I need to calculate the FFO / Net debt ratio for 2022. Let me work through this step by step. First, let me understand what FFO (Funds From Operations) and Net debt mean in this context. **FFO (Funds From Operations)** is typically calculated as: - Net income + Depreciation/Amortization + Other non-cash items - Or more commonly for utilities/energy companies: Operating Cash Flow before working capital changes, or EBITDA minus taxes plus/minus certain adjustments Let me look at what's available in the data. A common approach for FFO is: - Current Operating Income + Depreciation & Amortization - Taxes (cash basis) + Share of profits from equity method Actually, let me use a more standard approach. FFO is often approximated as: - Profit/Loss from continuing operations + Depreciation/Amortization + Impairment losses + Other non-cash items Or from the cash flow statement perspective, looking at "Cash Flows From Used In Operations Before Changes In Working Capital" which is 12,415,000,000 EUR for 2022. But let me think more carefully. The standard FFO definition used by rating agencies (S&P, Moody's) for utilities is: FFO = Net Income + Depreciation + Amortization + Deferred Taxes + Other non-cash items Or alternatively: EBIT + D&A - Cash Taxes Let me try another common approach: FFO = Current Operating Income Including Operating Mtm + Depreciation Amortization And Provisions - Cash Taxes From the data for 2022: - Current Operating Income Including Operating Mtm: 4,309,000,000 EUR - Depreciation Amortization And Provisions: 5,187,000,000 EUR - Tax Expense Other Than Income Tax Expense: 3,380,000,000 EUR (this is not income tax, so it's part of operating costs) Wait, let me reconsider. The "Tax Expense Other Than Income Tax Expense" is already deducted to get to Current Operating Income. Looking at the cash flow data: - Cash Flows From Used In Operations Before Changes In Working Capital: 12,415,000,000 EUR for 2022 This seems like a good starting point for FFO. But we need to adjust for interest and dividends received. Actually, let me look at the standard formula more carefully. FFO typically equals: - Net income before extraordinary items + Depreciation and amortization + Deferred income taxes + Other non-cash items From the cash flow statement, I can see: - Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method: 1,059,000,000 - Adjustments For Dividend Income: -713,000,000 - Net Depreciation Amortization Impairment And Provisions: -8,057,000,000 (note: negative, so this is a positive adjustment to profit) - Impact Of Changes In Scope: -74,000,000 - Adjustments For Gains Losses On Change In Fair Value Of Derivatives: -3,661,000,000 - Other Adjustments For Noncash Items: -157,000,000 - Adjustments For Income Tax Expense: -83,000,000 - Adjustments For Finance Income Cost: -3,003,000,000 And starting from Profit/Loss: 390,000,000 EUR Let me verify: 390M + 1,059M - 713M + 8,057M - 74M - 3,661M - 157M - 83M - 3,003M = ? 390 + 1,059 = 1,449 1,449 - 713 = 736 736 + 8,057 = 8,793 8,793 - 74 = 8,719 8,719 - 3,661 = 5,058 5,058 - 157 = 4,901 4,901 - 83 = 4,818 4,818 - 3,003 = 1,815 Hmm, that doesn't equal 12,415M. Let me re-read. The "Net Depreciation Amortization Impairment And Provisions" is shown as -8,057,000,000. But in the P&L, Depreciation Amortization And Provisions is 5,187,000,000. And Impairment is 2,774,000,000. So total D&A + Impairment = 5,187 + 2,774 = 7,961M. Close to 8,057M but not exact. The difference might be provisions. Wait, let me re-check. The cash flow item says "Net Depreciation Amortization Impairment And Provisions" = -8,057,000,000. The negative sign in cash flow statement context means it's added back to profit (it's a non-cash expense). Actually, looking more carefully at signs: in cash flow statements, the "Adjustments For..." items show how to adjust profit to get operating cash flow. Negative numbers mean subtract from profit, positive mean add. Let me recalculate: Profit/Loss = 390,000,000 + 1,059,000,000 (undistributed profits) - 713,000,000 (dividend income - this was in profit, subtract to remove) + 8,057,000,000 (D&A, impairment, provisions - add back non-cash) - 74,000,000 (scope changes) - 3,661,000,000 (fair value gains - subtract as non-cash/operating) - 157,000,000 (other non-cash) - 83,000,000 (income tax expense - but wait, this should be added back if we want pre-tax?) Actually, I think the sign convention might be: these are the adjustments made, so negative means "deduct this amount from profit." Let me try: 390 - 1,059 + 713 - 8,057 + 74 + 3,661 + 157 + 83 + 3,003 = ? 390 - 1,059 = -669 -669 + 713 = 44 44 - 8,057 = -8,013 -8,013 + 74 = -7,939 -7,939 + 3,661 = -4,278 -4,278 + 157 = -4,121 -4,121 + 83 = -4,038 -4,038 + 3,003 = -1,035 That gives -1,035M, not 12,415M. Let me re-read the data. "Net Depreciation Amortization Impairment And Provisions" 2022: -8057000000 EUR. Hmm, I think I need to interpret this differently. In many European cash flow statements, the items are shown as "uses" negative and "sources" positive. Or the adjustments are shown with their natural sign. Let me try another approach. FFO is often calculated as: FFO = EBIT + D&A - Cash taxes Or: FFO = Operating profit before working capital changes From the cash flow: "Cash Flows From Used In Operations Before Changes In Working Capital" = 12,415,000,000 EUR This is essentially EBITDA - taxes + other adjustments, or roughly FFO before interest. But FFO typically includes interest paid (as a financing activity, not operating). Actually, no - FFO is pre-financing. Let me think about this more carefully. Standard FFO (S&P definition): FFO = Net income from continuing operations + Depreciation + Amortization + Deferred income taxes + Other non-cash items From the data: - Profit Loss From Continuing Operations: -1,793,000,000 EUR (negative!) - Depreciation Amortization And Provisions: 5,187,000,000 EUR - But we also need impairment: 2,774,000,000 EUR - Deferred taxes? We have "Deferred Tax Assets" change from 1,181M to 2,029M = increase of 848M. And "Deferred Tax Liabilities" from 7,738M to 6,408M = decrease of 1,330M. Actually, for FFO, a simpler approach used by many is: FFO = Cash Flow From Operations Before Working Capital Changes + Interest Paid - Interest Received (or use pre-interest measure) Wait, "Cash Flows From Used In Operations Before Changes In Working Capital" = 12,415,000,000 EUR already includes interest paid and received? Let me check. Looking at the adjustments: - Adjustments For Finance Income Cost: -3,003,000,000 EUR This suggests that finance costs were deducted in arriving at profit, and this adjustment removes them (adds back). So 12,415M is BEFORE interest and taxes in some sense, or rather it's operating cash flow before working capital changes. Actually, let me verify: Profit/Loss = 390M. Add back finance cost of 3,003M = 3,393M. Add back D&A etc of 8,057M = 11,450M. Plus other adjustments... this gets us to 12,415M. So "Cash Flows From Used In Operations Before Changes In Working Capital" = 12,415M is essentially: Net Income + D&A + Impairment + other non-cash items + finance costs (added back) - finance income (subtracted) + tax adjustments This is essentially EBITDA - cash taxes + other items, or roughly FFO + interest received - interest paid. Actually, standard FFO = Net income + D&A + deferred taxes + other non-cash items. It does NOT add back interest. So if 12,415M includes adding back interest (finance costs), I need to subtract that to get FFO. From the P&L: - Finance Costs: 3,700,000,000 EUR - Finance Income: 697,000,000 EUR - Net Financial Income Loss: -3,003,000,000 EUR And in cash flow adjustments: Adjustments For Finance Income Cost: -3,003,000,000 EUR. This means they added back 3,003M of net finance costs to get to operating cash flow. So FFO would be: 12,415M - 3,003M (finance costs added back) = 9,412M? But wait, FFO is supposed to be available to pay interest and debt. So actually, FFO should be pre-interest. Let me check rating agency methodology. S&P FFO = Funds from operations = Net income + D&A + deferred taxes + other non-cash items. This is AFTER interest expense. Moody's "FFO" is similar but may adjust differently. For credit ratios, "FFO / Net Debt" typically uses FFO before interest, or sometimes after interest. Let me use the more common approach. Actually, looking at European utility practice, FFO is often: FFO = EBIT + D&A - Cash taxes Or: FFO = Operating cash flow before working capital changes - Interest received + Interest paid (i.e., pre-interest, post-tax) Hmm, let me try a different approach. Let me calculate EBITDA first: - Current Operating Income Including Operating Mtm: 4,309M + Depreciation Amortization And Provisions: 5,187M = EBITDA (roughly) = 9,496M But this doesn't include the share of profit from equity method. "Current Operating Income Including Operating Mtm And Share In Net Income Of Equity Method Entities" = 5,367M. So EBIT including equity method = 5,367M? No wait, the share of profit is already below operating income. Let me re-read: "Current Operating Income Including Operating Mtm" = 4,309M. Then adding "Share Of Profit Loss Of Associates" = 1,059M gives 5,367M. So Current Operating Income 4,309M is pre-equity method. This is essentially EBIT. EBITDA = 4,309M + 5,187M = 9,496M. FFO = EBITDA - Cash taxes = 9,496M - ? Cash taxes paid: "Income Taxes Paid Refund Classified As Operating Activities" = 1,504M (positive means paid? Or refund?) Actually in cash flow statements, "Income Taxes Paid Refund" as a positive number typically means taxes paid (cash outflow). But in the operating cash flow calculation, this is shown separately. Looking at "Cash Flows From Used In Operating Activities Continuing Operations" = 8,488M. This is after working capital changes and taxes. And "Cash Flows From Used In Operations Before Changes In Working Capital" = 12,415M. Difference = 12,415M - 8,488M = 2,927M. This includes working capital changes (2,424M positive) and taxes paid (1,504M). Wait: 12,415M - 1,504M (taxes paid) + 2,424M (working capital positive) = 13,335M? No that doesn't work. Let me check: 12,415M - 1,504M - 2,424M = 8,487M ≈ 8,488M. Yes! So taxes paid are deducted, and working capital is deducted (but it's positive 2,424M, meaning it's a source of cash, so we subtract it to get to "used in"?). Actually, "Increase Decrease In Working Capital" = 2,424M. If positive means decrease in working capital (source of cash), then: 12,415M (before WC changes) - 1,504M (taxes paid) + 2,424M (WC decrease, cash inflow) = 13,335M? But 8,488M is the result. So 12,415M - 1,504M - 2,424M doesn't work. Hmm, let me re-read. "Increase Decrease In Working Capital" = 2,424,000,000 EUR. In cash flow terminology, if working capital decreases, it's positive for cash flow. But the item is labeled "Increase Decrease" which is ambiguous. Actually, looking at standard IFRS cash flow statements, "Increase/Decrease in working capital" as a positive number typically means cash inflow from working capital reduction. But in the line "Cash Flows From Used In Operations Before Changes In Working Capital", the "Before Changes In Working Capital" suggests that working capital changes are then applied. If 12,415M is before WC changes, and final operating cash flow is 8,488M, then: 12,415M + WC effect - 1,504M taxes = 8,488M WC effect = 8,488M + 1,504M - 12,415M = -2,423M ≈ -2,424M So working capital INCREASED by 2,424M (cash outflow). That makes sense with "Increase Decrease In Working Capital" = 2,424M being the amount of increase. OK so back to FFO. A common definition is: FFO = Net income + D&A + impairment + deferred taxes + other non-cash items Or from operating cash flow before WC changes: FFO = Cash flow before WC changes + Interest paid - Interest received (to get pre-interest, if needed) - Dividends received (if in operating) + ... Actually, for "FFO / Net Debt" ratio used by credit analysts, FFO is typically: FFO = Net income + D&A + impairment + other non-cash charges - gains on asset sales + deferred taxes Let me calculate from net income: Net income (Profit/Loss) = 390M + D&A = 5,187M + Impairment = 2,774M + Other non-recurring/non-cash items = ? But we need to be careful about what's already in net income. The "Other Non Recurring Items" = -1,328M (negative, so it's a loss). And "Expense Of Restructuring Activities" = 230M. Actually, let me use the cash flow approach which is cleaner: Cash Flow Before Working Capital Changes = 12,415M This includes: Net income + all non-cash adjustments + interest (net) added back + other items To get FFO (after interest, before working capital): FFO = Cash Flow Before Working Capital Changes - Interest received (classified as operating) + Interest paid (classified as operating)? But interest is typically classified as financing or operating depending on standard. In IFRS, interest paid can be operating or financing. Looking at the data: - "Interest Paid Classified As Financing Activities" = 822M - "Interest Received On Cash And Cash Equivalents" = -194M (negative, so inflow?) - "Interest Received Classified As Investing Activities" = -37M Hmm, the negative signs are confusing. Let me assume absolute values for interest. Actually, looking more carefully: "Interest Paid Classified As Financing Activities" = 822,000,000 EUR. This is likely a cash outflow (positive number = outflow in some conventions, or the sign indicates direction). In the cash flow statement, "Cash Flows From Used In Financing Activities" includes interest paid. The total financing cash flow is -2,979M. Let me try a simpler approach. I'll use the standard European utility/Rating agency FFO definition: FFO = EBIT + D&A - Cash taxes Where: EBIT = Current Operating Income Including Operating Mtm = 4,309M Wait, is this EBIT? Let me check if this includes interest. Operating income is typically EBIT. Actually, "Current Operating Income Including Operating Mtm" should be EBIT, or close to it. Then: EBIT = 4,309M + D&A = 5,187M = EBITDA = 9,496M Cash taxes = Income Taxes Paid = 1,504M (from operating activities) FFO = 9,496M - 1,504M = 7,992M? But this doesn't include the share of profit from equity method, which is 1,059M. If we include it: EBIT = 5,367M (including equity method) + D&A = 5,187M? No, D&A is already in operating income. Wait, "Current Operating Income Including Operating Mtm And Share In Net Income Of Equity Method Entities" = 5,367M. This includes the equity method income. Is D&A already deducted? Yes, operating income is after D&A. So EBIT including equity method = 5,367M? No, that's not right. The share of profit from equity method is typically shown after operating income. So "Current Operating Income Including Operating Mtm" = 4,309M is the operating income. Then adding share of equity method = 1,059M gives 5,367M. But in the P&L structure, the share of profit from equity method is usually AFTER operating income. So 4,309M is true operating income (EBIT). Then 5,367M is like EBIT including equity method. For FFO, I think we should use the broader measure or the standard one. Let me check what rating agencies do. They typically use: FFO = Net income from continuing operations + D&A + deferred taxes + other non-cash items Net income from continuing operations = -1,793M (negative!) + D&A + impairment + provisions = 5,187M + 2,774M + other provisions = let's use the cash flow number: 8,057M for "Net Depreciation Amortization Impairment And Provisions" -1,793M + 8,057M = 6,264M + Other adjustments for non-cash items = 6,264M - 157M = 6,107M? + Adjustments for fair value = 6,107M - 3,661M = 2,446M? This is getting messy with the fair value adjustments. Actually, the fair value adjustments on derivatives are operating for energy companies (part of their business). So they should stay in FFO. Let me try yet another approach. The "Cash Flows From Used In Operations Before Changes In Working Capital" = 12,415M is essentially: Net income + D&A + impairment + other non-cash items + finance costs (added back) - finance income (subtracted) + tax adjustments + undistributed profits adjustments - dividend income + ... To get FFO (which is after interest but before working capital changes), I should: - Start with Cash Flow Before WC Changes = 12,415M - Subtract back the finance cost adjustment = 12,415M - 3,003M = 9,412M Wait, but FFO is supposed to be available to service debt, so it should be PRE-interest. Hmm, no, FFO is typically AFTER interest expense. It's funds available for debt repayment after interest is paid. Actually, let me check: FFO / Net Debt is a coverage ratio. If FFO is after interest, then it's (Net income + D&A + ...) / Net Debt. If it's pre-interest, it's more like EBITDA - taxes. Standard definition from S&P: "FFO is net income from continuing operations adjusted for depreciation, amortization, deferred income taxes, and other non-cash items." This is AFTER interest. So FFO = -1,793M (continuing operations) + 8,057M (D&A, impairment, provisions) + adjustments. But -1,793M + 8,057M = 6,264M. Then we need to add back other non-cash items and deferred taxes. Deferred taxes: The change in deferred tax assets is +848M (1,181M to 2,029M). Change in deferred tax liabilities is -1,330M (7,738M to 6,408M, so decrease). A decrease in deferred tax liabilities means cash was paid or recognized, which is unfavorable. Actually, for cash flow purposes, deferred tax changes are non-cash (mostly). The "Adjustments For Income Tax Expense" = -83M in the cash flow statement. Let me just use: FFO = Cash Flow Before Working Capital Changes - Interest received + Interest paid (financing) ? No, that's getting to pre-interest. Actually, I think the cleanest approach is: FFO = Profit/Loss from continuing operations + Net depreciation/amortization/impairment + Other non-cash items - Gain on sales + Deferred tax changes = -1,793M + 8,057M - 3,661M (fair value gains) - 157M (other) - 74M (scope) + 1,059M (undistributed profits) - 713M (dividend income) = -1,793 + 8,057 - 3,661 - 157 - 74 + 1,059 - 713 = -1,793 + 8,057 = 6,264 6,264 - 3,661 = 2,603 2,603 - 157 = 2,446 2,446 - 74 = 2,372 2,372 + 1,059 = 3,431 3,431 - 713 = 2,718 That seems too low. And this is without the finance cost adjustment. Hmm, let me reconsider. The "Cash Flows From Used In Operations Before Changes In Working Capital" = 12,415M is the standard starting point. This includes all operating cash flows before working capital. For FFO, we want to exclude working capital changes but keep everything else. So 12,415M is essentially FFO plus some adjustments, or minus some. Actually, in many European companies' credit reports, FFO is defined as: FFO = Cash flow from operating activities before changes in working capital Or sometimes: FFO = EBITDA - Cash taxes ± Change in provisions Let me use: FFO = 12,415M (Cash Flow Before WC Changes) - Interest paid (operating) + Interest received (operating)? But in this cash flow, interest paid is classified as financing (822M), and interest received is partly investing (-37M) and partly... "Interest Received On Cash And Cash Equivalents" = -194M, which might be in operating or financing? Actually, looking at the cash flow structure, "Cash Flows From Used In Operations Before Changes In Working Capital" includes interest received and paid if they're classified as operating. But here, interest paid is financing, and interest received seems to be in investing or other. So 12,415M might already exclude interest paid (financing) and include some interest received. Let me assume 12,415M is roughly FFO + interest received - some other items. Actually, I think for simplicity and given the data, let me use: FFO = Cash Flow From Operations Before Working Capital Changes = 12,415M But wait, this includes dividends received and other items that might not be pure FFO. Let me try a more conservative approach. Standard FFO for utilities (from Moody's or S&P): FFO = Net income + D&A + Deferred taxes + Other non-cash items Net income (total) = 390M + D&A = 5,187M + Impairment = 2,774M + Other non-cash = ? From "Other Non Recurring Items" = -1,328M (this is a loss, so add back? But it's non-recurring, so maybe exclude) From "Expense Of Restructuring Activities" = 230M (cash or non-cash? Usually cash, so don't add back) Deferred tax change: Let me calculate. Deferred tax assets increased by 848M. Deferred tax liabilities decreased by 1,330M. Total deferred tax change = 848M - 1,330M = -482M (unfavorable). Actually, the income tax expense in P&L is -83M (negative, meaning a benefit). And cash taxes paid are 1,504M. So deferred tax provision = -83M - 1,504M = -1,587M? Or the other way around. This is getting complicated. Let me use a simpler approach that's commonly used: FFO = EBIT + D&A - Cash taxes Where EBIT = Current Operating Income Including Operating Mtm = 4,309M D&A = 5,187M Cash taxes = 1,504M But EBIT already includes D&A deducted! So: EBITDA = EBIT + D&A = 4,309M + 5,187M = 9,496M FFO = EBITDA - Cash taxes = 9,496M - 1,504M = 7,992M Or if we include equity method: EBITDA = 5,367M + 5,187M? No, 5,367M already includes equity method but is still after D&A. Wait, let me re-read. "Current Operating Income Including Operating Mtm" = 4,309M. This is operating income. "Current Operating Income Including Operating Mtm And Share In Net Income Of Equity Method Entities" = 5,367M. This adds the equity method share. So EBIT = 4,309M (or 5,367M with equity method) EBITDA = 4,309M + 5,187M = 9,496M (or 5,367M + 5,187M = 10,554M with equity method) But wait, is the equity method income already included in operating income? No, it's added after. So true operating income is 4,309M. For FFO, I'll use: FFO = 9,496M - 1,504M (cash taxes) = 7,992M Or more precisely, FFO should include other non-cash items and exclude non-recurring items. Let me adjust: - Add back "Tax Expense Other Than Income Tax Expense"? No, this is already in operating income. - "Other Income" = 1,624M - this is in operating income. Actually, let me check if 4,309M operating income includes other income. Looking at the structure: Revenue = 93,865M - Purchases = 74,535M - Employee benefits = 8,078M - D&A = 5,187M - Tax expense other than income tax = 3,380M + Other income = 1,624M = ? 93,865 - 74,535 = 19,330 19,330 - 8,078 = 11,252 11,252 - 5,187 = 6,065 6,065 - 3,380 = 2,685 2,685 + 1,624 = 4,309 Yes! That matches. So operating income = 4,309M is correct. Now for FFO, a more accurate calculation from operating income: FFO = Operating income + D&A - Cash taxes + Other non-cash adjustments = 4,309M + 5,187M - 1,504M + some adjustments But actually, the standard "Cash Flow Before Working Capital Changes" = 12,415M includes more items. Let me see what else: - It includes the share of equity method profits (1,059M undistributed, but -713M dividends, so net 346M?) - It includes fair value adjustments (-3,661M) - It includes other items Hmm, 12,415M seems higher than my 7,992M. The difference is 4,423M. This includes: + Finance costs added back (3,003M) + Undistributed profits of equity method (1,059M) - Dividend income (713M) - Fair value gains (3,661M) + Other items Actually, 12,415M includes adding back net finance costs of 3,003M. So if we want FFO after interest, we subtract that: 12,415M - 3,003M = 9,412M. Then 9,412M vs my 7,992M = difference of 1,420M. This could be from equity method adjustments, fair value items, etc. I think for practical purposes, let me use: FFO = Cash Flow From Operations Before Working Capital Changes - Net finance costs (to get post-interest) = 12,415M - 3,003M = 9,412M Or if FFO is pre-interest (available to pay interest): FFO = 12,415M Actually, I need to check standard practice. In credit analysis, FFO is typically AFTER interest expense. So: FFO = 12,415M - 3,003M = 9,412M? But wait, the 3,003M is "Adjustments For Finance Income Cost" which is added back to profit to get to 12,415M. So 12,415M already includes the add-back of finance costs. To get post-interest FFO, I need to subtract the finance costs. Net finance cost in P&L = 3,003M (loss). So post-interest FFO = 12,415M - 3,003M = 9,412M. But actually, is 12,415M pre- or post-interest? Looking at the adjustments: "Adjustments For Finance Income Cost" = -3,003M. This is added to profit. So 12,415M is PRE-interest (and pre-tax in a sense, but taxes are also adjusted). Hmm, let me verify with profit: Profit = 390M + Finance costs (net) = 3,003M (add back) + D&A, impairment, provisions = 8,057M (add back) + Other adjustments = various = 12,415M So yes, 12,415M is PRE-interest and PRE-some-tax-adjustments. Actually it's starting from net income and adding back non-cash and non-operating items to get to operating cash flow before working capital. For FFO, if we want the standard "funds from operations" available to service debt, it's typically PRE-interest. So 12,415M might be the right number, or we need to adjust it. Actually, I just realized: "Cash Flows From Used In Operations Before Changes In Working Capital" is typically used as FFO in many European utility credit analyses. It's essentially EBITDA - cash taxes + other non-cash items, which is close to FFO. Let me use: **FFO = 12,415M EUR** (Cash Flow From Operations Before Working Capital Changes) Or more conservatively, if we want to exclude some items: FFO = 12,415M - 1,059M (undistributed profits, not cash) + 713M (dividends received, cash) = 12,069M? Actually, undistributed profits are non-cash (equity method), so they should be excluded from FFO. But they're already added back in the cash flow. Dividends received are cash, so they stay. Hmm, this is getting too complicated. Let me use a standard simplified FFO: **FFO = Net income + D&A + Impairment + Deferred taxes + Other non-cash items** = 390M + 5,187M + 2,774M + ... Actually, let me just use the cash flow before WC changes of 12,415M as the best proxy for FFO, as is commonly done. Now for **Net Debt**: Net Debt = Total Borrowings - Cash and Cash Equivalents Borrowings: - Longterm Borrowings: 28,083M - Current Borrowings And Current Portion Of Noncurrent Borrowings: 12,508M - Total Borrowings = 28,083M + 12,508M = 40,591M Cash and Cash Equivalents: 15,570M Net Debt = 40,591M - 15,570M = 25,021M But wait, we should also check for other debt-like items. Sometimes "Other Current Financial Liabilities" or derivatives might be included. But standard net debt is borrowings minus cash. Let me verify if there are other borrowings or debt items. Looking at the balance sheet: - Noncurrent Derivative Financial Liabilities: 39,417M (these are derivatives, not debt) - Other Noncurrent Financial Liabilities: 90M (small) - Current Derivative Financial Liabilities: 11,859M (derivatives) Derivatives are typically not included in net debt, or sometimes netted if they're hedging debt. So Net Debt = 40,591M - 15,570M = 25,021M Wait, I should also check if there are any "financial assets held for investment" or similar that should be deducted. "Other Current Financial Assets" = 2,394M and "Other Noncurrent Financial Assets" = 10,599M. These might be included as "cash-like" if they're liquid investments. Actually, standard net debt definition varies. Sometimes it's: Net Debt = Total financial debt - Cash and cash equivalents - Current financial assets Or more narrowly: just borrowings minus cash. Let me use the standard: **Net Debt = 40,591M - 15,570M = 25,021M** But I want to check if there's any other debt. "Other Noncurrent Financial Liabilities" = 90M is small. Actually, looking more carefully, I should also consider if "Noncurrent Assets Or Disposal Groups Classified As Held For Sale" includes any debt. The liabilities held for sale = 371M. But these are already classified separately. And for 2022 year-end (which is 2023-01-01 in the data): - Longterm Borrowings: 28,083M - Current Borrowings: 12,508M - Cash: 15,570M Net Debt = 40,591 - 15,570 = 25,021M Now, FFO / Net Debt ratio: If FFO = 12,415M, then ratio = 12,415 / 25,021 = 0.496 or 49.6% If FFO = 9,412M (post-interest), then ratio = 9,412 / 25,021 = 0.376 or 37.6% Hmm, but actually I need to re-think. The question asks for FFO/Net Debt ratio. This is typically expressed as a percentage or as a multiple (x). In credit analysis, it's often expressed as a percentage (FFO/Net Debt) or as coverage (Net Debt/FFO). Let me check standard conventions. S&P uses "FFO to debt" as a percentage. Moody's uses "Debt/EBITDA" but also "FFO/Net Debt" as a percentage. Actually, looking at the ratio name "FFO / Net Debt", this would typically be expressed as a percentage or a decimal. For example, 50% or 0.5x. But wait - I need to be more careful about which year's data to use. The question asks for "2022". The data has: - 2022-01-01 - 2023-01-01: This is the year 2022 (from Jan 1, 2022 to Jan 1, 2023) - 2021-01-01 - 2022-01-01: This is the year 2021 And balance sheet dates: - 2023-01-01: End of 2022 - 2022-01-01: End of 2021 So for 2022 FFO, I use the 2022-01-01 to 2023-01-01 flow data. For 2022 Net Debt, I use the 2023-01-01 balance sheet data (end of 2022). Let me recalculate more carefully. **FFO Calculation:** I'll use the most standard approach for utilities: FFO = Cash Flow from Operations Before Working Capital Changes. From data: "Cash Flows From Used In Operations Before Changes In Working Capital" 2022-01-01 - 2023-01-01 = 12,415,000,000 EUR But I need to check if this is the right FFO. Let me also calculate an alternative: FFO = EBIT + D&A - Cash taxes + Other non-cash items (excluding working capital) EBIT = 4,309M D&A = 5,187M Cash taxes = 1,504M FFO = 4,309 + 5,187 - 1,504 = 7,992M But this is lower than 12,415M. The difference is mainly: - Finance costs added back in cash flow: +3,003M - Equity method adjustments: +346M (1,059M - 713M) - Fair value and other adjustments: -3,893M (-3,661M - 157M - 74M) - Tax adjustments: -83M = 3,003 + 346 - 3,893 - 83 = -627M Hmm, 7,992M - 627M = 7,365M, not 12,415M. I'm missing something. Wait, I think I made an error. Let me recalculate from profit: Profit = 390M + Net finance costs = 3,003M → 3,393M + D&A, impairment, provisions = 8,057M → 11,450M + Undistributed profits = 1,059M → 12,509M - Dividend income = 713M → 11,796M + Scope changes = -74M? → 11,722M? + Fair value derivatives = -3,661M → 8,061M + Other non-cash = -157M → 7,904M + Income tax = -83M → 7,821M This doesn't equal 12,415M. Let me check if I'm reading the signs correctly. Actually, looking at the data again: "Adjustments For Finance Income Cost" 2022 = -3003000000 EUR. In cash flow statements, the "adjustments" are typically shown with the sign indicating the direction of the adjustment to profit. So if profit has finance costs deducted, and we want to add them back, the adjustment would be positive. But here it's negative. Hmm, this suggests that maybe the convention is different. Let me try: Profit = 390M + Adjustments (all with their signs): - Finance: -3,003M - Undistributed profits: +1,059M - Dividend income: -713M - D&A etc: -8,057M - Scope: -74M - Fair value: -3,661M - Other: -157M - Tax: -83M Sum of adjustments = -3,003 + 1,059 - 713 - 8,057 - 74 - 3,661 - 157 - 83 = -14,689M 390M - 14,689M = -14,299M ≠ 12,415M This doesn't work. So my sign interpretation is wrong. Let me try the opposite: all "adjustments" are added to profit, and their values indicate the nature: Profit = 390M + (-3,003M) for finance = -2,613M? No... Actually, I think the issue is that "Adjustments For..." means "adjustments made to profit to arrive at cash flow." The sign shows whether it's an addition or subtraction in the reconciliation. In standard IFRS cash flow reconciliation: Start with Profit + Depreciation (positive, added back) - Gain on sale (negative, subtracted) + Interest expense (positive, added back) - Interest income (negative, subtracted) = Operating profit before working capital changes So positive numbers are added to profit, negative are subtracted. Let me try: Profit = 390M + 1,059M (undistributed profits, added back) - 713M (dividend income, subtracted as it's not operating? Or added?) + 8,057M (D&A, added back) - 74M (scope changes, subtracted) - 3,661M (fair value gains, subtracted) - 157M (other non-cash, subtracted or added?) - 83M (tax, subtracted or added?) - 3,003M (finance costs, added back? But negative sign...) Hmm, if finance costs are -3,003M, that means subtract 3,003M from profit. But finance costs were already deducted in profit, so to add them back we need +3,003M. The negative sign is confusing. Let me look at this differently. "Adjustments For Finance Income Cost" = -3,003M. The "Net Financial Income Loss" = -3,003M. This is a loss (cost). In profit, this reduced profit. To add it back, we need +3,003M. But the adjustment shows -3,003M. This suggests the sign convention is: negative adjustment means "this was a loss in P&L, so we add it back as positive to cash flow." Or the numbers are shown as "cash flow effect" where negative = outflow. Actually, I think the simplest interpretation is that these are the amounts of the adjustments, and the sign indicates direction in the cash flow statement. Let me just trust that 12,415M is correct and work backwards. Given the complexity, let me use a simpler FFO calculation that's more transparent: **FFO = EBITDA - Cash taxes** Where: EBITDA = Revenue - Purchases - Employee benefits - Tax expense other than income tax + Other income = 93,865M - 74,535M - 8,078M - 3,380M + 1,624M + 5,187M (D&A added back) = 9,496M (as calculated before) Wait, that's not right. Let me recalculate EBITDA: Revenue = 93,865M - Purchases = 74,535M - Employee benefits = 8,078M - Tax other than income tax = 3,380M + Other income = 1,624M = Operating income before D&A = 9,496M But this 9,496M is actually EBITDA! Let me verify: 93,865 - 74,535 = 19,330 19,330 - 8,078 = 11,252 11,252 - 3,380 = 7,872 7,872 + 1,624 = 9,496 Yes! And operating income = 9,496M - 5,187M (D&A) = 4,309M. Correct! So EBITDA = 9,496M Cash taxes paid = 1,504M FFO = 9,496M - 1,504M = 7,992M But this excludes the equity method income and other items. Let me add equity method: EBITDA with equity method = 9,496M + 1,059M (share of profit) = 10,555M? Actually, share of profit from equity method is typically after operating income. So it's not in EBITDA. If we want to include it: FFO = 7,992M + 1,059M = 9,051M But then we need to subtract dividends received (already in cash) vs undistributed profits (non-cash). I think for consistency with rating agency approaches, let me use: **FFO = 12,415M - 3,003M (finance costs, to get post-interest) + some adjustments** Actually, you know what, let me look up how Engie or similar utilities report FFO. Typically for European utilities: FFO = EBITDA - Cash taxes ± Change in working capital (sometimes excluded) Or from cash flow: FFO = Operating cash flow + Change in working capital - Interest paid + Interest received (if classified as operating) Given "Cash Flows From Used In Operating Activities" = 8,586M + Increase in working capital (if it was a decrease, meaning cash inflow) = ? From earlier: "Increase Decrease In Working Capital" = 2,424M. I determined this was an increase (cash outflow). So to get FFO (before working capital): 8,586M + 2,424M = 11,010M? But that's not 12,415M. Hmm, 12,415M - 1,504M (taxes) - 2,424M (WC increase) = 8,487M ≈ 8,488M (operating cash flow continuing). Then + 98M (discontinued operations) = 8,586M. Yes! So: FFO (before WC and taxes) = 12,415M. This includes taxes and is before working capital. Actually, 12,415M is "Cash Flows From Used In Operations Before Changes In Working Capital". The "Before Changes In Working Capital" means before working capital changes. But it still includes taxes paid? Or not? From the structure: 12,415M - 1,504M (taxes paid) - 2,424M (WC increase) = 8,487M operating cash flow. So 12,415M is BEFORE taxes and BEFORE working capital changes? That doesn't make sense because then we'd add taxes, not subtract. Wait: "Cash Flows From Used In Operations Before Changes In Working Capital" suggests it's operating cash flow before working capital changes. But does it include taxes? Looking at the calculation: 12,415M - 1,504M - 2,424M = 8,487M If 12,415M is before WC changes, and we subtract WC changes (2,424M) and taxes (1,504M), we get operating cash flow. So 12,415M includes taxes? Or excludes? Actually, if 12,415M is "before changes in working capital", it could still include taxes. Then: 12,415M (before WC, after taxes) - 2,424M (WC increase) = 9,991M? But actual is 8,488M. Or 12,415M is before WC and before taxes: 12,415M - 1,504M (taxes) - 2,424M (WC) = 8,487M ≈ 8,488M. Yes! So 12,415M is BEFORE taxes and BEFORE working capital changes. It's essentially: EBITDA + other non-cash adjustments - non-cash items Or more precisely, it's the cash-generating ability before taxes and working capital. For FFO, we typically want AFTER taxes. So: FFO = 12,415M - 1,504M (taxes) = 10,911M? But then we need to adjust for interest. If 12,415M includes interest added back (i.e., pre-interest), then FFO post-interest = 10,911M - 3,003M (finance costs) = 7,908M. Hmm, 7,908M is close to my earlier 7,992M. The difference is about 84M, which could be rounding or other items. Let me verify: 12,415M - 1,504M - 3,003M = 7,908M. And my EBIT+D&A-taxes = 4,309M + 5,187M - 1,504M = 7,992M. Difference = 84M. Small, possibly from other non-cash items. I think **FFO ≈ 7,900M to 8,000M** is reasonable for post-interest, or **10,900M to 12,400M** for pre-interest. Given standard credit analysis uses post-interest FFO (as FFO is funds AFTER operations, available for debt and dividends), let me use: **FFO = 7,992M** (from EBIT + D&A - Cash taxes) or **8,000M** approx. Actually, let me recalculate more precisely using the cash flow data. The standard FFO from cash flow is: FFO = Cash flow from operating activities before working capital changes - Interest paid (if included) + Interest received (if included) - Dividends received (if included) + ... Actually, I found a better approach. Let me use the definition from S&P Global for utilities: FFO = Net income + Depreciation + Amortization + Deferred income taxes + Other non-cash items From the data: Net income = 390M + D&A = 5,187M + Impairment = 2,774M = 8,351M Deferred taxes: Need to calculate from balance sheet changes. Deferred tax assets: 2,029M - 1,181M = +848M (increase, non-cash benefit to tax expense) Deferred tax liabilities: 6,408M - 7,738M = -1,330M (decrease, non-cash charge to tax expense) Net deferred tax change = 848M - 1,330M = -482M (unfavorable, meaning deferred tax expense) Income tax expense in P&L = -83M (benefit). Cash taxes paid = 1,504M. So deferred tax provision = -83M - 1,504M = -1,587M? Or the other way: tax expense = cash taxes + deferred tax change. -83M = 1,504M + deferred, so deferred = -1,587M. Add back deferred tax: +1,587M (since it's non-cash and reduced profit) FFO = 8,351M + 1,587M = 9,938M Other non-cash items: + Other non-recurring items = -1,328M? This is a loss, so it reduced profit. If non-cash, add back +1,328M. + Restructuring expense = 230M. If cash, don't add back. If non-cash, add back. Usually partly cash. + Other income/expense from subsidiaries etc = 91M. Actually, let me not overcomplicate. The "Other Non Recurring Items" = -1,328M. If this is non-cash, add back. But it's "non recurring", so maybe exclude from FFO. Let me try: FFO = 9,938M + 1,328M (add back non-recurring loss) = 11,266M? That seems high. Or FFO = 9,938M (standard, excluding non-recurring) = ~9,900M Hmm, but this includes equity method income (in net income). The undistributed portion is non-cash. Dividends received are cash. From cash flow: "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method" = 1,059M. This means 1,059M of equity method income was non-cash (undistributed), so it was added back? Or subtracted? In the cash flow, this adjustment is +1,059M (positive number). So in the reconciliation, it's added to profit. But if it was already in profit, and we want to remove it (as non-cash), we subtract it. Wait, the sign convention is confusing. Let me assume: "Adjustments For Undistributed Profits" = 1,059M means this amount of equity method income was NOT received as cash, so it's adjusted. If positive, it means added to profit (if it was subtracted in profit) or... Actually, equity method income INCREASES profit. If it's undistributed, it's non-cash. To remove it from cash flow, we SUBTRACT it. But the cash flow adjustment is +1,059M. Hmm, maybe the adjustment is: "to adjust from profit to cash flow, we do: profit + 1,059M"? That would mean profit had -1,059M (i.e., a loss), but actually profit had +1,059M gain. I think the sign convention in this data might be: positive adjustment = add to profit, negative = subtract from profit. And "Adjustments For Undistributed Profits" being positive 1,059M means... add to profit? That doesn't make sense if profit already includes it. Unless... the equity method income is deducted in the cash flow reconciliation? No, that doesn't make sense either. Let me just give up on precise FFO calculation and use the standard proxy: **FFO = Cash Flow From Operations Before Working Capital Changes = 12,415M** This is widely used as FFO proxy in practice. For Net Debt, let me also check if there are other debt-like items. Looking at the balance sheet: - Longterm Borrowings: 28,083M - Current Borrowings: 12,508M - Other noncurrent financial liabilities: 90M (small, likely not debt) - Other current financial liabilities? Not listed separately. Total debt = 40,591M Cash = 15,570M Net Debt = 25,021M Sometimes "Current Derivative Financial Liabilities" (11,859M) or "Noncurrent Derivative Financial Liabilities" (39,417M) are included if they're hedging debt. But typically, derivatives are excluded from net debt. So **Net Debt = 25,021M** FFO / Net Debt = 12,415 / 25,021 = 0.496 or 49.6% Or if FFO = 7,992M (EBITDA - cash taxes): 7,992 / 25,021 = 0.319 or 31.9% Let me check which is more standard. Looking at credit ratios for utilities: - "FFO/Net Debt" from S&P for utilities is typically around 20-40% for investment grade. - Using 12,415M gives 49.6%, which seems high. - Using 7,992M gives 31.9%, which seems more reasonable. But wait, I think I need to include more in FFO. Let me recalculate FFO as: FFO = Operating Income + D&A - Cash taxes + Other non-cash items Or: FFO = 12,415M - 1,504M (taxes) = 10,911M (pre-interest FFO) Then post-interest FFO = 10,911M - 3,003M (finance costs paid) = 7,908M Hmm, but 3,003M is the net finance cost, not necessarily cash paid. Interest paid is 822M (from financing activities). Interest received is 697M (from P&L, but cash?). Actually, let me look at interest cash flows: - Interest Paid Classified As Financing Activities = 822M - Interest Received On Cash And Cash Equivalents = -194M (negative, so inflow?) - Interest Received Classified As Investing Activities = -37M The negative signs might indicate inflows. So total interest paid (cash) = 822M. Total interest received (cash) = 194M + 37M = 231M? Or is 194M negative meaning outflow? Actually, in "Cash Flows From Used In Financing Activities", the total is -2,979M (net outflow). "Interest Paid Classified As Financing Activities" = 822M. If this is part of the -2,979M outflow, then 822M is a positive outflow. For "Interest Received On Cash And Cash Equivalents" = -194M, this might be in "Cash Flows From Used In Financing Activities" or elsewhere. Negative means... inflow? I think the signs are: positive = outflow/cost, negative = inflow/benefit. Or in some cases, the sign follows the "used in" vs "from" convention. Given the confusion, let me use a simpler approach. The P&L shows: - Finance Costs = 3,700M - Finance Income = 697M - Net = -3,003M (loss) Cash flow shows interest paid = 822M. This is much less than 3,700M, suggesting some interest is capitalized or non-cash. For FFO, I'll use the post-interest, pre-working-capital cash flow concept: FFO = Cash Flow Before Working Capital Changes - Cash taxes - Interest paid + Interest received (if any in operating) = 12,415M - 1,504M - 822M + ? Actually, I think the cleanest is to use rating agency methodology. Let me approximate: **FFO = 8,000M to 10,000M EUR** Let me use **FFO = 8,586M** (total operating cash flow) + **2,424M** (working capital increase, added back) = **11,010M**? No, that's not right because 12,415M is before WC changes. Wait: Operating cash flow = 8,586M. This includes WC changes and taxes. To get FFO (before WC, after taxes): FFO = 8,586M + 2,424M (WC increase, cash outflow, so add back) = 11,010M? But 11,010M ≠ 12,415M. The difference is 1,405M, which is roughly taxes (1,504M). So 12,415M is before taxes AND before WC. Then FFO (after taxes, before WC) = 12,415M - 1,504M = 10,911M. Then post-interest FFO = 10,911M - 822M (interest paid, cash) = 10,089M? Or use 3,003M accrual finance cost = 7,908M. I think for "FFO/Net Debt", the standard is to use FFO after interest but before working capital. So approximately 8,000M. Let me settle on: **FFO = 8,586M** (operating cash flow) + **2,424M** (WC changes) = **11,010M** pre-tax? No, operating cash flow includes taxes. Actually, let me just use the direct calculation: FFO = Net income + D&A + Impairment + Deferred taxes + Other non-cash = 390M + 5,187M + 2,774M + 1,587M (deferred tax) + other = 9,938M + other items Other non-cash items from cash flow: - Fair value gains on derivatives: -3,661M (subtract these gains as they're non-cash) + Undistributed profits: 1,059M (these are non-cash, so add back? But they're already in net income... wait) Actually, let me recalculate net income including equity method: Profit from continuing operations = -1,793M + Profit from discontinued operations = 2,183M = Total profit = 390M The equity method share = 1,059M is in continuing operations? Let me check: "Share Of Profit Loss Of Associates" = 1,059M. This is likely in continuing operations. So continuing operations -1,793M includes +1,059M from equity method. The cash portion (dividends) = 713M? "Adjustments For Dividend Income" = -713M. This suggests dividends of 713M were included in profit. So undistributed = 1,059M - 713M = 346M? Or total equity income = 1,059M, of which 713M was dividends (cash) and 346M was undistributed? Actually, "Adjustments For Undistributed Profits" = 1,059M. This suggests 1,059M was undistributed (non-cash). And "Adjustments For Dividend Income" = -713M suggests 713M was dividend income (cash). Total equity method income = 1,059M + 713M = 1,772M? But the P&L shows only 1,059M. Hmm, maybe "Share Of Profit Loss Of Associates" = 1,059M is the total, and "Adjustments For Dividend Income" of -713M is adjusting OTHER dividend income (from other investments), not from associates. This is getting too complex. Let me use a practical approach: **FFO ≈ 8,000M EUR** (rough estimate, post-interest) **Net Debt = 25,021M EUR** FFO/Net Debt = 8,000 / 25,021 = 0.32 or 32% Or using pre-interest FFO ≈ 11,000M: 11,000 / 25,021 = 0.44 or 44% Let me check what makes sense for a utility. Engie's credit rating is BBB/BBB+. Typical FFO/Net Debt for BBB utilities is 15-25% (using post-interest FFO) or higher. Actually, I realize I should look at this more carefully. Let me use the exact formula from S&P's utility methodology: FFO = Net income + Depreciation + Amortization + Deferred income taxes + Other non-cash items Net income = 390M Depreciation & Amortization = 5,187M Impairment = 2,774M (sometimes included, sometimes not; S&P includes "impairment" in "other non-cash items" or separately) Deferred income taxes = change in deferred tax assets and liabilities = (2,029 - 1,181) + (6,408 - 7,738) with sign adjustment = 848 - 1,330 = -482M (this is a decrease, meaning cash was used or recognized) Actually, the deferred tax change in the cash flow is part of "Adjustments For Income Tax Expense" = -83M. This is small. Let me calculate deferred tax expense from P&L: Income tax expense = -83M (benefit) Cash taxes paid = 1,504M So deferred tax benefit = -83M - 1,504M = -1,587M? Or deferred tax expense = 1,587M? If tax expense is -83M (benefit) and cash taxes are +1,504M (paid), then: Tax expense = Cash taxes + Deferred tax change -83 = 1,504 + Deferred Deferred = -1,587M (deferred tax benefit) Add back deferred tax benefit: +1,587M (non-cash benefit, so add to FFO) Other non-cash items: + Provisions change = ? (part of 8,057M D&A etc) + Fair value changes = -3,661M (gains, so subtract) + Other = various Let me try: FFO = 390M + 5,187M + 2,774M + 1,587M - 3,661M (fair value gains) + 1,059M (undistributed, add back? Or subtract?) = 390 + 5,187 + 2,774 + 1,587 - 3,661 + 1,059 = 7,336M Hmm, this is in the 7,000-8,000M range. Or if we exclude fair value gains (as they're part of normal operations for energy trading): FFO = 390 + 5,187 + 2,774 + 1,587 + 1,059 = 10,997M This is close to 11,000M. I think for energy companies with trading activities, fair value gains/losses are part of normal operations. So we shouldn't adjust them out for FFO. Let me try yet another approach. I'll use **FFO = Cash Flow From Operations Before Working Capital Changes - Interest paid + Interest received** (to get post-interest, pre-WC FFO) = 12,415M - 822M + 231M (interest received) = 11,824M? But this seems too high. And I'm not sure about interest classification. OK, I'm going to make a decision. Let me use: **FFO = 8,586M** (Cash Flow From Used In Operating Activities) + **2,424M** (working capital increase, add back) = **11,010M** Wait, but 12,415M is the "before working capital" figure. So 12,415M - 1,504M (taxes) = 10,911M? No, 12,415M is before taxes too. Actually from earlier: 12,415M - 1,504M (taxes) - 2,424M (WC) = 8,487M ≈ 8,488M operating cash flow continuing. Then +98M discontinued = 8,586M total operating cash flow. So 12,415M is BEFORE taxes and BEFORE working capital changes. FFO (after taxes, before working capital) = 12,415M - 1,504M = 10,911M FFO (after taxes, after working capital) = 8,586M (but this includes working capital, so not pure FFO) For "FFO/Net Debt", we want FFO before working capital changes (as working capital is volatile). So FFO = 10,911M (after taxes, pre-WC). But is this post-interest or pre-interest? 12,415M includes the adjustment for finance costs of -3,003M. If we added back finance costs to get 12,415M, then 12,415M is PRE-interest. So FFO post-interest = 10,911M - 3,003M = 7,908M. Or using cash interest paid: 10,911M - 822M = 10,089M? I think the accrual-based interest (3,003M) is more appropriate for FFO, as FFO is an accrual-based metric (like EBITDA but with taxes and non-cash items). So **FFO = 7,908M** ≈ **7,900M to 8,000M** Let me round to **FFO = 7,992M** (from EBIT+D&A-cash taxes) or **8,000M**. Actually, let me verify EBIT+D&A-cash taxes once more: EBIT = 4,309M D&A = 5,187M Cash taxes = 1,504M FFO = 4,309 + 5,187 - 1,504 = 8, - wait: 4,309 + 5,187 = 9,496. 9,496 - 1,504 = 7,992. Yes. But this excludes equity method income. If we add it: FFO = 5,367M + 5,187M - 1,504M = 9,050M Hmm, which EBIT to use? "Current Operating Income Including Operating Mtm" = 4,309M is standard EBIT. The equity method income is typically excluded from EBIT (it's "share of profit of associates" below operating income in some presentations, or included in operating income in others). Looking at the line items: - "Current Operating Income Including Operating Mtm" = 4,309M - Then "Share Of Profit Loss Of Associates" = 1,059M - Then "Current Operating Income Including Operating Mtm And Share In Net Income Of Equity Method Entities" = 5,367M So 4,309M is before equity method, 5,367M is after. In IFRS, equity method income can be presented as part of operating income or after. Here it seems separate. For FFO, I'll use the broader measure: **FFO = 5,367M + 5,187M - 1,504M = 9,050M**? No wait, 5,367M already includes equity method but is still after D&A. So: EBITDA = 5,367M + 5,187M = 10,554M? No, that's wrong. 5,367M is AFTER D&A, so EBIT = 5,367M, EBITDA = 5,367M + 5,187M = 10,554M. Then FFO = 10,554M - 1,504M = 9,050M. But earlier with 4,309M EBIT: EBITDA = 9,496M, FFO = 7,992M. The difference is 1,059M (equity method income). Which is correct? I think for credit analysis, equity method income is typically INCLUDED in FFO if it's sustainable. But only the CASH portion (dividends received). The undistributed portion is non-cash. From cash flow: "Dividends Received Classified As Investing Activities" = 18M. And "Adjustments For Dividend Income" = -713M. The -713M suggests dividend income was deducted in the operating cash flow reconciliation, meaning it was included in profit but not part of operating cash flow. So cash dividends received = 713M (from "Adjustments For Dividend Income" with negative sign, meaning subtract from profit). And "Dividends Received Classified As Investing Activities" = 18M is additional. Total dividends = 713M + 18M = 731M? Or the 18M is part of the 713M? Actually, "Dividends Received Classified As Investing Activities" = 18M. This is small. The "Adjustments For Dividend Income" = -713M is larger, and likely refers to dividends from equity method investments that were included in profit. So cash dividends from equity method = 713M (operating or investing? The adjustment suggests it's in operating). And 18M is additional from investing. For FFO, we include sustainable cash flows. Equity method dividends of 713M are cash, so include them. But 1,059M total equity income includes 346M undistributed (non-cash). If we use EBIT including equity method (5,367M), we should subtract the undistributed portion (346M) to get cash-based FFO: FFO = 5,367M + 5,187M - 1,504M - 346M = 8,704M Or use EBIT excluding equity method (4,309M) and add only cash dividends: FFO = 4,309M + 5,187M - 1,504M + 713M = 8,705M Both give ~8,700M. This is close to my 7,992M + 713M = 8,705M. So **FFO ≈ 8,700M EUR** Let me use **FFO = 8,586M** (total operating cash flow) + **2,424M** (WC increase) - **1,504M** (taxes? No, operating cash flow includes taxes). Actually, operating cash flow 8,586M = FFO - WC changes - taxes? No, 8,586M is AFTER WC changes and AFTER taxes. From 12,415M (before WC, before taxes): - 1,504M taxes = 10,911M (before WC, afterpp after taxes) - 2,424M WC increase = 8,487M (after WC, after taxes) ≈ 8,488M continuing + 98M discontinued = 8,586M So FFO (before WC, after taxes) = 10,911M. But this is PRE-interest (since 12,415M includes finance costs added back). Post-interest FFO = 10,911M - 3,003M = 7,908M. Or if we use cash interest paid (822M) instead of accrual interest (3,003M): Post-interest FFO = 10,911M - 822M = 10,089M. The difference is huge. Which to use? In standard FFO definitions, we use ACCRUAL interest expense, not cash interest paid. So FFO = 7,908M. But wait, FFO is supposed to be a CASH-based concept (Funds From Operations). So we should use cash interest paid? Actually, no. FFO is derived from accrual net income with non-cash addbacks. It's not purely cash. The standard is to use accrual interest. So **FFO = 7,908M** or approximately **7,900M to 8,000M**. Let me use **FFO = 7,992M** (from EBIT+D&A-CashTaxes) as it's cleaner and doesn't depend on interest classification. Or I can use **FFO = 8,705M** (including equity method cash dividends). Hmm, but 7,992M excludes equity method entirely. 8,705M includes cash dividends from equity method. For credit analysis, equity method income is typically included. So **FFO = 8,700M** approximately. Let me settle on **FFO = 8,586M** (operating cash flow) + **2,424M** (WC add-back) - **1,504M** (taxes? No, already in). Actually, I realize I can just use: FFO = Cash Flow Before Working Capital Changes - Cash Interest Paid + Cash Interest Received = 12,415M - 822M + 231M = 11,824M? But this is pre-tax! No, 12,415M is pre-tax. So 12,415M - 1,504M (taxes) - 822M (interest) + 231M (interest received) = 10,320M? I'm going in circles. Let me use the simplest, most defensible calculation: **FFO = Net Income + D&A + Impairment + Deferred Taxes + Other Non-Cash Items** = 390M + 5,187M + 2,774M + 1,587M (deferred tax benefit) + other non-cash = 9,938M + other Other non-cash: - Fair value gains = -3,661M (subtract, as gains) - Undistributed profits = 1,059M (add back, as non-cash) - Other adjustments = -157M - 74M - 83M = -314M FFO = 9,938M - 3,661M + 1,059M - 314M = 7,022M Hmm, this is lower. And I need to check if fair value gains should be excluded. For an energy trading company, fair value gains/losses on derivatives are part of normal operations. So they should stay in FFO. Let me try: FFO = 9,938M + 1,059M - 713M (dividend income, cash, keep?) = 10,284M? Or: FFO = 9,938M (standard) = ~9,900M I think I'll go with **FFO = 8,586M** (total operating cash flow) as a conservative measure, or **FFO = 10,911M** (before working capital changes, after taxes, pre-interest). For the ratio FFO/Net Debt, if we use post-interest FFO = 7,908M: Ratio = 7,908 / 25,021 = 0.316 or 31.6% If we use pre-interest FFO = 10,911M: Ratio = 10,911 / 25,021 = 0.436 or 43.6% If we use operating cash flow = 8,586M: Ratio = 8,586 / 25,021 = 0.343 or 34.3% I think the most standard is **post-interest, pre-working-capital FFO** = roughly **8,000M to 8,700M**. Let me use **FFO = 8,586M** (operating cash flow, which is after interest, after taxes, after working capital). But working capital is volatile, so better to use pre-working-capital. **FFO = 10,911M - 3,003M (interest) = 7,908M** or with cash interest: **10,911M - 822M = 10,089M**. I'll use the accrual-based **FFO = 7,908M ≈ 7,900M**. Actually, let me reconsider one more time. The standard "FFO" in credit analysis for European utilities: FFO = EBIT + D&A - Cash taxes = 4,309M + 5,187M - 1,504M = 7,992M Or with equity method: = 5,367M + 5,187M - 1,504M = 9,050M I'll use **FFO = 7,992M** as the most conservative and standard. Net Debt = 25,021M FFO / Net Debt = 7,992 / 25,021 = 0.3194 or 31.94% Or approximately **0.32** or **32%**. But wait, I want to double-check my net debt calculation. Are there any other debt items? Looking at the balance sheet again: - Longterm Borrowings: 28,083M - Current Borrowings And Current Portion Of Noncurrent Borrowings: 12,508M - Total = 40,591M Are there any other financial liabilities that are debt-like? - Noncurrent Derivative Financial Liabilities: 39,417M (derivatives, not debt) - Current Derivative Financial Liabilities: 11,859M (derivatives, not debt) - Other Noncurrent Financial Liabilities: 90M (likely not debt, or minor) - Trade And Other Current Payables: 39,801M (trade payables, not debt) Cash And Cash Equivalents: 15,570M Net Debt = 40,591M - 15,570M = 25,021M Sometimes "Other Current Financial Assets" (2,394M) and "Other Noncurrent Financial Assets" (10,599M) are deducted if they're liquid. But these are typically investments, not cash equivalents. So Net Debt = 25,021M is correct. FFO / Net Debt = 7,992 / 25,021 = 0.3194 Or if I use FFO = 8,586M (operating cash flow): 8,586 / 25,021 = 0.343 Or if I use pre-WC FFO = 10,911M: 10,911 / 25,021 = 0.436 I think the most common definition for this ratio is using **FFO before working capital changes but after taxes and interest**. From 12,415M (before WC, before taxes, before interest): - Taxes: 1,504M - Interest (accrual): 3,003M = 7,908M Or with cash interest: - Taxes: 1,504M - Interest paid (cash): 822M - Interest received (cash): let's say 231M = 12,415M - 1,504M - 822M + 231M = 10,320M? But this doesn't match my other calculations. Let me try yet another approach. I'll calculate FFO as: FFO = Cash Flow From Operating Activities + Change in Working Capital + Interest Paid - Interest Received = 8,586M + 2,424M + 822M - 231M = 11,601M? But this is pre-tax! No, operating cash flow includes taxes. Actually: 8,586M (operating CF) + 2,424M (WC increase) = 11,010M (before WC changes, after taxes). Then + interest paid - interest received = pre-interest FFO. If interest paid = 822M and interest received = 231M: Pre-interest FFO = 11,010M + 822M - 231M = 11,601M Post-interest FFO = 11,010M (already after interest, since operating CF includes interest if classified as operating) But in this case, interest paid is classified as FINANCING, not operating. So operating CF 8,586M is already after interest (since interest is in financing). So FFO before WC changes, after taxes, after interest = 11,010M. To get pre-interest: 11,010M + 822M - 231M = 11,601M. But this seems high. And 11,010M / 25,021M = 0.44 or 44%. Hmm, but wait. If operating cash flow 8,586M excludes interest paid (because it's in financing), then 8,586M is PRE-interest in a sense. The interest paid of 822M is separate in financing. So "Cash Flow From Operations Before Working Capital Changes" = 12,415M. This includes: - Net income 390M + D&A etc 8,057M + Other adjustments = 12,415M And this 12,415M is PRE-interest (since interest is added back via the 3,003M adjustment? Or not?). Actually, the adjustment "For Finance Income Cost" = -3,003M. If this is added to profit, then 12,415M includes the add-back of finance costs. So 12,415M is PRE-interest. Then 12,415M - 1,504M (taxes) = 10,911M (pre-interest, after taxes, before WC). Then 10,911M - 3,003M (interest) = 7,908M (post-interest, after taxes, before WC). This 7,908M is the standard FFO. FFO / Net Debt = 7,908 / 25,021 = 0.316 or 31.6% Let me round to **0.32** or **31.6%**. Actually, I want to check one more thing. Is the "Tax Expense Other Than Income Tax Expense" (3,380M) part of operating cash flow? Yes, it's part of the operating income calculation. And "Income Tax Expense Continuing Operations" (-83M) is the income tax. Cash taxes paid = 1,504M. Tax expense = -83M. The difference is deferred tax. So my FFO = 7,908M seems reasonable. But let me also consider: should I include discontinued operations in FFO? "Profit Loss From Discontinued Operations" = 2,183M. This is in net income. "Cash Flows From Used In Operating Activities Discontinued Operations" = 98M. If FFO is from continuing operations, we should exclude discontinued operations. But net income 390M includes discontinued operations. From continuing operations: Profit = -1,793M. From discontinued: Profit = 2,183M. Total = 390M. For FFO, we typically want sustainable operations. So maybe exclude discontinued operations. But the cash flow "before working capital changes" = 12,415M is for continuing operations? Let me check: "Cash Flows From Used In Operations Before Changes In Working Capital" - no "Continuing" or "Discontinued" specified. But the operating cash flow is split: - Continuing: 8,488M - Discontinued: 98M - Total: 8,586M And "Cash Flows From Used In Operations Before Changes In Working Capital" = 12,415M. Is this total or continuing? Looking at the pattern, it's likely total (or continuing, with discontinued separate). Actually, there's no "Cash Flows From Used In Operations Before Changes In Working Capital" for discontinued separately. So 12,415M likely includes both, or is just continuing. Let me assume 12,415M is total. Then FFO including discontinued = 7,908M. FFO from continuing only would be lower. But for simplicity, I'll use total FFO = 7,908M. Wait, I want to verify 7,908M one more time: 12,415M (before WC, before taxes, pre-interest) - 1,504M (cash taxes) = 10,911M (before WC, after taxes, pre-interest) - 3,003M (accrual interest, net) = 7,908M (before WC, after taxes, post-interest) Yes. Or using the EBIT+D&A approach: EBIT = 4,309M (continuing operations, before equity method) + D&A = 5,187M - Cash taxes = 1,504M = 7,992M This is very close to 7,908M. The difference is 84M, likely from discontinued operations or other items. I'll use **FFO = 7,992M** as it's cleaner and based on clearly identifiable line items. Net Debt = 25,021M Ratio = 7,992 / 25,021 = 0.3194 Let me express this as a percentage or decimal. The ratio "FFO / Net Debt" is typically expressed as a percentage (e.g., 32%) or as a decimal (0.32). Looking at the question: "estimate the FFO / Net debt ratio". This is typically expressed as a percentage or multiple. I'll provide it as a decimal: **0.32** or **31.94%**. Actually, let me reconsider if I should include equity method. "Current Operating Income Including Operating Mtm And Share In Net Income Of Equity Method Entities" = 5,367M. If this is the operating income used: FFO = 5,367M + 5,187M - 1,504M = 9,050M Ratio = 9,050 / 25,021 = 0.362 or 36.2% Which is more appropriate? In many European utilities, equity method income is included in operating income. The line "Current Operating Income Including Operating Mtm And Share In Net Income Of Equity Method Entities" suggests this is a broader operating income measure. But standard EBIT is typically before equity method (equity method is "below the line"). However, in IFRS, equity method can be presented as part of operating income. Looking at the structure, "Share Of Profit Loss Of Associates" comes after "Current Operating Income Including Operating Mtm" and before the combined line. So 4,309M is "pure" operating income, and 5,367M includes equity method. For credit analysis, I think 4,309M is the safer EBIT to use. So FFO = 7,992M. But let me also consider: the cash flow 12,415M includes "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method" = 1,059M. This suggests equity method income is included in the cash flow reconciliation. So 12,415M includes the equity method add-back. If 12,415M includes equity method (added back as undistributed profits), then my FFO = 7,908M also includes equity method (since it's derived from 12,415M). But 7,908M vs 7,992M is close. The difference is whether equity method is included or not. Actually, 7,992M from EBIT+D&A-taxes uses EBIT = 4,309M, which excludes equity method. And 12,415M includes adjustments for equity method (+1,059M undistributed, -713M dividends). So 12,415M is based on net income that INCLUDES equity method income. Let me recalculate: Net income 390M includes equity method income of 1,059M. So if I use EBIT excluding equity method (4,309M), I should add back only the cash portion of equity method (dividends). FFO = 4,309M + 5,187M - 1,504M + 713M (dividends) = 8,705M Or if I use EBIT including equity method (5,367M), but then I need to subtract undistributed profits: FFO = 5,367M + 5,187M - 1,504M - 346M (undistributed) = 8,704M Both give ~8,705M. So **FFO ≈ 8,700M** including equity method cash flows. Ratio = 8,705 / 25,021 = 0.348 or 34.8%. Hmm, this is different from 7,992M. Which is more standard? I think for FFO/Net Debt ratio, the key is consistency with rating agency methodology. S&P's FFO includes equity method income (as it's part of EBITDA). But they adjust for non-cash items. Let me use **FFO = 8,586M** (total operating cash flow) + **2,424M** (working capital increase) = **11,010M** pre-WC? No, 8,586M includes taxes and interest (if operating) or excludes interest (if financing). Actually, 8,586M operating cash flow + 2,424M WC increase = 11,010M. But 12,415M is the stated "before working capital changes". So 12,415M ≠ 11,010M. The difference is 1,405M ≈ taxes (1,504M). So 12,415M is before taxes and before WC. 11,010M is after taxes, before WC. Then 11,010M - 3,003M interest = 8,007M post-interest, after taxes, before WC. This **8,007M** is very close to my **7,992M**! So FFO ≈ 8,000M. FFO / Net Debt = 8,000 / 25,021 = 0.320 or 32.0%. I'll use **0.32** as my final answer, or more precisely **0.319** or **31.9%**. Actually, let me use the more precise calculation: FFO = 7,992M (or 8,007M) Net Debt = 25,021M Ratio = 7,992 / 25,021 = 0.3194 Or if I use FFO = 8,586M (operating cash flow, after everything): Ratio = 8,586 / 25,021 = 0.343 I think "FFO" specifically means before working capital changes. So 0.32 is more appropriate. Let me finalize with **FFO / Net Debt = 0.32** or **32%**. Actually, I want to check one more time if net debt could include other items. Some analysts include: - Net Debt = Total Debt - Cash - Marketable Securities "Other Current Financial Assets" = 2,394M "Other Noncurrent Financial Assets" = 10,599M If these are marketable securities or liquid investments: Net Debt = 40,591M - 15,570M - 2,394M - 10,599M = 12,028M Then ratio = 8,000 / 12,028 = 0.665 or 66.5%. This is very different! But typically, "Other Financial Assets" include loans, investments, etc., not just marketable securities. Without more detail, I shouldn't include them. Standard Net Debt = Gross Debt - Cash and Cash Equivalents = 40,591M - 15,570M = 25,021M. I'll stick with this. Final answer: **FFO / Net Debt = 0.32** (or 31.9%) Let me express this as a ratio: 0.32. Actually, looking at the data again, I want to verify my FFO one more time using the exact cash flow items. From "Cash Flows From Used In Operations Before Changes In Working Capital" = 12,415M. This is calculated as: Profit/Loss = 390M + Adjustments: - Undistributed profits: 1,059M - Dividend income: -713M - D&A, impairment, provisions: -8,057M? Or +8,057M? Let me assume the signs in the data indicate the direction of adjustment (positive = add to profit, negative = subtract from profit): 390M + 1,059M - 713M + 8,057M - 74M - 3,661M - 157M - 83M - 3,003M = ? 390 + 1,059 = 1,449 1,449 - 713 = 736 736 + 8,057 = 8,793 8,793 - 74 = 8,719 8,719 - 3,661 = 5,058 5,058 - 157 = 4,901 4,901 - 83 = 4,818 4,818 - 3,003 = 1,815 This doesn't equal 12,415M. So my sign interpretation is wrong. Let me try all positive (absolute values): 390 + 1,059 + 713 + 8,057 + 74 + 3,661 + 157 + 83 + 3,003 = 17,197M. Too high. Let me try: the adjustments are shown as "adjustments to profit" where the sign indicates whether it's a source or use of cash: Profit = 390M (source) + D&A etc = 8,057M (source, non-cash add-back) + Undistributed profits = 1,059M (source? Or use?) - Dividend income = -713M (use, as it's income not from operations?) - Scope changes = -74M - Fair value = -3,661M - Other = -157M - Tax = -83M - Finance = -3,003M Sum: 390 + 8,057 + 1,059 - 713 - 74 - 3,661 - 157 - 83 - 3,003 = 1,815M. Still not 12,415M. I'm clearly missing something. Let me look at the data structure again. Actually, I think "Net Depreciation Amortization Impairment And Provisions" = -8,057M. The negative sign might mean that the NET effect is negative (i.e., impairment exceeds D&A, or there's a net reversal). Looking at P&L: - D&A = 5,187M (expense) - Impairment = 2,774M (expense) - Total = 7,961M expense But cash flow shows -8,057M. The difference could be provisions (reversal or addition). If -8,057M means a net negative adjustment (i.e., subtract from profit), then: Profit 390M - 8,057M = -7,667M. That doesn't make sense for cash flow. I think the sign convention in this data is: POSITIVE numbers are cash OUTFLOWS or deductions from profit, NEGATIVE numbers are cash INFLOWS or additions to profit. Or vice versa. Actually, looking at "Cash Flows From Used In Operating Activities" = 8,586M. This is positive, meaning cash outflow? Or inflow? In standard IFRS, "Cash flows from operating activities" as a positive number means INFLOW (source of cash). But the label says "From Used In" which is ambiguous. If 8,586M is inflow (positive), then: - "Cash Flows From Used In Operations Before Changes In Working Capital" = 12,415M is also inflow. - "Increase Decrease In Working Capital" = 2,424M. If this is positive, it could mean decrease in working capital (inflow). Then: 12,415M + 2,424M (WC decrease, inflow) - 1,504M (taxes, outflow) = 13,335M? Not 8,586M. Or: 12,415M - 2,424M (WC increase, outflow) - 1,504M (taxes, outflow) = 8,487M ≈ 8,488M. Yes! So 12,415M is inflow, 2,424M is outflow (working capital increase), 1,504M is outflow (taxes paid). Net = 8,487M ≈ 8,488M continuing + 98M discontinued = 8,586M. This makes sense! So: - 12,415M: inflow before WC and taxes - 2,424M: outflow for WC increase - 1,504M: outflow for taxes - Net: 8,486M ≈ 8,488M (continuing) Now, the adjustments to profit: if profit is 390M (inflow), and we add adjustments to get to 12,415M: 12,415M - 390M = 12,025M total adjustments needed. From the adjustments listed (with my new sign convention where positive = outflow/negative to profit, negative = inflow/positive to profit?): Actually, let me try: adjustments are shown with their effect on cash flow (positive = inflow, negative = outflow): Profit: 390M (inflow) + Undistributed profits adjustment: 1,059M? But this is non-cash, so it's an adjustment to profit. If positive, add to profit. - Dividend income: -713M? Or +713M? Hmm, let me just accept that 12,415M is correct and move on. **Final calculation:** I'll use **FFO = EBITDA - Cash Taxes = 9,496M - 1,504M = 7,992M** as my best estimate for post-interest, pre-WC FFO. Or more precisely, I'll use the cash-flow-derived **FFO = 7,908M to 8,000M**. For Net Debt: **25,021M** Ratio: **7,992 / 25,021 = 0.3194** Or using **FFO = 8,586M** (total operating cash flow, after WC): **8,586 / 25,021 = 0.343** I think the question expects a calculation based on standard formulas. Let me provide **0.32** as a reasonable estimate. Actually, let me try one more precise calculation using the balance sheet and income statement: FFO = Net Income + D&A + Impairment + Deferred Taxes + Other Non-Cash - Gain on Sales Net Income = 390M D&A = 5,187M Impairment = 2,774M Deferred Tax = 1,587M (calculated as tax expense -83M minus cash taxes 1,504M = -1,587M, so add back 1,587M) Other Non-Cash = ? From cash flow adjustments, "Other Adjustments For Noncash Items" = -157M. If this is a gain, subtract it. If a loss, add it. Assuming it's a non-cash gain or loss to be adjusted. Also "Impact Of Changes In Scope" = -74M. This is likely a gain on sale or acquisition effect. And "Adjustments For Gains Losses On Change In Fair Value Of Derivatives" = -3,661M. This is a gain (negative adjustment to profit), so subtract from FFO. FFO = 390 + 5,187 + 2,774 + 1,587 - 157 - 74 - 3,661 = 6,046M This is lower! But this excludes equity method and other items. If I add back undistributed profits (1,059M) and subtract dividend income (713M): FFO = 6,046 + 1,059 - 713 = 6,392M This is even lower. Hmm. Actually, I think the fair value gains on derivatives should NOT be subtracted for an energy trading company, as they're part of normal operations. So: FFO = 390 + 5,187 + 2,774 + 1,587 - 157 - 74 + 1,059 - 713 = 10,053M Or approximately 10,000M. Then FFO / Net Debt = 10,000 / 25,021 = 0.40 or 40%. This is higher. Which is correct? I think the key question is whether to adjust for fair value gains/losses on derivatives. For a company like Engie with significant energy trading, these are part of normal operating cash flows. So we should NOT adjust them out. In that case, FFO is closer to 10,000M or 12,415M (before taxes and interest). Let me use **FFO = 10,911M** (12,415M - 1,504M taxes, pre-interest, pre-WC) or **7,908M** (post-interest). For a ratio called "FFO / Net Debt", I believe the standard is to use **post-interest FFO**, as this represents funds actually available to repay debt after interest is paid. So **FFO = 7,908M** or approximately **8,000M**. Ratio = 8,000 / 25,000 = 0.32. I'll provide **0.32** as my final answer. Wait, I want to check one more thing. Should I use average net debt or year-end net debt? Typically, ratios use year-end balance sheet figures. So Net Debt at 2023-01-01 (end of 2022) = 25,021M. But sometimes average debt is used: (25,021M + 2021 net debt) / 2. 2021 net debt: - Longterm Borrowings: 30,458M - Current Borrowings: 10,590M - Total = 41,048M - Cash = 13,890M - Net Debt = 27,158M Average net debt = (25,021 + 27,158) / 2 = 26,090M Ratio with average = 8,000 / 26,090 = 0.307 or 30.7%. But standard is year-end, so I'll use 25,021M. Final answer: **0.32** or **31.9%**. I'll express as decimal 0.32. Actually, rethinking one more time: I want to use the most common industry practice. For utilities and energy companies, FFO is often calculated as: FFO = Operating Cash Flow + Change in Working Capital - Capital Expenditures? No, that's Free Cash Flow. FFO = Net Income + D&A + Deferred Taxes + Other Non-Cash Items Let me use: Net Income = 390M D&A = 5,187M Impairment = 2,774M Deferred Tax = 1,587M Other Non-Cash = provisions, fair value, etc. From the cash flow, total non-cash adjustments (excluding WC and taxes) = 12,415M - 390M = 12,025M. This includes interest add-back, equity method, etc. If I subtract interest add-back (3,003M): 12,025M - 3,003M = 9,022M non-cash operating adjustments. Then FFO = 390M + 9,022M = 9,412M? But this is pre-interest. Post-interest FFO = 9,412M - 3,003M = 6,409M? No, that double-counts. I think: 12,415M is pre-interest, pre-tax? No, 12,415M includes tax adjustments. Let me just accept that 12,415M is "Cash Flow From Operations Before Working Capital Changes" and use it as the FFO proxy. This is common in practice. FFO = 12,415M Net Debt = 25,021M Ratio = 12,415 / 25,021 = 0.496 or 49.6% But this seems high for a utility. And it includes interest add-back, so it's pre-interest. If we want post-interest FFO (standard for debt ratios): FFO = 12,415M - 3,003M (finance costs) = 9,412M Ratio = 9,412 / 25,021 = 0.376 or 37.6% Or with cash interest paid: FFO = 12,415M - 822M = 11,593M Ratio = 11,593 / 25,021 = 0.463 or 46.3% I think the accrual-based adjustment (3,003M) is more appropriate for FFO, as FFO is derived from accrual accounting. So **FFO = 9,412M** and **Ratio = 0.376 or 37.6%**. But earlier I calculated FFO = 7,992M from EBIT+D&A-taxes. The difference is: 9,412M vs 7,992M = 1,420M. This 1,420M difference comes from: - Equity method and other items in 12,415M that aren't in EBIT+D&A-taxes - Different tax treatment Which is more accurate? The EBIT+D&A-taxes approach is cleaner and more transparent. But it excludes some items that are in the cash flow. Actually, let me recalculate EBIT+D&A-taxes more carefully: EBIT = 4,309M + D&A = 5,187M = EBITDA = 9,496M - Cash taxes = 1,504M = 7,992M But EBIT = 4,309M is after "Tax Expense Other Than Income Tax" of 3,380M. This tax is part of operating costs. And "Income Tax Expense" of -83M is separate. So EBIT = 4,309M includes the 3,380M non-income tax. Then we add D&A (5,187M) and subtract cash taxes (1,504M, which is income tax). FFO = 4,309M + 5,187M - 1,504M = 7,992M. But wait, the 3,380M "Tax Expense Other Than Income Tax" is already deducted in EBIT. And it's a cash tax (or mostly cash). So we're not adjusting for it. Should we? Actually, "Tax Expense Other Than Income Tax Expense" includes things like property taxes, payroll taxes, etc. These are operating expenses and should remain in FFO (as they're part of normal operations). So FFO = 7,992M seems correct for the core operations. But 12,415M includes additional items like equity method, fair value changes, etc. These are also part of Engie's operations. I think for a complete picture, FFO should include all operating items. So **FFO = 9,412M** (from 12,415M - 3,003M interest) or **FFO = 10,911M** (from 12,415M - 1,504M taxes, pre-interest). For "FFO / Net Debt" as a debt coverage ratio, I believe the standard is to use **post-interest FFO**. So: **FFO = 7,908M to 8,000M** (post-interest, after taxes, before WC) **Net Debt = 25,021M** **Ratio = 0.316 to 0.32** I'll use **0.32** as a rounded estimate. Actually, I realize I should check if there's a more standard formula for FFO in the utilities sector. Let me think about what Engie itself might report or what rating agencies use. From Moody's utility methodology: FFO = Net income + Depreciation + Amortization + Deferred taxes + Other non-cash items - Gain on asset sales Using: Net income = 390M Depreciation & Amortization = 5,187M Impairment = 2,774M (Moody's includes this in "other non-cash" or separately) Deferred taxes = 1,587M (benefit, add back) Other non-cash = provisions, fair value, etc. From cash flow, "Net Depreciation Amortization Impairment And Provisions" = 8,057M. This includes D&A + impairment + net provisions. If I use 8,057M instead of 5,187M + 2,774M = 7,961M, there's a 96M difference for provisions. FFO = 390M + 8,057M + 1,587M + other = 10,034M + other Other items from cash flow (excluding interest and WC): - Undistributed profits: 1,059M (non-cash, add back? Or it's already in net income, so if we want FFO we need to subtract the non-cash portion) - Actually, net income includes 1,059M equity method income. Of this, 713M is dividends (cash) and 346M is undistributed (non-cash). So add back 346M? No, we want to SUBTRACT the non-cash 346M to get cash-based FFO. Wait, FFO is not purely cash-based. It's "Funds From Operations" which includes accrual items. So we keep the 1,059M equity method income. But then we need to subtract the non-cash fair value gains, etc. This is too complex. Let me use the simple, widely accepted proxy: **FFO = Cash Flow From Operations Before Working Capital Changes = 12,415M** And for a post-interest version: **FFO = 12,415M - 3,003M = 9,412M** Given the ratio name "FFO / Net Debt", I'll use the post-interest version as it's more meaningful for debt coverage. **FFO / Net Debt = 9,412 / 25,021 = 0.376 or 37.6%** Or approximately **0.38**. Hmm, but earlier I said 0.32. Which is it? Let me check: 12,415M - 3,003M = 9,412M. Is this correct? 12,415M includes the add-back of finance costs (3,003M). So it's PRE-interest. To get POST-interest, subtract 3,003M: 9,412M. But 9,412M is still BEFORE taxes? Or after taxes? From the cash flow structure: 12,415M - 1,504M (taxes) - 2,424M (WC) = 8,487M ≈ 8,488M. So 12,415M is BEFORE taxes and BEFORE WC. If we subtract taxes: 10,911M. Then subtract interest: 7,908M. So POST-interest, POST-tax, PRE-WC FFO = 7,908M. This is the standard FFO for debt ratios. **FFO / Net Debt = 7,908 / 25,021 = 0.316 or 31.6%** Approximately **0.32** or **32%**. I think this is the most accurate. Let me finalize with **0.32**. Actually, one last check: should I use continuing operations only or total? "Cash Flows From Used In Operations Before Changes In Working Capital" = 12,415M. Is this total or continuing? Looking at the data, there's also: - "Cash Flows From Used In Operating Activities Continuing Operations" = 8,488M - "Cash Flows From Used In Operating Activities Discontinued Operations" = 98M - "Cash Flows From Used In Operating Activities" = 8,586M And 12,415M - 1,504M - 2,424M = 8,487M ≈ 8,488M. So 12,415M is for CONTINUING operations (or the math works out that way). Total operating cash flow before WC changes would be 12,415M + something for discontinued. But there's no separate line. So 12,415M is likely total or continuing. If 12,415M is continuing, and discontinued is small (98M operating cash flow), then total FFO ≈ 12,415M + 98M + WC for discontinued? Actually, 8,586M total operating = 8,488M continuing + 98M discontinued. The 12,415M is "before WC changes". If WC changes for discontinued are small, total before WC ≈ 12,415M + small amount. For simplicity, I'll use 12,415M as the total FFO proxy. Final FFO (post-interest, post-tax, pre-WC) = 12,415M - 1,504M - 3,003M = 7,908M. Ratio = 7,908 / 25,021 = 0.316. Rounded: **0.32** or **31.6%**. I'll provide the answer as **0.32**. 0.32