To estimate the Net Debt / EBITDA ratio for TenneT Holding B.V. for the year 2022 (period 2022-01-01 to 2023-01-01) based on S&P methodology, we need to calculate two components: Adjusted EBITDA and Net Debt. **1. Calculate Adjusted EBITDA** S&P Global Ratings typically defines EBITDA as Earnings Before Interest, Taxes, Depreciation, and Amortization. We start with the Profit/Loss and add back the relevant items. * **Profit Loss (Net Income):** -879,000,000 EUR * **Add: Income Tax Expense:** The reported "Income Tax Expense Continuing Operations" is -354,000,000 EUR. Since this is an expense reducing profit, we add it back. Note: In many European reports, a negative expense indicates a tax benefit or credit, but looking at the "Profit Loss Before Tax" (-1,233,000,000) and "Profit Loss" (-879,000,000), the difference is 354,000,000. Thus, the tax *benefit* was 354M. To get to Pre-tax income, we subtract the benefit (or add the negative expense). Wait, standard EBITDA calculation starts from Operating Profit or Net Income. * Let's use the standard add-back approach from Net Income: * Net Income: -879,000,000 * Add: Income Tax Expense (benefit): -354,000,000 (Adding a negative reduces the total, which is correct because the tax benefit increased the net loss less than it would have been otherwise? No. Profit Before Tax = -1,233M. Tax Benefit = 354M. Net Loss = -879M. To go from Net Loss to Pre-Tax Loss, we *subtract* the tax benefit. So, -879M - 354M = -1,233M. Correct.) * Add: Finance Costs (Interest Expense): 300,000,000 EUR * Subtract: Finance Income (Interest Income): 43,000,000 EUR (S&P usually nets interest, or adds back net interest. Let's add back Net Finance Costs). * Net Finance Costs = Finance Costs - Finance Income = 300M - 43M = 257M. * Alternatively, using the line item "Finance Income Cost": -257,000,000 EUR. This is a net cost. We add this back. * Add: Depreciation And Amortisation Expense: 1,233,000,000 EUR * **EBITDA Calculation:** * Profit Before Tax: -1,233,000,000 * Add: Net Finance Costs: 257,000,000 * Add: Depreciation & Amortization: 1,233,000,000 * **EBITDA** = -1,233 + 257 + 1,233 = **257,000,000 EUR** * *Alternative Check using Operating Profit:* * Profit Loss From Operating Activities: -976,000,000 * Add: Depreciation & Amortization: 1,233,000,000 * **EBITDA** = -976 + 1,233 = **257,000,000 EUR** * *S&P Adjustments:* S&P often adjusts EBITDA for non-recurring items, share-based compensation, etc. The data provided includes "Other Gains Losses" of -38,000,000 EUR. This is a loss. S&P might add this back if considered non-operating or non-recurring. However, without specific classification as "non-recurring" in the text, standard practice often keeps it or adjusts based on specific rating criteria. Given the limited data, we will stick to the core EBITDA derived from operating results. The "Other Gains Losses" is likely included in the Operating Expense or separate line. The "Profit Loss From Operating Activities" is -976M. If we assume this is the starting point, adding D&A gives 257M. * Let's check if there are other significant add-backs. "Share Of Profit Loss Of Associates..." is 120M. This is included in the Profit Before Tax but is non-cash and often excluded from EBITDA in strict definitions, or added back if it's a loss. Here it is a profit. It is part of the -976M operating profit? Usually, equity income is below operating profit or included. The line "Profit Loss From Operating Activities" is -976M. The line "Share Of Profit... Equity Method" is 120M. The line "Profit Loss Before Tax" is -1,233M. * Let's trace: Operating Profit (-976) + Share of Associates (120) + Finance Income/Cost (-257) = -976 + 120 - 257 = -1,113. This does not match -1,233. There is a discrepancy of 120M. * Let's look at the structure: * Revenue: 8,299 * Operating Expense: 9,395 * Operating Profit (Revenue - OpEx): 8,299 - 9,395 = -1,096. * The reported "Profit Loss From Operating Activities" is -976. The difference is 120. This matches the "Share Of Profit Loss Of Associates". So, the -976 figure *includes* the 120M share of profit. * So, EBITDA = Operating Profit (-976) + D&A (1,233) = 257M. * Does S&P exclude equity income? Often, yes. If we exclude the 120M equity income from EBITDA, EBITDA would be 257 - 120 = 137M. However, standard EBITDA definitions vary. S&P's "Standard & Poor's Ratings Services Corporate Methodology" generally starts with EBITDA as reported by the company or derived from operating income. If the company includes equity income in operating profit, it stays unless adjusted. Given the ambiguity, the most robust "reported" EBITDA is 257M. However, looking at the cash flow from operations (1,196M), an EBITDA of 257M seems low relative to cash flow, but working capital changes were huge. * Let's consider if "Other Gains Losses" (-38M) should be added back. If it's a non-cash or non-recurring loss, EBITDA increases. 257 + 38 = 295M. * Let's stick to the core calculated EBITDA of **257,000,000 EUR**. **2. Calculate Net Debt** S&P defines Net Debt as Total Debt minus Cash and Cash Equivalents. Total Debt includes short-term and long-term borrowings, lease liabilities, and sometimes other interest-bearing liabilities. * **Gross Debt Components (2023-01-01 balances, representing end of 2022):** * Long-term Borrowings: 19,006,000,000 EUR * Short-term Borrowings: 709,000,000 EUR * Current Bank Overdrafts: 0 EUR * Noncurrent Lease Liabilities: 574,000,000 EUR * Current Lease Liabilities: 155,000,000 EUR * Other Noncurrent Financial Liabilities: 185,000,000 EUR * Other Current Financial Liabilities: 550,000,000 EUR * *Note on S&P Methodology:* S&P typically includes all interest-bearing debt. Lease liabilities are generally included in debt for industrial companies like TenneT. "Other Financial Liabilities" are often included if they are debt-like. * Total Debt = Long-term Borrowings + Short-term Borrowings + Lease Liabilities (Current + Noncurrent) + Other Financial Liabilities (Current + Noncurrent). * Total Debt = 19,006 + 709 + 574 + 155 + 185 + 550 = **21,179,000,000 EUR** * **Cash and Cash Equivalents:** * Cash And Cash Equivalents: 6,547,000,000 EUR * *Note:* S&P may deduct unrestricted cash. We assume all reported cash is deductible. * **Net Debt:** * Net Debt = Total Debt - Cash * Net Debt = 21,179,000,000 - 6,547,000,000 = **14,632,000,000 EUR** **3. Calculate Net Debt / EBITDA Ratio** * Net Debt: 14,632,000,000 EUR * EBITDA: 257,000,000 EUR * Ratio = 14,632 / 257 ≈ **56.93** This ratio is extremely high, driven by the very low (and positive but small) EBITDA resulting from the large operating loss. Let's double-check the EBITDA calculation. Operating Profit = -976M. D&A = 1,233M. EBITDA = 257M. Is there a different interpretation of EBITDA? Sometimes EBITDA is calculated from Revenue - Operating Expenses (excluding D&A). Revenue: 8,299M. Operating Expense: 9,395M. This includes D&A? Usually, "Operating Expense" in these summaries includes D&A. If OpEx (9,395) includes D&A (1,233), then Operating Profit before D&A would be Revenue - (OpEx - D&A) = 8,299 - (9,395 - 1,233) = 8,299 - 8,162 = 137M. Wait. If Operating Profit (reported) is -976M. And D&A is 1,233M. Then EBITDA = -976 + 1,233 = 257M. Let's check the components of Operating Expense. Employee Benefits: 285 Depreciation: 1,233 Misc Other: 322 Sum = 1,840. The reported Operating Expense is 9,395. The difference (7,555) is likely "Energy Transmission Charges" or Cost of Goods Sold / Network costs which are not broken out as "Operating Expense" in the snippet but are part of the total costs. Actually, "Energy Transmission Charges" is a revenue line or cost? It says "Energy Transmission Charges" 7,517M. This is likely a pass-through cost or revenue component. Revenue is 8,299M. If we look at Cash Flow from Operations: 1,196M. Change in Working Capital was significant. The low EBITDA is the key driver. Let's re-evaluate "Net Debt". Does S&P include Hybrid Capital in Debt? S&P often treats Hybrid Capital as 50% equity and 50% debt, or fully equity if it has strong equity characteristics. TenneT's hybrids are likely treated as equity or mezzanine. If treated as debt, Net Debt increases by 2,125M. If treated as equity, it stays in Equity. Given the label "Hybrid Capital" and "Equity Attributable To Owners Of Parent" includes it (7,258 = 5,133 + 2,125), it is classified as equity in the balance sheet. S&P ratings usually adjust for this. If we treat it as 50% debt: Debt increases by ~1,062M. Net Debt becomes ~15,694M. Ratio = 15,694 / 257 = 61. However, the standard "Net Debt" calculation from financial statements usually sticks to interest-bearing borrowings and leases. Let's stick to the strict financial debt definition. Net Debt = 14,632M. EBITDA = 257M. Ratio = 56.9. Let's consider if EBITDA should be higher. Did we miss add-backs? "Other Gains Losses": -38M. If added back: EBITDA = 295M. Ratio = 14,632 / 295 = 49.6. "Share of profit of associates": 120M. If excluded (subtracted from EBITDA because it's non-operating/non-cash investment income included in Op Profit): EBITDA = 137M. Ratio = 14,632 / 137 = 106. Standard S&P methodology for utilities/infrastructure: EBITDA is often "Funds From Operations" (FFO) based or adjusted EBITDA. S&P's "Corporate Methodology" states: "We calculate EBITDA by adding depreciation and amortization to earnings before interest and taxes." Earnings Before Interest and Taxes (EBIT) = Profit Before Tax + Net Interest. Profit Before Tax = -1,233M. Net Interest = 257M (Cost). EBIT = -1,233 + 257 = -976M. (This matches Operating Profit if we assume no non-operating items other than interest/tax). Wait, Profit Before Tax (-1,233) includes the Share of Associates (120). So EBIT (strict) = -1,233 + 257 = -976. EBITDA = EBIT + D&A = -976 + 1,233 = 257M. This seems the most consistent derivation. Final Check on Debt: Long-term Borrowings: 19,006 Short-term Borrowings: 709 Lease Liabilities (Noncurrent): 574 Lease Liabilities (Current): 155 Other Noncurrent Financial Liab: 185 Other Current Financial Liab: 550 Total Debt = 21,179. Cash = 6,547. Net Debt = 14,632. Ratio = 14,632 / 257 = 56.93. Rounding to one decimal place: 56.9. 56.9