# FFO / Net Debt Ratio Calculation for EDP, S.A. (2022)

## S&P FFO Methodology

FFO (Funds From Operations) under S&P methodology is calculated as:
**FFO = Net Income + Depreciation & Amortization + Impairments - Stock-based Compensation + Other Adjustments**

More specifically for utilities:
**FFO = Operating Cash Flow - Changes in Working Capital + Interest Paid**

However, the most common S&P approach uses:
**FFO = Net Income + Depreciation/Amortization + Impairments - Gains on Asset Sales**

## Step 1: Calculate FFO for 2022

Using the income statement approach:

**Net Income (2022):** 1,169,749,000 EUR

**Add back:**
- Depreciation, Amortization & Impairment Loss: 1,979,007,000 EUR

**Less:**
- Gains/Losses on disposal and scope effects: -4,377,000 EUR (add back the loss)

**FFO = 1,169,749,000 + 1,979,007,000 + 4,377,000 = 3,153,133,000 EUR**

Alternatively, using the cash flow statement approach (which is often more reliable):

**Operating Cash Flow (2022):** 3,777,785,000 EUR

This is a direct measure closer to FFO, as it already accounts for working capital changes and cash-based operations.

## Step 2: Calculate Net Debt for 2022

**Total Debt (2022):**
- Long-term Borrowings: 15,299,588,000 EUR
- Current Borrowings & Current Portion of Non-current Borrowings: 1,518,348,000 EUR
- Total Gross Debt: 16,817,936,000 EUR

**Less: Cash and Cash Equivalents (2022):** 3,222,409,000 EUR

**Net Debt = 16,817,936,000 - 3,222,409,000 = 13,595,527,000 EUR**

## Step 3: Calculate FFO / Net Debt Ratio

Using FFO from operating cash flow (more conservative and reliable):

**Ratio = 3,777,785,000 / 13,595,527,000 = 0.278**

Or using the income statement FFO approach:

**Ratio = 3,153,133,000 / 13,595,527,000 = 0.232**

The operating cash flow approach is more aligned with S&P methodology for utilities, as it represents actual cash generation.

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