I need to estimate the FFO (Funds From Operations) / Net Debt ratio for 2022. First, let me identify the components needed: **FFO (Funds From Operations)** is typically calculated as: - Profit Loss From Operating Activities (EBIT) + Depreciation & Amortization - Taxes on operating activities ± Working capital changes Or more commonly for utilities: EBITDA - Cash Taxes - Cash Interest (approximation) From the data: - "Beneficio Bruto De Explotacion Ebitda" (EBITDA): 13,228,000,000 EUR for 2022 - "Depreciation Amortisation And Impairment Loss...": 4,774,000,000 EUR for 2022 - "Profit Loss From Operating Activities" (EBIT): 7,984,000,000 EUR for 2022 A common FFO calculation for utilities/rating agencies: FFO = EBIT + D&A - Cash taxes (approx) + Other adjustments Or more simply: FFO ≈ Net Income + D&A + Other non-cash items + Interest expense (since we want pre-financing) Let me use a standard approach: FFO = Cash Flows From Used In Operating Activities + Interest Paid (since FFO is before financing costs) From cash flow statement: - "Cash Flows From Used In Operating Activities": 10,443,000,000 EUR for 2022 But this already includes interest paid and taxes paid. Let me check what's in operating cash flow. Actually, standard FFO for credit analysis is typically: FFO = Net Income + Depreciation & Amortization + Deferred Taxes + Other non-cash items Or: FFO = EBIT + D&A - Cash Taxes From the data: - EBIT: 7,984,000,000 EUR - D&A: 4,774,000,000 EUR - EBITDA: 13,228,000,000 EUR Cash taxes paid: "Income Taxes Paid Classified As Operating Activities": 1,055,000,000 EUR So FFO ≈ EBIT + D&A - Cash Taxes = 7,984,000,000 + 4,774,000,000 - 1,055,000,000 = 11,703,000,000 EUR Or using EBITDA - Cash Taxes approach: 13,228,000,000 - 1,055,000,000 = 12,173,000,000 EUR Actually, let me use a more standard FFO definition from rating agencies: FFO = Funds from Operations = Net Income + D&A + Deferred Tax + Other non-cash items Or simply: FFO = Cash from Operations before working capital changes + Interest paid From cash flow: Operating cash flow 10,443,000,000 includes working capital changes. Let me calculate FFO more carefully: - Net Income (Profit Loss): 5,060,000,000 EUR (2022) - Add back D&A: 4,774,000,000 EUR - Add back Interest expense (Finance Costs): 3,042,000,000 EUR - Less: Interest income: 1,204,000,000 EUR - Taxes: 1,161,000,000 EUR (income tax expense) FFO = Net Income + D&A + Interest Expense - Interest Income + Taxes (to get to pre-tax, pre-interest) = 5,060,000,000 + 4,774,000,000 + 3,042,000,000 - 1,204,000,000 + 1,161,000,000 = 12,833,000,000 EUR Or simpler: EBIT + D&A - Cash Taxes + Interest received - Interest paid adjustments... Actually, standard FFO = Operating Cash Flow + Interest Paid - Interest Received (since FFO is before financing) From data: - Operating Cash Flow: 10,443,000,000 EUR - Interest Paid (classified as investing): 189,000,000 EUR - But we need total interest paid. Finance Costs are 3,042,000,000 EUR (accrual) Let me look for interest paid in financing: "Intereses Pagados Excluidos Intereses Capitalizados De Deudas Con Entidades De Credito YObligaciones UOtros Valores Negociables": 1,495,000,000 EUR + "Intereses Pagados Excluidos Intereses Capitalizados De Pasivos Financieros Por Arrendamiento": 61,000,000 EUR + "Intereses Pagados De Obligaciones Perpetuas Subordinadas": 169,000,000 EUR + "Interest Paid Classified As Investing Activities": 189,000,000 EUR Total interest paid ≈ 1,495 + 61 + 169 + 189 = 1,914,000,000 EUR But Finance Costs are 3,042,000,000 EUR. The difference may include capitalized interest, foreign exchange, etc. For FFO, I'll use: FFO = Cash Flow from Operations + Interest Paid (since FFO is funds before financing charges) FFO = 10,443,000,000 + 1,914,000,000 = 12,357,000,000 EUR Or using the EBITDA-based approach more common for utilities: FFO = EBITDA - Cash Taxes = 13,228,000,000 - 1,055,000,000 = 12,173,000,000 EUR Let me use a cleaner approach: FFO ≈ Net Income + D&A + Interest Expense + Tax Expense - Interest Income (i.e., EBIT + D&A) = 5,060,000,000 + 4,774,000,000 + 3,042,000,000 + 1,161,000,000 - 1,204,000,000 = 12,833,000,000 EUR Or: EBIT + D&A = 7,984,000,000 + 4,774,000,000 = 12,758,000,000 EUR I'll use FFO ≈ 12,200,000,000 EUR as a reasonable estimate (close to EBITDA - cash taxes). **Net Debt Calculation:** Debt components (2023-01-01, which is end of 2022): - "Deudas Con Entidades De Credito YObligaciones UOtros Valores Negociables" (Non-current): 36,129,000,000 EUR - "Instrumentos De Capital Con Caracteristicas De Pasivo Financiero No Corriente": 576,000,000 EUR - "Noncurrent Derivative Financial Liabilities": 3,690,000,000 EUR - "Noncurrent Lease Liabilities": 2,287,000,000 EUR - "Other Noncurrent Financial Liabilities": 1,534,000,000 EUR Current debt: - "Deudas Con Entidades De Credito YObligaciones UOtros Valores Negociables Corrientes": 10,458,000,000 EUR - "Instrumentos De Capital Con Caracteristicas De Pasivo Financiero Corriente": 87,000,000 EUR - "Current Derivative Financial Liabilities": 3,398,000,000 EUR - "Current Lease Liabilities": 151,000,000 EUR - "Other Current Financial Liabilities": 5,058,000,000 EUR Total Debt = 36,129 + 576 + 3,690 + 2,287 + 1,534 + 10,458 + 87 + 3,398 + 151 + 5,058 = 63,368,000,000 EUR Wait, let me check "Current Financial Liabilities" total: 25,079,000,000 EUR And "Noncurrent Financial Liabilities": 44,216,000,000 EUR Total Financial Liabilities = 69,295,000,000 EUR But this includes derivatives. For Net Debt, we typically use: - Debt with credit institutions + Bonds + Lease liabilities + Other debt-like items Let me use a more standard approach. From balance sheet: Total Liabilities = 288,390,000,000 (current) + 67,714,000,000 (non-current) = wait, let me recheck. Actually "Noncurrent Liabilities": 67,714,000,000 EUR "Current Liabilities": 28,839,000,000 EUR Total Liabilities = 96,553,000,000 EUR But this includes trade payables, provisions, tax liabilities, etc. For Net Debt, standard definition: Net Debt = (Short-term debt + Long-term debt + Current portion of long-term debt) - Cash and Cash Equivalents From financial liabilities: - Noncurrent Financial Liabilities: 44,216,000,000 EUR - Current Financial Liabilities: 25,079,000,000 EUR Total Financial Debt = 69,295,000,000 EUR Less: Cash and Cash Equivalents: 4,608,000,000 EUR Net Debt = 69,295,000,000 - 4,608,000,000 = 64,687,000,000 EUR But we should also check if there are other debt-like items. "Other Noncurrent Financial Assets" and derivatives might need adjustment. Actually, let me check if derivatives are debt-like. "Noncurrent Derivative Financial Liabilities" (3,690M) and "Current Derivative Financial Liabilities" (3,398M) are typically included in net debt calculations if they represent hedging of debt. Let me use a cleaner approach from the financial liabilities section: - "Deudas Con Entidades De Credito YObligaciones UOtros Valores Negociables" (non-current): 36,129M - "Deudas Con Entidades De Credito YObligaciones UOtros Valores Negociables Corrientes" (current): 10,458M - Total bank debt and bonds: 46,587M - "Instrumentos De Capital Con Caracteristicas De Pasivo Financiero" (non-current): 576M - "Instrumentos De Capital Con Caracteristicas De Pasivo Financiero Corriente": 87M - Total hybrid capital instruments: 663M - "Noncurrent Lease Liabilities": 2,287M - "Current Lease Liabilities": 151M - Total leases: 2,438M - "Other Noncurrent Financial Liabilities": 1,534M - "Other Current Financial Liabilities": 5,058M (this includes trade payables? No, those are separate) Actually "Other Current Financial Liabilities" at 5,058M seems high. Let me check what's in it. Looking at current liabilities breakdown: - Current Provisions: 922M - Current Financial Liabilities: 25,079M - Deudas...Corrientes: 10,458M - Instrumentos...Corriente: 87M - Current Derivative Financial Liabilities: 3,398M - Current Lease Liabilities: 151M - Trade And Other Payables To Trade Suppliers: 5,927M - Other Current Financial Liabilities: 5,058M Wait, "Trade And Other Payables To Trade Suppliers" is 5,927M - this is trade payables, not debt! So Current Financial Liabilities of 25,079M includes trade payables? That doesn't seem right. Let me re-read. Actually looking more carefully, the line items listed under Current Financial Liabilities seem to be components. Let me add: 10,458 + 87 + 3,398 + 151 + 5,927 + 5,058 = 25,079M. Yes! But "Trade And Other Payables To Trade Suppliers" (5,927M) is trade payables, not financial debt. And "Other Current Financial Liabilities" (5,058M) - need to check if this includes dividends payable or other non-debt items. For Net Debt, we want interest-bearing debt. Typically: - Bank loans and bonds: Yes - Capital instruments with debt characteristics: Yes - Lease liabilities: Yes (under IFRS 16) - Derivatives: Sometimes excluded if operating hedges - Trade payables: No - Other payables: Depends Let me calculate more carefully. Looking at "Other Current Financial Liabilities" = 5,058M and "Other Noncurrent Financial Liabilities" = 1,534M. From the cash flow statement, there's "Payments To Acquire Or Redeem Entitys Shares" (1,885M) and other equity-related items in financing. The 5,058M might include accrued interest, dividends payable, etc. For a standard Net Debt calculation, I'll use: Interest-bearing debt = Total Financial Liabilities - Trade Payables - Derivatives (if operating) - Other non-debt payables But this is getting complex. Let me use a simpler approach common for utilities: Gross Debt = "Deudas Con Entidades De Credito YObligaciones UOtros Valores Negociables" (both current and non-current) + Capital instruments + Lease liabilities = 46,587M + 663M + 2,438M = 49,688M Plus other financial liabilities that are debt-like: Other Noncurrent Financial Liabilities (1,534M) + Other Current Financial Liabilities (5,058M) = 6,592M But need to exclude trade payables which are already separated out. Actually, let me check if "Other Current Financial Liabilities" includes trade payables - no, "Trade And Other Payables To Trade Suppliers" is separate at 5,927M. So Gross Debt ≈ 46,587 + 663 + 2,438 + 1,534 + 5,058 = 56,280M? But this double counts if some items are already in the 46,587M. Let me use the total financial liabilities approach but exclude trade payables: Current Financial Liabilities: 25,079M - 5,927M (trade payables) = 19,152M Noncurrent Financial Liabilities: 44,216M But wait, is there trade payables in noncurrent? "Other Noncurrent Financial Liabilities" = 1,534M - likely not trade payables. Total Financial Debt = 44,216 + 19,152 = 63,368M Less Cash: 4,608M Net Debt = 58,760M Hmm, but this seems high. Let me verify with another approach. Actually, looking at standard utility metrics, let me check if we should include derivatives. "Noncurrent Derivative Financial Liabilities" = 3,690M and "Current Derivative Financial Liabilities" = 3,398M. These are likely hedging instruments. If they're hedging debt, they might be netted or excluded. Let me try: Gross Debt excluding derivatives = 63,368 - 3,690 - 3,398 = 56,280M Plus the debt-like "Other Noncurrent Nonfinancial Liabilities"? No, those are non-financial. Actually, I recall that "Instalaciones Cedidas YFinanciadas Por Terceros" (5,673M) might be debt-like - these are installations ceded and financed by third parties, essentially off-balance sheet or structured debt. Let me include this: Gross Debt = 56,280 + 5,673 = 61,953M Net Debt = 61,953 - 4,608 = 57,345M This is getting complicated. Let me use a simpler, more standard approach for FFO/Net Debt: From S&P/Moody's type calculations for utilities: - FFO = Cash from Operations before working capital changes (or EBITDA - cash taxes) - Net Debt = Total Debt - Cash Let me use EBITDA - Cash Taxes for FFO: FFO = 13,228 - 1,055 = 12,173M EUR For Net Debt, I'll use a comprehensive but standard definition: Total interest-bearing debt = Bank loans + Bonds + Capital instruments + Lease liabilities + Other debt-like liabilities From balance sheet items that are clearly debt: - Deudas Con Entidades De Credito + Obligaciones (non-current and current): 46,587M - Instrumentos De Capital Con Caracteristicas De Pasivo Financiero: 663M - Lease liabilities (non-current and current): 2,438M - Other financial liabilities (non-current): 1,534M For "Other Current Financial Liabilities" (5,058M): This likely includes accrued expenses, deferred income, etc. Some may be debt-like. Let me assume 50% is debt-like or exclude for conservatism. Actually, looking at the cash flow statement for financing activities, "Emisiones YDisposiciones De Deudas Con Entidades De Credito YObligaciones UOtros Valores Negociables" = 14,826M and "Reembolso" = 10,272M. This suggests active debt management. Let me use a cleaner Net Debt from total financial liabilities minus cash, but excluding derivatives and trade payables: Net Debt = (44,216 + 25,079 - 5,927 trade payables) - 4,608 cash = 63,368 - 4,608 = 58,760M Or if we include derivatives as part of debt management: same number since they're already in financial liabilities. Wait, I need to check: Are derivatives included in "Deudas Con Entidades De Credito..."? No, they're separate line items. So Gross Debt = 46,587 (bank/bonds) + 663 (capital instruments) + 6,088 (derivatives) + 2,438 (leases) + 6,592 (other financial liabilities) = 62,368M? Let me add components of Current and Noncurrent Financial Liabilities: Noncurrent: 36,129 + 576 + 3,690 + 2,287 + 1,534 = 44,216 ✓ Current: 10,458 + 87 + 3,398 + 151 + 5,927 + 5,058 = 25,079 ✓ Total: 69,295M Exclude trade payables (5,927): 63,368M Exclude derivatives (6,088): 57,280M Exclude other current financial liabilities that aren't debt-like... For a standard calculation, let me use: Net Debt = Total Financial Liabilities - Cash - Trade Payables = 69,295 - 4,608 - 5,927 = 58,760M Or more conservatively, include only clear debt items: Net Debt = 46,587 + 663 + 2,438 + 1,534 + 5,058 - 4,608 = 51,672M I'll use an intermediate approach: include "Other Current Financial Liabilities" partially. Actually, in many annual reports, "other financial liabilities" includes items like accrued interest, which is debt-like. Let me use: Net Debt = 58,760M (excluding trade payables but including other items) Now, FFO/Net Debt: FFO = 12,173M (EBITDA - Cash Taxes) Net Debt = 58,760M Ratio = 12,173 / 58,760 = 0.207 or 20.7% But this seems low for a utility. Let me recheck. Actually, for utilities, FFO is often calculated differently. Let me use Operating Cash Flow + Interest Paid as FFO: Operating Cash Flow = 10,443M Interest Paid total = 1,495 + 61 + 169 + 189 = 1,914M (from various line items) FFO = 10,443 + 1,914 = 12,357M Or if some interest is already in operating cash flow? Looking at operating cash flow, it includes "Income Taxes Paid" but interest paid might be in financing or operating depending on classification. In IAS 7, interest paid can be classified as operating or financing. Here, some interest is in "Investing Activities" (189M) and some in financing activities (1,495 + 61 + 169 = 1,725M). Total interest paid = 1,914M, all classified outside operating activities. So operating cash flow is before interest paid. FFO = Operating Cash Flow + Interest Paid = 10,443 + 1,914 = 12,357M But wait, FFO should also add back interest received if it was deducted in operating cash flow. "Dividends Received Classified As Operating Activities" = 67M. Interest received is in investing activities (172M). Actually, for FFO, we want funds available to pay debt, so: FFO = Operating Cash Flow + Interest Paid - Interest Received (if interest received was in operating CF) Operating CF includes: -1,701M (receivables) + 521M (inventories) + 44M (payables) - 512M (provisions) - 1,055M (taxes) + 67M (dividends) + other items. Let me try yet another approach. FFO from EBITDA: FFO = EBITDA - Cash Interest - Cash Taxes ± Working capital changes = 13,228 - 1,914 - 1,055 - 1,701 + 521 + 44 - 512 + 67... This gets messy. Let me use the direct cash flow approach. Actually, standard FFO for credit metrics (like those used by S&P for utilities): FFO = Funds from Operations = Net Income + Depreciation + Deferred Income Taxes + Other Non-Cash Items From data: - Net Income: 5,060M - D&A: 4,774M - Deferred Tax Assets change: 6,321 - 5,917 = 404M increase (use of funds, negative) - Actually "Deferred Tax Assets" 2023: 6,321M, 2022: 5,917M (previously stated) - "Deferred Tax Liabilities" 2023: 11,682M, 2022: 11,364M Net Deferred Tax change = (6,321 - 5,917) - (11,682 - 11,364) = 404 - 318 = 86M increase in net deferred tax asset, or -86M cash flow effect. FFO ≈ 5,060 + 4,774 + adjustments for working capital and other non-cash = roughly 10,443M (operating CF) + 1,914M interest = 12,357M Let me settle on FFO ≈ 12,200M to 12,400M range. I'll use 12,300M. For Net Debt, let me try to be more precise. Looking at "Noncurrent Liabilities" and "Current Liabilities": Noncurrent Liabilities (67,714M) includes: - Noncurrent Government Grants: 1,247M (not debt) - Instalaciones Cedidas YFinanciadas Por Terceros: 5,673M (debt-like) - Noncurrent Provisions: 4,225M (not debt, though employee benefits have some debt-like nature) - Noncurrent Financial Liabilities: 44,216M - Other Noncurrent Nonfinancial Liabilities: 309M - Current Tax Liabilities Noncurrent: 362M - Deferred Tax Liabilities: 11,682M (not debt) Current Liabilities (28,839M) includes: - Liabilities Held for Sale: 27M - Current Provisions: 922M - Current Financial Liabilities: 25,079M - Other Current Nonfinancial Liabilities: 2,811M Total Financial Liabilities = 44,216 + 25,079 = 69,295M For Net Debt, standard is interest-bearing debt minus cash. From financial liabilities, exclude: - Trade payables: 5,927M - Maybe some of "Other Current Financial Liabilities" But actually, looking more carefully at current financial liabilities components, "Trade And Other Payables To Trade Suppliers" (5,927M) is clearly trade payables. "Other Current Financial Liabilities" (5,058M) - this could include accrued expenses, customer deposits, etc. Some may be debt-like (accrued interest), some not. For a conservative estimate, let me include all of "Other Current Financial Liabilities" as debt-like, but exclude trade payables: Gross Debt = 69,295 - 5,927 = 63,368M Net Debt = 63,368 - 4,608 = 58,760M Or if we exclude derivatives (which can be volatile and are often hedging instruments): Gross Debt = 63,368 - 6,088 = 57,280M Net Debt = 57,280 - 4,608 = 52,672M I'll use Net Debt = 55,000M as a middle estimate, or more precisely calculate with derivatives included. Actually, for 2022 year-end, let me check if there's a "Net Debt" or "Net Financial Debt" figure commonly used. Since this is Iberdrola, a major utility, they likely report Net Debt. Based on typical utility calculations and the data provided, let me use: - FFO = 12,300M (approximately) - Net Debt = 55,000M to 58,000M Actually, let me recalculate more carefully. Looking at the balance sheet at 2023-01-01 (end of 2022): For Net Debt, I'll use: Total Debt = Noncurrent Financial Liabilities + Current Financial Liabilities - Trade Payables = 44,216 + 25,079 - 5,927 = 63,368M But wait, is "Trade And Other Payables To Trade Suppliers" the only non-debt item in current financial liabilities? Let me check if there are other payables embedded in "Other Current Financial Liabilities". Looking at the cash flow: "Adjustments For Increase Decrease In Trade And Other Payables" = 44M. This is small, suggesting trade payables didn't change much. For a more standard approach, let me also check "Other Current Nonfinancial Liabilities" (2,811M) and "Other Noncurrent Nonfinancial Liabilities" (309M) - these are non-financial, so not in financial liabilities. I think the cleanest Net Debt is: Financial Debt = 44,216 + 25,079 = 69,295M Less: Cash = 4,608M Net Debt = 64,687M But this includes trade payables. If we exclude trade payables: Net Debt = 64,687 - 5,927 = 58,760M For FFO, using Operating Cash Flow + Interest Paid: = 10,443 + 1,914 = 12,357M FFO/Net Debt = 12,357 / 58,760 = 0.210 or 21.0% Or with gross financial debt (including trade payables): = 12,357 / 64,687 = 0.191 or 19.1% Let me also try the EBITDA-based FFO: FFO = EBITDA - Cash Taxes = 13,228 - 1,055 = 12,173M Or FFO = EBITDA - Cash Taxes + Dividends Received - Working capital changes... Actually, standard "Funds From Operations" in credit analysis is closer to: FFO = Net Income + D&A + Interest Expense + Tax Expense - Interest Income (i.e., essentially EBIT + D&A, or EBITDA if no other non-cash items) EBIT + D&A = 7,984 + 4,774 = 12,758M FFO/Net Debt = 12,758 / 58,760 = 0.217 or 21.7% Hmm, but this is pre-tax. Actually EBIT is pre-tax and pre-interest, so EBIT + D&A = EBITDA - other non-operating items... wait, EBITDA is 13,228M, and EBIT is 7,984M, difference is 4,244M, but D&A is 4,774M. There's a 530M difference which is "Correccion Valorativa De Deudores Comerciales YActivos De Contrato" (-470M) and other items. Actually, "Depreciation Amortisation And Impairment Loss..." = 4,774M includes impairment. So EBIT = EBITDA - D&A - Impairment + other items = 13,228 - 4,774 + ... Let me check: 13,228 - 4,774 = 8,454, but EBIT is 7,984. Difference is 470M, which matches the "Correccion Valorativa" (impairment of receivables and contract assets). So FFO = EBIT + D&A = 7,984 + 4,774 = 12,758M, or simply EBITDA - other non-cash charges = 13,228 - 470 = 12,758M. For Net Debt, I want to be more accurate. Let me see if I can find a better breakdown. Actually, looking at "Other Current Financial Liabilities" = 5,058M. In many Spanish annual reports, this includes: - Accrued expenses - Payables to employees - Social security payables - Other tax payables (already separated?) - Customer advances - Dividends payable Some of these are debt-like (dividends payable, accrued interest), most are not. Also, "Current Payables On Social Security And Taxes Other Than Income Tax" = 1,262M is separate, and "Current Tax Liabilities Current" = 156M is separate. So "Other Current Financial Liabilities" likely excludes these. It might include items like current portion of long-term debt that's not yet due, accrued interest, etc. For conservatism, I'll include all of it as debt-like. Let me also check if there are debt-like items outside financial liabilities. "Instalaciones Cedidas YFinanciadas Por Terceros" = 5,673M is in noncurrent liabilities but outside financial liabilities. This is essentially debt - third parties finance installations that Iberdrola uses. Including this: Gross Debt = 63,368 + 5,673 = 69,041M Net Debt = 69,041 - 4,608 = 64,433M FFO/Net Debt = 12,758 / 64,433 = 0.198 or 19.8% Or if we exclude this structured financing: FFO/Net Debt = 12,758 / 58,760 = 0.217 or 21.7% For a utility like Iberdrola, FFO/Net Debt is typically around 20-25%, so these estimates seem reasonable. Let me use a more standard approach. I'll calculate FFO as: FFO = Cash Flow from Operating Activities + Interest Paid = 10,443 + 1,914 = 12,357M And Net Debt as: Gross Debt (interest-bearing) = 46,587 (bank loans & bonds) + 663 (capital instruments) + 2,438 (leases) + 1,534 (other noncurrent financial) + 5,058 (other current financial, debt-like portion) + 5,673 (instalaciones cedidas) = 61,953M Actually, let me be more careful. The 46,587M already includes current portion of bank debt (10,458M is listed separately as current). So: - Noncurrent bank/bonds: 36,129M - Current bank/bonds: 10,458M - Total: 46,587M Capital instruments: 576 + 87 = 663M Leases: 2,287 + 151 = 2,438M Derivatives: 3,690 + 3,398 = 6,088M Other financial: 1,534 + 5,058 = 6,592M Trade payables (in current financial): 5,927M Total financial liabilities: 46,587 + 663 + 6,088 + 2,438 + 6,592 + 5,927 = 68,295M? Wait, let me recheck: 36,129 + 576 + 3,690 + 2,287 + 1,534 + 10,458 + 87 + 3,398 + 151 + 5,927 + 5,058 = 69,295M. Yes. Now excluding trade payables (5,927): 63,368M Excluding derivatives (6,088): 57,280M For Net Debt, if we include derivatives (as they represent hedging costs that are economically part of debt management): Net Debt = 63,368 - 4,608 = 58,760M If we exclude derivatives: Net Debt = 57,280 - 4,608 = 52,672M Adding "Instalaciones Cedidas" (5,673M): With derivatives: 58,760 + 5,673 = 64,433M Without derivatives: 52,672 + 5,673 = 58,345M I'll use Net Debt ≈ 58,000M to 64,000M range. For FFO, let me also consider: FFO = Net Income + D&A + Interest Expense - Interest Income + Tax Expense = 5,060 + 4,774 + 3,042 - 1,204 + 1,161 = 12,833M Or using operating cash flow approach: 12,357M Average FFO ≈ 12,500M FFO/Net Debt with Net Debt = 58,000M: 12,500/58,000 = 21.6% FFO/Net Debt with Net Debt = 64,000M: 12,500/64,000 = 19.5% Given Iberdrola's actual credit metrics, they typically report FFO/Net Debt around 20-24%. Let me use a middle estimate. Actually, I want to check one more thing. The "Previously Stated Member" dates are 2022-01-01, which means those are restated 2021 year-end figures. The 2023-01-01 figures are 2022 year-end. For 2022 performance (2022-01-01 to 2023-01-01), we use the 2022 year-end balance sheet. Let me finalize with: FFO = 12,300M (using cash flow based approach, or approximately EBITDA - cash taxes + interest adjustment) Net Debt = 58,000M (excluding derivatives and trade payables, including instalaciones cedidas) Actually, let me try to match more closely with standard rating agency calculations. S&P typically calculates: FFO = Funds from operations = Net income from continuing operations + depreciation + amortization + deferred income taxes + other non-cash items For utilities, they also add back post-retirement benefit expenses and other items. From our data, a reasonable FFO is around 12,000M to 13,000M. For Net Debt, Moody's/S&P typically include: - All short-term and long-term debt - Capitalized lease obligations - Pension liabilities (sometimes) - Preferred stock/hybrid instruments - Less: Cash and equivalents - Less: Short-term investments Using a comprehensive Net Debt: Gross Debt = 46,587 (bank/bonds) + 663 (hybrids) + 2,438 (leases) + 6,088 (derivatives, if included) + 6,592 (other financial) + 5,673 (instalaciones cedidas) = 68,041M Less Cash = 4,608M Net Debt = 63,433M Or excluding derivatives: 57,345M I'll use Net Debt = 60,000M as a round figure, or more precisely about 58,000M to 62,000M. Let me settle on: FFO = 12,200M (EBITDA 13,228 - Cash Taxes 1,055 + some adjustments, or Operating CF 10,443 + Interest 1,914 = 12,357) Net Debt = 58,500M (approximate, excluding some derivatives and trade payables, including instalaciones cedidas) FFO/Net Debt = 12,200 / 58,500 = 0.208 or about 21% Actually, let me recalculate with slightly different assumptions: - FFO = 12,357M (Operating CF + Interest Paid) - Net Debt = 58,760M (Financial Liabilities - Trade Payables - Cash) Ratio = 12,357 / 58,760 = 0.2103 or 21.0% Or if we use EBITDA - Cash Taxes + Interest Paid (since FFO should be before interest): FFO = 13,228 - 1,055 + 0 (interest already excluded from EBITDA) = 12,173M... wait, EBITDA is before interest. Actually, EBITDA is before interest, taxes, depreciation. So: FFO = EBITDA - Cash Taxes - Cash Interest? No, FFO is funds available to pay debt, so it's before interest. Standard: FFO = EBIT + D&A - Cash Taxes = 7,984 + 4,774 - 1,055 = 11,703M? But this seems low. Or: FFO = Net Income + D&A + Interest Expense - Interest Income + Tax Expense = 5,060 + 4,774 + 3,042 - 1,204 + 1,161 = 12,833M This equals EBIT + D&A + Interest Income - Interest Expense + Interest Expense - Interest Income... wait. Net Income = EBIT - Interest Expense + Interest Income - Taxes = 7,984 - 3,042 + 1,204 - 1,161 = 4,985? But actual Net Income is 5,060. Close, difference due to discontinued operations and other items. So FFO = Net Income + D&A + Interest Expense - Interest Income + Tax Expense = 5,060 + 4,774 + 3,042 - 1,204 + 1,161 = 12,833M Or: FFO = EBIT + D&A + (Net Income - (EBIT - Interest + Interest - Taxes))... Actually, simple way: FFO = EBIT + D&A - Cash Taxes + adjustments for non-cash items in earnings. I'll use FFO = 12,500M as a reasonable estimate. For Net Debt, let me use 58,000M. FFO/Net Debt = 12,500 / 58,000 = 0.216 or 21.6% Hmm, but I want to check if this is too high or low. For a utility with heavy capex, FFO/Net Debt of 20-25% is typical investment grade. Let me try one more precise calculation: Net Debt = Total Financial Liabilities (69,295) - Trade Payables (5,927) - Cash (4,608) = 58,760M FFO from cash flows: Operating CF (10,443) + Interest Paid (1,914) = 12,357M But wait, is all interest paid excluded from operating CF? In IAS 7, interest paid can be operating or financing. Here, interest paid is in investing (189M) and financing (1,725M), none in operating. So operating CF is before interest. Also, dividends received (67M) are in operating. Interest received is in investing (172M). So FFO = Operating CF + Interest Paid - Dividends Received (if we want to exclude equity income) + Interest Received? = 10,443 + 1,914 - 67 + 172 = 12,462M Or keeping dividends (as FFO typically includes them): 10,443 + 1,914 + 172 = 12,529M I'll use FFO = 12,400M. FFO/Net Debt = 12,400 / 58,760 = 0.211 or 21.1% Let me also check with a lower Net Debt (excluding derivatives): Net Debt = 58,760 - 6,088 = 52,672M FFO/Net Debt = 12,400 / 52,672 = 0.235 or 23.5% Or with instalaciones cedidas added back: Net Debt = 52,672 + 5,673 = 58,345M FFO/Net Debt = 12,400 / 58,345 = 0.213 or 21.3% I think a ratio around 21-23% is reasonable. Let me use 22% as a middle estimate, or calculate more precisely with one consistent set of assumptions. Final calculation: - FFO = 12,357M (Operating CF 10,443 + Interest Paid 1,914) - Net Debt = 58,760M (Financial Liabilities 69,295 - Trade Payables 5,927 - Cash 4,608) - FFO/Net Debt = 12,357 / 58,760 = 0.2103 Or with instalaciones cedidas included: - Net Debt = 64,433M - FFO/Net Debt = 12,357 / 64,433 = 0.1918 For utilities, rating agencies typically include operating leases and similar obligations. "Instalaciones Cedidas YFinanciadas Por Terceros" is essentially a lease-like obligation. So I'll use Net Debt = 64,433M and FFO = 12,357M + some adjustment for the accrual/cash difference. Actually, FFO should be accrual-based, not cash-based. Let me use: FFO = EBIT + D&A - Cash Taxes = 7,984 + 4,774 - 1,055 = 11,703M? No, this seems low. Or FFO = EBITDA - Cash Taxes = 13,228 - 1,055 = 12,173M Using EBITDA - Cash Taxes = 12,173M Net Debt = 64,433M FFO/Net Debt = 12,173 / 64,433 = 0.189 or 18.9% This seems a bit low. Let me try FFO = 12,500M and Net Debt = 58,000M. Actually, I realize I should check Iberdrola's actual reported metrics if possible from the data. But we only have the raw financial data. Let me use a standard utility calculation: FFO = Net Income + D&A + Interest Expense + Tax Expense - Interest Income = 5,060 + 4,774 + 3,042 + 1,161 - 1,204 = 12,833M Net Debt = Total Debt - Cash Where Total Debt = Short-term debt + Long-term debt + Current portion of long-term debt + Capital leases/finance leases From our data, using financial liabilities minus trade payables: = 69,295 - 5,927 = 63,368M gross debt Net Debt = 63,368 - 4,608 = 58,760M FFO/Net Debt = 12,833 / 58,760 = 0.218 or 21.8% Adding instalaciones cedidas: Net Debt = 58,760 + 5,673 = 64,433M FFO/Net Debt = 12,833 / 64,433 = 0.199 or 19.9% I'll go with approximately 20-22%. Let me provide 0.21 or 21% as a reasonable estimate. Actually, for more precision, let me use: FFO = 12,357M (cash-based, from Operating CF + Interest Paid) Net Debt = 58,760M (excluding instalaciones cedidas and derivatives, excluding trade payables) Or if we want to match typical "Net Financial Debt" as reported by Iberdrola: They typically report Net Debt = Gross Financial Debt - Cash Where Gross Financial Debt includes bank debt, bonds, derivatives, and other debt-like items. Let me use Net Debt = 64,433M (including instalaciones cedidas, excluding trade payables, including derivatives) FFO = 12,357M FFO/Net Debt = 12,357 / 64,433 = 0.192 Hmm, this is about 19.2%. Or with FFO = 12,833M (accrual-based): FFO/Net Debt = 12,833 / 64,433 = 0.199 or 19.9% ≈ 20% I think 20% is a reasonable round estimate, or more precisely about 0.20 to 0.22. Let me check one more time with a slightly different FFO calculation. Some analysts use: FFO = Cash Flow from Operating Activities - Change in Working Capital + Interest Paid Change in Working Capital from cash flow: - Receivables: -1,701M (increase, use of cash) - Inventories: +521M (decrease, source of cash) - Payables: +44M (increase, source of cash) - Provisions: -512M (decrease, use of cash) Net working capital change = -1,701 + 521 + 44 - 512 = -1,648M So "Cash Flow before Working Capital" = 10,443 - (-1,648) = 12,091M? No, wait. Operating CF already includes working capital changes. To get "Cash Flow before Working Capital Changes": = Operating CF - Working Capital Changes = 10,443 - (-1,648) = 12,091M? Actually, working capital changes in the cash flow are adjustments to net income. Let me think differently. From indirect method: Net Income: 5,060M + D&A: 4,774M + Other non-cash: ? ± Working capital: -1,648M net + Other items: ? = Operating CF: 10,443M So 5,060 + 4,774 - 1,648 + other = 10,443 Other = 10,443 - 5,060 - 4,774 + 1,648 = 2,257M These "other" items include adjustments for undistributed profits of equity method investments (-146M), subsidies (-304M), finance income/cost adjustments (1,842M), etc. Cash Flow before Working Capital and before Interest = 10,443 + 1,648 + 1,914 = 14,005M? No, this is getting confusing. Let me just use a simple, standard definition: FFO = EBITDA - Cash Taxes = 13,228 - 1,055 = 12,173M Or FFO = Operating Cash Flow + Interest Paid = 10,443 + 1,914 = 12,357M I'll use 12,300M as FFO. For Net Debt, I'll use a comprehensive definition: = (36,129 + 10,458) bank/bonds + (576 + 87) hybrids + (2,287 + 151) leases + (3,690 + 3,398) derivatives + (1,534 + 5,058 - 5,927 trade payables) other + 5,673 instalaciones cedidas - 4,608 cash = 46,587 + 663 + 2,438 + 7,088 + 665 + 5,673 - 4,608 = 58,506M Wait, let me recalculate: 46,587 + 663 = 47,250 47,250 + 2,438 = 49,688 49,688 + 7,088 = 56,776 56,776 + 665 = 57,441 57,441 + 5,673 = 63,114 63,114 - 4,608 = 58,506M Hmm, I had different numbers before. Let me recheck "other" current financial liabilities excluding trade payables: 5,058M is "Other Current Financial Liabilities" and 1,534M is "Other Noncurrent Financial Liabilities". Trade payables (5,927M) is separate. So other financial = 5,058 + 1,534 = 6,592M. Total gross debt = 46,587 + 663 + 2,438 + 7,088 + 6,592 + 5,673 = 69,041M Less cash = 4,608M Net Debt = 64,433M But this includes trade payables? No, trade payables (5,927M) is listed separately under Current Financial Liabilities, but I didn't include it in my sum. Let me verify: Current Financial Liabilities components: - Deudas...Corrientes: 10,458M - Instrumentos...Corriente: 87M - Current Derivative Financial Liabilities: 3,398M - Current Lease Liabilities: 151M - Trade And Other Payables To Trade Suppliers: 5,927M - Other Current Financial Liabilities: 5,058M Sum: 10,458 + 87 + 3,398 + 151 + 5,927 + 5,058 = 25,079M ✓ So my "bank/bonds" = 10,458M (current) + 36,129M (noncurrent) = 46,587M Hybrids = 87 + 576 = 663M Leases = 151 + 2,287 = 2,438M Derivatives = 3,398 + 3,690 = 7,088M Other financial = 5,058 + 1,534 = 6,592M Trade payables = 5,927M (excluded from debt) Instalaciones cedidas = 5,673M Gross debt (excluding trade payables) = 46,587 + 663 + 2,438 + 7,088 + 6,592 + 5,673 = 69,041M Net Debt = 69,041 - 4,608 = 64,433M FFO/Net Debt = 12,300 / 64,433 = 0.191 or 19.1% If we exclude derivatives from debt (as they're hedging instruments, not funding): Gross debt = 69,041 - 7,088 = 61,953M Net Debt = 61,953 - 4,608 = 57,345M FFO/Net Debt = 12,300 / 57,345 = 0.214 or 21.4% I think 20-21% is a good estimate. Let me use 0.21 or 21%. For a single number, I'll use FFO = 12,357M (cash-based) and Net Debt = 58,760M (excluding instalaciones cedidas and derivatives, excluding trade payables, including other financial liabilities). Wait, let me recheck that Net Debt: Financial Liabilities total: 69,295M Less Trade Payables: 5,927M Less Cash: 4,608M = 58,760M But this includes derivatives (7,088M) and instalaciones cedidas is not included (it's not in financial liabilities). If we add instalaciones cedidas (5,673M): Net Debt = 58,760 + 5,673 = 64,433M I think for comparability with typical "Net Debt" or "Net Financial Debt" as reported by companies, we should include derivatives if they're hedging debt (which affects effective interest cost) and include instalaciones cedidas if they're economically debt. But many "Net Debt" calculations exclude derivatives (as they're marked-to-market and fluctuate) and include instalaciones cedidas. Let me use Net Debt = 58,760M (standard, from financial liabilities minus trade payables minus cash, including derivatives). FFO/Net Debt = 12,357 / 58,760 = 0.2103 Or with FFO = 12,833M (accrual-based): FFO/Net Debt = 12,833 / 58,760 = 0.2184 I'll go with approximately 0.22 or 22%. Actually, let me see if I can derive a more precise number. Looking at the data, Iberdrola's actual FFO/Net Debt for 2022 was likely around 20-22% based on their credit profile (BBB+ rating typically requires 20-25% FFO/Net Debt for utilities). Using: FFO = 12,500M (middle estimate) Net Debt = 58,000M (approximate, excluding some items) FFO/Net Debt = 12,500 / 58,000 = 0.216 or 21.6% I'll round to 0.22 or 22%. But let me try one more precise calculation using all available data: From the cash flow statement, let me verify Operating Cash Flow calculation: Starting from Profit Loss From Operating Activities: 7,984M + Depreciation Amortisation...: 4,774M = 12,758M (approximate cash earnings before working capital) Working capital and other adjustments: - Correccion Valorativa...: -470M (already in EBIT?) - Adjustments For Undistributed Profits...: -146M - Subvenciones Aplicadas...: -304M - Adjustments For Finance Income Cost: 1,842M - Adjustments For Decrease Increase In Trade And Other Receivables: -1,701M - Adjustments For Decrease Increase In Inventories: 521M - Adjustments For Increase Decrease In Trade And Other Payables: 44M - Pagos De Provisiones: -512M - Income Taxes Paid: -1,055M - Dividends Received: 67M Sum of adjustments: -470 - 146 - 304 + 1,842 - 1,701 + 521 + 44 - 512 - 1,055 + 67 = -1,714M Operating CF = 7,984 - 1,714 = 6,270M? But actual is 10,443M. Wait, I think the adjustments include D&A. Let me restart. From indirect method, starting from Net Income or Profit Before Tax? Actually, looking at "Profit Loss From Operating Activities" = 7,984M, this is EBIT. To get Operating CF from EBIT: EBIT: 7,984M + D&A: 4,774M - Working capital increase: -1,648M (net from receivables, inventory, payables, provisions) - Taxes paid: -1,055M + Dividends received: 67M + Other adjustments: ? = 7,984 + 4,774 - 1,648 - 1,055 + 67 + other = 10,122 + other Actual Operating CF = 10,443M So other = 321M These other items include adjustments for finance income/cost (1,842M), undistributed profits (-146M), subsidies (-304M), etc. But these seem large to only net to 321M. Actually, I think "Adjustments For Finance Income Cost" = 1,842M is added back because finance costs were deducted to get to Net Income, but for operating cash flow we want to exclude them. But EBIT is already before finance costs, so this adjustment shouldn't apply to EBIT. Let me try starting from Net Income: Net Income: 5,060M + D&A: 4,774M + Finance Costs: 3,042M - Finance Income: 1,204M + Other non-cash: ? - Working capital: -1,648M - Taxes: -1,055M (but tax expense was 1,161M, so difference is 106M deferred) + Dividends: 67M = 5,060 + 4,774 + 3,042 - 1,204 - 1,648 - 1,055 + 67 + other = 9,036 + other Actual = 10,443M, so other = 1,407M This "other" includes various items. It's complex. Let me just accept Operating CF = 10,443M and work from there. FFO = Operating CF + Interest Paid (since FFO is before financing costs) = 10,443 + 1,914 = 12,357M Net Debt = 58,760M (as calculated) FFO/Net Debt = 12,357 / 58,760 = 0.2103 I'll provide 0.21 as the answer, or more precisely 0.210. But wait - I want to double-check if "Interest Paid" is all the financing cost. "Finance Costs" = 3,042M, but "Interest Paid" items sum to 1,914M. The difference (1,128M) may be capitalized interest, foreign exchange losses, or other finance costs. For FFO, we want recurring funds available, so we should use the actual interest expense rather than just cash paid, or adjust for capitalized interest. If interest is capitalized (included in PP&E), then it's not expensed but still a cash outflow. Looking at "Construction In Progress" = 11,513M, significant increase from 9,062M. Some interest may be capitalized. Capitalized interest would be: Interest expense - Interest paid = 3,042 - 1,914 = 1,128M (approximate, though not exact due to timing differences). For FFO, if we add back total interest expense (not just paid): FFO = Operating CF + Interest Expense = 10,443 + 3,042 = 13,485M? But this double counts if some interest is already in operating CF. Actually, operating CF is after interest expense (if interest is classified as operating) or before (if financing). Here, interest paid is in financing and investing, not operating. So operating CF is before interest. But "Adjustments For Finance Income Cost" in operating activities = 1,842M. This suggests some finance cost adjustment is in operating CF. Actually, looking more carefully: "Adjustments For Finance Income Cost" = 1,842M is added back in operating activities. This means finance costs were deducted in earnings but added back for cash flow. So operating CF excludes finance costs (i.e., they're not a cash outflow in operating activities). So FFO = Operating CF + Interest Paid = 10,443 + 1,914 = 12,357M is correct for cash-based FFO. For accrual-based FFO: FFO = EBIT + D&A - Cash Taxes + Other non-cash adjustments = 7,984 + 4,774 - 1,055 + 67 (dividends received, equity income) - 146 (undistributed profits adjustment) + ... This is getting too detailed. I'll use FFO = 12,357M and Net Debt = 58,760M. FFO/Net Debt = 12,357 / 58,760 = 0.2103 Or if we want to use the more common "Net Financial Debt" including instalaciones cedidas: Net Debt = 64,433M FFO/Net Debt = 12,357 / 64,433 = 0.1918 For a utility, rating agencies might use the broader definition. Let me check which gives a more reasonable number. Iberdrola is typically rated BBB+/Baa1 with FFO/Net Debt around 20%. So 19-21% seems right. I'll use 0.20 or 20% as a round number, or 0.21 for the narrower definition. Actually, let me provide a more precise calculation. I'll use: - FFO = 12,400M (rounded from 12,357M) - Net Debt = 58,800M (rounded from 58,760M) - FFO/Net Debt = 12,400 / 58,800 = 0.2109 Or with Net Debt = 64,400M: FFO/Net Debt = 12,400 / 64,400 = 0.1925 I'll go with 0.21 as a reasonable estimate for the standard definition, acknowledging it could be 0.19-0.22 depending on definitions. Let me finalize with 0.21 (or 21%). 0.21