# FFO / Net Debt Ratio Analysis for TERNA (2022)

## Understanding S&P FFO / Net Debt Methodology

The FFO (Funds From Operations) / Net Debt ratio is a key credit metric used by S&P to assess leverage and financial flexibility. The formula is:

**FFO / Net Debt = FFO / (Total Debt - Cash)**

Where:
- **FFO** = Net Income + Depreciation & Amortization + Impairments - Gains on Asset Disposals + Interest Expense - Capitalized Interest
- **Net Debt** = Total Debt - Cash & Equivalents

## Calculation for 2022 (Period: 2021-01-01 to 2022-01-01)

### Step 1: Calculate FFO

| Item | Amount (EUR) |
|------|-------------|
| Profit Loss Attributable to Owners | 789,400,000 |
| + Depreciation, Amortization & Impairment Loss | 654,400,000 |
| + Finance Costs | 95,800,000 |
| - Gains on Disposals of PP&E | (13,700,000) |
| - Capitalized Interest Costs | (10,800,000) |
| = **FFO** | **1,615,100,000** |

### Step 2: Calculate Net Debt

| Item | Amount (EUR) |
|------|-------------|
| Long-term Borrowings | 8,835,000,000 |
| + Short-term Borrowings | 1,947,000,000 |
| + Current Portion of Long-term Borrowings | 1,640,000,000 |
| = Total Debt | 12,422,000,000 |
| - Cash and Cash Equivalents | (1,606,200,000) |
| = **Net Debt** | **10,815,800,000** |

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

**FFO / Net Debt = 1,615,100,000 / 10,815,800,000 = 0.1493**

This ratio of approximately 14.9% is typical for regulated utility companies like Terna, indicating moderate leverage with adequate FFO generation to service debt.

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