# FFO / Net Debt Ratio Analysis for Acciona SA (2022)

## Reasoning

The FFO (Funds From Operations) / Net Debt ratio is a key metric used by S&P to assess financial leverage and debt service capacity. Let me calculate this step by step using S&P methodology.

### Step 1: Calculate FFO (Funds From Operations)

According to S&P methodology, FFO is calculated as:
**FFO = Net Income + Depreciation & Amortization + Impairment Losses - Gains on Asset Sales**

From the data for 2021-2022 (year ending 2022-01-01):
- Net Income (Profit Loss Attributable to Owners of Parent): 332,000,000 EUR
- Depreciation & Amortization (Dotacion Amortizacion Y Variacion De Provisiones): 714,000,000 EUR
- Impairment Loss Reversal: -67,000,000 EUR (this is a reversal, so we add it back)
- Other gains/losses: -7,000,000 EUR

**FFO = 332 + 714 + 67 - 7 = 1,106,000,000 EUR**

However, S&P typically adds back certain non-cash items. Let me verify using the operating cash flow approach which is more reliable:

Looking at Cash Flows From Operating Activities for 2021-2022: 574,000,000 EUR

A more comprehensive FFO calculation using adjustments:
- Operating Cash Flow: 574,000,000 EUR
- Interest Paid: 206,000,000 EUR (add back as FFO starts before interest)
- Working Capital changes: -340,000,000 EUR (already reflected in operating CF)

**FFO = 574 + 206 = 780,000,000 EUR** (approximate, including interest paid back)

For S&P purposes, the most conservative approach:
**FFO ≈ 574 + 206 = 780,000,000 EUR** or using the net income method with full adjustments gives approximately **1,100,000,000 EUR**

I'll use the operating cash flow plus interest paid approach: **~780,000,000 EUR to 900,000,000 EUR**

### Step 2: Calculate Net Debt

**Net Debt = Total Debt - Cash and Cash Equivalents**

Total Debt (2022-01-01):
- Noncurrent Loans: 2,073,000,000 EUR
- Current Loans and Current Portion: 280,000,000 EUR
- Noncurrent Preferred Shares/Bonds: 2,364,000,000 EUR
- Current Preferred Shares/Bonds: 1,666,000,000 EUR
- Lease Liabilities (noncurrent): 430,000,000 EUR
- Lease Liabilities (current): 68,000,000 EUR

**Total Debt = 2,073 + 280 + 2,364 + 1,666 + 430 + 68 = 6,881,000,000 EUR**

Cash and Cash Equivalents (2022-01-01): 2,318,000,000 EUR

**Net Debt = 6,881 - 2,318 = 4,563,000,000 EUR**

### Step 3: Calculate FFO / Net Debt Ratio

Using FFO of approximately 780,000,000 EUR (conservative operating CF approach):
**Ratio = 780 / 4,563 = 0.171 or 17.1%**

Using FFO of approximately 900,000,000 EUR (mid-range estimate):
**Ratio = 900 / 4,563 = 0.197 or 19.7%**

Using the profit-based FFO approach of ~1,100,000,000 EUR:
**Ratio = 1,100 / 4,563 = 0.241 or 24.1%**

The most appropriate S&P methodology uses operating cash flow adjusted for interest: approximately **0.17-0.20** or **17-20%**.

Given standard S&P practice, a reasonable estimate is: **0.19 or 19%**

<answer>0.19</answer>