liabilities = 486,851,000 - 797,055,000 = -310,204,000 (decrease). Deferred Tax Assets = 35,811,000 - 0 = 35,811,000 (increase). Net = -274,393,000 (use of deferred tax, positive for cash?). Actually, decrease in deferred tax liability means cash tax was less than accrual tax, so add back. But increase in deferred tax asset also means add back. So +274,393,000? No wait, if DTL decreases, we paid more cash tax. If DTA increases, we paid more cash tax or had benefit. This is confusing. Let me just use a standard approximation: **FFO ≈ 2,500,000,000 to 2,650,000,000 EUR** I'll settle on: **FFO = 2,516,130,000** (Subtotal from cash flow, as proxy for FFO before interest and tax) or adjust for interest and tax. Actually, for FFO/Net Debt, the debt is in denominator, so we want pre-interest cash flow to service that debt. So FFO should be pre-interest: FFO = Subtotal + Interest Paid (if not already in Subtotal) - Interest Received Since Subtotal is based on pre-interest Operating Profit, it's already pre-interest. So: FFO_pre-interest = Subtotal = 2,516,130,000? But then we'd compare to Net Debt and the ratio would be very high. Actually, standard FFO/Net Debt uses POST-interest FFO: FFO = Net Income + D&A + Deferred Taxes - Equity Earnings + Other non-cash Let me calculate more carefully using actual cash flow data: From the cash flow statement, after working capital adjustments, we have: Cash Flows From Used In Operating Activities = 2,019,859,000 Then we know: - Income Taxes Paid = 343,100,000 - Interest Paid = 36,100,000 - Interest Received = 6,100,000 - Dividends Received = 29,900,000 If these are NOT included in 2,019,859,000, then operating cash flow before these = 2,019,859,000. But if they are included... Actually, in standard IFRS cash flow statements, "Cash flows from operating activities" INCLUDES interest paid (if classified as operating), interest received, dividends received, and income taxes paid. So: Cash flows from operating activities = 2,019,859,000 INCLUDES: - Interest paid: 36,100,000 (outflow) - Interest received: 6,100,000 (inflow) - Dividends received: 29,900,000 (inflow) - Income taxes paid: 343,100,000 (outflow) So pre-interest, pre-tax operating cash flow = 2,019,859,000 + 36,100,000 - 6,100,000 - 29,900,000 + 343,100,000 = 2,363,059,000? No, that's not right either. Actually, if interest paid is an outflow already included, adding it back gives pre-interest. If interest received is an inflow, subtracting it gives pre-interest. Dividends received - depends on classification. Taxes paid - if we want pre-tax, add back. For FFO (post-interest, post-tax, pre-working capital): = Cash flows from operating activities - Working capital changes + Interest Paid - Interest Received - Dividends Received + Income Taxes Paid = 2,019,859,000 - (-496,271,000) + 36,100,000 - 6,100,000 - 29,900,000 + 343,100,000 = 2,019,859,000 + 496,271,000 + 36,100,000 - 6,100,000 - 29,900,000 + 343,100,000 = 2,859,330,000 That seems too high. Let me try simpler: FFO = Subtotal (pre-working capital) - Interest Paid + Interest Received + Dividends Received - Income Taxes Paid? No... Actually, Subtotal = 2,516,130,000 is BEFORE working capital and presumably BEFORE interest and taxes paid (since it's based on accrual profit). So FFO (accrual-based, post-interest, post-tax, pre-working capital) would be: = Subtotal - Interest Expense (accrual) - Income Tax Expense (accrual) + Interest Income (accrual) + Dividends from associates = 2,516,130,000 - 101,703,000 - 583,352,000 + 40,132,000 + 29,900,000? = 1,901,107,000 Hmm, this is close to Net Income + D&A = 1,948,767,000 + 462,694,000 = 2,411,461,000. I'm overcomplicating this. Let me use the **most common industry practice for FFO/Net Debt**: **FFO = EBITDA - Cash Interest - Cash Taxes + Dividends from associates - Minority interest distributions** Or: **FFO = Net Income + D&A + Interest Expense + Income Tax Expense - Equity Earnings** (pre-interest version for coverage ratio) For the ratio FFO/Net Debt, if FFO is pre-interest, we're measuring gross cash flow against debt. If FFO is post-interest, we're measuring residual cash flow against debt. Both are used, but pre-interest is more common for "Debt Service Coverage" type metrics. Actually, I recall now: **FFO/Net Debt** is typically calculated as: - FFO = Funds from Operations = Net Income + D&A + Deferred Taxes + Other non-cash - Equity Earnings + Interest Expense - This is EBITDA - Cash Taxes + Interest - ... no wait. Let me look at this from Net Debt perspective. Net Debt = Total Debt - Cash. We want to know how many times FFO covers Net Debt. If FFO is post-interest, then FFO/Net Debt tells us years to pay off debt from internal cash after interest. If FFO is pre-interest, then FFO/Net Debt tells us gross coverage. For credit ratios, **FFO is typically post-interest** (funds actually available to pay debt principal). Standard Moody's definition: FFO = Net Income + D&A + Deferred Income Taxes + Other non-cash items - Equity in earnings of unconsolidated affiliates + Minority interest in net income of subsidiaries that are not wholly owned For VERBUND 2022: - Net Income: 1,948,767,000 - D&A: 462,694,000 - Deferred Taxes: ~240,252,000 (estimate from tax expense vs paid, or from balance sheet changes) - Other non-cash: impairments net, etc. Let's say ~45,191,000 from earlier - Equity in earnings: -4,293,000 (subtract, meaning it was income) - Minority interest: 231,754,000 (add back, since we want FFO attributable to all providers of capital, or not?) Actually, if we want FFO available to service debt, we might add back minority interest (since it's a distribution to other equity holders, not debt service). FFO = 1,948,767,000 + 462,694,000 + 240,252,000 + 45,191,000 - 4,293,000 + 231,754,000 = 2,924,365,000 Or simpler, excluding minority interest (since it's not available to debt holders): FFO = 1,948,767,000 + 462,694,000 + 240,252,000 + 45,191,000 - 4,293,000 = 2,692,611,000 Let me try yet another approach using actual cash flow data more carefully. From Cash Flow Statement 2022: - Cash Flows From Used In Operating Activities: 2,019,859,000 This is the bottom-line operating cash flow. To get FFO (before working capital changes): FFO = Cash Flows From Operating Activities - Working capital changes + Interest Paid - Interest Received - Dividends Received + Income Taxes Paid Working capital change effect = sum of adjustments: = -73,079,000 - 192,271,000 + 339,687,000 + 548,678,000 - 1,360,527,000 + 241,241,000 = -496,271,000 (negative means working capital absorbed cash) So FFO = 2,019,859,000 - (-496,271,000) + 36,100,000 - 6,100,000 - 29,900,000 + 343,100,000 = 2,019,859,000 + 496,271,000 + 36,100,000 - 6,100,000 - 29,900,000 + 343,100,000 = 2,859,330,000 This is pre-interest, pre-tax FFO (since we added back interest and taxes). For post-interest, post-tax FFO: = 2,859,330,000 - 36,100,000 + 6,100,000 + 29,900,000 - 343,100,000 = 2,516,130,000 Wait, that's just Subtotal! So Subtotal = post-interest, post-tax, pre-working capital cash flow = FFO! Actually no: 2,859,330,000 - 36,100,000 (interest paid) + 6,100,000 (interest received) + 29,900,000 (dividends) - 343,100,000 (taxes paid) = 2,516,130,000. But this uses CASH interest and CASH taxes, not accrual. So Subtotal is essentially FFO based on cash interest and cash taxes, before working capital. Hmm, but 2,516,130,000 is less than EBITDA (3,160,679,000). The difference is taxes (343,100,000 cash vs 583,352,000 accrual) and interest (36,100,000 cash vs 101,703,000 accrual) and other items. So Subtotal = EBITDA - Cash Interest - Cash Taxes + Other adjustments = FFO (broadly defined). For practical credit analysis, I'll use **FFO = 2,516,130,000** (the Subtotal) as proxy for FFO, or adjust slightly. Actually, looking at rating agency practice more carefully, they often use: FFO = Net Income + D&A + Deferred Taxes + Other non-cash - Equity earnings For 2022, using balance sheet deferred tax changes: - Deferred Tax Liabilities: 486,851,000 (2022 end) vs 797,055,000 (2021 end) = -310,204,000 - Deferred Tax Assets: 35,811,000 (2022 end) vs 0 (2021 start) = +35,811,000 - Net change in deferred tax = -274,393,000 (decrease in net deferred tax liability) This means cash taxes exceeded accrual taxes by 274,393,000, so we should SUBTRACT this from Net Income + D&A to get FFO? No wait, if deferred tax liability decreases, we paid more cash tax, so FFO (cash-based) would be lower. Actually, the standard formula adds back deferred tax EXPENSE (non-cash), not the balance sheet change. Income Tax Expense = 583,352,000. Cash Taxes Paid = 343,100,000. So deferred tax expense (non-cash portion) = 583,352,000 - 343,100,000 = 240,252,000. This is what we add back. FFO = 1,948,767,000 + 462,694,000 + 240,252,000 - 4,293,000 + other non-cash = 2,647,420,000 + other non-cash Other non-cash from cash flow (excluding D&A and deferred tax already counted): - Impairment Losses Net: -11,833,000 (this is net reversal, so negative) - Undistributed Profits: -17,259,000 - Gains On Disposal: 4,914,000 (gain, so negative for FFO) - Change In Noncurrent Provisions: 35,247,000 - Change In Contributions: 2,782,000 - Other Adjustments: 31,340,000 But some of these are working capital or balance sheet changes, not pure non-cash P&L items. Let me focus on true non-cash P&L items: - D&A: 462,694,000 - Impairment Loss net of reversal: 197,761,000 - 125,973,000 = 71,788,000 (expense) - Share of equity earnings: 4,293,000 (income, subtract) - Finance costs non-cash: Wertminderungen 46,455,000, Wertaufholungen 0, Other Finance 1,642,000... Actually, from P&L: - Profit Loss From Operating Activities: 2,626,196,000 - Add: D&A: 462,694,000 - Add: Impairment net: 71,788,000 - Less: Equity earnings: 4,293,000 - Less: Other income from subs: 8,013,000 - Add: Finance costs non-cash: ? = Operating cash flow before working capital and before interest/tax This is getting too detailed. Let me use a practical estimate. **Final FFO estimate:** I'll use **FFO = 2,500,000,000 EUR** as a rounded estimate based on Subtotal (2,516,130,000) which represents post-interest, post-tax, pre-working capital cash flow. Actually, for more precision, let me use the accrual-based FFO: FFO = Net Income + D&A + Deferred Tax Expense - Equity Earnings + Minority Interest = 1,948,767,000 + 462,694,000 + 240,252,000 - 4,293,000 + 231,754,000 = 2,879,174,000 Or without minority interest: = 2,647,420,000 I think for FFO/Net Debt, the standard includes minority interest add-back (since it's part of total company cash flow available, just distributed differently): FFO = 2,879,174,000 ≈ 2,880,000,000 But let me check if Subtotal + Minority Interest works: Subtotal = 2,516,130,000. This is based on Profit Loss From Operating Activities which is pre-minority. So Subtotal already includes cash flow attributable to minorities. Actually, Profit Loss From Operating Activities is before interest and tax, so it's for the whole company. Net Income is after minority interest. So: - Subtotal (2,516,130,000) is whole-company, pre-interest, pre-tax, pre-working capital - Net Income (1,948,767,000) is after minority, after interest, after tax To get whole-company post-interest, post-tax FFO: = Subtotal - Cash Interest - Cash Taxes + adjustments = 2,516,130,000 (already calculated as such) Or using accrual: = EBIT for whole company - Accrued Interest - Accrued Taxes = ~2,626,196,000 + adjustments - 101,703,000 - 583,352,000 + ... I'll settle on **FFO ≈ 2,520,000,000 EUR** (using Subtotal as best proxy for FFO). **Step 2: Calculate Net Debt** Net Debt = Total Financial Debt - Cash and Cash Equivalents Financial Debt = Noncurrent Financial Liabilities + Current Financial Liabilities = 1,834,155,000 + 1,462,453,000 (for 2022 end, i.e., 2023-01-01) = 3,296,608,000 Wait, I need to check date. "2022-01-01 - 2023-01-01" is the fiscal year 2022. Balance sheet at end of 2022 is "2023-01-01" or "2022-01-01" for start. For 2022 year-end (2023-01-01): - Noncurrent Financial Liabilities: 2,844,559,000 - Current Financial Liabilities: 1,109,297,000 - Total Financial Debt = 3,953,856,000 For 2021 year-end (2022-01-01): - Noncurrent Financial Liabilities: 1,834,155,000 - Current Financial Liabilities: 1,462,453,000 - Total Financial Debt = 3,296,608,000 Wait, I need to be careful. The period "2022-01-01 - 2023-01-01" is fiscal year 2022. The balance sheet at the START of this period is 2022-01-01. The balance sheet at the END is 2023-01-01. For ratios at end of 2022, I should use 2023-01-01 balance sheet figures. At 2023-01-01: - Noncurrent Financial Liabilities: 2,844,559,000 - Current Financial Liabilities: 1,109,297,000 - Total Financial Debt = 3,953,856,000 Cash and Cash Equivalents at 2023-01-01: 409,252,000 Net Debt = 3,953,856,000 - 409,252,000 = 3,544,604,000 But wait, I should also check if there are other debt-like items. "Noncurrent Derivative Financial Liabilities" and "Current Derivative Financial Liabilities" might be debt-like, but they're typically operating hedges, not financing. Also "Payments Of Lease Liabilities" suggests leases are part of debt. In balance sheet, "Rightofuse Assets" = 146,613,000 at 2023-01-01. The lease liabilities might be included in financial liabilities or payables. Actually, looking at 2022-01-01: Rightofuse Assets = 103,826,000. Payments Of Lease Liabilities = 11,447,000. These are finance leases or IFRS 16 leases. For Net Debt, we typically include: - Financial Liabilities (current and non-current) - Less: Cash and Cash Equivalents - Sometimes plus derivatives if debt-like Standard Net Debt = 3,953,856,000 - 409,252,000 = 3,544,604,000 But some analysts also subtract "Current Derivative Financial Assets" and "Noncurrent Derivative Financial Assets" if they're viewed as cash-like, or add derivative liabilities. This gets complex. Let me use standard Net Debt = Total Financial Liabilities - Cash = 3,544,604,000. Actually, I should check if 2022 average or year-end is used. For ratios, year-end is standard unless specified otherwise. **Step 3: Calculate FFO / Net Debt** Using FFO = 2,516,130,000 (Subtotal) and Net Debt = 3,544,604,000: FFO / Net Debt = 2,516,130,000 / 3,544,604,000 = 0.710 or 71.0% Using FFO = 2,647,420,000 (Net Income + D&A + Deferred Tax - Equity): FFO / Net Debt = 2,647,420,000 / 3,544,604,000 = 0.747 or 74.7% Using FFO = 2,019,859,000 (Operating Cash Flow, after working capital): FFO / Net Debt = 2,019,859,000 / 3,544,604,000 = 0.570 or 57.0% The standard FFO/Net Debt should use FFO before working capital changes, so 71% or 75% range. Let me refine. I'll use a more precise FFO calculation: FFO = Profit Loss + Depreciation And Amortisation Expense + Interest Expense + Income Tax Expense - Share Of Profit Loss Of Associates And Joint Ventures - Other Income Expense From Subsidiaries Jointly Controlled Entities And Associates + Minority Interest = 1,948,767,000 + 462,694,000 + 101,703,000 + 583,352,000 - 4,293,000 - 8,013,000 + 231,754,000 = 3,315,964,000 Wait, this is too high (higher than EBITDA). Let me not add back minority interest if it's already in Profit Loss. Actually, Profit Loss = 1,948,767,000 is AFTER minority interest. So to get total FFO, I should add minority interest back. But EBITDA = 3,160,679,000. So FFO = 3,315,964,000 > EBITDA? That can't be right if FFO is post-some items. Let me check: 1,948,767,000 (Net Income) + 231,754,000 (Minority) = 2,180,521,000 (Total Net Income) + 462,694,000 (D&A) = 2,643,215,000 + 101,703,000 (Interest) = 2,744,918,000 + 583,352,000 (Taxes) = 3,328,270,000 - 4,293,000 (Equity earnings) = 3,324,0... This is essentially EBIT + D&A + Minority = EBITDA + Minority + other adjustments. Since EBITDA = 3,160,679,000, and this is 3,328,270,000 - 4,293,000 = 3,323,977,000, there's a difference of ~163,000,000 due to other items (impairments, etc.). Actually, EBITDA already excludes impairments? No, EBITDA is before depreciation, amortization, interest, and taxes. Impairments might be included or excluded depending on definition. Looking at VERBUND's EBITDA: 3,160,679,000. This likely excludes impairments (which are below EBITDA). So my calculation gives something like "EBITDA + Minority + Impairments net - Equity..." which is not standard FFO. Let me use cleaner: FFO = EBITDA - Cash Interest - Cash Taxes + Dividends Received = 3,160,679,000 - 36,100,000 - 343,100,000 + 29,900,000 = 2,811,379,000 Or with accrual taxes and interest: = 3,160,679,000 - 101,703,000 - 583,352,000 + 29,900,000 = 2,505,524,000 This is close to Subtotal (2,516,130,000)! The difference is due to other adjustments. So **FFO ≈ 2,510,000,000 EUR** is reasonable. Using FFO = 2,516,130,000 and Net Debt = 3,544,604,000: Ratio = 0.7098 or about 0.71 But I want to check if Net Debt should include or exclude certain items. Let me also calculate using 2022 average debt or just year-end. Actually, for more accurate Net Debt, I should check if there are lease liabilities included in financial liabilities. The "Payments Of Lease Liabilities Classified As Financing Activities" = 11,447,000 in 2022. This suggests some leases are in financing activities. Also, "Noncurrent Payables" and "Current Payables" might include debt-like items. Standard Net Debt calculation: = Noncurrent Financial Liabilities + Current Financial Liabilities - Cash and Cash Equivalents = 2,844,559,000 + 1,109,297,000 - 409,252,000 = 3,544,604,000 Some analysts also include derivatives if they're debt-like: + Noncurrent Derivative Financial Liabilities + Current Derivative Financial Liabilities = 1,069,177,000 + 1,491,588,000 = 2,560,765,000 But these are typically operating hedges, not financing. So I'll exclude them. Net Debt = 3,544,604,000 FFO / Net Debt = 2,516,130,000 / 3,544,604,000 = 0.7098 Or if I use FFO = 2,505,524,000 (EBITDA - Interest - Taxes + Dividends): = 2,505,524,000 / 3,544,604,000 = 0.7069 Or if I use a more conservative FFO = 2,019,859,000 (Operating Cash Flow): = 2,019,859,000 / 3,544,604,000 = 0.5698 Given standard practice, FFO should be before working capital changes. I'll use **FFO = 2,516,130,000** (the Subtotal). Final calculation: 2,516,130,000 / 3,544,604,000 = 0.7098 ≈ **0.71 or 71%** But wait - I should double check my Net Debt calculation. Are there any other cash-like items to subtract? Current Assets include: - Cash: 409,252,000 - Current Derivative Financial Assets: 1,833,683,000 - Trade Receivables: 1,546,061,000 - Inventories: 122,997,000 Some analysts subtract only "excess cash" or include marketable securities. But standard is Cash and Cash Equivalents. Also, I should check if Financial Liabilities include leases. Looking at Rightofuse Assets = 146,613,000 at 2023-01-01, the corresponding lease liability might be in Financial Liabilities or separately disclosed. Since "Payments Of Lease Liabilities" is classified as financing, the liability is likely in Financial Liabilities. So Net Debt = 3,544,604,000 seems correct. Let me also verify with 2022 beginning balance sheet (2022-01-01): Financial Debt = 1,834,155,000 + 1,462,453,000 = 3,296,608,000 Cash = 318,562,000 Net Debt (start) = 2,978,046,000 Average Net Debt = (2,978,046,000 + 3,544,604,000) / 2 = 3,261,325,000 FFO / Average Net Debt = 2,516,130,000 / 3,261,325,000 = 0.7715 But year-end is more standard for this ratio. Actually, I realize I should check one more thing. Is "Current Financial Liabilities" at 2023-01-01 really 1,109,297,000? Let me re-read the data. "Current Financial Liabilities" 2023-01-01: 1109297000 EUR = 1,109,297,000 ✓ "Noncurrent Financial Liabilities" 2023-01-01: 2844559000 EUR = 2,844,559,000 ✓ Total = 3,953,856,000 ✓ Less Cash 409,252,000 = 3,544,604,000 ✓ Now for FFO, let me also consider if I should use a different figure. Some credit analysts use: FFO = Cash Flow From Operating Activities + Interest Paid - Interest Received + Dividends Received - Working Capital Changes = 2,019,859,000 + 36,100,000 - 6,100,000 + 29,900,000 - (-496,271,000) Wait, working capital change was -496,271,000 (absorption), so subtracting working capital change means adding it back? Actually: Cash Flow = FFO + Working Capital Change - Interest Paid + Interest Received - Dividends Received + Taxes Paid... Let me just accept Subtotal = 2,516,130,000 as FFO proxy. One more check: Is Subtotal really FFO? Looking at rating agency definitions: Moody's: "FFO = Net income + depreciation & amortization + deferred income taxes + other non-cash items - equity in earnings of unconsolidated affiliates + minority interest" For VERBUND 2022: - Net income: 1,948,767,000 - D&A: 462,694,000 - Deferred income taxes: 240,252,000 (estimate) - Other non-cash: let's say 0 for simplicity, or include impairments - Equity in earnings: -4,293,000 - Minority interest: 231,754,000 = 1,948,767,000 + 462,694,000 + 240,252,000 - 4,293,000 + 231,754,000 = 2,879,174,000 This is higher than Subtotal. The difference is due to using accrual-based deferred tax vs cash-based, and including minority interest. If I use this FFO: 2,879,174,000 / 3,544,604,000 = 0.812 or 81.2% But I think Subtotal is closer to actual cash-based FFO used in practice. Let me try another common definition: FFO = Operating Cash Flow before Working Capital Changes From cash flow statement, this is exactly "Subtotal" = 2,516,130,000. FFO / Net Debt = 2,516,130,000 / 3,544,604,000 = 0.7098 Rounding to reasonable precision: **0.71 or 71%** But let me also consider if we should use Net Debt including or excluding certain items. Some analysts use "Net Debt" = Total Debt - Cash - Marketable Securities. Here, "Investments And Other Receivables" might include some marketable securities. At 2023-01-01: - Investments And Other Receivables: 945,454,000 (non-current) + some current? Actually, "Investments And Other Receivables" is non-current. Current assets have "Current Derivative Financial Assets" = 1,833,683,000 which are hedging instruments, not really cash equivalents. I'll stick with standard Net Debt = 3,544,604,000. Final answer: FFO / Net Debt = 2,516,130,000 / 3,544,604,000 = 0.7098 Or using slightly different FFO estimate of 2,500,000,000: 2,500,000,000 / 3,544,604,000 = 0.705 Given the data, I'll use **0.71** as my best estimate, or more precisely **0.7098**. Actually, let me recalculate with exact numbers: 2,516,130,000 / 3,544,604,000 = 0.709846... Rounded to two decimal places: 0.71 Or as percentage: 71% The question asks for ratio, so 0.71 or 71%. Typically FFO/Net Debt is expressed as a percentage or decimal. I'll provide as decimal: 0.71 Wait, I want to double-check one thing. Should I use 2022 year-end or average? For credit ratios, year-end is standard. Also, should FFO be for 2022 (flow) and Net Debt at 2022 year-end (stock)? Yes, that's standard - flow over ending stock, or sometimes average stock. Let me also verify my FFO one more time. I'll calculate it as: FFO = EBITDA - Cash Interest - Cash Taxes + Dividends from Associates = 3,160,679,000 - 36,100,000 - 343,100,000 + 29,900,000 = 2,811,379,000 This is higher than Subtotal because Subtotal uses accrual-based adjustments that include some negative items. Actually, let me check: EBITDA - Interest Expense - Income Tax Expense + Dividends = 3,160,679,000 - 101,703,000 - 583,352,000 + 29,900,000 = 2,505,524,000 This is very close to Subtotal (2,516,130,000). The difference of ~10.6 million is due to other adjustments. I'll use **FFO = 2,516,130,000** (Subtotal) as it's directly from the cash flow statement and represents cash-based FFO before working capital. Final ratio: 2,516,130,000 / 3,544,604,000 = **0.7098 ≈ 0.71** Actually, I want to make one more verification. Let me see if there's any other debt I should include. Looking at balance sheet at 2023-01-01: - Noncurrent Financial Liabilities: 2,844,559,000 - Current Financial Liabilities: 1,109,297,000 - Total: 3,953,856,000 Is there any other debt-like liability? - Noncurrent Derivative Financial Liabilities: 1,069,177,000 - these are hedging derivatives, not debt - Current Derivative Financial Liabilities: 1,491,588,000 - also hedging - Trade And Other Current Payables: 1,035,805,000 - trade payables, not debt - Noncurrent Payables: 563,379,000 - might include some debt-like items Actually, "Noncurrent Payables" could include deferred payments or other debt-like obligations. But typically only "Financial Liabilities" are included in Net Debt. Also, "Contributions To Building Costs And Grants" = 791,160,000 - these are like deferred income/grants, not debt. I'll stick with standard definition. One more thing: Should I subtract "Cash And Cash Equivalents" only, or also other liquid investments? Current Assets at 2023-01-01: - Cash: 409,252,000 - Current Derivative Financial Assets: 1,833,683,000 (not liquid, hedging) - Trade Receivables: 1,546,061,000 (not liquid) - Inventories: 122,997,000 (not liquid) So only Cash = 409,252,000 should be subtracted. Final answer: **0.71** or if more precise **0.7098** Let me provide as decimal with reasonable precision: 0.71 or 0.710 Actually, I'll calculate more carefully: 2,516,130,000 / 3,544,604,000 = ? 2,516,130,000 / 3,544,604,000 = 0.709846... So 0.710 or 0.71 or 71.0% I'll go with **0.71** as a rounded figure, or if more precision is desired, **0.710**. But actually, looking at this again, I want to verify my FFO calculation one more time by computing it from the income statement and cash flow statement more carefully. Alternative FFO calculation: FFO = Profit Loss From Operating Activities + Depreciation And Amortisation Expense + Interest Expense + Income Tax Expense - Share Of Profit Loss Of Associates - Other Income From Subsidiaries + Dividends From Associates No wait, Profit Loss From Operating Activities is already pre-interest and pre-tax for the operating company. Let me trace through: From IS: Profit Loss From Operating Activities = 2,626,196,000 + Share Of Profit Of Associates = 4,293,000 + Other Income From Subsidiaries = 8,013,000 + Revenue From Interest = 40,132,000 - Interest Expense = 101,703,000 + Other Finance Income Cost = 1,642,000 - Wertminderungen = 46,455,000 + Wertaufholungen = 0 = Finance Income Cost subtotal? = -94,077,000? Let me verify. Actually: 40,132,000 + 1,642,000 - 101,703,000 - 46,455,000 = -106,384,000 ≠ -94,077,000 Difference = 12,307,000. There might be other finance items. Then: Profit Loss Before Tax = 2,626,196,000 + 4,293,000 + 8,013,000 - 94,077,000 = 2,544,425,000? But actual is 2,532,119,000. Difference = 12,306,000. Hmm, close to the 12,307,000 difference above. Possibly rounding or other items. Anyway, Profit Loss Before Tax = 2,532,119,000 - Income Tax = 583,352,000 = Profit Loss = 1,948,767,000 ✓ Now, FFO (standard definition) = Net Income + D&A + Deferred Taxes + Other non-cash - Equity earnings + Minority interest = 1,948,767,000 + 462,694,000 + 240,252,000 + 45,191,000 - 4,293,000 + 231,754,000 = 2,924,365,000 But this seems high. Let me check if this equals: EBITDA - Cash Interest - Cash Taxes + Dividends + Minority = 3,160,679,000 - 36,100,000 - 343,100,000 + 29,900,000 + 231,754,000 = 3,043,133,000 Not matching. The difference is due to accrual vs cash, and other items. I think the safest is to use **Subtotal = 2,516,130,000** as FFO proxy, which is directly from the cash flow statement and represents operating cash flow before working capital changes. Or, I can use a more conservative **FFO = 2,019,859,000** which is actual operating cash flow. But this includes working capital changes which are volatile. For credit analysis, FFO before working capital is preferred. Final decision: **FFO = 2,516,130,000 EUR**, **Net Debt = 3,544,604,000 EUR** Ratio = 2,516,130,000 / 3,544,604,000 = 0.7098 I'll round to **0.71** or provide more precisely as **0.710**. Actually, let me see if I can get a more precise FFO. Looking at the cash flow statement, "Subtotal" includes various adjustments. Let me see if interest and taxes are already reflected. The cash flow statement shows: - Subtotal: 2,516,130,000 - Working capital adjustments - Cash Flow From Operating Activities: 2,019,859,000 - Then: Income Taxes Paid, Interest Paid, Interest Received, Dividends Received This structure suggests that "Cash Flow From Operating Activities" = 2,019,859,000 might already include interest and taxes, or they are shown as additional information. If 2,019,859,000 is AFTER interest and taxes, then to get FFO (before working capital, after interest and taxes): = 2,019,859,000 + working capital changes = 2,019,859,000 + 496,271,000 = 2,516,130,000 ✓ This matches Subtotal! So Subtotal = Operating Cash Flow + Working Capital Changes = FFO (post-interest, post-tax, pre-working capital). And since "Income Taxes Paid" and "Interest Paid" are shown after Cash Flow From Operating Activities, they might be separate disclosures, not additional adjustments. In some presentations, these are shown as memorandum items. So my calculation holds: **FFO = 2,516,130,000**, **Net Debt = 3,544,604,000**, **Ratio = 0.71** One final check: Should I use Net Debt at 2022 year-end (2023-01-01) or average? For a ratio at end of 2022, year-end is appropriate. Answer: **0.71** (or 0.7098 more precisely) I'll provide as 0.71 or 71%. Since the question asks for ratio, decimal form is appropriate: 0.71 Actually, I want to see if using the more precise 0.7098 or rounding to 0.71 is better. Given the estimation involved in FFO, 0.71 is reasonable. But let me also consider if 0.70 or 0.71 is more appropriate. 2,516,130,000 / 3,544,604,000 = 0.709846... Rounded to two significant figures: 0.71 Or as percentage: 71% I'll use **0.71** as final answer. Wait, I want to make absolutely sure about Net Debt. Let me re-read the financial liabilities: At 2023-01-01 (end of fiscal year 2022): - Noncurrent Financial Liabilities: 2,844,559,000 - Current Financial Liabilities: 1,109,297,000 Is there any other debt? "Noncurrent Derivative Financial Liabilities" = 1,069,177,000. These are derivative liabilities, typically from hedging. In some Net Debt calculations, these are included if they're debt-like (e.g., interest rate swaps). But for commodity/electricity hedges, they're typically excluded. Also, "Current Derivative Financial Liabilities" = 1,491,588,000. These are likely from electricity/gas hedging, not financing. I'll exclude derivatives from Net Debt. What about "Trade And Other Current Payables" = 1,035,805,000? These are trade payables, not debt. "Noncurrent Payables" = 563,379,000? Could include some debt-like items, but typically classified as payables, not financial liabilities. So Total Financial Debt = 3,953,856,000 seems correct. Net Debt = 3,953,856,000 - 409,252,000 = 3,544,604,000 ✓ Final answer: 0.71 Or should I express as percentage? The ratio FFO/Net Debt is typically expressed as a percentage (e.g., "71%") or as a multiple (e.g., "0.71x"). The question says "ratio", so either is fine. I'll use decimal: 0.71 Actually, looking at credit rating reports, FFO/Net Debt is often expressed as a percentage. So 71% or 0.71. I'll use 0.71 as it's more standard for mathematical ratios. Hmm, but actually in many European utility credit reports, it's shown as "FFO/Net Debt = 71%" or "0.71x". I'll provide: **0.71** Let me do one more sanity check. Is this ratio reasonable for a utility? For a hydroelectric utility like VERBUND, debt levels are moderate. FFO/Net Debt of ~71% means FFO covers about 71% of Net Debt, or alternatively, Net Debt is about 1.4x FFO. This is reasonable for a regulated/utilities company, especially in 2022 when electricity prices were high (boosting FFO). Given the high EBITDA growth from 2021 to 2022 (3.16B vs 1.58B), the FFO is also high, making the ratio look strong. However, Net Debt also increased significantly (from ~2.98B to ~3.54B). Actually, let me verify: Net Debt at 2022-01-01 = 3,296,608,000 - 318,562,000 = 2,978,046,000 Net Debt at 2023-01-01 = 3,953,856,000 - 409,252,000 = 3,544,604,000 Increase in Net Debt = 566,558,000 This makes sense given investing activities of ~1.59B and financing outflows. Ratio at 2021 year-end using 2021 FFO: FFO 2021 (Subtotal) = 1,272,174,000? Let me check: "Subtotal" 2021 = 1,272,174,000? No, "Subtotal" 2021-01-01 to 2022-01-01 = 1,272,174,000? Let me check data. "Subtotal" 2021-01-01 - 2022-01-01: 1272174000 EUR = 1,272,174,000 FFO/Net Debt 2021 = 1,272,174,000 / 2,978,046,000 = 0.427 or 43% So the ratio improved significantly in 2022 due to higher electricity prices boosting FFO. 71% seems reasonable. I'm confident in my answer. 0.71