I need to estimate the FFO (Funds From Operations) / Net Debt ratio for 2022. First, let me identify the relevant components: **FFO (Funds From Operations)** is typically calculated as: - Net income + Depreciation and amortization + Deferred taxes + Other non-cash items - Or more commonly: Operating cash flow before working capital changes From the cash flow data, I can find "Cash Flows From Used In Operations Excluding Eeg Working Capital" which represents operating cash flow before working capital changes: - 2022: 596,000,000 EUR However, this includes some working capital adjustments already. Let me look more carefully at what's available. Actually, FFO is more commonly defined in credit analysis as: FFO = Net income + Depreciation/Amortization + Deferred taxes + Other non-cash items Or alternatively: FFO = Cash flow from operating activities before changes in working capital Looking at the data: - "Cash Flows From Used In Operations Excluding Eeg Working Capital" 2022-01-01 - 2023-01-01: 596,000,000 EUR This seems to be operating cash flow excluding EEG working capital. But I need to check if this is before or after working capital changes. Looking more carefully at the structure: - "Increase Decrease In Working Capital Excluding Eeg Working Capital" 2022: 736,000,000 EUR - "Cash Flows From Used In Operations Excluding Eeg Working Capital" 2022: 596,000,000 EUR Wait, let me re-read. The "Cash Flows From Used In Operations Excluding Eeg Working Capital" likely already includes some adjustments. Let me trace through: From the cash flow statement structure, typically: - Start with profit/loss - Add back depreciation, amortization, non-cash items - Adjust for changes in working capital = Operating cash flow Looking at the items: - "Adjustments For Depreciation And Amortisation Expense And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" 2022: 1,233,000,000 EUR - "Other Adjustments For Noncash Items" 2022: 1,347,000,000 EUR - Various other adjustments The "Cash Flows From Used In Operations Excluding Eeg Working Capital" 2022: 596,000,000 EUR appears to be after all these adjustments but excluding EEG working capital. Then "Increase Decrease In Working Capital Eeg Working Capital" 2022: -1,792,000,000 EUR And "Cash Flows From Used In Operating Activities" 2022: 1,196,000,000 EUR Wait, let me check: 596,000,000 + (-1,792,000,000) doesn't equal 1,196,000,000. So there must be other components. Actually, looking more carefully: "Cash Flows From Used In Operations Excluding Eeg Working Capital" might already include some working capital changes (the non-EEG working capital). Let me check: "Increase Decrease In Working Capital Excluding Eeg Working Capital" 2022: 736,000,000 EUR Hmm, but 596,000,000 is the result, not an intermediate step. For FFO, a common approach in credit ratings is: FFO = Profit/Loss before tax + Interest expense + Depreciation/Amortization - Income tax paid Or: FFO = Cash flow from operating activities before changes in working capital + Interest paid Let me try a different approach. FFO for credit analysis (Moody's/Standard & Poor's style): FFO = Net income + Depreciation + Deferred taxes + Other non-cash items From the income statement: - "Profit Loss" 2022: -879,000,000 EUR - "Depreciation And Amortisation Expense" 2022: 1,233,000,000 EUR - "Income Tax Expense Continuing Operations" 2022: -354,000,000 EUR (negative means tax benefit) For FFO, I should also consider that we need to add back interest expense (since net debt ratios typically use FFO before interest): - "Finance Costs" 2022: 300,000,000 EUR But wait - "Finance Income Cost" is -257,000,000 EUR (net) Let me think about this more carefully. Standard FFO calculation: FFO = Net income + Depreciation/Amortization + Deferred income taxes + Other non-cash items From the data: - Net income: -879,000,000 EUR - Depreciation and Amortization: +1,233,000,000 EUR - Deferred tax assets increased from 162M to 711M, so that's a use of cash... actually the change is 711-162 = 549M increase. This is a non-cash benefit to some extent. Actually, looking at "Deferred Tax Assets" 2022-01-01: 162,000,000 and 2023-01-01: 711,000,000. The increase of 549M would reduce tax expense. "Income Tax Expense Continuing Operations" is -354,000,000 EUR (negative = tax benefit). For FFO, a practical approach using available data: FFO = "Cash Flows From Used In Operations Excluding Eeg Working Capital" + Interest paid (if not already included) + some adjustments Actually, let me look at what "Cash Flows From Used In Operations Excluding Eeg Working Capital" includes. It says 596,000,000 for 2022. But wait - I need FFO for 2022, which is the period 2022-01-01 to 2023-01-01. This is actually the year 2022. Let me recalculate using a more standard approach. FFO is often approximated as: FFO = EBIT + Depreciation & Amortization - Cash taxes Or: FFO = EBITDA - Cash taxes EBITDA = Operating profit before depreciation = "Profit Loss From Operating Activities" + "Finance Income Cost" + Depreciation... no wait. "Profit Loss From Operating Activities" 2022: -976,000,000 EUR This is EBIT (operating profit before financing). EBITDA = EBIT + Depreciation = -976,000,000 + 1,233,000,000 = 257,000,000 EUR Then FFO = EBITDA - Taxes + Interest... this gets confusing. Let me use a cleaner approach. FFO (Funds From Operations) per Moody's: FFO = Net income + Depreciation + Deferred taxes + Other non-cash charges + Interest expense Or more practically for utility companies: FFO = Operating cash flow before working capital changes Looking at the cash flow statement items that build up to "Cash Flows From Used In Operations Excluding Eeg Working Capital": The components leading to this include: - Various adjustments for non-cash items - "Other Adjustments For Noncash Items" 2022: 1,347,000,000 EUR Actually, I think "Cash Flows From Used In Operations Excluding Eeg Working Capital" 596,000,000 EUR is the best proxy for FFO available directly, but this might already exclude some items. Wait - I need to check if this includes interest paid or not. Typically operating cash flow includes interest paid. For Net Debt, I need: Net Debt = Total Debt - Cash and Cash Equivalents Total Debt = Long-term borrowings + Short-term borrowings + Current Bank Overdrafts + Other financial liabilities (maybe) From balance sheet 2022-01-01 (start of 2022, which is end of 2021): - "Longterm Borrowings" 2022-01-01: 12,366,000,000 EUR - "Shortterm Borrowings" 2022-01-01: 1,339,000,000 EUR - "Current Bank Overdrafts" 2022-01-01: 64,000,000 EUR - "Other Current Financial Liabilities" 2022-01-01: 281,000,000 EUR - "Other Noncurrent Financial Liabilities" 2022-01-01: 183,000,000 EUR But for Net Debt at end of 2022 (which is 2023-01-01): - "Longterm Borrowings" 2023-01-01: 19,006,000,000 EUR - "Shortterm Borrowings" 2023-01-01: 709,000,000 EUR - "Current Bank Overdrafts" 2023-01-01: 0 EUR - "Other Current Financial Liabilities" 2023-01-01: 550,000,000 EUR - "Other Noncurrent Financial Liabilities" 2023-01-01: 185,000,000 EUR Cash 2023-01-01: 6,547,000,000 EUR Net Debt at end of 2022 = 19,006 + 709 + 0 + 550 + 185 - 6,547 = 13,903,000,000 EUR? Wait, I need to be careful about what counts as debt. "Other financial liabilities" might not all be debt. Actually, standard net debt = Long-term borrowings + Short-term borrowings + Bank overdrafts - Cash and cash equivalents Net Debt 2022 (end) = 19,006,000,000 + 709,000,000 + 0 - 6,547,000,000 = 13,168,000,000 EUR Or if we use average net debt, or beginning of period net debt? For FFO/Net Debt ratio, typically use end-of-period or average net debt. Let me use end-of-period. Actually, I realize I need to check: the question asks for 2022. Do they mean the ratio at the end of 2022 using 2022 FFO and 2022 end net debt? Yes, typically. But wait - I need FFO for 2022. Let me re-examine. Actually, looking more carefully at "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596,000,000 EUR for 2022. But this seems low for a company with 8.3B revenue. Let me verify by building FFO from net income: Net income 2022: -879,000,000 + Depreciation & Amortization: 1,233,000,000 + Other non-cash items (provisions, etc.): ? = ? From cash flow adjustments: - "Adjustments For Depreciation And Amortisation" 2022: 1,233,000,000 - "Adjustments For Losses Gains On Disposal" 2022: 38,000,000 - "Adjustments For Undistributed Profits" 2022: 120,000,000 - "Adjustments For Provisions" 2022: 104,000,000 - "Other Adjustments For Noncash Items" 2022: 1,347,000,000 Sum of adjustments to net income: 1,233 + 38 + 120 + 104 + 1,347 = 2,842,000,000 Net income + adjustments = -879 + 2,842 = 1,963,000,000 Then working capital changes: - "Increase Decrease In Working Capital Excluding Eeg Working Capital" 2022: 736,000,000 So operating cash flow before EEG working capital = 1,963 + 736 = 2,699,000,000? But reported "Cash Flows From Used In Operations Excluding Eeg Working Capital" is 596,000,000. That's very different. Wait, I need to re-read. "Cash Flows From Used In Operations Excluding Eeg Working Capital" - the "Used In" suggests this is negative, but the value is positive 596,000,000. Actually in IFRS, "used in" means outflow, but the number is positive... Let me check the sign convention. Looking at "Cash Flows From Used In Investing Activities" 2022: -4,345,000,000 - negative means outflow. "Cash Flows From Used In Financing Activities" 2022: 6,556,000,000 - positive means inflow. So "Cash Flows From Used In Operations Excluding Eeg Working Capital" 2022: 596,000,000 - positive means inflow. But my calculation gave 2,699,000,000. There's a big difference. Let me check if there are more adjustments. Actually, I missed some items. Let me look at "Other Adjustments For Noncash Items" = 1,347,000,000. This is quite large and might include things like fair value changes. Also, I need to check: "Increase Decrease In Working Capital Excluding Eeg Working Capital" - is this a source or use? 736,000,000 positive. If it's "Increase Decrease", positive might mean increase (use of cash) or decrease (source of cash). Actually, looking at the pattern: "Adjustments For Decrease Increase In Trade And Other Receivables" 2022: -1,026,000,000. Negative means increase in receivables (use of cash). "Adjustments For Increase Decrease In Trade And Other Payables" 2022: -33,000,000. Negative means decrease in payables (use of cash). So "Increase Decrease In Working Capital Excluding Eeg Working Capital" 2022: 736,000,000 - this is positive, so likely net source of cash? But the sum of components I see is negative... Let me add: -1,026 - 49 - 33 + 103 + 269 = -736,000,000. That's -736M, not +736M. Hmm, but the reported is +736,000,000. Maybe I have signs wrong or there are other components. Actually wait - I misread. Let me recheck: - "Adjustments For Decrease Increase In Trade And Other Receivables Excluding Eeg Working Capital" 2022: -1,026,000,000 - "Adjustments For Decrease Increase In Inventories Excluding Eeg Working Capital" 2022: -49,000,000 - "Adjustments For Increase Decrease In Trade And Other Payables Excluding Eeg Working Capital" 2022: -33,000,000 - "Adjustments For Increase Decrease In Contract Liabilities Excluding Eeg Working Capital" 2022: 103,000,000 - "Adjustments For Increase Decrease In Current Financial Liabilities Excluding Eeg Working Capital" 2022: 269,000,000 Sum: -1,026 - 49 - 33 + 103 + 269 = -736,000,000 But "Increase Decrease In Working Capital Excluding Eeg Working Capital" is +736,000,000. So there's a sign difference. The individual items use "Adjustments For" while the total is "Increase Decrease In". If working capital increases, that's a use of cash (negative adjustment). But "Increase Decrease In Working Capital" being positive 736M might mean... actually I think the convention is that "Increase Decrease In" with positive value means increase in working capital (use of cash), but then it should be subtracted, not added. This is getting confusing with signs. Let me just use the reported "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596,000,000 as a proxy for FFO, or try to find a better FFO measure. Actually, for credit analysis, FFO is often defined more specifically. Let me try: FFO = Net income + D&A + Deferred taxes + Other non-cash items - Gain on sale + Interest expense From data: - Net income: -879,000,000 - D&A: +1,233,000,000 - Deferred tax benefit (from income statement): The tax expense is -354M (benefit). The deferred tax asset increased by 549M. Cash tax paid was 231M. So deferred tax benefit = 354 - 231 = 123M? Or just look at change in deferred tax assets. Actually, "Income Tax Expense Continuing Operations" is -354,000,000. This includes current and deferred. "Income Taxes Paid Refund" is 231,000,000. So deferred tax benefit = 354 - 231 = 123M... wait, no. Total tax expense is -354M (benefit). Cash tax paid is 231M. So deferred tax must be -354 - 231 = -585M? No that's wrong too. Actually: Tax expense = Current tax + Deferred tax -354 = Current tax expense + Deferred tax expense Cash taxes paid = 231M, so current tax expense is roughly 231M (with some timing differences) So deferred tax expense = -354 - 231 = -585M? That seems large. Or: if tax expense is -354M (benefit), and cash paid is 231M (outflow), then the accounting benefit is much larger than cash paid, suggesting large deferred tax benefit. Actually for FFO, we add back deferred tax expense (which is non-cash). If deferred tax benefit is -585M, we subtract it (or add back negative). Let me try a simpler approach. FFO = Cash flow from operations before working capital changes. From the cash flow statement, I can back this out: "Cash Flows From Used In Operating Activities" 2022: 1,196,000,000 - "Increase Decrease In Working Capital Eeg Working Capital" 2022: -1,792,000,000 = Cash flow before EEG working capital changes: 1,196 - (-1,792) = 2,988,000,000? No wait... Actually: Operating cash flow = Cash flow before WC changes + WC changes So: Cash flow before WC changes = Operating cash flow - WC changes But "Cash Flows From Used In Operations Excluding Eeg Working Capital" is already 596M, and then adding EEG working capital gives 1,196M. Hmm, let me check: 596 + (-1,792) = -1,196, not 1,196. But reported is 1,196. So maybe 596 - (-1,792) = 2,388? No... Actually I think "Cash Flows From Used In Operations Excluding Eeg Working Capital" might already be after some working capital changes (non-EEG), and then EEG working capital is added to get total operating cash flow. Looking at the structure: - Start with profit/loss - Add non-cash adjustments - Add non-EEG working capital changes = "Cash Flows From Used In Operations Excluding Eeg Working Capital" - Add EEG working capital changes = "Cash Flows From Used In Operating Activities" So "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596,000,000 includes non-EEG working capital changes. For FFO, we want before ALL working capital changes. So I need to add back non-EEG working capital changes. "Increase Decrease In Working Capital Excluding Eeg Working Capital" 2022: 736,000,000 If this is a source of cash (positive), then to get pre-working capital FFO, I subtract it (remove the benefit). If it's a use of cash, I add it back. Given the component detail showed -1,026 - 49 - 33 + 103 + 269 = -736, and the total is +736, I think there's a sign convention issue. Let me assume "Increase Decrease In Working Capital" with positive 736 means increase in working capital (use of cash, negative for cash flow). So if working capital increased by 736M (use of cash), then cash flow before this change would be 596M + 736M = 1,332,000,000? Or 596M - 736M = -140M? Actually, looking at the individual "Adjustments For" items: - Receivables increase: -1,026M (use of cash) - Inventory increase: -49M (use of cash) - Payables decrease: -33M (use of cash) - Contract liabilities increase: +103M (source of cash) - Current financial liabilities increase: +269M (source of cash) Net: -736M (use of cash, working capital increase) But "Increase Decrease In Working Capital Excluding Eeg Working Capital" is +736M. This suggests the naming means "Increase [or] Decrease" and positive means increase. So working capital increased by 736M, which is a use of cash. The adjustment to cash flow is -736M. Then "Cash Flows From Used In Operations Excluding Eeg Working Capital" of 596M already includes this -736M adjustment. Cash flow before working capital changes = 596M - (-736M)? No wait... Let me think again. If net income + non-cash adjustments = X, then: X + working capital adjustments = operating cash flow If working capital adjustment is -736M (use), then: X - 736 = 596 X = 1,332M So FFO (before working capital changes) = 1,332,000,000 EUR? But wait, I also need to check if this includes interest paid. Typically operating cash flow includes interest paid. For FFO/Net Debt, we often want FFO before interest or after interest - there's variation. Actually, looking at the financing activities, "Interest Paid Classified As Financing Activities" 2022: 202,000,000 EUR. This suggests interest is classified as financing, not operating! This is under IFRS where companies have choice. So "Cash Flows From Used In Operations Excluding Eeg Working Capital" of 596M does NOT include interest paid (since interest is financing). For FFO, if we want after interest but before working capital: 1,332M (from above) - but wait, this is before interest if interest is not in operating activities. Actually, the starting point "Profit Loss" includes finance costs of 300M and finance income of 43M, so net -257M. So net income includes interest expense (as expense, reducing income). So if we start from net income and add back non-cash items, we get cash flow before working capital changes that is AFTER interest expense. Let me verify: Net income -879M includes -257M net finance cost. So pre-interest operating profit is -879 + (-257) = wait, no. Net income = profit before tax + tax benefit = -1,233 + 354 = -879. Profit before tax includes finance cost net of -257. So operating profit before financing = -1,233 + (-257) = -976? No wait, profit before tax = operating profit + finance income - finance cost. "Profit Loss Before Tax" = -1,233,000,000 "Finance Income Cost" = -257,000,000 (net cost) So "Profit Loss From Operating Activities" = -1,233 - (-257) = -976,000,000. Yes, matches. So net income includes interest expense. When we add back non-cash items to get FFO, we get an after-interest measure. For FFO/Net Debt ratio, sometimes we want FFO after interest (since net debt requires interest payments). The ratio measures how well FFO covers debt service. OK so let me estimate FFO = 1,332,000,000 EUR (after interest, before working capital changes). But let me cross-check with another approach. Looking at "Other Adjustments For Noncash Items" = 1,347,000,000. This is quite large. What does it include? Actually, I realize I should look more carefully. The cash flow statement items that adjust net income to get operating cash flow before working capital: From net income (-879M), add: - D&A: 1,233M - Losses on disposal: 38M - Undistributed profits of equity investments: 120M - Provisions: 104M - Other non-cash items: 1,347M - Dividends received (operating): 92M Subtotal before working capital: -879 + 1,233 + 38 + 120 + 104 + 1,347 + 92 = 2,155M? Wait, dividends received are typically a cash inflow, not a non-cash adjustment. Let me re-read. Actually, looking at standard cash flow statement preparation: - Net income + Adjustments to reconcile net income to net cash: - D&A - Other non-cash items = Net income adjusted for non-cash items +/- Changes in working capital +/- Other operating items = Net cash from operating activities "Dividends Received Classified As Operating Activities" 2022: 92M - this is a cash inflow, not an adjustment to net income. So let me recalculate: Net income: -879M + D&A adjustments: 1,233M + Losses on disposal: 38M + Undistributed profits: 120M (this is equity method income not received in cash) + Provisions: 104M + Other non-cash: 1,347M = -879 + 1,233 + 38 + 120 + 104 + 1,347 = 2,063M Then +/- working capital changes = 596M (excluding EEG) So working capital change adjustment = 596 - 2,063 = -1,467M? But "Increase Decrease In Working Capital Excluding Eeg Working Capital" is 736M. Hmm, doesn't match. Unless "Other Adjustments For Noncash Items" includes some working capital related items or other things. Actually, I think I'm overcomplicating this. Let me use a simpler and more standard definition of FFO. For utility/infrastructure companies, FFO is often approximated as: FFO = EBITDA - Cash taxes Or: FFO = Operating cash flow before working capital changes From the data, let me use: EBITDA = "Profit Loss From Operating Activities" + "Depreciation And Amortisation Expense" + "Finance Costs" - "Finance Income" ? No, operating activities is already before finance. "Profit Loss From Operating Activities" 2022: -976,000,000 EUR (this is EBIT) + Depreciation & Amortization: 1,233,000,000 = EBITDA: 257,000,000 EUR Then FFO = EBITDA - Cash taxes + Interest? Cash taxes paid: 231,000,000 (from "Income Taxes Paid Refund") FFO = 257 - 231 = 26M? That seems very low. But we also have "Other Gains Losses" of -38M in operating expenses. And "Miscellaneous Other Operating Expense" of 322M. Actually, EBITDA should be: Revenue - Operating expenses + D&A (since operating expenses include D&A) Revenue 2022: 8,299,000,000 Operating expenses 2022: 9,395,000,000 Operating profit: -1,096,000,000? But "Profit Loss From Operating Activities" is -976,000,000. Difference is "Share Of Profit Loss Of Associates And Joint Ventures" 120M. So operating profit before equity method = -976 - 120 = -1,096M. Then revenue - operating expenses = 8,299 - 9,395 = -1,096M. Yes. So EBITDA = Revenue - Cash operating expenses = 8,299 - (9,395 - 1,233) = 8,299 - 8,162 = 137M? Wait: Operating expenses 9,395M includes D&A 1,233M. So cash operating expenses = 9,395 - 1,233 = 8,162M. Revenue 8,299 - Cash operating expenses 8,162 = 137M EBITDA? But then add equity method income 120M? Operating activities includes equity method income. So maybe EBITDA = 137 + 120 = 257M. Yes, matches. So EBITDA is 257M. Very low for 8.3B revenue company. This is because "Energy Transmission Charges" 7,517M is the main revenue component, and total revenue 8,299M. But operating expenses are high. Actually, looking at this more carefully - this is a regulated utility with pass-through costs. The "Energy Transmission Charges" might be costs passed through to customers, with small margin. For such companies, FFO is often calculated differently or the ratio uses different metrics. Let me try yet another approach. FFO from cash flow statement: "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596M + "Interest Paid Classified As Financing Activities" = 202M (if we want pre-interest FFO) + "Payments Of Lease Liabilities" = 221M (financing, but operating in nature) = ? Actually for FFO/Net Debt, we typically want FFO after interest, since the debt service is what we're measuring. Let me look at what rating agencies do. Moody's FFO: FFO = Net income + Depreciation + Deferred taxes + Other non-cash items From our data, using the cash flow adjustments: Net income: -879M + D&A: 1,233M + Other adjustments (losses, undistributed profits, provisions, other): 38 + 120 + 104 + 1,347 = 1,609M = FFO before working capital: -879 + 1,233 + 1,609 = 1,963M But this includes some items that might not be standard FFO. "Other Adjustments For Noncash Items" 1,347M is very large. What is this? Looking at the nature of business - transmission system operator with EEG (German renewable energy surcharge mechanism). The EEG working capital is huge and volatile. Actually, I think "Other Adjustments For Noncash Items" might include accruals related to EEG balancing accounts. This is a pass-through item. For a cleaner FFO, I should use: FFO = Net income + D&A + other standard non-cash items Or use "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596M as the best available proxy for sustainable FFO, since EEG working capital is financing-like and volatile. But 596M seems low. Let me check if this is after interest. Since interest is in financing activities, yes, this is after interest. Actually, wait. I need to re-examine. Is "Cash Flows From Used In Operations Excluding Eeg Working Capital" of 596M the same as FFO? FFO is typically BEFORE working capital changes. "Cash Flows From Used In Operations Excluding Eeg Working Capital" is AFTER non-EEG working capital changes. So to get FFO, I need to add back non-EEG working capital changes. If "Increase Decrease In Working Capital Excluding Eeg Working Capital" is +736M and this represents a use of cash (increase in working capital), then: FFO = 596M + 736M = 1,332M If it represents a source of cash, then: FFO = 596M - 736M = -140M Given the component analysis showed receivables up, inventory up, payables down (all uses of cash), with only small sources from contract liabilities and financial liabilities, the net is clearly a use of cash. So +736M means increase in working capital (use of cash). Thus FFO = 596M + 736M = 1,332,000,000 EUR. Let me verify with another check. Total operating cash flow 1,196M includes both non-EEG and EEG working capital changes. EEG working capital change: -1,792M (from "Increase Decrease In Working Capital Eeg Working Capital") If total operating cash flow = FFO + non-EEG WC change + EEG WC change 1,196 = FFO + (-736) + (-1,792)? That gives FFO = 3,724M. No, signs are wrong. Let me try: 1,196 = FFO - 736 - 1,792? Then FFO = 3,724M. Too high. Or: 1,196 = FFO + 736 - 1,792? Then FFO = 2,252M. Or: 1,196 = FFO + 736 + 1,792? Then FFO = -1,332M. Hmm. Let me look at this differently. The term "Increase Decrease In Working Capital" with negative value -1,792M likely means decrease (source of cash). So: Operating cash flow = Cash flow before WC changes + WC changes 1,196 = X + (-1,792) where -1,792 is decrease in working capital (positive for cash flow) 1,196 = X - 1,792? No... Actually if working capital decreases by 1,792M, that's a source of +1,792M cash. So: 1,196 = X + 1,792? Then X = -596M. That doesn't match. I think the problem is "Cash Flows From Used In Operations Excluding Eeg Working Capital" is not "before all working capital changes" but rather "excluding EEG working capital changes." So: Operating cash flow = [Cash flow excluding EEG working capital] + [EEG working capital change] 1,196 = 596 + EEG_change EEG_change = 600M But reported "Increase Decrease In Working Capital Eeg Working Capital" is -1,792M. Doesn't match 600M. Unless "Cash Flows From Used In Operations Excluding Eeg Working Capital" is not the right intermediate step. Let me re-read the structure. Perhaps: - "Cash Flows From Used In Operations Excluding Eeg Working Capital" 596M - This includes non-EEG working capital changes - Then add EEG working capital changes to get total operating cash flow But 596 + (-1,792) = -1,196, not +1,196. Unless the sign convention for "Increase Decrease In Working Capital Eeg Working Capital" is that negative means increase (use of cash), so we subtract it: 596 - (-1,792) = 2,388. Not 1,196. Or: The total operating cash flow 1,196 is composed differently. Let me check if there's an intermediate "Cash Flows From Used In Operations" that includes both. Actually, looking more carefully at the labels: "Cash Flows From Used In Operations Excluding Eeg Working Capital" "Cash Flows From Used In Operating Activities" The second is total operating cash flow. The first excludes EEG working capital. But my math doesn't work. Let me check if 596M is for 2022 and 1,196M is also for 2022. Yes, both are 2022-01-01 to 2023-01-01. Wait - I need to re-check. "Cash Flows From Used In Operating Activities" 2022: 1,196,000,000. But earlier I read it as 1,196, let me verify: "Cash Flows From Used In Operating Activities" 2022-01-01 - 2023-01-01: 1196000000 EUR. Yes, 1,196M. Hmm, let me try: 596 - 1,792 = -1,196. The absolute value matches but sign is wrong. Could "Cash Flows From Used In Operating Activities" be -1,196M? No, it's 1,196M positive. Unless... "Increase Decrease In Working Capital Eeg Working Capital" of -1,792M means decrease of 1,792M (source of cash). Then: 596 + 1,792 = 2,388. Not 1,196. Or the EEG working capital change is embedded differently. Actually, I think I need to look at this more carefully. The EEG working capital might have multiple components: - "Adjustments For Decrease Increase In Trade And Other Receivables Eeg Working Capital" 2022: 592M - "Adjustments For Decrease Increase In Trade And Other Receivables Eeg Working Capital Over Three Months" 2022: 472M - "Adjustments For Increase Decrease In Trade And Other Payables Eeg Working Capital" 2022: 728M Sum: 592 + 472 + 728 = 1,792M. But these are all positive! And "Increase Decrease In Working Capital Eeg Working Capital" is -1,792M. So the components sum to +1,792M, but total is -1,792M. This suggests sign convention: "Adjustments For" with positive means source of cash (decrease in receivables or increase in payables). But "Increase Decrease In" with negative -1,792M means... decrease? Actually, looking at the first item: "Adjustments For Decrease Increase In Trade And Other Receivables Eeg Working Capital" 2022: 592M. If receivables decreased, that's a source of cash. Positive 592M means source. Similarly, payables increased 728M, source of cash. So EEG working capital provided +1,792M cash. But "Increase Decrease In Working Capital Eeg Working Capital" is -1,792M. This seems to use opposite sign: negative means decrease in working capital (source of cash). For non-EEG: "Increase Decrease In Working Capital Excluding Eeg Working Capital" is +736M. This means increase in working capital (use of cash, negative for cash flow). So: - Non-EEG working capital change: +736M = increase = use of cash = -736M cash effect - EEG working capital change: -1,792M = decrease = source of cash = +1,792M cash effect Total working capital effect: -736 + 1,792 = 1,056M source of cash. Then: Operating cash flow 1,196 = FFO + 1,056? FFO = 1,196 - 1,056 = 140M. Or: "Cash Flows From Used In Operations Excluding Eeg Working Capital" 596 = FFO - 736 (non-EEG use) FFO = 596 + 736 = 1,332M. But then 1,332 + 1,792 (EEG source) = 3,124M, not 1,196M. I'm getting confused with signs. Let me try yet again with explicit signs. Define: FFO = cash flow before any working capital changes (after interest, after taxes) Cash flow = FFO + ΔWC_nonEEG + ΔWC_EEG Where ΔWC is cash effect: negative for increase in WC (use), positive for decrease (source). From "Increase Decrease In Working Capital Excluding Eeg Working Capital" = +736M: If this means WC increased by 736M, cash effect = -736M. From "Increase Decrease In Working Capital Eeg Working Capital" = -1,792M: If this means WC decreased by 1,792M, cash effect = +1,792M. Then: 1,196 = FFO + (-736) + 1,792 = FFO + 1,056 FFO = 140M. Check with excluding EEG: 596 = FFO + (-736) = 140 - 736 = -596. But reported is +596. Sign wrong! So maybe: 596 = FFO + 736 (if +736 means source, i.e., decrease in WC) Then FFO = 596 - 736 = -140M. And 1,196 = -140 + 1,792 = 1,652? No, doesn't match 1,196. Or: 1,196 = -140 + (-1,792) = -1,932? No. Let me try: FFO = 1,332M Then 1,332 + (-736) + 1,792 = 2,388? No. Or: 1,332 + 736 - 1,792 = 276? No. Hmm. Let me try FFO = -596M: -596 + 736 + 1,792 = 1,932? No. Or: -596 - 736 + 1,792 = 460? No. What about: FFO = 2,388M? 2,388 - 736 - 1,792 = -140? No. Or: 2,388 + 736 - 1,792 = 1,332? No. Let me try: 2,388 - 736 + 1,792 = 3,444? No. What combination gives 1,196 and 596? We need: FFO + a*736 + b*1,792 = 1,196 (total operating) FFO + a*736 = 596 (excluding EEG) Where a, b are +1 or -1. From second: FFO = 596 - 736a Substitute: 596 - 736a + 1792b = 1,196 -736a + 1792b = 600 Try a=1, b=1: -736 + 1792 = 1056 ≠ 600 Try a=1, b=-1: -736 - 1792 = -2528 ≠ 600 Try a=-1, b=1: 736 + 1792 = 2528 ≠ 600 Try a=-1, b=-1: 736 - 1792 = -1056 ≠ 600 No integer solution. So my assumption about the structure is wrong. Perhaps "Cash Flows From Used In Operations Excluding Eeg Working Capital" is not FFO + non-EEG WC, but something else. Let me re-read: "Cash Flows From Used In Operations Excluding Eeg Working Capital" - this is a subtotal that excludes EEG working capital. But it might include other items beyond FFO and working capital. Actually, looking at standard IFRS cash flow statements, there can be many line items. The "operations excluding EEG working capital" might be after all operating adjustments but before the specific EEG items. Given the complexity, let me use a simpler approach for FFO estimation. **Standard FFO estimation for credit analysis:** FFO = Net income + Depreciation and amortization + Deferred income taxes + Other non-cash items From income statement and cash flow: - Net income: -879,000,000 - D&A: 1,233,000,000 - Deferred taxes: Change in deferred tax assets = 711 - 162 = 549M increase. This is a non-cash benefit (reduces tax expense). But we need to be careful - is this already in tax expense? "Income Tax Expense Continuing Operations" is -354M (benefit). This includes current and deferred. If cash tax paid is 231M, then: Tax expense = Current + Deferred -354 = 231 + Deferred? That gives Deferred = -585M. So deferred tax benefit is 585M (reduces tax expense). This is non-cash. Other non-cash items from cash flow adjustments: - Losses on disposal: 38M - Undistributed profits of equity investments: 120M (equity method income not in cash) - Provisions: 104M But wait, "Share Of Profit Loss Of Associates And Joint Ventures" 120M is already in operating profit and net income. The adjustment "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method" 120M suggests we remove the equity method income (since it's not cash). But it's already included in net income. So adding back 120M removes it. Actually, equity method income is IN net income. To get cash flow, we subtract it (since no cash received). So adjustment is -120M, not +120M. But reported is +120M. Hmm, "Adjustments For Undistributed Profits" with +120M. If undistributed profits mean we received less than our share of earnings, we add back the difference? Or this is adding back the equity method income to remove it? I think +120M means: add back the amount to remove the non-cash equity income. Since equity income of 120M was included in net income, we add -120M to remove it? No, +120M would increase it. Actually, if "Share Of Profit" is 120M (positive, profit), and we want to remove it, we subtract 120M. But adjustment is +120M. Unless the share of profit was a loss? "Share Of Profit Loss Of Associates And Joint Ventures" 2022: 120,000,000. Positive means profit. Hmm, maybe the adjustment is for "undistributed profits" meaning we add back the portion not received as dividends. If we recognized 120M equity income but only received 92M dividends (from "Dividends Received Classified As Operating Activities"), then undistributed is 28M. But adjustment is 120M. Actually, looking at this again: "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method" 120M. This likely means the entire equity method income is considered "undistributed" and added back as a negative adjustment... but sign is positive. I think in cash flow statements, "adjustments" can have confusing signs. Let me trust the aggregated subtotals more. Given the complexity, let me use a practical approach: **FFO = Cash Flows From Used In Operating Activities + Interest Paid - Working Capital Changes (or more simply, use a standard formula)** For utility companies with volatile working capital (like EEG), FFO is often calculated excluding working capital changes. Let me use: FFO = "Cash Flows From Used In Operations Excluding Eeg Working Capital" + non-EEG working capital change If non-EEG working capital increased by 736M (use of cash), and this is already reflected in the 596M, then: FFO = 596 + 736 = 1,332M (if we add back the use) or FFO = 596 - 736 = -140M (if 736 was a source) Given the components (receivables up, inventory up, payables down), it's clearly a use of cash. So if "Increase Decrease In Working Capital" of +736M means increase, then cash effect is -736M. Then 596 = FFO - 736, so FFO = 1,332M. Let me verify with total operating cash flow: Total operating 1,196 = FFO - 736 + EEG_effect If EEG working capital decreased by 1,792M (source of cash, +1,792M cash effect): 1,196 = 1,332 - 736 + 1,792 = 2,388? No. If EEG working capital increased by 1,792M (use of cash, -1,792M): 1,196 = 1,332 - 736 - 1,792 = -1,196? Absolute value matches, sign wrong. Hmm. What if FFO = -1,332M? -1,332 - 736 - 1,792 = -3,860? No. Or: -1,332 - 736 + 1,792 = -276? No. What if EEG effect is +1,792 and non-EEG is +736 (both sources, meaning decreases in WC)? Then 596 = FFO + 736, so FFO = -140M. And 1,196 = -140 + 736 + 1,792 = 2,388? No. Or both uses (increases in WC, negative for cash): 596 = FFO - 736, FFO = 1,332M. 1,196 = 1,332 - 736 - 1,792 = -1,196? Sign wrong again. Unless total operating cash flow is actually -1,196M? Let me re-read: "Cash Flows From Used In Operating Activities" 2022-01-01 - 2023-01-01: 1196000000 EUR. Positive 1,196M. But "Used In" suggests outflow. However the number is positive. In IFRS, positive can mean inflow. The "Used In" is part of the element name, not necessarily indicating sign. Actually, looking at investing activities: "Cash Flows From Used In Investing Activities" is -4,345M. Negative means outflow. So for operating, positive 1,196M means inflow. For my calculation to work: 1,196 = 1,332 + (-736) + (-1,792)? No, that's -1,196. What about: 1,196 = -1,332 + 736 + 1,792? = 1,196! Yes! So FFO = -1,332M? That seems odd. Check excluding EEG: -1,332 + 736 = -596. But reported is +596. Sign wrong. What about: 1,196 = 1,332 + 736 - 1,792? = 276. No. Or: 1,196 = 1,332 - 736 + 1,792? = 2,388. No. Or: 1,196 = -1,332 - 736 + 1,792? = -276. No. Or: 1,196 = -1,332 + 736 - 1,792? = -2,388. No. Hmm, let me try: FFO = 596, and EEG is not added but something else. Actually, I think the issue is that "Cash Flows From Used In Operations Excluding Eeg Working Capital" already includes some EEG-related items, or the structure is different than I think. Perhaps there's an intermediate step I'm missing. Let me look for "Cash Flows From Used In Operating Activities Before Changes In Working Capital" or similar. I don't see it explicitly. But I can calculate FFO from the income statement approach: FFO = EBIT + D&A - Cash taxes (approximate) EBIT = "Profit Loss From Operating Activities" = -976M Wait, this includes equity method income. Is EBIT before or after equity method? Usually operating profit includes equity method. Actually, standard EBIT includes equity method income. So EBIT = -976M. D&A = 1,233M. EBITDA = 257M. Cash taxes = 231M. FFO ≈ 257 - 231 = 26M. Very low. But we also have interest received of 43M and interest paid of 300M. If we want after-interest FFO: Net income + D&A + other non-cash = -879 + 1,233 + ... Let me add back all non-cash adjustments to net income: -879 + 1,233 (D&A) + 38 (losses) + 120 (undistributed) + 104 (provisions) + 1,347 (other) = 2,063M Then subtract dividends received (cash, not in net income? No, dividends received are cash and would be in net income if classified as operating... actually dividends from equity investments might be in investing). "Dividends Received Classified As Operating Activities" 92M - these are cash dividends received, likely from equity investments. In net income, we have equity method income of 120M. The 92M dividends are part of that or separate? If we received 92M dividends in cash, and recognized 120M equity income, the 92M might be included in the 120M or separate. Actually, looking at cash flow: "Dividends Received Classified As Operating Activities" 92M. These are actual cash dividends. The equity method income of 120M is non-cash (accrual). So in net income, 120M is included. We need to subtract 120M and add 92M? Or the 92M is part of the 120M? I think for FFO, we want sustainable cash generation. Let me use a cleaner approach. **Moody's FFO for utilities:** FFO = Net income + Depreciation/Amortization + Deferred taxes + Other non-cash items - Equity earnings + Dividends received From data: - Net income: -879M - D&A: +1,233M - Deferred tax: Need to estimate. Change in deferred tax assets 549M. But this includes items going through OCI (defined benefit plans). From OCI, deferred tax related to defined benefit plans: 64M. So operating deferred tax change = 549 - 64 = 485M? Or total deferred tax benefit in P&L is roughly 585M (from earlier estimate). Actually, let me use: "Income Tax Expense Continuing Operations" -354M (benefit). Cash taxes paid 231M. So total non-cash tax benefit = 354 + 231 = 585M? No, if cash paid is 231M and total benefit is 354M, then there's a large deferred benefit. Wait: Tax expense = -354M (benefit, so negative expense) Cash taxes paid = 231M (outflow, positive number in "paid") These are different concepts. Tax expense is accrual, cash paid is cash. If tax expense is -354M and cash paid is 231M, the difference is 585M. This 585M is the non-cash deferred tax benefit (reducing tax expense without cash payment). So add back deferred tax benefit: 585M (since it's non-cash benefit, we add it back to get cash basis... wait, if it reduced tax expense, adding it back increases FFO). Actually, standard: FFO = Net income + D&A + Deferred tax expense + Other non-cash. If deferred tax benefit is -585M (negative expense), then adding it back: -879 + 1,233 + (-585)? No, we add back the expense, so if expense is negative (benefit), we add negative = subtract. Hmm, this is confusing. Let me use: FFO = NI + D&A + max(0, Deferred tax expense) or similar. Actually, for credit analysis, if deferred tax is a benefit (reducing tax expense), it increases earnings but not cash. So to get cash earnings, we should subtract the benefit (since it didn't generate cash). FFO = NI + D&A - Deferred tax benefit + Other non-cash = -879 + 1,233 - 585 + other = -231 + other This is getting messy. Let me use a completely different approach. **Use EBITDA - Cash taxes as proxy for FFO:** EBITDA = 257M (calculated earlier) Cash taxes = 231M FFO ≈ 26M This seems very low. But looking at the business - revenue 8.3B, operating expenses 9.4B, the company is loss-making at operating level before D&A. After adding D&A, EBITDA is small. But then how is operating cash flow 1,196M? Because of working capital changes (1,792M from EEG, etc.). For FFO/Net Debt, we want sustainable FFO without working capital swings. Actually, I think for this company, given the EEG mechanism, a better FFO measure might be: FFO = "Cash Flows From Used In Operations Excluding Eeg Working Capital" + Interest paid = 596M + 202M = 798M Or if we want before interest: 596M (since interest is already in financing, not deducted from this). Wait, net income includes interest expense of 300M (finance costs) minus 43M (finance income) = 257M net. So net income is after interest. "Cash Flows From Used In Operations Excluding Eeg Working Capital" starts from net income and adds back non-cash items, so it's also after interest. For FFO/Net Debt ratio, after-interest FFO is appropriate. Let me use FFO = 596M or try to calculate a cleaner number. Actually, looking at this from a credit rating perspective (TenneT is rated by Moody's, S&P, Fitch), they likely use: FFO = Funds from operations = Net income + D&A + Deferred taxes + Other non-cash items Given the data quality, let me estimate: - Net income: -879M - D&A: 1,233M - Deferred taxes: ~585M benefit (non-cash, so subtract from FFO? Or add if it's an expense) Actually, standard formula adds back deferred tax EXPENSE. If there's a benefit, we don't add it back (or we subtract it). Let me use: FFO = -879 + 1,233 + 0 (deferred tax benefit, not added) + 1,609 (other non-cash: 38+120+104+1,347) = 1,963M But this includes "Other Adjustments For Noncash Items" 1,347M which might not be sustainable. If I exclude that large "other" item: FFO = -879 + 1,233 + 38 + 120 + 104 = 616M This is close to 596M! So "Cash Flows From Used In Operations Excluding Eeg Working Capital" ≈ FFO with standard non-cash adjustments. The difference (616 vs 596) might be due to taxes or other items. So FFO ≈ 596M to 616M. Let me use 596M as reported. But wait - this is AFTER non-EEG working capital changes, not true FFO (before working capital). For a cleaner FFO, I should add back non-EEG working capital changes. If non-EEG working capital increased by 736M (use of cash), then true FFO = 596 + 736 = 1,332M. But is this increase in working capital sustainable? Probably not. For credit ratios, we usually want sustainable FFO. Actually, looking at the working capital components: - Receivables increase: 1,026M - Inventory increase: 49M - Payables decrease: 33M - Contract liabilities increase: -103M (source) - Current financial liabilities increase: -269M (source) Net use: 736M. This seems partly sustainable (contract liabilities, financial liabilities) and partly cyclical (receivables, inventory). For a conservative FFO estimate, let me use 596M or calculate from EBITDA. Given all this analysis, let me settle on: **FFO ≈ 1,332M** (before working capital changes, after interest) or **FFO ≈ 596M** (after non-EEG working capital, excluding EEG which is financing-like) For Net Debt: End of 2022 (2023-01-01): - Long-term borrowings: 19,006M - Short-term borrowings: 709M - Current bank overdrafts: 0M - Other financial liabilities (current): 550M - Other financial liabilities (non-current): 185M Total debt = 19,006 + 709 + 0 + 550 + 185 = 20,450M Less: Cash and cash equivalents = 6,547M Net debt = 13,903M But "Other financial liabilities" might include derivatives, leases, or other items not classified as debt. Let me use a narrower definition: Net Debt = Long-term borrowings + Short-term borrowings + Bank overdrafts - Cash = 19,006 + 709 + 0 - 6,547 = 13,168M Or if we include lease liabilities (which are debt-like): + Non-current lease liabilities: 574M + Current lease liabilities: 155M = 13,897M For credit analysis, sometimes "Net Debt" includes all interest-bearing liabilities. Let me check: "Other Current Financial Liabilities" 550M and "Other Noncurrent Financial Liabilities" 185M. These might include derivatives at fair value, not debt. Standard net debt for TenneT (from their own reporting) likely includes: - Borrowings (long and short term) - Lease liabilities - Less cash Net Debt = 19,006 + 709 + 574 + 155 - 6,547 = 13,897M ≈ 13.9B Using FFO = 1,332M: FFO/Net Debt = 1,332 / 13,897 = 9.6% Using FFO = 596M: FFO/Net Debt = 596 / 13,897 = 4.3% Given the company's profile and typical utility ratios, let me think about which FFO is more appropriate. Actually, I realize I should check if TenneT reports FFO or if I can derive it more precisely. Looking at the cash flow statement structure again, "Cash Flows From Used In Operations Excluding Eeg Working Capital" of 596M is likely the best proxy for sustainable operating cash flow, as EEG working capital is volatile and financing-like. But for FFO (before working capital), I should add back working capital changes. Actually, I found a key insight. Let me re-read "Increase Decrease In Working Capital Excluding Eeg Working Capital" 2022: 736,000,000. If I interpret this as "Increase [or] Decrease" and the value is positive 736M, and given the context where operating cash flow excluding EEG is 596M, let me think about what makes sense. Total operating cash flow 1,196M = 596M (excluding EEG) + EEG component. If EEG working capital change was -1,792M (meaning decrease, source of 1,792M cash), then: 1,196 = 596 + 1,792 = 2,388? No. If EEG working capital change was +1,792M (increase, use of 1,792M cash), then we subtract: 1,196 = 596 - 1,792 = -1,196? Absolute value matches, sign opposite. Unless total operating cash flow is actually outflow of 1,196M? But it's positive. Hmm, what if "Cash Flows From Used In Operating Activities" 1,196M is actually inflow, and the "Used In" is just part of the standard label, but the value can be positive (inflow) or negative (outflow)? Actually yes - "Cash Flows From Used In X Activities" with positive value means inflow, negative means outflow. This is consistent with investing at -4,345M (outflow) and financing at +6,556M (inflow). So operating is +1,196M (inflow). Then 1,196 = 596 + EEG_cash_effect EEG_cash_effect = 600M But "Increase Decrease In Working Capital Eeg Working Capital" is -1,792M. If this means decrease of 1,792M (source of 1,792M cash), then EEG cash effect is +1,792M, not 600M. Unless there's only partial inclusion. Or the 1,792M includes both receivables and payables effects with different signs. Actually, looking at components: - "Adjustments For Decrease Increase In Trade And Other Receivables Eeg Working Capital" 2022: 592M (positive = source, receivables decreased) - "Adjustments For Decrease Increase In Trade And Other Receivables Eeg Working Capital Over Three Months" 2022: 472M (positive = source) - "Adjustments For Increase Decrease In Trade And Other Payables Eeg Working Capital" 2022: 728M (positive = source, payables increased) All three are positive, meaning sources of cash. Total source: 1,792M. But "Increase Decrease In Working Capital Eeg Working Capital" is -1,792M. This is confusing. If all components are sources (+1,792M cash), but total is -1,792M, maybe the total uses opposite sign convention: negative means source. Then: Operating cash flow = Excluding_EEG + EEG_source 1,196 = 596 + 1,792 = 2,388? Still doesn't match. Unless "Cash Flows From Used In Operations Excluding Eeg Working Capital" is not 596 but something else, or there's another component. Wait - I need to re-check. Is "Cash Flows From Used In Operations Excluding Eeg Working Capital" 596M or could I misread? "Cash Flows From Used In Operations Excluding Eeg Working Capital" 2022-01-01 - 2023-01-01: 596000000 EUR. Yes, 596M. And total operating: 1,196M. What if there's a sign error in my reading? Let me check "Increase Decrease In Working Capital Eeg Working Capital" again: -1792000000 EUR. Yes, -1,792M. Hmm, 596 + (-1,792) = -1,196. The absolute value is 1,196, same as total operating but opposite sign. What if total operating cash flow is actually -1,196M? Let me re-read: 1196000000. Positive. Unless... the "Cash Flows From Used In Operating Activities" includes other items beyond the two components I'm considering. Actually, I think I need to accept that "Cash Flows From Used In Operations Excluding Eeg Working Capital" might already include some EEG items, or the structure is more complex. Let me try a different approach: calculate FFO from EBITDA. **FFO = EBITDA - Cash taxes + Interest received - Interest paid (if after-interest) or just EBITDA - Cash taxes (if before-interest)** EBITDA = 257M (from earlier) Cash taxes = 231M FFO after interest = 257 - 231 = 26M This is very low. But then operating cash flow is 1,196M due to working capital. For credit ratios, we need sustainable FFO. The 257M EBITDA is very low because operating expenses exceed revenue by a small amount before D&A. Actually, let me recheck EBITDA: Revenue: 8,299M Operating expenses: 9,395M (includes D&A 1,233M, so cash operating expenses 8,162M) Operating profit (EBIT): -976M EBITDA = EBIT + D&A = -976 + 1,233 = 257M. Yes. But wait, operating expenses include "Employee Benefits" 285M, "Depreciation" 1,233M, "Miscellaneous Other Operating Expense" 322M. What else? "Energy Transmission Charges" 7,517M is part of revenue? Or is it an expense? Looking at revenue: "Revenue" 8,299M and "Energy Transmission Charges" 7,517M. I think "Energy Transmission Charges" is the main revenue component. The total revenue 8,299M includes this plus other items. But then what are operating expenses of 9,395M? They must include pass-through costs that are netted against revenue or added as expenses. Actually, looking at this again: for transmission system operators, they collect transmission charges and remit most to other parties, keeping a small fee. The accounting might show gross revenue and gross expenses, or net. If "Energy Transmission Charges" 7,517M is the fee paid by customers, and the company remits say 7,000M to generators or other TSOs, then net revenue is small. But the reported "Revenue" is 8,299M, which is higher than Energy Transmission Charges 7,517M. So there are other revenue streams. Operating expenses 9,395M exceed revenue 8,299M by 1,096M. This is before equity method income. After equity method income 120M, operating profit is -976M. This is a structurally low-margin or loss-making business, funded by debt and equity. For such a company, FFO/Net Debt will be low. Given all this analysis, let me make my best estimate: **FFO for 2022:** I'll use "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596M as the base, and adjust for interest and working capital to get a cleaner FFO. Actually, for a standard approach, let me use: FFO = Net income + D&A + Deferred taxes + Other non-cash items - Equity earnings + Dividends received From cash flow adjustments to net income: - D&A: 1,233M - Losses on disposal: 38M - Undistributed profits (remove equity income): 120M... but this is add back, meaning we add positive 120M to remove negative? No, equity income is positive 120M in P&L. To remove it, we subtract 120M. But adjustment is +120M. Unless "undistributed profits" means something else - like we add back the amount not received as dividends. If equity income was 120M and dividends received were 92M, undistributed is 28M. But adjustment is 120M. I think the cash flow statement uses "adjustments" with signs that directly modify net income. So +120M means add 120M to net income. If net income includes +120M equity income, adding +120M would increase it further, not remove it. Unless the equity income was a loss? "Share Of Profit Loss" 120M - positive means profit. Hmm, maybe "Adjustments For Undistributed Profits" means we subtract the undistributed portion. If total equity income 120M, dividends received 92M, undistributed 28M. But adjustment is 120M, not 28M. I think I need to accept that I cannot perfectly reconcile the cash flow statement, and use the reported subtotals. **My best estimate for FFO:** Use "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596M, plus add back non-EEG working capital changes if we want pre-working capital FFO. But actually, for FFO/Net Debt, many practitioners use operating cash flow before working capital changes, which is closer to 1,332M (if my calculation is right) or 596M (if we accept post-some-working-capital). Given the ambiguity, let me use a practical approach: FFO ≈ 1,000M to 1,500M. Let me settle on 1,332M as the pre-working-capital figure, or about 1.3B. Actually, I want to check one more thing. Is there any guidance in the data about what FFO might be? Looking at "Other Adjustments For Noncash Items" 1,347M - this is very large. What could this be? For a TSO with EEG mechanism, there are large balancing accounts. The EEG surcharge is collected from consumers and paid to renewable energy producers. Timing differences create large working capital swings. "Other Adjustments For Noncash Items" might include accruals for these balancing accounts that are non-cash. If I exclude this 1,347M as non-sustainable, then: FFO = Net income (-879) + D&A (1,233) + other standard items (38+120+104 = 262) = 616M. This is close to 596M. So sustainable FFO might be around 600M. For Net Debt, let me use a comprehensive definition: - Long-term borrowings: 19,006M - Short-term borrowings: 709M - Lease liabilities (non-current): 574M - Lease liabilities (current): 155M - Other financial liabilities if debt-like Total debt = 20,444M Cash = 6,547M Net debt = 13,897M ≈ 13.9B Or narrower definition (just borrowings and leases): Debt = 19,006 + 709 + 574 + 155 = 20,444M Net debt = 13,897M FFO/Net Debt = 596 / 13,897 = 4.3% or 616 / 13,897 = 4.4% Using pre-working-capital FFO of 1,332M: 1,332 / 13,897 = 9.6% Which is more appropriate? For credit ratios, FFO is typically before working capital changes. So 9.6% or about 10%. But let me check if this makes sense for a utility. FFO/Net Debt of 10% is low but plausible for a heavily investing utility. Actually, I want to verify my net debt calculation. At end of 2021 (2022-01-01): - Long-term borrowings: 12,366M - Short-term borrowings: 1,339M - Bank overdrafts: 64M - Lease liabilities non-current: 235M - Lease liabilities current: 169M Total debt = 14,173M Cash = 3,204M Net debt = 10,969M At end of 2022 (2023-01-01): Total debt = 20,444M Cash = 6,547M Net debt = 13,897M Net debt increased by about 2.9B, mainly due to increased borrowings. For 2022 FFO, if I use 1,332M (pre-working-capital): FFO/Net Debt = 1,332 / 13,897 = 9.6% If I use average net debt = (10,969 + 13,897) / 2 = 12,433M: FFO/Net Debt = 1,332 / 12,433 = 10.7% For 2022, using end-of-period net debt is more common: 9.6%. But wait - I need to check if FFO should be after interest. Since net debt requires interest payments, and FFO is after interest, the ratio measures coverage. If I used pre-interest FFO, I'd add back interest paid (202M) or interest expense (257M net, or 300M gross): Pre-interest FFO = 1,332 + 202 = 1,534M (using interest paid in financing) Or = 1,332 + 257 = 1,589M (using net finance cost) Then FFO/Net Debt would be higher: 1,534 / 13,897 = 11.0%. But standard practice is after-interest FFO for this ratio. Let me finalize my estimate. Given all the analysis, I'll use: **FFO ≈ 1,300M to 1,600M** **Net Debt ≈ 13,900M** **FFO/Net Debt ≈ 9.3% to 11.5%** For a single number, I'll use FFO = 1,332M (pre-working-capital, after-interest) and Net Debt = 13,897M. FFO/Net Debt = 1,332 / 13,897 = 0.0958 or about 9.6%. But let me also consider if "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596M is the better FFO measure. This would give 4.3%. In credit analysis, FFO specifically excludes working capital changes. So 1,332M is more appropriate. However, I want to double-check my FFO calculation. Let me verify: If "Cash Flows From Used In Operations Excluding Eeg Working Capital" 596M includes non-EEG working capital changes, and non-EEG working capital increased by 736M (use of cash), then: Pre-WC cash flow = 596 + 736 = 1,332M. Is this correct? Only if the 736M is indeed a use of cash that was deducted. From components: - Receivables increase: 1,026M (use) - Inventory increase: 49M (use) - Payables decrease: 33M (use) - Contract liabilities increase: 103M (source, negative use) - Current financial liabilities increase: 269M (source, negative use) Net use: 1,026 + 49 + 33 - 103 - 269 = 736M. Yes, use of 736M. So if 596M is after this 736M use, then before it was 596 + 736 = 1,332M. But wait - I need to check signs in the original data. The items are: - "Adjustments For Decrease Increase In Trade And Other Receivables Excluding Eeg Working Capital" 2022: -1026000000 EUR Negative! So receivables adjustment is -1,026M, not +1,026M. Similarly: - Inventories: -49M - Payables: -33M - Contract liabilities: +103M - Current financial liabilities: +269M Sum: -1,026 - 49 - 33 + 103 + 269 = -736M And "Increase Decrease In Working Capital Excluding Eeg Working Capital" is +736M. So the "Adjustments For" items with negative signs mean use of cash (increase in receivables, increase in inventory, decrease in payables). Positive means source of cash. Total adjustment to cash flow: -736M (use of cash). Then "Increase Decrease In Working Capital" of +736M means... increase in working capital? Which matches the use of cash. So cash flow before WC changes = 596 - (-736)? No, if 596 is after -736 adjustment: CF = Pre_WC - 736 = 596? Then Pre_WC = 1,332M. Yes. Or: CF = Pre_WC + (-736) = 596? Then Pre_WC = 1,332M. Same result. So FFO = 1,332M. Now for the final ratio: 1,332 / 13,897 = 0.0958. Let me round to reasonable precision: 9.6% or 0.096. Actually, I want to check one more time if I should include lease liabilities in net debt. For IFRS 16, lease liabilities are debt-like and typically included in net debt. Also, should I include "Other Current Financial Liabilities" 550M and "Other Noncurrent Financial Liabilities" 185M? These might include: - Derivatives at fair value (not debt, but hedging instruments) - Accruals or other items For conservative net debt, I'll include only borrowings and leases: Debt = 19,006 + 709 + 574 + 155 = 20,444M Net debt = 20,444 - 6,547 = 13,897M If I also include other financial liabilities: Debt = 20,444 + 550 + 185 = 21,179M Net debt = 21,179 - 6,547 = 14,632M FFO/Net Debt = 1,332 / 14,632 = 9.1% The difference is small. I'll use 13,897M as it's more standard. Final answer: FFO/Net Debt = 1,332 / 13,897 = 0.0958 ≈ 9.6%. But let me also consider if I should use average net debt. For 2022, average of beginning and end: Beginning 2022 (end 2021): Net debt = 12,366 + 1,339 + 64 + 235 + 169 - 3,204 = 10,969M End 2022: 13,897M Average: 12,433M FFO/Average Net Debt = 1,332 / 12,433 = 10.7% Using end-of-period is more common for point-in-time ratios. I'll use 9.6%. Actually, I want to make one more verification. Is FFO typically calculated as "cash flow from operations before working capital changes" or "before changes in operating working capital"? Standard definition: FFO = Net income + D&A + Deferred taxes + Other non-cash items. This is before ALL working capital changes, including both non-EEG and EEG. So my 1,332M is before non-EEG working capital, but what about EEG? "Cash Flows From Used In Operations Excluding Eeg Working Capital" suggests EEG is excluded from this subtotal. So 1,332M is before non-EEG WC, and EEG WC is separate. But is EEG WC included in the starting net income? EEG accruals would affect revenue and expenses, so yes, net income includes EEG effects. The working capital changes are the cash timing differences. So true FFO (before all WC changes) = 1,332M (before non-EEG) and also before EEG WC changes. Actually, if "Cash Flows From Used In Operations Excluding Eeg Working Capital" excludes EEG working capital changes, then it might already be after EEG accruals but before EEG cash timing differences. Hmm, this is getting too complex. Let me assume 1,332M is a reasonable FFO proxy. Wait - I need to re-think. "Excluding Eeg Working Capital" means excluding the working capital changes related to EEG. So the 596M is: - Start with net income - Add non-cash adjustments - Add non-EEG working capital changes = 596M And EEG working capital changes are handled separately. So 1,332M is before non-EEG working capital changes, but after EEG accruals (which are in net income). For true FFO, we want before ALL working capital changes. But EEG "working capital" might actually be more like financing (timing differences in pass-through funds). So 1,332M is probably the right FFO for this business. Final calculation: 1,332 / 13,897 = 0.0958. Let me express as percentage: 9.58%. Or as ratio: 0.0958. The question asks for "FFO / Net debt ratio" - this is typically expressed as a percentage or decimal. I'll provide as decimal. Actually, looking at typical financial ratios, FFO/Net Debt is often expressed as a percentage (e.g., "15%") or as a multiple (e.g., "0.15x"). I'll provide as decimal. Let me do one final sanity check. If I use a simpler FFO = EBITDA - Cash taxes = 257 - 231 = 26M, then ratio = 26 / 13,897 = 0.2%. Way too low. If FFO = Operating cash flow = 1,196M, ratio = 1,196 / 13,897 = 8.6%. Close to my 9.6%. Given the uncertainties, I'll use 9.6% or about 10%. Actually, let me try to find a more precise FFO using the income statement approach with all items: FFO = Net income + D&A + Deferred tax expense + Other non-cash items Net income: -879M D&A: +1,233M Deferred tax: Need to estimate. From balance sheet, deferred tax assets increased 549M. But some went through OCI. The OCI items show tax effects of 64M. So maybe operating deferred tax asset change is 549 - 64 = 485M? This would be a benefit (reducing tax expense). Actually, the increase in deferred tax assets could be from: 1. Operating losses carried forward (benefit to P&L) 2. Defined benefit plan remeasurements (to OCI) 3. Other temporary differences From OCI: "Income Tax Relating To Remeasurements Of Defined Benefit Plans" 64M. This is tax benefit on OCI items, which increases deferred tax assets. So operating-related deferred tax asset increase = 549 - 64 = 485M. This is a non-cash benefit to tax expense. Tax expense in P&L: -354M (benefit). This includes current and deferred. Cash taxes paid: 231M. If deferred tax benefit is 485M, then current tax expense = -354 - 485 = -839M? That would mean current tax benefit of 839M, but we paid 231M cash. Doesn't make sense. Actually: Tax expense = Current tax expense + Deferred tax expense -354 = Current + Deferred If cash taxes paid are 231M, current tax expense is approximately 231M (with some timing). Then deferred tax expense = -354 - 231 = -585M (benefit). This 585M benefit is non-cash. It increases net income without generating cash. For FFO, we add back deferred tax EXPENSE. If deferred tax is a benefit (negative expense), we don't add it back, or we subtract the benefit. Standard: FFO = NI + D&A + Deferred tax expense + ... If deferred tax expense is -585M, then adding it back: FFO = -879 + 1,233 + (-585) + ... = -231 + ... This gives lower FFO, which doesn't make sense for a cash measure. Actually, I think the correct treatment is: FFO = NI + D&A + max(Deferred tax expense, 0) + ... If deferred tax is a benefit, it artificially increases NI, so we should subtract it to get cash basis. FFO = -879 + 1,233 - 585 + ... = -231 + ... This is negative without other items. But we have other non-cash items of 1,609M. FFO = -231 + 1,609 = 1,378M. Close to my 1,332M! So my estimate of 1,332M is reasonable. With this FFO, FFO/Net Debt = 1,332 / 13,897 = 9.58%. I'll round to 9.6% or provide as 0.096. Actually, let me see if I can get a more precise number. Using FFO = 1,378M (from above): 1,378 / 13,897 = 9.92% ≈ 10%. Or if I use the exact cash flow based calculation: 1,332 / 13,897 = 9.58%. The difference is small. I'll use 9.6% as my best estimate. Wait, I want to check one more thing. Should I use end-of-period or average net debt? For credit ratios, both are used. End-of-period is more common for published financials. Actually, for FFO/Net Debt, S&P and Moody's often use end-of-period debt and latest 12-month FFO. So my calculation is appropriate. Final answer: 9.6% or 0.096. Let me express as a ratio (decimal): 0.096. Or should I check if the ratio is sometimes expressed as FFO/Net Debt where FFO is annual and debt is end-of-period, giving a "coverage" ratio? Yes, 0.096 means FFO covers 9.6% of net debt annually. I'll provide 0.096 or 9.6%. Since the question says "ratio", decimal form is appropriate. Actually, re-reading the question: "estimate the FFO / Net debt ratio for 2022". This is typically expressed as a percentage in credit analysis (e.g., "FFO/Net Debt was 15%"). But mathematically it's a ratio. I'll provide as decimal: 0.096. But let me also consider if it should be higher. Looking at the financing activities, the company raised 7,338M in borrowings and had 6,556M net financing inflow. This is a growing, capital-intensive utility. For such companies, FFO/Net Debt is often in the 5-15% range. My 9.6% estimate is reasonable. One more check: if I use FFO = 596M (after non-EEG working capital) and Net Debt = 13,897M: 596 / 13,897 = 4.3%. This is also plausible but on the low side. Given that FFO should exclude working capital changes, I'll stick with 9.6%. Actually, I realize I want to verify my net debt one more time. The company has significant cash (6,547M). Is this all available to repay debt? Some might be restricted. For conservatism, some analysts use Gross Debt/FFO or subtract only "excess cash". But standard is to subtract all cash. Net Debt = 13,897M. Final answer: FFO/Net Debt = 1,332 / 13,897 = 0.0958. I'll round to 0.096 or 9.6%. Let me provide as 0.096. Hmm, but looking at this again, I want to make sure about the FFO calculation. Let me try one more approach. From the cash flow statement, the path to operating cash flow: Net income: -879M + Adjustments: - D&A: 1,233M - Losses on disposal: 38M - Undistributed profits: 120M - Dividends received (operating): 92M... wait, is this an adjustment or a cash inflow? Actually, "Dividends Received Classified As Operating Activities" is a cash inflow, not an adjustment to net income. It's already separate. Let me re-read the structure. In cash flow statements: - Net income + Adjustments to reconcile net income to net cash provided by operating activities = Net income adjusted for non-cash items + Changes in working capital + Other operating cash flows = Net cash from operating activities "Dividends Received" might be in "Other operating cash flows" or part of adjustments. Given the complexity, I'll trust the reported subtotal "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596M as a reasonable starting point. And I'll calculate pre-working-capital FFO as 1,332M. For the final ratio, I'll use 0.10 (10%) as a rounded estimate, or 0.096 more precisely. Given the estimation uncertainty, I'll provide 0.096. Wait - I want to check one more thing. Is "Cash Flows From Used In Operations Excluding Eeg Working Capital" of 596M positive or negative? The text says 596000000, which is positive. And "Cash Flows From Used In Operating Activities" is 1196000000, also positive. But in my earlier sign analysis, I had issues. Let me re-verify with the actual reported total. If non-EEG working capital adjustment is -736M (use of cash, negative for cash flow), and excluding-EEG operating cash flow is +596M, then: Net income + non-cash adjustments = 596 - (-736) = 1,332? No wait: CF = NI_adj + WC_change 596 = NI_adj + (-736) NI_adj = 1,332M Yes. And total operating CF = 1,196 = NI_adj + (-736) + EEG_change 1,196 = 1,332 + (-736) + EEG_change EEG_change = 600M But reported "Increase Decrease In Working Capital Eeg Working Capital" is -1,792M, not 600M. This inconsistency suggests my sign interpretation is wrong, or there's a different structure. Perhaps "Increase Decrease In Working Capital Eeg Working Capital" of -1,792M is not the cash effect but the change in balance, and the cash effect has opposite sign. If EEG working capital decreased by 1,792M (source of cash, +1,792M cash effect): 1,196 = 1,332 + (-736) + 1,792 = 2,388? No. If EEG working capital increased by 1,792M (use of cash, -1,792M): 1,196 = 1,332 + (-736) + (-1,792) = -1,196? Absolute value matches, sign wrong. Unless total operating cash flow is -1,196M, not +1,196M. Let me re-read: 1196000000. Positive. Hmm. What if "Cash Flows From Used In Operations Excluding Eeg Working Capital" is -596M? The text says 596000000. Positive. Unless... the label "Cash Flows From Used In Operations" with positive value means outflow? No, that contradicts "Used In Investing" being negative for outflow. I think there might be an error in my assumption that total operating cash flow equals excluding-EEG plus EEG change. There might be other items in between. Given this uncertainty, let me use a different approach: calculate FFO directly from EBITDA and verify. EBITDA = 257M + Interest received: 43M (if classified as operating... but it's in investing per the data) - Interest paid: 300M (financing) - Cash taxes: 231M = 257 + 43 - 300 - 231 = -231M? This is negative, which can't be right for FFO. Actually, FFO is typically after interest and taxes. So: EBITDA 257M - Interest paid (if we want after interest): 300M paid, 43M received, net 257M - Cash taxes: 231M = 257 - 257 - 231 = -231M This is negative! But the company has positive operating cash flow due to working capital. This suggests the company's operations are not generating positive cash flow without working capital benefits. But it's a regulated utility with cost-pass-through, so the accounting might not reflect economic reality well. For credit analysis, rating agencies might adjust FFO to reflect the regulated nature. They might use "funds from operations including working capital" or make other adjustments. Given all this, I think my FFO estimate of 1,332M might be too high, or the EBITDA-based approach suggests lower FFO. Let me try yet another approach. Look at "Other Adjustments For Noncash Items" 1,347M. What is this? If this includes large non-cash items like regulatory asset amortization or accruals, it might be added back to get FFO. But if it's related to pass-through timing, it might not be sustainable. For a conservative estimate, let me use FFO = 596M (operating cash flow excluding EEG working capital). This is after non-EEG working capital, which might be more sustainable than EEG. Or use FFO = 1,196M (total operating cash flow). This includes all working capital. For FFO/Net Debt, using 1,196M / 13,897M = 8.6%. Using 596M / 13,897M = 4.3%. I think 8.6% or 9.6% is more reasonable for this type of company. Let me settle on FFO = 1,196M (total operating cash flow) as a practical proxy, even though it's not pure FFO. Or use 1,332M as pre-working-capital. Given the estimation challenges, I'll provide a range and then a point estimate. My best point estimate: FFO/Net Debt = 9.6% or 0.096. Actually, I want to check one more source of information. The company's equity changes show comprehensive income and dividends. The retained earnings went from 3,355M to 2,980M, a decrease of 375M. But comprehensive income was -814M for ordinary equity holders. And there were dividends paid of 141M, plus hybrid dividends of 57M, plus other distributions. This doesn't directly help with FFO, but confirms the company is not generating strong earnings. Given all analysis, my final answer is: FFO ≈ 1,300M to 1,600M Net Debt ≈ 13,900M FFO/Net Debt ≈ 9.4% to 11.5% Point estimate: **9.6%** or **0.096** I'll express as 0.10 if rounding to one decimal, or 0.096 more precisely. Given the data quality and estimation uncertainty, I'll provide 0.096. 0.096