I need to estimate the FFO / Net debt ratio for 2022 based on S&P methodology. First, let me understand S&P's FFO (Funds From Operations) methodology. S&P typically calculates FFO as: - Net income from continuing operations - Plus depreciation and amortization - Plus/minus other non-cash items - Plus/minus changes in working capital (sometimes) - Less capital expenditures (sometimes, but for FFO before capex, this is excluded) Actually, let me use a more standard S&P approach for FFO: FFO = Profit Loss From Continuing Operations + Depreciation And Amortisation Expense + Other non-cash adjustments - Interest expense adjustments + some other items Or more commonly for utility/energy companies, S&P uses: FFO = Net income + Depreciation & Amortization + Deferred taxes + Other non-cash items Let me look at what's available and use a practical approach. S&P Global Ratings typically defines FFO as: - Funds from operations = operating cash flow before working capital changes (or EBITDA - interest - taxes + some adjustments) Actually, the most common S&P methodology for FFO is: FFO = Net income from continuing operations + Depreciation and amortization + Deferred income taxes + Other non-cash items Looking at the data, I can also use: FFO = Cash Flows From Used In Operations Before Changes In Working Capital + Interest Paid - Interest Received (approximately) Or more directly, let me use the standard approach: FFO = Profit Loss From Continuing Operations + Depreciation And Amortisation Expense + Adjustments For Income Tax Expense (if negative, add back) + other non-cash items Let me calculate FFO using the most standard S&P approach from available data: From the cash flow statement approach: "Cash Flows From Used In Operations Before Changes In Working Capital" 2022 = 2,322,000,000 EUR But this already includes interest paid and received. For S&P FFO, we typically want: FFO = Cash flow from operations before changes in working capital + Interest paid (if classified as operating) - Interest received (if classified as operating) Wait, let me reconsider. S&P FFO is typically calculated as: FFO = Net income + D&A + Deferred taxes + Other non-cash items - Gain on sale + Other adjustments From the data: - Profit Loss From Continuing Operations 2022: 1,011,000,000 EUR - Depreciation And Amortisation Expense 2022: 566,000,000 EUR - Adjustments For Income Tax Expense 2022: -556,000,000 EUR (this is a negative adjustment, meaning taxes were paid/accrued) Actually, looking at "Adjustments For Income Tax Expense" = -556,000,000 EUR. This suggests income tax expense was subtracted to get to operating cash flow. But in FFO, we want to add back non-cash items. Let me use the more direct EBITDA-based approach that S&P often uses for corporates: FFO = EBITDA - Interest expense - Cash taxes Or from the cash flow data: "Cash Flows From Used In Operations Before Changes In Working Capital" = 2,322,000,000 EUR This is often close to FFO. But let me check if this includes interest paid/received. Looking at the detailed cash flow: - Interest Received Classified As Operating Activities: 84,000,000 - Interest Paid Classified As Operating Activities: 201,000,000 - Dividends Received Classified As Operating Activities: 18,000,000 - Income Taxes Paid Refund Classified As Operating Activities: 167,000,000 The "Cash Flows From Used In Operations Before Changes In Working Capital" of 2,322,000,000 likely includes these items. For S&P FFO, a common calculation is: FFO = Operating cash flow before working capital changes + Interest paid (financing) - Interest received (financing) + Dividends received - Dividends paid (if in operating) Actually, let me use a cleaner approach. S&P typically calculates FFO as: FFO = Net income + D&A + Deferred tax + Other non-cash items + Interest expense (net of capitalized interest) - Equity earnings + Dividends from equity investments From continuing operations: - Profit Loss From Continuing Operations: 1,011,000,000 - Add: Depreciation And Amortisation Expense: 566,000,000 - Add: Adjustments For Finance Income Cost: 193,000,000 (this is negative in cash flow, so add back the expense) - Add: Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method: 629,000,000 (negative means loss, so we add back the loss?) Wait, let me re-read. "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method" 2022: -629,000,000 EUR. This means the equity method investment showed a loss of 629M, which was subtracted in the income statement but we want to add it back for cash flow (since it's non-cash). Actually, looking more carefully at standard S&P FFO for this type of company: FFO = Funds from operations = EBITDA - Cash interest - Cash taxes Or using the direct definition: FFO = Net income + D&A + Deferred taxes + Other non-cash items From the data, let me construct FFO: - Start with Profit Loss From Continuing Operations: 1,011,000,000 - Add Depreciation And Amortisation Expense: 566,000,000 - Add back the negative adjustments (non-cash items that reduced income) Looking at "Other Adjustments For Noncash Items" 2022: 153,000,000 Also, the "Items Affecting Comparability" of -593,000,000 includes: - Impairment Loss Reversal: 905,000,000 - Capital Gains And Other Related Items: 785,000,000 - Changes In Fair Values Of Derivatives: 393,000,000 - Other Adjustments: 80,000,000 Wait, these are items affecting comparability that total to -593,000,000. Let me verify: 905 + 785 + 393 + 80 = 2,163,000,000 positive, but the total is -593,000,000. That doesn't add up directly. Actually, "Items Affecting Comparability" = -593,000,000 means it's a net negative (expense/loss). The components might be mixed signs. For S&P FFO, we typically want to add back non-cash, non-recurring items. The impairment loss reversal of 905M is non-cash (actually it's a reversal, so positive). Capital gains of 785M are likely non-recurring cash or non-cash. Let me use a more standard approach. S&P FFO is often calculated from the cash flow statement as: FFO = Cash flows from operating activities before changes in working capital = 2,322,000,000 EUR for 2022 But we need to adjust for: - Interest paid (operating): 201,000,000 - this is already in operating cash flow - Interest received (operating): 84,000,000 - already in - Dividends received: 18,000,000 - already in For S&P methodology, FFO typically excludes working capital changes but includes interest and dividends as part of operations. However, sometimes S&P defines FFO as: FFO = Net income + D&A + Deferred taxes + Other non-cash items - Capital gains + Other adjustments Let me try another approach using "Comparable Ebitda" which is cleaner: Comparable EBITDA 2022 = 2,436,000,000 EUR Then FFO = Comparable EBITDA - Interest expense - Cash taxes + Dividends from equity investments Interest Expense 2022: 179,000,000 Finance Income 2022: 87,000,000 Net interest: 179,000,000 - 87,000,000 = 92,000,000 (but this includes other finance items) Actually "Finance Income Cost" 2022: -193,000,000 EUR (net finance cost) Cash taxes: Income Taxes Paid Refund 2022: 167,000,000 (positive means paid) But we need accrual-based FFO, not cash-based. Let me go with the most standard S&P FFO calculation from available data: FFO = Profit Loss From Continuing Operations + Depreciation And Amortisation Expense + Interest Expense (add back, as it's a financing item) - Interest Income (or use net) + Income Tax Expense (add back, as we want pre-tax FFO typically) + Other non-cash items Actually, standard S&P FFO is typically after-tax. Let me use: FFO = Net income + D&A + Deferred taxes + Other non-cash items - Equity earnings + Dividends received From data 2022: - Profit Loss From Continuing Operations: 1,011,000,000 - Add: Depreciation And Amortisation Expense: 566,000,000 - Add: "Other Adjustments For Noncash Items": 153,000,000 - Add: Adjustments For Undistributed Profits Of Investments (equity method loss, add back): 629,000,000 (since it's -629M adjustment, meaning we add back the loss) Wait, "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method" = -629,000,000. In cash flow statement, this is an adjustment to net income. Since Share Of Profit Loss was -629M (loss), this reduced net income. To get to cash flow, we add back this non-cash loss. So +629,000,000. Also, "Adjustments For Income Tax Expense" = -556,000,000. This means income tax expense was 556M, which reduced net income. For FFO, we might want to add back deferred portion, but we don't have split. Let me check: "Income Tax Expense Continuing Operations" = -556,000,000 (negative means expense). "Adjustments For Income Tax Expense" = -556,000,000. This suggests all tax expense was cash or the adjustment equals the expense. Actually, looking at cash flow: "Income Taxes Paid Refund Classified As Operating Activities" = 167,000,000. This is cash paid. The difference 556M - 167M = 389M would be deferred tax change. For S&P FFO, we add back deferred taxes (non-cash). So add 389M? But we need to be careful. Let me use a simpler, well-defined approach. S&P Global Ratings typically uses: FFO = Funds from operations = Operating cash flow before changes in working capital From the data: "Cash Flows From Used In Operations Before Changes In Working Capital" = 2,322,000,000 EUR But this includes interest and dividends. For pure FFO, S&P sometimes adjusts. Actually, let me verify by building it: Profit Loss From Continuing Operations: 1,011,000,000 + Depreciation And Amortisation Expense: 566,000,000 + Adjustments For Income Tax Expense: -556,000,000 (wait, this is negative, meaning subtract?) Hmm, let me re-think. In cash flow statement, we start with net income and add back/adjust. "Adjustments For Income Tax Expense" = -556,000,000 means we subtract 556M from net income? No, that doesn't make sense if tax expense already reduced net income. Actually, I think "Adjustments For Income Tax Expense" in the cash flow context means: if it's negative, we subtract it (meaning tax expense was already in net income, and we need to adjust for actual cash taxes). Let me look at this differently. The standard cash flow reconciliation: Net income: 1,011,000,000 + D&A: 566,000,000 + Other non-cash adjustments: ? = Cash flow before working capital changes: 2,322,000,000 So other adjustments = 2,322,000,000 - 1,011,000,000 - 566,000,000 = 745,000,000 From listed adjustments: - Adjustments For Income Tax Expense: -556,000,000 - Adjustments For Finance Income Cost: -193,000,000 - Adjustments For Undistributed Profits: -629,000,000 - Other Adjustments For Noncash Items: 153,000,000 - Adjustments For Alternative Performance Measures: -593,000,000 Sum: -556 - 193 - 629 + 153 - 593 = -1,818,000,000 That doesn't equal 745M. So there are other items or I'm misunderstanding. Actually, looking again: "Adjustments For Alternative Performance Measures" = -593,000,000. This is items affecting comparability. Let me try: The cash flow starts from "Profit Loss From Operating Activities" or from some other base? "Operating Profit Before Depreciations Ebitda" = 1,842,000,000 for 2022. Wait, "Cash Flows From Used In Operations Before Changes In Working Capital" = 2,322,000,000. If we start from EBITDA 1,842M, to get to 2,322M we'd need to add 480M. That could be interest/dividends/tax adjustments. Actually, let me check: EBITDA - Interest - Taxes + other = ? 1,842M - 179M interest - 556M taxes = 1,107M. Not matching. Let me try from Profit Loss From Operating Activities: 1,277,000,000 + D&A: 566,000,000 + Other non-cash: ? = 2,322,000,000 So other = 2,322 - 1,277 - 566 = 479,000,000 Or from Profit Loss From Continuing Operations: 1,011,000,000 + D&A: 566,000,000 + Interest expense (financing): 179,000,000? But this is in continuing ops already or not? Actually, Profit Loss From Continuing Operations is after all expenses including interest and tax. Let me use: 1,011 + 566 + 193 (finance cost) + 629 (equity method loss) + 153 (other non-cash) - 556 (tax, but this is already in net income)... Hmm, I need to be more careful. Let me just use the directly reported "Cash Flows From Used In Operations Before Changes In Working Capital" = 2,322,000,000 as the base for FFO, and adjust if needed. For S&P FFO, typically: FFO = Cash flow from operations before working capital changes - Dividends received from equity investments (sometimes excluded) + Interest paid (if not already in operating) - Interest received (if not operating) Actually, in this data, interest paid and received are classified as operating activities. So 2,322M includes them. Standard S&P FFO often includes dividends received but excludes interest received. Or sometimes interest paid is added back to get to a pre-financing measure. Let me use a common S&P definition: FFO = Net income + D&A + Deferred taxes + Other non-cash items - Working capital changes (no, that's CFO) Actually, I found a good approximation. Let me use: FFO = Profit Loss From Continuing Operations + Depreciation And Amortisation Expense + Interest Expense + Adjustments For Undistributed Profits (equity method, add back loss) + Other non-cash items - Capital gains (if non-recurring) = 1,011,000,000 + 566,000,000 + 179,000,000 + 629,000,000 + 153,000,000 + 593,000,000 (items affecting comparability, add back negative items) Wait, items affecting comparability of -593M means there were 593M of net negative items. If these are non-cash (like impairments), we add them back. Let me check components of items affecting comparability: - Impairment Loss Reversal: 905,000,000 (positive, so this increased profit) - Capital Gains And Other Related Items: 785,000,000 (positive) - Changes In Fair Values Of Derivatives: 393,000,000 (positive) - Other Adjustments: 80,000,000 (positive) Sum of positives: 2,163,000,000. But total is -593,000,000. So there must be large negative items not detailed, or these are mixed. Actually, re-reading: "Items Affecting Comparability" 2022: -593,000,000 EUR. The components listed are likely the breakdown, but maybe some are negative. Or perhaps the 905M impairment reversal is actually an impairment (negative) despite the name. Given the confusion, let me use a simpler approach. S&P FFO for utilities is often approximated as: FFO = Comparable EBITDA - Cash interest - Cash taxes Or from the cash flow statement directly. Let me use "Cash Flows From Used In Operations Before Changes In Working Capital" = 2,322,000,000 Plus: "Interest Paid Classified As Operating Activities" = 201,000,000 (to get pre-interest) Less: "Interest Received Classified As Operating Activities" = 84,000,000 So pre-interest FFO = 2,322,000,000 + 201,000,000 - 84,000,000 = 2,439,000,000? No wait, if interest paid is already subtracted in the 2,322M, then to get pre-interest we add back interest paid. Actually, looking at typical cash flow construction: Net income + D&A + Other non-cash - Interest paid (operating classification) + Interest received = CFO before WC Hmm, I think interest paid is typically subtracted to get net income, so in CFO before WC, if interest paid is classified as operating, it's already reflected. Let me just use 2,322,000,000 as FFO, which is a common simplification. Or adjust to get a cleaner measure. Actually, for S&P, FFO is typically defined as: FFO = Net income from continuing operations + Depreciation and amortization + Deferred income taxes + Other non-cash items - Gain/loss on asset sales - Equity earnings + Dividends received from equity investments From data 2022: - Net income from continuing operations: 1,011,000,000 - D&A: 566,000,000 - Deferred taxes: ? (Income Tax Expense 556M, Cash taxes paid 167M, so deferred tax expense = 389M, or change in deferred tax assets/liabilities) Change in Deferred Tax Assets: 933M - 2,149M = -1,216,000,000 (decrease, meaning benefit) Change in Deferred Tax Liabilities: 152M - 827M = -675,000,000 (decrease, meaning expense) Net deferred tax change: complicated. Let me use cash flow approach. Actually, let me use the most straightforward S&P FFO from available data: FFO = "Cash Flows From Used In Operations Before Changes In Working Capital" + "Interest Paid Classified As Operating Activities" (if we want pre-interest FFO) For S&P credit metrics, FFO is typically after interest but before working capital. So 2,322M is reasonable. But wait - S&P sometimes defines FFO as: FFO = EBITDA - Cash interest - Cash taxes From data: - "Operating Profit Before Depreciations Ebitda" (this is actually "Ebitda" in the name): 1,842,000,000? No wait, "Operating Profit Before Depreciations Ebitda" = 1,842,000,000. But "Comparable Ebitda" = 2,436,000,000. The 1,842M includes items affecting comparability. The comparable EBITDA is 2,436M. Cash interest paid: 201,000,000 (from operating) or 179,000,000 (expense) Cash taxes paid: 167,000,000 So FFO ≈ 2,436,000,000 - 201,000,000 - 167,000,000 = 2,068,000,000? Or using reported interest expense: 2,436M - 179M - 167M = 2,090M But this is approximate. Let me use the directly reported cash flow metric. Actually, I realize "Cash Flows From Used In Operations Before Changes In Working Capital" = 2,322,000,000 is likely the best starting point. This is essentially FFO before working capital changes. For S&P, FFO / Net Debt is a key ratio. Net Debt = Total Debt - Cash and Cash Equivalents. From balance sheet 2022-01-01 (which is end of 2021, beginning of 2022) or 2023-01-01 (end of 2022)? Wait, the dates are: "Assets" 2023-01-01: 23,642,000,000 EUR (end of 2022) "Assets" 2022-01-01: 149,661,000,000 EUR (end of 2021) So 2023-01-01 means end of 2022 (after the 2022 fiscal year). For 2022 ratios, we need end-of-2022 (2023-01-01) or average balance sheet. Let me identify debt items at 2023-01-01 (end of 2022): - Other Noncurrent Financial Liabilities: 3,658,000,000 - Noncurrent Derivative Financial Liabilities: 756,000,000 - Other Current Financial Liabilities: 4,127,000,000 - Current Derivative Financial Liabilities: 3,973,000,000 Total financial liabilities = 3,658 + 756 + 4,127 + 3,973 = 12,514,000,000 But we need to check if derivatives are debt-like. For net debt, typically we include: - Borrowings/debt - Less: Cash and cash equivalents From "Liquid Funds" 2023-01-01: 3,919,000,000 Or "Cash And Cash Equivalents" 2023-01-01: 3,919,000,000 (same) For gross debt, we need to identify all interest-bearing liabilities. The financial liabilities are: - Other Noncurrent Financial Liabilities: 3,658M - Other Current Financial Liabilities: 4,127M The derivative liabilities may or may not be included in gross debt depending on definition. For S&P, derivatives are typically excluded from debt but included in certain adjustments. Actually, looking at standard net debt: Net Debt = Short-term borrowings + Long-term borrowings + Current portion of long-term debt - Cash and cash equivalents From the data, we have: - Other Noncurrent Financial Liabilities: 3,658M (likely includes long-term debt) - Other Current Financial Liabilities: 4,127M (likely includes short-term debt) But we also have margin liabilities: 352M, which might be debt-like. Let me check if there are lease liabilities embedded. Actually, for a cleaner approach, let me look at total liabilities and equity structure. The company went through major restructuring (discontinued operations). At 2023-01-01 (end of 2022): Total Assets: 23,642M Total Equity: 7,737M Total Liabilities: 15,905M The liabilities include: - Noncurrent Liabilities: 5,784M - Current Liabilities: 10,122M (other than held for sale) From noncurrent liabilities: - Other Noncurrent Financial Liabilities: 3,658M - Noncurrent Derivative Financial Liabilities: 756M - Deferred Tax Liabilities: 152M - Nuclear Non Current Provisions: 966M - Other Longterm Provisions: 118M - Noncurrent Recognised Liabilities Defined Benefit Plan: 13M - Other Noncurrent Liabilities: 121M From current liabilities: - Other Current Financial Liabilities: 4,127M - Current Derivative Financial Liabilities: 3,973M - Other Shortterm Provisions: 13M - Margin Liabilities: 352M - Trade And Other Current Payables: 1,657M For S&P net debt, we typically include: - All borrowings (short and long term) - Bank overdrafts - Exclude trade payables, provisions, deferred taxes, derivatives (sometimes) A common approach: Gross debt = Other Noncurrent Financial Liabilities + Other Current Financial Liabilities = 3,658 + 4,127 = 7,785M Or including derivatives: 7,785 + 756 + 3,973 = 12,514M But S&P typically includes derivative liabilities that are debt-like in nature, or excludes all derivatives. Actually, for energy companies with heavy trading, derivatives are often part of operations. Let me check if margin liabilities are debt-like. Looking at the 2022 balance (2022-01-01, which is beginning of 2022 or end of 2021): - Other Noncurrent Financial Liabilities: 8,701M - Noncurrent Derivative Financial Liabilities: 16,657M - Other Current Financial Liabilities: 8,519M - Current Derivative Financial Liabilities: 71,947M The derivatives were huge at end of 2021 due to energy market volatility. By end of 2022, they reduced significantly. For S&P net debt, a standard definition is: Net Debt = Short-term debt + Long-term debt + Current portion of long-term debt - Cash and cash equivalents - Liquid investments From available data, using the most standard approach: Gross Debt = Other Noncurrent Financial Liabilities + Other Current Financial Liabilities = 3,658M + 4,127M = 7,785M Net Debt = 7,785M - 3,919M (Cash And Cash Equivalents) = 3,866M But we might also include margin liabilities as debt-like: 352M Net Debt = 7,785M + 352M - 3,919M = 4,218M Or more broadly, include all financial liabilities: Gross Debt = 3,658 + 756 + 4,127 + 3,973 + 352 = 12,866M? Wait, margin liabilities might be included in other current financial liabilities or separate. Actually, let me check: "Margin Liabilities" 352M is separate from "Other Current Financial Liabilities" 4,127M. For a trading company, margin liabilities are typically debt-like (collateral obligations). Let me use a comprehensive debt definition: Debt = Other Noncurrent Financial Liabilities + Noncurrent Derivative Financial Liabilities + Other Current Financial Liabilities + Current Derivative Financial Liabilities + Margin Liabilities = 3,658 + 756 + 4,127 + 3,973 + 352 = 12,866M Net Debt = 12,866M - 3,919M = 8,947M But this seems high for derivatives. S&P may treat derivatives differently. Actually, looking at S&P methodology for utilities/energy companies, they often report "adjusted debt" which includes certain portions of derivatives. However, for a standard FFO/Net Debt ratio, let me use the simpler definition first: Net Debt = (Other Noncurrent Financial Liabilities + Other Current Financial Liabilities) - Cash And Cash Equivalents = (3,658 + 4,127) - 3,919 = 7,785 - 3,919 = 3,866M Or with margin liabilities: = 7,785 + 352 - 3,919 = 4,218M Let me also consider if "Liquid Funds" equals "Cash And Cash Equivalents". Both are 3,919M at 2023-01-01. Now for FFO, let me finalize my calculation. I'll use: FFO = Cash Flows From Used In Operations Before Changes In Working Capital (continuing operations) = 2,322,000,000 EUR But wait, this is for continuing operations? Let me check: "Cash Flows From Used In Operations Before Changes In Working Capital" - is this total or continuing? Looking at the data: "Cash Flows From Used In Operating Activities Continuing Operations" = 2,104,000,000 "Cash Flows From Used In Operations Before Changes In Working Capital" = 2,322,000,000 The difference is working capital changes: 2,322M - 219M (increase in WC) = 2,103M ≈ 2,104M. So "Cash Flows From Used In Operations Before Changes In Working Capital" is for continuing operations. Actually, let me verify: "Increase Decrease In Working Capital" 2022 = 219,000,000. And 2,322M - 219M = 2,103M ≈ 2,104M. Yes, matches. For total operations (including discontinued): "Cash Flows From Used In Operating Activities" = -8,767,000,000 (this includes discontinued) For FFO, S&P typically uses continuing operations or total depending on context. Since discontinued operations are being separated, continuing FFO is often used. But for the full company picture until disposal, total FFO might be relevant. However, with massive discontinued operations losses (-10.9B), the total operating cash flow is negative. Actually, looking at "Cash Flows From Used In Operating Activities Discontinued Operations" = -10,870,000,000. This is huge negative. For 2022, Fortum had major discontinued operations (likely Uniper). The -10.87B operating cash outflow from discontinued operations is significant. For S&P FFO/Net Debt, we need to decide whether to use continuing or total. Typically, if discontinued operations are being sold, S&P might use pro forma continuing operations or total depending on timing. Given the data, let me use continuing operations FFO as the company is restructuring. FFO (continuing) = 2,322,000,000 EUR But S&P FFO is typically defined to exclude working capital changes but include interest and dividends. The 2,322M figure is before working capital changes, so it's essentially FFO from continuing operations. However, S&P sometimes adjusts FFO further. Let me see if I need to add back anything. Standard S&P FFO = Funds from operations = Net income before extraordinary items + Depreciation and amortization + Deferred income taxes + Other non-cash items From continuing operations data: Net income: 1,011,000,000 + D&A: 566,000,000 + Other non-cash (other adjustments): 153,000,000 + Equity method loss add-back: 629,000,000 + Items affecting comparability (if non-cash): ? The "Adjustments For Alternative Performance Measures" = -593,000,000. If these are non-cash items that reduced earnings, we add back. Actually, let me check if "Items Affecting Comparability" includes cash items. The components include "Capital Gains And Other Related Items" of 785M, which could be cash from asset sales. If cash, we exclude from FFO (S&P excludes capital gains from FFO). For a cleaner S&P FFO, let me use: FFO = Comparable Operating Profit + D&A - Cash taxes + Interest expense (or use comparable EBITDA - cash interest - cash taxes) Comparable Operating Profit 2022: 1,871,000,000 + D&A: 566,000,000 = Comparable EBITDA: 2,437,000,000 (matches reported 2,436M approximately) Then FFO = Comparable EBITDA - Interest expense - Cash taxes = 2,436,000,000 - 179,000,000 - 167,000,000 = 2,090,000,000 Or using cash interest paid: 2,436M - 201M - 167M = 2,068M This is close to the 2,322M reported. The difference might be dividends received (18M) and other items. Actually, let me use the reported cash flow metric as it's more comprehensive: FFO = 2,322,000,000 But I need to check if this includes discontinued operations or not. The label doesn't specify "continuing", but the matching with continuing operating cash flow suggests it's continuing. Wait, there is also: "Cash Flows From Operating And Investing Activities From Continuing Operations" = 3,568,000,000. This is a Fortum-specific metric combining operating and investing. Let me stick with FFO = 2,322,000,000 from "Cash Flows From Used In Operations Before Changes In Working Capital" for 2022. Now for Net Debt at end of 2022 (2023-01-01): I need to be careful about what to include. Let me use a standard definition: - Gross debt: All interest-bearing liabilities - Less: Cash and cash equivalents - Less: Liquid investments From the balance sheet at 2023-01-01: Financial liabilities: - Other Noncurrent Financial Liabilities: 3,658M - Other Current Financial Liabilities: 4,127M These are clearly debt/borrowings. Derivative liabilities: - Noncurrent Derivative Financial Liabilities: 756M - Current Derivative Financial Liabilities: 3,973M These are mark-to-market derivatives, not necessarily debt in the traditional sense. For S&P, they may be included in "adjusted debt" but often excluded from "net debt" unless in-the-money payables. Margin liabilities: 352M - this is collateral posted, debt-like. Let me check if there are other debt-like items: - Nuclear Non Current Provisions: 966M - this is a provision for nuclear waste, not debt - Other Longterm Provisions: 118M - provision, not debt - Noncurrent Recognised Liabilities Defined Benefit Plan: 13M - pension liability, sometimes included in debt For a conservative S&P-style net debt: Gross Debt = 3,658 + 4,127 + 756 + 3,973 = 12,514M (including all derivative liabilities) Or = 3,658 + 4,127 = 7,785M (excluding derivatives) Net Debt (with derivatives) = 12,514 - 3,919 = 8,595M Net Debt (without derivatives) = 7,785 - 3,919 = 3,866M Which is more appropriate? For energy trading companies, S&P often includes derivative liabilities in "adjusted debt" because they represent economic obligations. However, for the standard "Net Debt" metric used in FFO/Net Debt, the simpler definition excluding derivatives is common, unless the derivatives are clearly debt-like (e.g., energy forwards with physical delivery). Let me check the 2021 numbers to see the scale: at 2022-01-01, derivative liabilities were 16,657M + 71,947M = 88,604M, which was huge compared to other liabilities. This was due to the energy crisis. By end of 2022, these reduced to 756M + 3,973M = 4,729M. If I include all derivatives in net debt, the ratio changes significantly. For a standard approach, let me calculate both and see which makes more sense. Actually, looking at S&P Global Ratings methodology for corporates, "Total Debt" typically includes: - Short-term borrowings - Current portion of long-term debt - Long-term debt - Bank overdrafts - Sometimes finance lease liabilities - Sometimes put options, pension deficits, etc. Derivatives are typically excluded from "Total Debt" but may be in "Adjusted Debt". For FFO/Net Debt, the standard denominator is "Net Debt" = Total Debt - Cash and Equivalents. Let me use: Total Debt = Other Noncurrent Financial Liabilities + Other Current Financial Liabilities = 3,658 + 4,127 = 7,785M Net Debt = 7,785 - 3,919 = 3,866M But wait - I should check if there are lease liabilities included in these figures or separate. The "Repayments Of Non Current Borrowings And Repayments Of Lease Liabilities" suggests leases are included. Also, "Other Current Financial Liabilities" might include trade finance, which is not debt. Let me try another approach. Looking at the equity and total liabilities: Total Liabilities = 15,905M Less: Non-debt items (provisions, payables, deferred taxes, derivatives if excluded) Trade And Other Current Payables: 1,657M (not debt) Margin Liabilities: 352M (debt-like) Other Shortterm Provisions: 13M (not debt) Current Tax: not separately stated as liability From noncurrent: Deferred Tax Liabilities: 152M (not debt) Nuclear provisions: 966M (not debt, provision) Other long-term provisions: 118M (not debt) Pension liability: 13M (sometimes debt) Other noncurrent liabilities: 121M (unclear) If I classify only clear borrowings as debt: Debt = 3,658 + 4,127 = 7,785M If I include all financial liabilities and margin: Debt = 3,658 + 756 + 4,127 + 3,973 + 352 = 12,866M Net Debt = 12,866 - 3,919 = 8,947M For S&P, let me check which FFO to use with which net debt. Actually, I realize I should look at this more carefully. The company had major discontinued operations. The balance sheet at 2023-01-01 might reflect the disposal of Uniper or other operations. Looking at the massive reduction in assets from 149,661M to 23,642M, and equity from 13,665M to 7,737M, this suggests major divestitures. The "Increase Decrease Through Changes In Group Structure" of 6,119M (total) with 6,104M to noncontrolling interests suggests a major restructuring where Uniper was likely deconsolidated or sold. Given this restructuring, the 2022 year-end balance sheet is post-restructuring or during it. For FFO/Net Debt, S&P typically uses the latest available balance sheet and trailing 12-month FFO. Let me use FFO from continuing operations = 2,322,000,000 and Net Debt at year-end 2022. For Net Debt, let me use a comprehensive but reasonable definition: - Include all borrowings and debt-like financial liabilities - Exclude derivative liabilities (as they are MTM, not principal amounts) - Exclude provisions, payables, deferred taxes Net Debt = (Other Noncurrent Financial Liabilities + Other Current Financial Liabilities + Margin Liabilities) - Cash And Cash Equivalents = (3,658 + 4,127 + 352) - 3,919 = 8,137 - 3,919 = 4,218M Or without margin liabilities: = 7,785 - 3,919 = 3,866M Let me also consider if we should use average net debt or year-end. S&P typically uses average for ratios, but year-end is also common. With major restructuring, year-end might be more relevant. Actually, for the FFO/Net Debt ratio, S&P Global Ratings typically uses: - FFO = Funds from operations (trailing 12 months) - Net Debt = End of period or average Let me calculate with year-end net debt. Using Net Debt = 3,866M (simple) or 4,218M (with margin) or 8,947M (with derivatives). I think for a standard approach, let me use: FFO = 2,322,000,000 Net Debt = 7,785M (gross debt) - 3,919M (cash) = 3,866M FFO/Net Debt = 2,322 / 3,866 = 0.60 or 60% Wait, this seems low for a ratio that should typically be > 0.15 for investment grade. Actually, 0.60 is 60%, which is quite strong. But let me double-check. FFO/Net Debt of 0.60 means FFO is 60% of net debt, or net debt is 1.67x FFO. This is actually a strong ratio. Actually, I think I may have made an error. Let me re-read: FFO/Net Debt ratio. If FFO = 2,322M and Net Debt = 3,866M, then ratio = 0.60. But sometimes this is expressed as a percentage: 60%. Or as a multiple: FFO/Net Debt = 0.60x. Actually, looking at S&P methodology, they often report this as a ratio or percentage. A value of 0.60 means 60%. But wait - I want to make sure about the FFO calculation. Let me verify using another approach. From "Comparable Ebitda" = 2,436,000,000 Less: Interest expense = 179,000,000 Less: Cash taxes = 167,000,000 Plus: Other non-cash or adjustments = ? FFO ≈ 2,436 - 179 - 167 = 2,090M Or from cash flow: 2,322M includes interest paid (201M) and received (84M), dividends received (18M), and other items. 2,322M = EBIT + D&A - Cash taxes + Interest received - Interest paid + other adjustments? Actually, let me trace through more carefully. Starting from Profit Loss From Operating Activities: 1,277M + D&A: 566M + Other adjustments: ? = 2,322M before working capital So other adjustments = 2,322 - 1,277 - 566 = 479M What are these other adjustments? Likely: - Finance income/cost adjustments: 193M (finance cost, added back) - Equity method adjustment: 629M (loss added back) - Tax adjustment: -556M? No, tax is after operating profit. Actually, Profit Loss From Operating Activities is before finance items and tax. So to get to CFO before WC, we add back non-cash and non-operating items, then subtract cash taxes, add interest received, subtract interest paid, etc. Hmm, this is getting complicated. Let me just use 2,322M as reported CFO before WC, which is a standard proxy for FFO. But actually, S&P FFO typically excludes dividends received from equity investments if they're not from core operations. The 18M dividends received are included. Also, S&P FFO sometimes excludes interest received if it's not operating. But here it's classified as operating. Let me use FFO = 2,322,000,000 - 18,000,000 (dividends received, if excluded) = 2,304,000,000. Or include them. Actually, for utility companies, dividends from equity investments are often part of normal operations. Let me proceed with FFO ≈ 2,322M. Now for net debt, I want to reconsider. At end of 2022, the company had just gone through major restructuring. The simple net debt of 3,866M might be too low. Let me check if "Other Noncurrent Financial Liabilities" and "Other Current Financial Liabilities" capture all debt. Looking at cash flow financing activities: - Proceeds From Noncurrent Borrowings: 2,421M - Repayments Of Non Current Borrowings And Repayments Of Lease Liabilities: 5,888M - Cash Flows From Used In Increase Decrease In Current Borrowings: -170M This suggests significant debt repayment during 2022. Also, "Cash Flows From Used In Financing Activities Continuing Operations" = -4,686M, indicating net debt repayment. Given the restructuring, year-end 2022 debt is likely lower than average. For S&P ratios, they often use "average" debt or "end of period". With major changes, end of period is acceptable but might not reflect the year's operations. Let me try to estimate average net debt. At beginning of 2022 (end of 2021): - Other Noncurrent Financial Liabilities: 8,701M - Other Current Financial Liabilities: 8,519M - Cash And Cash Equivalents: 7,592M Gross debt = 17,220M Net debt = 17,220 - 7,592 = 9,628M Average gross debt = (17,220 + 7,785) / 2 = 12,503M Average cash = (7,592 + 3,919) / 2 = 5,756M Average net debt = 12,503 - 5,756 = 6,747M FFO/Average Net Debt = 2,322 / 6,747 = 0.34 or 34% Or using year-end: 2,322 / 3,866 = 0.60 or 60% Which is more appropriate? For S&P, with major restructuring, they might use end-of-period or pro forma. Actually, looking at the data more carefully, I notice that "Cash Flows From Used In Financing Activities Discontinued Operations" = 10,757M. This is a huge inflow, likely from the disposal/discontinuation. The discontinued operations also had: - Operating cash outflow: -10,870M - Investing cash outflow: -2,450M - Financing cash inflow: 10,757M This suggests the discontinued operations (Uniper) had significant cash outflows that were funded by... actually, the financing inflow might be from Fortum to Uniper or vice versa. Given the complexity, let me focus on the continuing operations for the ratio, as the discontinued operations are being separated. For continuing operations at year-end 2022: - FFO = 2,322M (or we could use 2,104M operating cash flow, but FFO is before working capital) - Net debt = need to estimate for continuing operations only The balance sheet at 2023-01-01 is consolidated but post-restructuring. Most discontinued operations have been removed. Actually, looking at "Noncurrent Assets Or Disposal Groups Classified As Held For Sale" = 0 at 2023-01-01 and 108M at 2022-01-01. This suggests the disposal was completed. So the 2023-01-01 balance sheet represents the continuing Fortum. For net debt at end of 2022, let me use a more comprehensive definition that S&P might use: S&P "Adjusted Debt" often includes: - Reported debt - Pension deficits - Operating lease debt (if not already in financial debt) - Derivatives in certain cases - Less: Cash and equivalents For Fortum, with major energy trading derivatives, S&P might include a portion. But for simplicity and standardization, let me use: Net Debt = (Other Noncurrent Financial Liabilities + Other Current Financial Liabilities) - Cash And Cash Equivalents = 7,785M - 3,919M = 3,866M And FFO = 2,322M Ratio = 2,322 / 3,866 = 0.6005... Or about 60%. But wait, I want to double-check if I should use total FFO or continuing FFO. The 2,322M is labeled without "continuing" or "discontinued", but it matches with continuing operations cash flows. Actually, looking again: "Cash Flows From Used In Operations Before Changes In Working Capital" - there's no "Continuing Operations" or "Discontinued Operations" label. But the matching with "Cash Flows From Used In Operating Activities Continuing Operations" = 2,104M and working capital change of 219M gives 2,103M ≈ 2,104M, not 2,322M. Wait: 2,322M - 219M = 2,103M. But reported "Cash Flows From Used In Operating Activities Continuing Operations" is 2,104M. Close enough (rounding). So yes, 2,322M is for continuing operations. For total operations, "Cash Flows From Used In Operating Activities" = -8,767M. This includes discontinued operations with huge negative cash flow. If we used total FFO (including discontinued), it would be negative, making the ratio meaningless. So continuing operations FFO = 2,322M is correct. Now, one more check: should I add back interest paid to get to a pre-interest FFO measure? S&P FFO is typically after interest (as it's "funds from operations" available to service debt). So 2,322M which is after interest paid is correct. Actually, let me verify: 2,322M includes interest paid of 201M and interest received of 84M. So the pre-interest, pre-tax operating cash flow would be higher. But S&P FFO is meant to be a post-interest, pre-working capital measure. So 2,322M is appropriate. Final calculation: FFO = 2,322,000,000 EUR Net Debt = 7,785,000,000 - 3,919,000,000 = 3,866,000,000 EUR FFO / Net Debt = 2,322 / 3,866 = 0.6006 Or approximately 0.60. Let me also try with margin liabilities included: Net Debt = 7,785M + 352M - 3,919M = 4,218M FFO / Net Debt = 2,322 / 4,218 = 0.550 Or with derivatives included: Net Debt = 7,785M + 756M + 3,973M - 3,919M = 8,595M FFO / Net Debt = 2,322 / 8,595 = 0.270 The wide range shows the importance of definition. For S&P, I think a reasonable approach is to include debt-like derivatives and margin. Actually, let me reconsider. "Current Derivative Financial Liabilities" of 3,973M - are these payables from derivative positions or margin calls? In energy trading, these could be settlements due. For a conservative S&P approach, let me include all derivative liabilities that are "in the money" against Fortum (i.e., Fortum owes). But we don't know the offsetting assets. Actually, looking at assets: - Noncurrent Derivative Financial Assets: 343M - Current Derivative Financial Assets: 1,486M Total derivative assets: 1,829M Derivative liabilities: - Noncurrent: 756M - Current: 3,973M Total derivative liabilities: 4,729M Net derivative position: 1,829M - 4,729M = -2,900M (net liability) If we include net derivatives in debt: Net Debt = 7,785M + 2,900M - 3,919M = 6,766M FFO / Net Debt = 2,322 / 6,766 = 0.343 Or about 34%. This seems more balanced. But S&P typically doesn't net derivatives against debt in this way. Let me go with a simpler, more standard definition: Net Debt = Total Debt - Cash Where Total Debt = Other Noncurrent Financial Liabilities + Other Current Financial Liabilities + Margin Liabilities (as debt-like) = 3,658 + 4,127 + 352 = 8,137M Net Debt = 8,137 - 3,919 = 4,218M FFO / Net Debt = 2,322 / 4,218 = 0.550 Or without margin: Net Debt = 3,866M FFO / Net Debt = 0.601 Given the ambiguity, let me check if there's another way to estimate. S&P reports for Fortum might be available, but I need to estimate from this data. Actually, I realize I should look at whether "Other Current Financial Liabilities" already includes "Margin Liabilities". The separate listing suggests they might be separate. Looking at 2022-01-01: - Other Current Financial Liabilities: 8,519M - Margin Liabilities: 985M - Current Derivative Financial Liabilities: 71,947M These are all separate line items. So margin liabilities are separate from other financial liabilities. For 2023-01-01: - Other Current Financial Liabilities: 4,127M - Margin Liabilities: 352M - Current Derivative Financial Liabilities: 3,973M All separate. So my calculation with margin liabilities as additional debt is correct if we choose to include them. For S&P methodology, margin liabilities are typically included in "adjusted debt" or "total debt" because they represent collateral obligations that are debt-like. Let me use: Total Debt = 3,658 + 4,127 + 352 = 8,137M Net Debt = 8,137 - 3,919 = 4,218M FFO / Net Debt = 2,322 / 4,218 = 0.5505 Rounding: 0.55 or 55%. But I want to check one more thing. Should I use FFO after or before dividends? S&P FFO is typically before dividends. The 2,322M is before dividends. Also, should I use FFO from "Cash Flows From Used In Operations Before Changes In Working Capital" or add back some items? Actually, looking at S&P's precise definition for utilities: FFO is often defined as net income + D&A + deferred taxes + other non-cash items - capital gains + other adjustments. Let me try to build this from the income statement: - Profit Loss From Continuing Operations: 1,011M - Add: Depreciation And Amortisation Expense: 566M - Add: Share Of Profit Loss Of Associates (loss, so add back): 629M - Add: Items Affecting Comparability (non-cash portion): ? Items Affecting Comparability = -593M (net negative, meaning expenses/losses). If non-cash, add back. - Impairment Loss Reversal: 905M (positive, but is it cash or non-cash? Reversal of impairment is non-cash gain, so subtract from FFO) - Capital Gains: 785M (likely cash or non-cash from asset sales, subtract from FFO) - Changes In Fair Values Of Derivatives: 393M (non-cash, subtract or add depending on gain/loss) - Other Adjustments: 80M This is getting messy with the signs. Let me assume the -593M includes both cash and non-cash items, and the net is already reflected in net income. For a cleaner FFO, let me use the cash flow based measure: 2,322M. Actually, I want to verify if 2,322M is reasonable by checking the components: From "Operating Profit Before Depreciations Ebitda" = 1,842M This is EBITDA including items affecting comparability. From "Comparable Ebitda" = 2,436M This is cleaner EBITDA. The difference: 2,436 - 1,842 = 594M, which matches the items affecting comparability (593M). So Comparable EBITDA = 2,436M is the clean operating measure. To get FFO from Comparable EBITDA: - Subtract: Interest expense = 179M - Subtract: Cash taxes = 167M - Add: Other non-cash or cash items (dividends received, etc.) FFO ≈ 2,436 - 179 - 167 + 18 (dividends) + 84 (interest received) - 201 (interest paid) + other adjustments = 2,436 - 179 - 167 + 18 + 84 - 201 + ... = 1,991 + ... Hmm, this doesn't match 2,322M. Let me think again. Actually, EBITDA is before interest, taxes, depreciation, amortization. So: Comparable EBITDA = 2,436M Less: D&A = 566M (already in EBITDA, wait no - EBITDA is before depreciation) Less: Interest = 179M Less: Taxes = 556M (accrual) = Comparable EBIT = 1,871M (matches "Comparable Operating Profit") Less: Interest = 179M Less: Taxes = 556M = Net income before equity and other items... Actually: Comparable Operating Profit = EBIT = 1,871M Less: Interest expense = 179M Less: Finance costs = 193M (total finance) Plus: Finance income = 87M Plus: Other finance = ? Profit Loss Before Tax = 455M (from total, not continuing) For continuing operations: Profit Loss From Continuing Operations = 1,011M From Comparable Operating Profit 1,871M to Profit Before Tax: 1,871M - 179M interest expense + 87M finance income - 101M other finance cost - 629M equity method loss = 1,049M? Let me check: 1,871 - 179 + 87 - 101 - 629 = 1,049M. But Profit Loss Before Tax is 455M. Hmm, doesn't match because there are other items. Actually, Profit Loss From Operating Activities = 1,277M (total, not comparable). This includes items affecting comparability. From 1,277M operating profit to 455M before tax: 1,277 - 629 (equity loss) - 179 (interest) + 87 (finance income) - 101 (other finance) = 455M. Let me check: 1,277 - 629 = 648; 648 - 179 = 469; 469 + 87 = 556; 556 - 101 = 455. Yes! Matches. So the path is: Operating Profit (total) = 1,277M Less: Equity method loss = 629M Less: Net finance cost = 193M (which is 179 + 101 - 87 = 193, or Finance Income Cost = -193M) = Profit Before Tax = 455M Then taxes = -556M (expense) = Profit From Continuing Operations = 455 - 556 = -101M? No, it's 1,011M. Wait, that doesn't work. 455M - 556M = -101M, not 1,011M. Oh! I see - the tax is negative expense of -556M, meaning tax benefit. So 455M - (-556M) = 455 + 556 = 1,011M. Yes! Matches. So the -556M "Income Tax Expense" is actually a tax benefit (negative expense). Now, back to FFO. From cash flow: Start with Profit Loss From Continuing Operations: 1,011M Add: D&A: 566M Add: Equity method loss: 629M Add: Finance cost (non-cash portion): ? Add: Tax expense (non-cash portion): -556M was a benefit, so if non-cash, subtract? Add: Other non-cash: 153M Add: Items affecting comparability (non-cash): ? The cash flow before working capital is 2,322M. So: 1,011 + 566 + 629 + 153 + other adjustments = 2,322 2,359 + other = 2,322 Other = -37M Hmm, this suggests some negative adjustments or my identification is wrong. Actually, "Adjustments For Finance Income Cost" = -193M. This is added back (since it's a negative adjustment, meaning finance cost was subtracted in income, so add back for cash flow). Wait, let me re-read the signs. In cash flow statement: - "Adjustments For Income Tax Expense" = -556,000,000 If this is an adjustment to net income, and tax expense was -556M (benefit), then the adjustment might be to remove this benefit (subtract 556M) to get to cash basis? That would mean cash taxes were paid, not refunded. But "Income Taxes Paid Refund Classified As Operating Activities" = 167,000,000 (positive, meaning paid). So the cash flow adjustments seem to be: Start with net income: 1,011M + D&A: 566M + Other non-cash items: 153M + Equity method loss: 629M (add back the loss) + Finance cost adjustment: -193M? Or +193M? Actually, "Adjustments For Finance Income Cost" = -193,000,000. If finance cost was 193M, and we want to add it back, the adjustment should be +193M. But it's listed as -193M. This might mean the adjustment is to subtract 193M, which would be strange. Or perhaps the sign convention is: negative adjustment means subtract from net income, positive means add. In that case: Start: 1,011M + 566M (D&A, positive) - 556M (tax, negative adjustment) - 193M (finance, negative) - 629M (equity, negative) + 153M (other, positive) - 593M (items, negative) = 1,011 + 566 - 556 - 193 - 629 + 153 - 593 = -241M That doesn't equal 2,322M. So my sign interpretation is wrong. Let me try: all "Adjustments For" items are added back (positive in cash flow): 1,011 + 566 + 556 + 193 + 629 + 153 + 593 = ... too high. Actually, looking at standard cash flow presentation: Net income + Depreciation and amortization + Other non-cash expenses - Gains on sales + Losses on sales = Cash flow before working capital The "Adjustments For" items with negative values might represent expenses that were already in net income and need to be "adjusted for" (i.e., added back if non-cash). "Adjustments For Income Tax Expense" = -556M: If tax expense was -556M (benefit), this reduced net income. To adjust, we subtract this benefit (i.e., add back expense or remove benefit). Hmm, this is confusing. Let me just trust the reported "Cash Flows From Used In Operations Before Changes In Working Capital" = 2,322M as the correct FFO proxy. Given all this analysis, let me finalize: FFO = 2,322,000,000 EUR (from continuing operations, before working capital changes) Net Debt options: 1. Simple: 7,785M - 3,919M = 3,866M 2. With margin: 8,137M - 3,919M = 4,218M 3. With all derivatives: 12,514M + 352M - 3,919M = 8,947M? No, 12,514 includes derivatives, plus margin 352 = 12,866 - 3,919 = 8,947M For S&P methodology, I'll use a moderate definition: Net Debt = (Other Noncurrent Financial Liabilities + Other Current Financial Liabilities + Margin Liabilities) - Cash And Cash Equivalents = (3,658 + 4,127 + 352) - 3,919 = 8,137 - 3,919 = 4,218M FFO / Net Debt = 2,322 / 4,218 = 0.5505 Or approximately 0.55. If I use the simple definition without margin: = 2,322 / 3,866 = 0.6006 ≈ 0.60 Given that S&P typically includes debt-like obligations such as margin liabilities in adjusted debt, I'll use the with-margin version. But actually, let me reconsider one more time. "Margin Liabilities" might be already included in "Other Current Financial Liabilities" or "Current Derivative Financial Liabilities". The fact that it's separately listed suggests it's separate. However, looking at the 2021 data: - Other Current Financial Liabilities: 8,519M - Margin Liabilities: 985M - Current Derivative Financial Liabilities: 71,947M These are clearly separate line items. For 2022: - Other Current Financial Liabilities: 4,127M - Margin Liabilities: 352M - Current Derivative Financial Liabilities: 3,973M All separate. So my calculation stands. Actually, I want to check one more thing. Is "Cash And Cash Equivalents" the same as "Liquid Funds"? - "Liquid Funds" 2023-01-01: 3,919,000,000 - "Cash And Cash Equivalents" 2023-01-01: 3,919,000,000 Yes, same. Final answer: FFO / Net Debt = 2,322 / 4,218 = 0.5505 Or if we want to express as percentage: 55.1% But typically this ratio is expressed as a decimal or times (e.g., 0.55x or 55%). Actually, looking at S&P reports, they often express FFO/Net Debt as a percentage (e.g., "FFO to debt: 60%"). Let me provide 0.55 as the decimal ratio. Wait, I want to double-check my FFO. Should I use "Cash Flows From Used In Operations Before Changes In Working Capital" = 2,322M or "Cash Flows From Used In Operating Activities Continuing Operations" = 2,104M? The difference is working capital changes of 219M. FFO is before working capital changes, so 2,322M is correct. But let me also consider if S&P FFO includes dividends received. The 2,322M includes dividends received of 18M. S&P sometimes excludes these if they're not core operations. But for a utility with equity investments, they might be core. If I exclude dividends received: FFO = 2,322 - 18 = 2,304M Ratio = 2,304 / 4,218 = 0.546 ≈ 0.55 Not much difference. I'll go with 0.55. Actually, one more consideration: should I use end-of-year net debt or average? With major restructuring, the year-end net debt is much lower than beginning. Average might be more representative. Average gross debt = (17,220 + 8,137) / 2 = 12,679M (using with-margin) Average cash = (7,592 + 3,919) / 2 = 5,756M Average net debt = 6,923M FFO / Average Net Debt = 2,322 / 6,923 = 0.335 ≈ 0.34 This is quite different. But S&P typically uses end-of-period for point-in-time ratios, or average for trend analysis. For annual report-based calculation, year-end is standard. Let me stick with year-end: 0.55. Actually, I realize I should check if there are any other debt items I missed. Looking at noncurrent liabilities: - "Nuclear Non Current Provisions" = 966M: This is a provision for nuclear waste management. Is this debt-like? In some ways yes, as it's a contractual obligation. But it's typically classified as a provision, not debt. - "Noncurrent Recognised Liabilities Defined Benefit Plan" = 13M: Pension deficit. Sometimes included in debt by S&P. If I include these: Gross debt = 8,137 + 966 + 13 = 9,116M Net debt = 9,116 - 3,919 = 5,197M FFO / Net debt = 2,322 / 5,197 = 0.447 ≈ 0.45 This changes things. But these are clearly provisions/liabilities, not financial debt. For standard "Net Debt" as used in FFO/Net Debt, financial debt is typical. Let me verify with a narrower definition: just borrowings. Gross debt = 3,658 + 4,127 = 7,785M Net debt = 3,866M Ratio = 0.60 I think 0.55 to 0.60 is the reasonable range. Let me use 0.55 as a moderate estimate including margin liabilities. Actually, re-reading S&P methodology one more time. They often define "Total Debt" as: - Short-term debt - Long-term debt - Current portion of long-term debt - Bank overdrafts - Commercial paper - Finance leases And "Net Debt" = Total Debt - Cash and Equivalents. Margin liabilities might not be included in "Total Debt" but in "Total Adjusted Debt". For the pure FFO/Net Debt ratio, standard debt is used. Let me go with: Net Debt = 7,785 - 3,919 = 3,866M FFO / Net Debt = 2,322 / 3,866 = 0.601 Or about 0.60. Hmm, but I want to check one more thing. Is there any "debt" in the noncurrent or current portions that I'm missing? Looking at "Other Noncurrent Financial Liabilities" = 3,658M. This likely includes long-term borrowings, bonds, etc. "Other Current Financial Liabilities" = 4,127M. This likely includes short-term borrowings, current portion of long-term debt, etc. Are there any other financial liabilities? "Noncurrent Derivative Financial Liabilities" and "Current Derivative Financial Liabilities" are derivatives, not typically "debt". I think 7,785M gross debt is reasonable for total debt. But wait - let me check if "Share In State Nuclear Waste Management Fund" of 966M is an asset that offsets the nuclear provision. Yes! - Asset: "Share In State Nuclear Waste Management Fund" = 966M - Liability: "Nuclear Non Current Provisions" = 966M They match! This is a restricted asset for nuclear waste, with a matching provision. So the net is zero. This confirms I should not include nuclear provisions in debt. Final decision: FFO = 2,322,000,000 Net Debt = 7,785,000,000 - 3,919,000,000 = 3,866,000,000 FFO / Net Debt = 0.6006 I'll round to 0.60. But let me also consider: should I use FFO from "Cash Flows From Used In Operations Before Changes In Working Capital" or from a more standard definition? Actually, looking at S&P's precise formula for FFO: FFO = Net income + Depreciation & amortization + Deferred income taxes + Other non-cash items From data: Net income (continuing): 1,011M + D&A: 566M + Deferred taxes: ? (change in deferred tax assets and liabilities) Change in Deferred Tax Assets: 933 - 2,149 = -1,216M (decrease, benefit to income) Change in Deferred Tax Liabilities: 152 - 827 = -675M (decrease, expense to income) Net deferred tax benefit: 1,216 - 675 = 541M? Or is it the other way around? Actually, decrease in deferred tax assets means we used them, which is a benefit (reduces tax expense). Decrease in deferred tax liabilities means we paid them off, which is an expense (increases tax expense). The net effect on cash flow would be: decrease in DTA is source of cash (541M benefit), decrease in DTL is use of cash (675M expense). Net: -134M cash outflow from deferred taxes. But for FFO, we add back deferred tax expense (non-cash). The "Income Tax Expense Continuing Operations" = -556M was a benefit. The cash taxes paid were 167M. So the non-cash tax benefit was -556M - 167M = -723M? That seems wrong. Actually: Tax expense (accrual) = -556M (benefit) Cash taxes paid = 167M (positive means outflow, so expense) The difference: -556M - 167M = -723M non-cash benefit? Or is cash taxes the amount paid, so: If tax benefit is 556M (reduces net income) and cash tax paid is 167M, then the non-cash portion is 556M - 167M = 389M benefit? I'm getting confused with signs. Let me use: Accrual tax = -556M (negative expense = benefit). Cash tax = +167M (positive in cash flow = paid, so expense). In cash flow statement: Start with net income (which includes 556M tax benefit). To get to cash basis, we need to adjust for the difference between accrual and cash taxes. If the adjustment is -556M, this means we subtract 556M from net income. Since net income already has +556M benefit, subtracting 556M removes it. Then we have cash tax paid of 167M, which is subtracted separately. So: Net income (with 556M benefit) - 556M (adjustment) - 167M (cash tax paid) = Net income - 167M cash tax. This makes sense! The -556M adjustment removes the non-cash tax benefit, and then 167M cash tax is subtracted. So for FFO, we want to add back the non-cash tax benefit? No, FFO is after tax. We just want to remove non-cash items. Actually, standard FFO adds back non-cash expenses. If there was a non-cash tax benefit, we might subtract it to normalize. For simplicity, the cash flow based FFO of 2,322M already handles all this correctly. Final answer: 0.60 Wait, I want to check one more thing. The ratio FFO/Net Debt - is it typically expressed as a decimal (0.60) or as a percentage (60%)? In S&P methodology, they often say "FFO to debt: 60%" or "FFO/debt: 0.6x". Both are used. For this answer, I'll provide the decimal: 0.60. Actually, looking at the format requested: "no units, and no prose". So just the number. Let me provide 0.60. But should I use more precision? 0.6006 rounds to 0.60. Or I could use 60 if expressing as percentage. But typically this is a ratio. Let me check: If FFO/Net Debt = 2,322/3,866 = 0.6006... Or if I use with margin: 2,322/4,218 = 0.5505... Given the ambiguity, let me use the simpler definition without margin liabilities (as they're operationally related to trading, not financing): Net Debt = 3,866M FFO/Net Debt = 0.60 Actually, I want to reconsider one more time. Should I include margin receivables as a reduction to debt? No, those are assets. Should I include all cash-like items? "Liquid Funds" = 3,919M. Is there any other cash? "Current Tax Assets Current" = 71M. Not cash. So cash = 3,919M. Final answer: 0.60 Hmm, but I want to verify by looking at whether this makes sense for Fortum. After the Uniper disposal, Fortum is a much smaller, cleaner company. Net debt of 3.9B and FFO of 2.3B gives a ratio of 0.60, meaning FFO covers 60% of net debt. This is quite healthy. Actually, let me also try with total FFO including discontinued operations. The total "Cash Flows From Used In Operations Before Changes In Working Capital" isn't directly reported, but we can estimate: Total operating cash flow before WC = Continuing (2,322M) + Discontinued (?) We have "Cash Flows From Used In Operating Activities Discontinued Operations" = -10,870M. This is after working capital changes. We don't have the before-WC version. If discontinued operations had large working capital changes (likely, given energy trading), the before-WC FFO might be very different. Given the negative total operating cash flow, total FFO would likely be negative or very low. So continuing FFO is the right choice. One final check: should I use "Profit Loss From Continuing Operations" of 1,011M plus D&A to get a quick FFO? 1,011 + 566 = 1,577M. This is much lower than 2,322M. The difference is 745M, which comes from other non-cash items and financing adjustments. The cash flow based 2,322M is more comprehensive and correct for FFO. I'll go with 0.60. Actually, I want to see if using average net debt gives a more stable ratio. With major restructuring in 2022, the year-end balance sheet might not reflect the full year. But the problem asks for 2022 ratio based on annual report. Typically, year-end balances are used. Final answer: 0.60 Wait, I want to double-check my arithmetic: Net Debt = 7,785,000,000 - 3,919,000,000 = 3,866,000,000 FFO = 2,322,000,000 Ratio = 2,322 / 3,866 = ? 2,322 / 3,866 = 0.600620796... Rounded to two decimals: 0.60 Or if I use with margin: Net Debt = 8,137,000,000 - 3,919,000,000 = 4,218,000,000 Ratio = 2,322 / 4,218 = 0.550497866... Rounded: 0.55 Given the "no units, no prose" requirement, I should provide a precise number. Let me think about which definition is most standard S&P. After careful consideration, I believe S&P would likely include margin liabilities as they represent collateral obligations that are debt-like in nature. However, the standard "Net Debt" definition varies. Let me provide 0.55 as a more conservative estimate including margin liabilities. Actually, re-reading the S&P methodology document in my mind, they typically define "Total Debt" as borrowings plus certain adjustments. For commodity trading companies, margin liabilities are often included in "Total Adjusted Debt" but not always in "Total Debt". For the ratio "FFO/Net Debt", standard practice is to use total debt minus cash. I'll use the narrower definition (excluding margin and derivatives) as it's more universally applicable. Net Debt = 3,866M Ratio = 0.60 But I'm second-guessing. Let me see if there's any other clue in the data. The "Cash Flows From Used In Financing Activities Continuing Operations" = -4,686M includes: - Proceeds from noncurrent borrowings: 2,421M - Repayments of noncurrent borrowings and leases: 5,888M - Change in current borrowings: -170M - Dividends paid: 1,013M + 19M - Margin liabilities change: 150M - Other financing: -168M Sum: 2,421 - 5,888 - 170 - 1,013 - 19 + 150 - 168 = -4,687M ≈ -4,686M. Matches. The margin liabilities change of 150M is classified as financing, suggesting it's debt-like. This supports including margin liabilities in debt. Net Debt with margin = 4,218M Ratio = 0.55 I'll use 0.55. Actually, one more thing. The "Other Current Financial Liabilities" of 4,127M - does this include margin liabilities? Looking at the financing cash flow, "Increase Decrease In Margin Liabilities Classified As Financing Activities" is separate. So margin liabilities are not in other financial liabilities. Final answer: 0.55 Hmm, but I want to check if the 2,322M FFO is for the full year 2022 or just continuing operations. The cash flow statement shows "Cash Flows From Used In Operations Before Changes In Working Capital" without "Continuing" or "Discontinued" label. But the amount 2,322M matches when I calculate from continuing operations (2,104M + 219M working capital change ≈ 2,323M, close to 2,322M). Actually, 2,322M - 219M = 2,103M, and reported continuing operating cash flow is 2,104M. The 1M difference is rounding. So yes, 2,322M is continuing operations. For total company, operating cash flow before WC would need to include discontinued. We don't have that directly, but we can estimate: Discontinued operating cash flow = -10,870M. If working capital change was significant (likely in energy trading), the before-WC could be very different. Given we don't have the before-WC for discontinued, using continuing 2,322M is the only practical choice. Final answer: 0.55 (with margin) or 0.60 (without). I'll provide 0.55 as more comprehensive. Actually, let me reconsider one more time whether to use end-of-year or average. The problem says "for 2022". In financial analysis, this typically means using 2022 data. For balance sheet items, year-end is standard unless specified otherwise. But with major restructuring, S&P might use "pro forma" or "adjusted" figures. Since we don't have those, year-end is what we use. Let me provide: 0.55 Wait, I want to check one more thing. Is "Cash Flows From Used In Operations Before Changes In Working Capital" the same as "EBITDA - taxes + interest"? From "Operating Profit Before Depreciations Ebitda" = 1,842M (this is actually EBIT + D&A = EBITDA, but with items affecting comparability). "Comparable Ebitda" = 2,436M. If I use Comparable EBITDA - Interest - Taxes + other: = 2,436 - 179 - 556(benefit, so +556?) + other = 2,436 - 179 + 556 + other... this gets messy with signs. Let me just trust the 2,322M reported figure. Final answer: 0.55 0.55