I need to calculate the FFO (Funds From Operations) / Net Debt ratio for 2022 using S&P methodology. First, let me understand S&P's methodology for FFO: - FFO = Net income + Depreciation and amortization + Deferred income taxes + Other non-cash items For S&P specifically, FFO is typically calculated as: - Net income before extraordinary items - Plus: Depreciation and amortization - Plus: Deferred income taxes - Plus/minus: Other non-cash items From the data, I need to use 2022 figures (which correspond to the period 2022-01-01 to 2023-01-01 for income statement items, and 2022-01-01 balance sheet for debt). Let me identify the relevant figures: **For FFO (2022 period: 2022-01-01 to 2023-01-01):** - Profit Loss (Net Income): 681,187,000 EUR - Depreciation And Amortisation Expense: 544,992,000 EUR - Income Tax Expense Continuing Operations: 188,330,000 EUR Wait - let me reconsider. S&P FFO typically starts with operating cash flow or adjusts net income. Let me look at what S&P Global Ratings specifically uses. S&P methodology for FFO: FFO = Funds from operations = Net income from continuing operations + Depreciation and amortization + Deferred income taxes + Other non-cash items Alternatively, a common S&P approach is: FFO = Net income + D&A + Deferred taxes + Other non-cash charges - Gain on sale of assets + Minority interest in earnings Looking at the cash flow statement approach might be cleaner. Operating cash flow was 1,566,829,000 EUR. But S&P FFO is not exactly operating cash flow. Let me use the standard S&P definition: FFO = Net income + Depreciation and amortization + Deferred income tax expense/(benefit) + Other non-cash items From the data: - Net income (Profit Loss): 681,187,000 EUR - Depreciation and amortization: 544,992,000 EUR - Deferred tax assets changed from 70,567,000 to 69,217,000 = decrease of 1,350,000 (benefit, so subtract) - Actually, looking at deferred tax: 2022-01-01: 70,567,000; 2023-01-01: 69,217,000. This is a decrease, meaning deferred tax expense was negative (benefit). Actually, let me think more carefully. The change in deferred tax assets doesn't directly give us the deferred tax expense. We need the deferred tax component of income tax expense. From the income statement, total tax expense was 188,330,000 EUR. But we don't have the split between current and deferred. Let me use a more practical approach. S&P FFO can also be approximated from operating cash flow: FFO = Cash flow from operating activities - Working capital changes + Interest paid - Interest received + Dividends received (sometimes) + Income taxes paid Actually, let me use the standard S&P formula more carefully: FFO = Net income + D&A + Deferred income taxes + Other non-cash items Looking at adjustments to reconcile profit to operating cash flow: - Adjustments For Depreciation And Amortisation Expense: 544,992,000 - Other Adjustments To Reconcile Profit Loss: 47,579,000 - Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method: 50,405,000 - Adjustments For Finance Income: 23,161,000 - Adjustments For Finance Costs: 116,468,000 - Adjustments For Provisions: 35,046,000 - Ajustes Por Imputacion De Subvenciones De Capital YOtros: 24,996,000 - Ajustes Por Resultados Por Enajenacion ODeterioro De Activos No Corrientes EInstrumentos Financieros: -708,000 Sum of adjustments: 544,992 + 47,579 + 50,405 + 23,161 + 116,468 + 35,046 + 24,996 - 708 = 841,939,000 But profit was 681,187,000, so 681,187 + 841,939 = 1,523,126,000, which doesn't equal operating cash flow of 1,566,829,000. The difference is working capital and other items. For S&P FFO, a common practical formula is: FFO = Operating cash flow + Interest paid - Interest received (if classified in operating) +/- Working capital changes Actually, let me use a cleaner S&P approach: FFO = Net income + D&A + Deferred taxes + Other non-cash items Where "Other non-cash items" includes things like provisions, equity-accounted earnings, etc. From the reconciliation: - Net income: 681,187,000 - Add: D&A: 544,992,000 - Add: Undistributed profits of equity investments: 50,405,000 (this is non-cash income already in net income) - Add: Finance costs (non-cash portion? No, this includes interest paid) - Add: Provisions: 35,046,000 - Add: Other adjustments: 47,579,000 Let me try: FFO = Net income + D&A + Provisions + Equity-accounted earnings adjustments + Other non-cash = 681,187 + 544,992 + 35,046 + 50,405 + 47,579 + 24,996 - 708 = 1,383,497,000 Hmm, this seems high. Let me reconsider what S&P actually uses. Actually, looking at S&P Global Ratings methodology more precisely: FFO = Net income before extraordinary items + Depreciation and amortization + Deferred income taxes + Other non-cash items "Other non-cash items" typically includes: - Asset impairment charges - Provisions - Stock-based compensation - Gain/loss on asset sales - Equity in earnings of affiliates (undistributed) From our data, let me identify: - Net income: 681,187,000 - D&A: 544,992,000 - Provisions adjustment: 35,046,000 - Undistributed profits of equity investments: 50,405,000 - Gain/loss on disposal and impairment: -708,000 (negative means gain, so subtract) - Other adjustments: 47,579,000 - Imputation of capital grants: 24,996,000 (this is non-cash income, already deducted?) Let me try a different approach. S&P FFO is often approximated as: FFO = Operating cash flow before working capital changes From the cash flow statement: - Cash Flows From Used In Operating Activities: 1,566,829,000 - This includes working capital changes of: 574,568,000 (positive, meaning source of cash) - And other operating cash flows of: -469,827,000 So operating cash flow before working capital and other items = 1,566,829 - 574,568 + 469,827? No, that's not right. Let me think: Operating CF = Net income + Adjustments - Working capital changes + Other operating cash flows Actually: 681,187 + 592,571 + 574,568 - 469,827 = 1,378,499? Not quite 1,566,829. Let me check: 681,187 + 592,571 = 1,273,758 (cash before working capital) + 574,568 (working capital) = 1,848,326 - 469,827 (other operating) = 1,378,499? That doesn't match 1,566,829. Let me recheck. Actually, looking more carefully: "Adjustments For Reconcile Profit Loss" = 592,571,000 total, which includes: - D&A: 544,992 - Other adjustments: 47,579 - Undistributed profits: 50,405 - Gain/loss on disposal: -708 - Finance income: 23,161 - Finance costs: 116,468 - Provisions: 35,046 - Capital grants imputation: 24,996 Sum: 544,992 + 47,579 + 50,405 + (-708) + 23,161 + 116,468 + 35,046 + 24,996 = 841,939 But stated total is 592,571. There's a discrepancy. Let me re-read... Ah, I think "Other Adjustments To Reconcile Profit Loss" of 47,579 might be the net of several items, or the components listed are not all additive. Some might already be included in the 47,579. Actually, re-reading: "Adjustments For Reconcile Profit Loss" is 592,571, and it has sub-items. Let me see which are separate line items vs. sub-components. Looking at the structure, it seems like the main categories are listed with amounts, and some have sub-items. The total "Adjustments For Reconcile Profit Loss" = 592,571. For S&P FFO, I'll use: FFO = Net income + Total adjustments - Working capital changes adjustments? No. Standard S&P FFO = Net income + Depreciation + Deferred taxes + Other non-cash charges Let me use: FFO = Profit Loss + D&A + Adjustments For Provisions + Adjustments For Undistributed Profits + Other non-cash items - Gains on sales Actually, a more standard approach for utility/telecom companies (which Red Eléctrica is - it's a Spanish electricity transmission company): FFO = EBIT + D&A - Cash taxes + Other non-cash items Or: FFO = Operating cash flow - Working capital changes From operating cash flow 1,566,829, subtract working capital benefit of 574,568: FFO = 1,566,829 - 574,568 = 992,261? No, that removes working capital which is wrong. Actually, S&P wants to ADD working capital uses (or subtract working capital sources) to get to FFO. Since working capital was a source of 574,568, we subtract it: FFO = 1,566,829 - 574,568 = 992,261? That seems low. Wait - I need to be more careful. In S&P methodology, FFO excludes working capital changes. So if operating CF includes a working capital benefit, we remove it to get FFO. But actually, looking at standard S&P practice, they often use: FFO = Net income + D&A + Deferred taxes + Other non-cash items And they accept operating cash flow as a starting point, then adjust. Let me try yet another approach. For European utilities, S&P often calculates: FFO = EBITDA - Cash interest - Cash taxes Or from the cash flow statement directly. Let me calculate EBITDA first: Revenue: 2,015,036 Other Work Performed: 62,903 Participation in profits of equity method: 50,405 Miscellaneous Other Operating Income: 77,673 Less: Aprovisionamientos: 37,061 Less: Employee Benefits: 210,614 Less: Miscellaneous Other Operating Expense: 467,088 Less: D&A: 544,992 Wait, Profit Loss From Operating Activities (EBIT) = 961,554 So EBITDA = EBIT + D&A = 961,554 + 544,992 = 1,506,546 Then FFO ≈ EBITDA - Cash taxes + Interest paid (if not in EBIT) - Interest received Cash taxes paid: 363,996 Interest paid (operating): 123,524 Interest received (operating): 15,680 FFO = 1,506,546 - 363,996 - 123,524 + 15,680? No, interest is already in EBIT. Actually, EBIT is before interest. So: FFO = EBIT + D&A - Cash taxes = 961,554 + 544,992 - 363,996 = 1,142,550? But this ignores that EBIT already includes non-cash items and excludes some cash items. Let me try: FFO = Operating profit before working capital changes ≈ 1,566,829 - 574,568 = 992,261? Or: FFO = Net income + D&A + other non-cash adjustments = 681,187 + 544,992 + 50,405 (undistributed, already in net income so add back? No, it's already added to get net income, we need to subtract it if non-cash) Actually, undistributed profits of equity investments: This is the equity method income included in net income but not received as cash. So to get from net income to FFO, we should SUBTRACT it (since it's non-cash income). Wait - in the cash flow reconciliation, "Adjustments For Undistributed Profits" is added back to net income. This means it was included in net income but not cash, so we add it back to get operating cash flow? No, that doesn't make sense. Actually, looking at cash flow statement logic: Start with net income, add back non-cash items, subtract non-cash gains, add decreases in working capital, etc. If undistributed profits are ADDED in the reconciliation, it means they were SUBTRACTED from net income to get operating cash flow. But that would mean they were a deduction from net income, i.e., they reduced net income? No, equity method income INCREASES net income. Let me re-read: "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method" = 50,405,000. In the cash flow statement, this is added to net income. This is confusing because equity method income increases net income but isn't cash received. Actually, I think I misread. Let me check if this is income or expense. "Participacion En Beneficios De Sociedades Valoradas Por El Metodo De La Participacion" = 50,405,000. This is income (participation in profits). In the cash flow reconciliation, if we add back the adjustment for undistributed profits, it suggests that this income was deducted somewhere or we need to remove it. Actually, standard practice is to SUBTRACT equity method income from net income because it's non-cash. But here the amount is positive in the adjustments column, meaning it's added. Wait - I need to check the sign convention. In many European cash flow statements, the "adjustments" are shown as positive when they need to be added back to net income. So if equity income is positive in net income, we'd show a negative adjustment to subtract it. But here it's positive 50,405... Hmm, let me look at the pattern. D&A is positive 544,992 - clearly added back. Finance income is positive 23,161 - added back (subtracted from net income to remove it). Finance costs is positive 116,468 - added back. For equity method income: if it's income in the P&L, we'd subtract it in the cash flow. But the adjustment is positive. Unless... the "undistributed profits" refers to the portion NOT received as dividends, meaning we subtract the total equity income and add back only the dividends received? Actually, I think "Adjustments For Undistributed Profits" means we're adjusting FOR (i.e., removing) the undistributed portion. If total equity income was 50,405 and dividends received were 7,578, then undistributed = 50,405 - 7,578 = 42,827. But the figure is 50,405. Let me not overcomplicate. Let me use the standard S&P formula as typically applied: **FFO = Net income + Depreciation and amortization + Deferred income taxes + Other non-cash items** Where I'll include: - Net income: 681,187 - D&A: 544,992 - Deferred taxes: Need to estimate. Change in deferred tax assets: 70,567 - 69,217 = 1,350 decrease. Change in deferred tax liabilities: 417,650 - 397,811 = 19,839 increase. Net deferred tax expense = 19,839 - 1,350 = 18,489? Or looking at it differently, the increase in DTL minus decrease in DTA = deferred tax expense. Actually, deferred tax asset decrease of 1,350 could mean deferred tax benefit (if it was used) or it could mean reversal. Deferred tax liability increase of 19,839 is deferred tax expense. Net deferred tax expense ≈ 18,489. But we don't know the exact deferred tax component. Total tax expense was 188,330. If current tax paid was 363,996 (from cash flow), this seems higher than total tax expense, suggesting deferred tax benefit of 175,666. But that can't be right because cash tax paid should relate to prior year or current year timing. Actually, cash taxes paid of 363,996 vs tax expense of 188,330 suggests the company paid more cash tax than it expensed, implying deferred tax asset increase or liability decrease. But we see DTA decreased and DTL increased, both suggesting deferred tax expense, not benefit. This is getting messy with timing. Let me use a simpler approach. For S&P, a common practical FFO calculation for European companies: **FFO = Cash flow from operating activities + Interest paid - Interest received - Dividends received + Income taxes paid - Working capital changes** Or more commonly: **FFO = EBIT + D&A - Cash taxes** Let me use: FFO = Operating cash flow - Working capital changes + Interest paid - Interest received (if interest is in financing) Actually, in this company's cash flow: - Interest paid is in operating activities: 123,524 - Interest received is in operating: 15,680 - Dividends received in operating: 7,578 For S&P FFO, they typically want to add back interest paid (to get pre-interest cash flow) and subtract interest received, and also adjust for working capital. Standard S&P FFO = Funds from operations before interest and working capital changes: = Operating cash flow + Interest paid - Interest received - Dividends received (if included in operating) + Working capital uses - Working capital sources Hmm, let me try yet another formulation. S&P's official definition (simplified): **FFO = Net income + Depreciation, amortization, and other non-cash items + Deferred income taxes + Other non-cash items in net income - Gain on asset sales + Minority interest in earnings - Preferred dividends** For our company: - Net income: 681,187 - D&A: 544,992 - Other non-cash from reconciliation: provisions (35,046), undistributed profits adjustment (50,405), other (47,579), grants (24,996), gain/loss (-708) - Deferred taxes: unknown, but let's estimate from balance sheet changes Actually, let me look at this from the comprehensive income and equity changes. The "Resultado Del Ejercicio Atribuido ALa Sociedad Dominante" (Profit attributable to parent) is 664,731, and "Profit Loss Attributable To Noncontrolling Interests" is 16,456, so total Profit Loss = 681,187. For S&P, they often use "Comprehensive Income" or adjust for certain items. But let's stick with net income. Let me try a cleaner approach. I'll calculate FFO as: **FFO = EBITDA - Cash interest - Cash taxes + Other non-cash adjustments** Or: **FFO = Operating profit (EBIT) + D&A - Cash taxes ± Other non-cash items** EBIT = 961,554 D&A = 544,992 Cash taxes paid = 363,996 But wait, EBIT is before tax and interest. So: EBITDA = 961,554 + 544,992 = 1,506,546 Then FFO = EBITDA - Cash taxes - Cash interest? No, EBITDA is before interest too. Actually: FFO = EBIT + D&A - Cash taxes = 961,554 + 544,992 - 363,996 = 1,142,550 But this doesn't include interest. S&P FFO is typically after interest (since it's "funds from operations" available to debt holders and equity, but interest is a real cash outflow). Actually, looking at S&P more carefully: FFO is funds from operations, meaning cash generated from operations before working capital changes but after operating expenses including cash interest? No, FFO is typically before interest. Let me check: "Funds From Operations" in S&P terminology is typically: - EBITDA - Less: Cash interest - Less: Cash taxes - Less: Maintenance capex (sometimes, for AFFO) But for the ratio FFO/Debt, S&P uses FFO before interest and taxes, or after? Actually, S&P's official FFO definition for corporate ratings: FFO = Net income from continuing operations + Depreciation and amortization + Deferred income taxes + Other non-cash items And this is typically AFTER interest expense (since net income is after interest). So FFO as defined by S&P is after interest. But for the FFO/Debt ratio, they want to measure debt coverage, so they might use FFO before interest or adjust the ratio. Actually, let me check: S&P's "FFO to debt" ratio uses FFO as defined (after interest) divided by total debt. This measures how well after-interest cash covers debt. OK, let me calculate S&P FFO properly: - Net income from continuing operations: 681,187 (no discontinued ops mentioned) - Add: D&A: 544,992 - Add: Deferred income taxes: Need to calculate For deferred taxes: Total tax expense 188,330. Cash taxes paid 363,996. The difference is -175,666, which would be deferred tax benefit. But this doesn't match balance sheet changes. Actually, cash taxes paid in 2022 might include payments for 2021 taxes. The balance sheet shows Current Tax Assets of 7,561 at start and 182,497 at end, suggesting overpayment. Current Tax Liabilities were 10,887 at start and 13,320 at end. The change in deferred taxes (DTL increase 19,839, DTA decrease 1,350) suggests deferred tax expense of about 21,189. But this is book basis, not the cash flow basis. Let me use the cash flow approach: FFO = Operating cash flow - Working capital changes + Interest paid (if S&P wants pre-interest) - Interest received. But actually for S&P's standard FFO, it's based on net income plus addbacks, not from cash flow. Let me try: FFO = Net income + D&A + Total adjustments - Working capital changes + Interest paid - Interest received? No, the adjustments already include interest and other items. Let me look at this differently. The cash flow reconciliation shows: Net income: 681,187 + Adjustments: 592,571 = Cash before working capital: 1,273,758 + Working capital changes: 574,568 + Other operating cash flows: -469,827 = Operating cash flow: 1,566,829? Wait: 1,273,758 + 574,568 - 469,827 doesn't equal 1,566,829. Let me recalculate: 1,273,758 + 574,568 = 1,848,326. Then 1,848,326 - 469,827 = 1,378,499. That's not 1,566,829. There's a discrepancy of 188,330. Interesting - that's exactly the income tax expense! Ah! I think "Other Operating Income Expense" of 4,665 and some other items might bridge this, or the working capital and other items have different signs than I assumed. Actually, looking more carefully: "Otros Flujos De Efectivo De Las Actividades De Explotacion" = -469,827. This includes: - Interest paid: -123,524 (negative = outflow) - Dividends received: +7,578 - Interest received: +15,680 - Income taxes paid: -363,996 - Other: -5,565 Sum: -123,524 + 7,578 + 15,680 - 363,996 - 5,565 = -469,827. Yes! So operating cash flow = Net income + Adjustments + Working capital changes + Other operating cash flows = 681,187 + 592,571 + 574,568 + (-469,827) = 1,378,499? Still not 1,566,829. Difference is 188,330 again. Hmm, let me check if "Other Operating Income Expense" of 4,665 is part of this. Actually, I wonder if the "Adjustments For Reconcile Profit Loss" of 592,571 is not all added to net income, or if some items are subtracted. Let me try: Maybe finance income and finance costs are not both added. Finance income of 23,161 - do we add or subtract? In cash flow statements, we typically subtract finance income (to remove it from operating) and add finance costs (to remove them, since they're financing). But actually, both are adjustments to get from net income to operating profit. Wait - I need to think about this more carefully. Net income includes finance income (positive) and finance costs (negative, i.e., expense). To get to operating profit, we subtract finance income and add finance costs. So both adjustments should be: -23,161 for finance income and +116,468 for finance costs. But the table shows both as positive amounts in the adjustments section. Actually, in many European cash flow statements using the indirect method, the adjustments are shown with their natural sign or all as positive with explanatory notes. The total "Adjustments For Reconcile Profit Loss" = 592,571 suggests this is the net add-back. Let me recalculate: If D&A (544,992) + Other adjustments (47,579) + Undistributed profits (50,405) + Gain/loss (-708) + Finance income (23,161) + Finance costs (116,468) + Provisions (35,046) + Grants (24,996) = 841,939, but total is 592,571. Unless... some of these are not included in the 592,571 total. Maybe the sub-items listed are explanatory, not additive. Looking at the structure again, I see "Adjustments For Reconcile Profit Loss" has amount 592,571, and then sub-items like "Adjustments For Depreciation And Amortisation Expense" = 544,992, "Other Adjustments To Reconcile Profit Loss" = 47,579. These two sum to 592,571. The other items (undistributed profits, finance income, etc.) might be part of "Other Adjustments" or separate. Actually, re-reading: "Other Adjustments To Reconcile Profit Loss" = 47,579. This could be the net of all other items. Let me check if 47,579 = 50,405 + (-708) + 23,161 + 116,468 + 35,046 + 24,996 - something. Sum of those: 50,405 - 708 + 23,161 + 116,468 + 35,046 + 24,996 = 249,368. Not 47,579. So these are separate line items, not sub-items of "Other Adjustments". But then the total should be higher. Unless the signs are different. Let me reconsider: In the indirect method, to reconcile net income to operating cash flow: - Add: D&A - Add: decrease in assets, increase in liabilities - Subtract: increase in assets, decrease in liabilities - Add/subtract: non-cash and non-operating items For undistributed profits of equity investments: These are income in P&L but not cash. So we SUBTRACT them (they increased net income but weren't cash). So adjustment = -50,405. For finance income: Not operating, so subtract: -23,161. For finance costs: Not operating, so add back: +116,468. For gain on disposal: Non-operating, subtract: +708 (since it was a loss of -708 in P&L, we add back the loss, or if gain, subtract). For provisions: Non-cash expense, add: +35,046. For grants imputation: Non-cash income, subtract: -24,996. So total adjustments = 544,992 + (-50,405) + (-23,161) + 116,468 + 708 + 35,046 + (-24,996) + other = ? = 544,992 - 50,405 - 23,161 + 116,468 + 708 + 35,046 - 24,996 + 47,579 (other) = 544,992 + 47,579 - 50,405 - 23,161 + 116,468 + 708 + 35,046 - 24,996 = 592,571 - 50,405 - 23,161 + 116,468 + 708 + 35,046 - 24,996 = 646,231? Not matching. I'm making this too complicated. Let me just use the stated total adjustments of 592,571 and work from there. For S&P FFO, I'll use a practical definition: **FFO = Net income + D&A + Other non-cash adjustments that are sustainable** A common simplified FFO for S&P = Operating cash flow - Working capital changes = 1,566,829 - 574,568 = 992,261? But this removes working capital benefit, which is wrong direction. Actually, if working capital was a source of cash (positive 574,568), then to get FFO (which excludes working capital), we SUBTRACT this benefit: FFO = 1,566,829 - 574,568 = 992,261 But wait, this assumes working capital benefit is non-recurring or non-operational. Actually, S&P FFO typically INCLUDES working capital if it's sustainable, or adjusts it if it's one-time. Hmm, let me try yet another approach. S&P sometimes calculates FFO as: FFO = EBIT + D&A - Cash taxes = 961,554 + 544,992 - 363,996 = 1,142,550 Or including interest: FFO = EBITDA - Cash taxes = 1,506,546 - 363,996 = 1,142,550 (same, since EBIT is before interest) But this uses cash taxes, not tax expense. And EBIT includes non-cash items like provisions. Let me verify EBIT: Revenue 2,015,036 + Other work 62,903 + Equity income 50,405 + Misc income 77,673 - Aprovisionamientos 37,061 - Employee 210,614 - Misc expense 467,088 - D&A 544,992 - Grants -15,800? Actually, let me use stated EBIT: 961,554. Then FFO = EBIT + D&A - Cash taxes = 961,554 + 544,992 - 363,996 = 1,142,550 But cash taxes paid (363,996) seems high compared to tax expense (188,330). This might include prior year payments. Alternatively, FFO = EBIT + D&A - Tax expense - Interest expense + Interest income? No, that's getting to net income + D&A. Let me try: FFO = Net income + D&A + Deferred tax expense + Other non-cash = 681,187 + 544,992 + 21,189 (est. deferred tax) + 35,046 (provisions) + 50,405 (undistributed, if we add back? No, it's income) Actually for undistributed profits: If we want FFO (cash available), we should SUBTRACT undistributed profits since they're not cash. So: FFO = 681,187 + 544,992 + 21,189 - 50,405 + 35,046 - 24,996 + 708... This is getting messy with signs. Let me use a cleaner approach. **I'll use S&P's standard formula as typically applied by practitioners:** FFO = Net income + Depreciation and amortization + Deferred income taxes + Other non-cash items - Gain on sale of assets Where "Other non-cash items" includes provisions, impairment, stock-based comp, etc. From our data, sustainable FFO items: - Net income: 681,187 - D&A: 544,992 - Provisions: 35,046 (from cash flow adjustments) - Grants imputation: 24,996 (non-cash income, so subtract) Deferred taxes: I'll estimate from balance sheet. DTL increased 19,839, DTA decreased 1,350, so deferred tax expense ≈ 21,189. Undistributed profits: 50,405 (non-cash income, subtract) Gain/loss on disposal: -708 (loss, so add back? Or if gain, subtract) Let me try: FFO = 681,187 + 544,992 + 21,189 + 35,046 - 50,405 + 708 - 24,996 + 47,579 = 681,187 + 544,992 + 21,189 + 35,046 - 50,405 + 708 - 24,996 + 47,579 = 1,255,300 Hmm, this seems reasonable but I'm not sure about signs. Let me try a completely different approach. Look at what S&P reports for similar companies. For European utilities, S&P typically reports FFO roughly equal to: Operating cash flow + Interest paid - Working capital changes (if one-time) Or about 60-80% of EBITDA for stable utilities. Actually, let me use the most standard definition I can find: **S&P FFO = Net income + Depreciation, depletion, and amortization + Deferred income taxes + Other non-cash items** Where I'll take "Other non-cash items" from the cash flow reconciliation as: provisions, undistributed profits (with appropriate sign), and other items net. Actually, I realize I should look at this from the equity perspective. The comprehensive income and equity changes might help. Let me try a simpler approach and calculate FFO as: **FFO = Cash flow from operating activities - Changes in working capital + Interest paid - Interest received** Wait, no. Let me think... Actually, for many European companies, a practical S&P FFO is: **FFO = EBITDA - Cash interest - Cash taxes ± Sustainable working capital changes** Or simply use operating cash flow and adjust for one-time items. Given the complexity, let me use the most widely accepted S&P formula: **FFO = Net income before extraordinary items + Depreciation and amortization + Deferred income taxes + Other non-cash items** I'll calculate: - Net income: 681,187 - D&A: 544,992 - Deferred taxes: Using change in net deferred tax position. Net deferred tax asset 2021: 70,567 - 397,811 = -327,244 (net liability). Net 2022: 69,217 - 417,650 = -348,433. Increase in net liability = 21,189, which is deferred tax expense. - Other non-cash items: I'll include provisions (35,046) and exclude undistributed profits (50,405) since it's non-cash income... wait, we need to subtract it. Actually, let me be more careful. Starting from net income: - Net income includes: +50,405 equity income (non-cash, so subtract from FFO) - Net income includes: -35,046 provision expense (non-cash, so add back) - Net income includes: -24,996 grant income (non-cash, so subtract... wait, it's income, so if we remove it we subtract) Hmm, actually "Imputacion De Subvenciones" is grant income recognized in P&L. It's non-cash (already received). So it increased net income but is not cash flow. For FFO, we want to exclude it since it's not from operations? Or include since it's sustainable? Actually, capital grants are typically excluded from FFO by S&P since they're not from operations. Let me try: FFO = 681,187 + 544,992 + 21,189 - 50,405 + 35,046 - 24,996 - (-708)? For gain/loss: "Deterioro YResultado Por Enajenaciones Del Inmovilizado" = -730 in 2021, 488 in 2022. The adjustment is -708. This is loss on disposal/impairment. In 2022 P&L, it was 488 (positive = loss? or negative = gain?). Actually, looking at cash flow adjustment: "Ajustes Por Resultados Por Enajenacion ODeterioro De Activos No Corrientes EInstrumentos Financieros" = -708. Negative adjustment means... if it's added in the reconciliation, a negative number would be subtracted. I think the sign convention in this cash flow statement might be that positive adjustments are added to net income. So -708 means subtract 708 from net income, i.e., there was a gain of 708 that needs to be removed. But the P&L line shows 488, not -708. Hmm. Let me give up on perfect accuracy and use a standard approximation: **FFO ≈ Operating cash flow - Working capital changes** But with correct sign: If working capital change was +574,568 (source of cash), and we want FFO excluding working capital, we subtract it: FFO = 1,566,829 - 574,568 = 992,261 But this seems low. Let me check if working capital is sustainable or not. Actually, for S&P, they typically DO include sustainable working capital in FFO. The adjustment is only for one-time or unsustainable working capital changes. Given this is a utility with relatively stable working capital, maybe we shouldn't adjust. Let me try another common S&P formula: **FFO = Net income + D&A + Interest expense + Deferred taxes + Other non-cash items - Preferred dividends** = 681,187 + 544,992 + 116,468 (finance costs, approx interest) + 21,189 + 35,046 - 50,405... Wait, if we add interest expense, we're getting to a pre-interest measure. But S&P FFO is typically after interest. Let me look up S&P's exact words: "Funds from operations (FFO)--Net income from continuing operations adjusted for depreciation and amortization, deferred income taxes, and other non-cash items." This is AFTER interest. So no adding back interest. OK, final attempt at FFO: = 681,187 (net income) + 544,992 (D&A) + 21,189 (deferred tax expense, estimated) + 35,046 (provisions, non-cash) - 50,405 (undistributed profits, non-cash income) - 24,996 (grant income, non-cash and non-operating) +/- other items = 681,187 + 544,992 + 21,189 + 35,046 - 50,405 - 24,996 = 1,207,013 Let me add the "Other Adjustments" of 47,579 if it's non-cash: = 1,207,013 + 47,579 = 1,254,592 And the gain/loss adjustment of -708... if it's a gain, subtract; if loss, add. The P&L shows 488 which is positive. In Spanish accounts, "Deterioro YResultado Por Enajenaciones" positive likely means loss. So add back? But cash flow adjustment is -708, confusing. Let me just use: FFO ≈ 1,255,000 (roughly) Actually, I want to verify using another method. Let me look at "Comprehensive Income" = 790,460. This includes OCI. Not directly useful. Or: Cash flow from operations 1,566,829. If I add back interest paid 123,524 and subtract interest received 15,680, and add back taxes paid 363,996, I get roughly EBITDA-ish number: 1,566,829 + 123,524 - 15,680 + 363,996 = 2,038,669. Compare to revenue of 2,015,036 + other income. This seems high. Actually, that calculation is wrong because operating CF already includes interest paid and taxes paid as outflows. Let me try: Operating CF 1,566,829 + Interest paid 123,524 + Taxes paid 363,996 - Interest received 15,680 - Dividends received 7,578 = 2,031,091. This is roughly pre-interest, pre-tax operating cash flow. Compare to EBIT+D&A = 1,506,546. The difference is working capital and other items. For FFO, S&P typically uses after-interest, so: FFO = Operating CF + Interest paid - Interest received (if interest is operating) - Working capital changes (if one-time) = 1,566,829 + 123,524 - 15,680 - 574,568 = 1,100,105? Hmm, but this adds back interest paid, making it pre-interest. S&P FFO is after interest. Let me try yet again: FFO = Operating CF - Working capital changes (if benefit) = 1,566,829 - 574,568 = 992,261. This is after interest, after taxes, excluding working capital benefit. Or if working capital is sustainable: FFO = Operating CF = 1,566,829. I think for a utility, working capital is relatively stable, so we might include it. But 574,568 working capital benefit seems large (28% of revenue). Let me check what it is. Working capital change = 574,568, comprising: - Variation in inventories, receivables, prepaids, other current assets: 71,466 - Variation in payables, contract liabilities, other current liabilities: 503,102 The payables increase of 503,102 is large. Trade payables increased from 382,309 to 485,624 = 103,315. Other payables increased from 409,459 to 661,232 = 251,773. Total payables increase = 355,088. But the working capital shows 503,102 for "acreedores comerciales...". This might include more than just trade payables. Actually, looking at balance sheet: Trade And Other Current Payables: 802,655 to 1,160,176 = increase of 357,521 But cash flow shows 503,102. The difference might be exchange rate or other items. The large working capital benefit might be partly due to increased other payables. Is this sustainable? Hard to say. For S&P FFO, I'll use a conservative approach and exclude working capital benefits that seem one-time or large: FFO = 1,566,829 - 574,568 + 71,466 (sustainable inventory/receivable change? No, this is also working capital) Actually, let me just use the standard formula and not overthink: **FFO = Net income + D&A + Deferred taxes + Other non-cash items** = 681,187 + 544,992 + 21,189 + (provisions 35,046 - undistributed profits 50,405 + other 47,579 - grants 24,996 + gain/loss adjustment -708) For the "other non-cash items", I need to determine which are truly non-cash and sustainable. From the reconciliation, items that are non-cash or non-operating: - Undistributed profits: 50,405 (non-cash income, subtract from FFO) - Grants imputation: 24,996 (non-cash income, subtract) - Provisions: 35,046 (non-cash expense, add back) - Gain/loss on disposal: -708 (if loss, add back; the negative sign in adjustment is confusing) Let me assume: FFO = 681,187 + 544,992 + 21,189 + 35,046 - 50,405 - 24,996 + 47,579 = 1,254,592 I'll round to **FFO ≈ 1,255 million EUR** or more precisely 1,254,592,000. Now for **Net Debt**: Net Debt = Total debt - Cash and cash equivalents Total debt = Current borrowings + Non-current borrowings + Other financial liabilities (debt-like) From balance sheet 2022-01-01 (start of 2022, which is end of 2021): - Longterm Borrowings: 5,896,170 - Other Noncurrent Financial Liabilities: 57,264 - Current Borrowings And Current Portion Of Noncurrent Borrowings: 1,391,722 - Other Current Financial Liabilities: 752,703 Total debt = 5,896,170 + 57,264 + 1,391,722 + 752,703 = 8,097,859 But wait, "Other Current Financial Liabilities" might include derivatives or other non-debt items. Let me check. Actually, looking at 2023-01-01: - Noncurrent Financial Liabilities total: 5,543,755 - Longterm Borrowings: 5,491,124 - Other Noncurrent Financial Liabilities: 52,631 - Current Financial Liabilities total: 1,705,277 - Current Borrowings: 721,845 - Other Current Financial Liabilities: 983,432 The "Other" includes derivatives and other items. For debt, we want interest-bearing debt. S&P typically uses "Total debt" including: - Short-term borrowings - Current portion of long-term debt - Long-term debt - Bank overdrafts - Sometimes other debt-like liabilities For Red Eléctrica, let me use: Debt = Longterm Borrowings + Current Borrowings + Other financial liabilities that are debt-like Actually, S&P often uses "Total debt" as reported by the company or from balance sheet items. Let me use the financial liabilities: Total financial liabilities = Noncurrent Financial Liabilities + Current Financial Liabilities = 5,543,755 + 1,705,277 = 8,249,032 at 2023-01-01 At 2022-01-01: = 5,953,434 + 2,144,425 = 8,097,859 But this includes derivative liabilities. Let me check: Noncurrent Derivative Financial Liabilities = 16,436. Current Derivative Financial Liabilities = 5,129. Total derivatives = 21,565. Also, "Other Noncurrent Financial Liabilities" and "Other Current Financial Liabilities" might include non-debt items. For S&P net debt, typically: Net debt = Short-term debt + Long-term debt + Current portion of long-term debt - Cash and equivalents Using: - Short-term debt: Current Borrowings And Current Portion Of Noncurrent Borrowings = 1,391,722 - Long-term debt: Longterm Borrowings = 5,896,170 - Other debt-like: Maybe part of "Other" if it's debt Total debt = 1,391,722 + 5,896,170 = 7,287,892 Less: Cash and Cash Equivalents = 1,574,427 Net debt = 7,287,892 - 1,574,427 = 5,713,465 But this might understate debt if "Other Current Financial Liabilities" includes debt. Actually, looking at 2022-01-01 current financial liabilities of 2,144,425 vs current borrowings of 1,391,722, the difference is 752,703. This "Other Current Financial Liabilities" might include trade payables? No, those are separate. It might include accrued interest, derivatives, or other items. For S&P, they typically include all interest-bearing liabilities. Let me check if "Other Current Financial Liabilities" is interest-bearing. Given the name "Financial Liabilities", it's likely debt or debt-like. So: Total debt = 8,097,859 (all financial liabilities) Less: Derivatives (if not debt-like): 21,565 Less: Cash: 1,574,427 Net debt = 6,501,867? Or if we include derivatives as part of debt management: Net debt = 8,097,859 - 1,574,427 = 6,523,432 Actually, let me look at what the company reports. The "Equity And Liabilities" total matches assets, so we're good. For S&P methodology, I'll use: **Net debt = Total financial liabilities - Cash and cash equivalents** = (5,953,434 + 2,144,425) - 1,574,427 = 8,097,859 - 1,574,427 = 6,523,432 But wait - should I use 2022-01-01 or 2023-01-01? For 2022 performance, S&P typically uses average debt or year-end debt. For ratios, they often use year-end debt. Actually, for 2022 FFO / Net debt ratio, we should use 2022 FFO and 2022 year-end net debt, or average net debt. 2022 year-end is 2023-01-01 in this data. So: Net debt at 2022 year-end = 8,249,032 - 794,824 = 7,454,208 Or using average: (6,523,432 + 7,454,208) / 2 = 6,988,820 For S&P, they typically use year-end or average depending on context. For published ratios, often average is used to match the flow nature of FFO. But sometimes year-end is used for simplicity. Let me check S&P practice: For FFO/debt, they typically use "debt" as year-end or average. For their published ratios on rated companies, they often use average debt for the year. Actually, looking at S&P methodology documents, they say: "We typically use average debt for the year when calculating FFO to debt." Average debt = (Beginning net debt + Ending net debt) / 2 = (6,523,432 + 7,454,208) / 2 = 6,988,820 Or if using gross debt average and then subtract average cash... Let me just use average net debt. But actually, I realize I need to be more careful about what's in "financial liabilities". Let me check if there are non-debt items. "Noncurrent Financial Liabilities" = 5,543,755 at 2023-01-01, comprising: - Longterm Borrowings: 5,491,124 - Other Noncurrent Financial Liabilities: 52,631 "Current Financial Liabilities" = 1,705,277, comprising: - Current Borrowings And Current Portion Of Noncurrent Borrowings: 721,845 - Other Current Financial Liabilities: 983,432 The "Other" categories likely include accrued interest, derivative liabilities, and possibly other debt-like items. For S&P, they typically scrutinize these. Actually, I notice "Noncurrent Derivative Financial Liabilities" = 22,016 and "Current Derivative Financial Liabilities" = 7,053. These are likely included in "Other" financial liabilities or separate. Wait, looking at 2022-01-01: "Noncurrent Derivative Financial Liabilities" = 16,436. But total Noncurrent Financial Liabilities = 5,953,434, and Longterm + Other = 5,896,170 + 57,264 = 5,953,434. So derivatives might be in "Other" or separate. Actually, 16,436 + 5,896,170 + 57,264 = 5,969,870, which is more than 5,953,434. So derivatives are likely included in "Other". Hmm, 5,896,170 + 57,264 = 5,953,434 exactly. So "Other Noncurrent Financial Liabilities" = 57,264 includes derivatives? But we also have "Noncurrent Derivative Financial Liabilities" = 16,436 as a separate line item. Wait, let me re-read. The total "Noncurrent Financial Liabilities" = 5,953,434. The components shown are "Longterm Borrowings" = 5,896,170 and "Other Noncurrent Financial Liabilities" = 57,264. These sum to 5,953,434. So "Noncurrent Derivative Financial Liabilities" = 16,436 must be a sub-component of "Other" or the totals don't add up. Actually, 5,896,170 + 57,264 = 5,953,434. And 16,436 is shown separately. Unless 16,436 is included in 57,264? 57,264 - 16,436 = 40,828 remaining other items. Similarly for current: 721,845 + 983,432 = 1,705,277. And derivative is 5,129. So 983,432 includes 5,129 derivatives. For S&P net debt, we want to exclude derivative liabilities that are not debt-like (i.e., not interest-bearing). But this gets complicated. Let me use a simpler approach: Total debt = Longterm Borrowings + Current Borrowings = 5,896,170 + 1,391,722 = 7,287,892 at 2022-01-01. This is the core interest-bearing debt. Net debt = 7,287,892 - 1,574,427 = 5,713,465 at 2022-01-01. At 2023-01-01: 5,491,124 + 721,845 - 794,824 = 5,418,145. Average net debt = (5,713,465 + 5,418,145) / 2 = 5,565,805. But this excludes "Other Financial Liabilities" which might include debt-like items. Let me check if they should be included. "Other Noncurrent Financial Liabilities" = 57,264. This could be accrued interest, finance lease liabilities, or other debt-like items. "Other Current Financial Liabilities" = 983,432. This seems large. At 2023-01-01 it's even larger at 983,432. Wait, 2022-01-01 was 752,703, 2023-01-01 is 983,432. Actually, I wonder if "Other Current Financial Liabilities" includes dividends payable or other non-debt items. Given it's called "financial liabilities", it's likely debt or debt-like. For conservative S&P analysis, they might include all financial liabilities. Let me use total financial liabilities minus cash: Net debt = 8,097,859 - 1,574,427 = 6,523,432 at 2022-01-01 Net debt = 8,249,032 - 794,824 = 7,454,208 at 2023-01-01 Average = 6,988,820 Or if we want to be more precise and exclude derivatives: At 2022-01-01: 8,097,859 - 21,565 (derivatives) - 1,574,427 = 6,501,867 At 2023-01-01: 8,249,032 - 29,069 (derivatives) - 794,824 = 7,425,139 Average = 6,963,503 The difference is small. Let me use total financial liabilities minus cash as my net debt figure, which is more standard for S&P when they don't have detailed breakdowns. Average net debt = 6,988,820 Now, FFO / Net Debt ratio: If FFO = 1,254,592 and Net Debt = 6,988,820 Ratio = 1,254,592 / 6,988,820 = 0.1795 or 17.95% Or if using year-end net debt: 1,254,592 / 7,454,208 = 0.1683 or 16.83% Or if FFO = 1,566,829 (operating CF, no working capital adjustment): 1,566,829 / 6,988,820 = 0.2242 or 22.4% Let me reconsider FFO. I want to verify my FFO calculation using another method. From the cash flow statement, a common S&P FFO is: FFO = Cash flow from operating activities + Interest paid - Interest received - Dividends received (if in operating) + Income taxes paid - Working capital changes... Actually, let me try: FFO = Operating CF + Interest paid - Interest received (if interest is operating) - Working capital benefit + Other one-time items. = 1,566,829 + 123,524 - 15,680 - 574,568 = 1,100,105 This is close to my earlier 1,142,550 from EBIT+D&A-cash taxes. The difference is working capital and other items. Hmm, 1,100,105 vs 1,142,550. Let me check: 1,142,550 - 1,100,105 = 42,445. This could be the working capital benefit that is sustainable, or other items. Actually, I think the formula FFO = Operating CF + Interest paid - Interest received makes it pre-interest, not S&P FFO. Let me not add back interest. S&P FFO = Operating CF - Working capital changes (if one-time) = 1,566,829 - 574,568 = 992,261 Or if working capital is sustainable: S&P FFO = Operating CF = 1,566,829 For a utility, working capital is usually stable, so maybe include it. But 574,568 benefit seems large. Let me check if it's sustainable. Looking at working capital components: - Variation in inventories, receivables, other current assets: 71,466 (source, meaning decrease in assets or increase... wait, positive means source?) Actually, in cash flow statements, positive typically means cash inflow (source). So: - Inventories, receivables, other assets: +71,466 means cash inflow from decrease in these assets or... Wait, "Variacion En Existencias Deudores Pagos Anticipados Corrientes YOtros Activos Corrientes" = 71,466. This is the change in working capital assets. Positive in cash flow means it's added to net income, meaning decrease in assets (source of cash). - "Variacion En Acreedores Comerciales Pasivos Por Contratos Corrientes YOtros Pasivos Corrientes" = 503,102. Positive means increase in payables (source of cash). Total working capital source = 574,568. Is this sustainable? The payables increase of 503,102 is large. But looking at balance sheet: - Trade And Other Current Payables increased from 802,655 to 1,160,176 = 357,521. But cash flow shows 503,102. The difference might be exchange rate, reclassification, or other items. Actually, I think the 503,102 includes more than just trade payables. It might include contract liabilities, accrued expenses, etc. For S&P, they typically adjust for large working capital changes if they deem them unsustainable. But without specific guidance, I'll use a middle ground. Let me try a different FFO calculation that S&P sometimes uses for European utilities: FFO = EBITDA - Cash interest - Cash taxes EBITDA = EBIT + D&A = 961,554 + 544,992 = 1,506,546 Cash interest = Interest paid = 123,524 (from operating activities, or total interest paid) Cash taxes = Income Taxes Paid = 363,996 FFO = 1,506,546 - 123,524 - 363,996 = 1,019,026 This is close to my 992,261 from operating CF minus working capital. The difference is other items. Or if we use interest expense from P&L rather than cash interest: Finance Costs = 116,468. FFO = 1,506,546 - 116,468 - 363,996 = 1,026,082 Hmm, but finance costs might include non-interest items. Let me verify with another approach: FFO = EBIT + D&A - Cash taxes - Cash interest + Interest income (if cash) = 961,554 + 544,992 - 363,996 - 123,524 + 15,680 = 1,034,706 This is in the ballpark of 1,000,000 to 1,250,000. Given the range, let me settle on a reasonable FFO figure. I'll use the cash flow based approach with conservative working capital adjustment: FFO = Operating cash flow - Working capital benefit + Sustainable working capital = 1,566,829 - 574,568 + 0 (assuming none is sustainable) = 992,261 But this seems too conservative. Let me check: if payables increased due to normal business growth, some working capital benefit is sustainable. Actually, looking at revenue growth: 2,015,036 / 1,952,958 = 3.2% growth. Payables growth from 802,655 to 1,160,176 = 44.5% growth. This seems disproportionate, suggesting some one-time benefit. I'll use FFO = 1,100,000 (roughly) as a middle estimate, or more precisely let me use 1,019,026 from EBITDA approach. Actually, let me try to be more precise. I'll use S&P's standard formula with actual data: FFO = Net income + D&A + Deferred taxes + Other non-cash items Where I'll estimate deferred taxes from the tax reconciliation and other non-cash items from cash flow adjustments. From the cash flow reconciliation, "Other Adjustments To Reconcile Profit Loss" = 47,579. This likely includes various non-cash items net. Let me also look at whether there are any "Other non-cash items" I should include. The total adjustments of 592,571 include D&A (544,992) and other (47,579). But we also have separate lines for undistributed profits, finance items, provisions, grants, etc. I think the 592,571 is the total of all adjustments, and the sub-items are detailed breakdown. Let me verify: 544,992 + 47,579 = 592,571. Yes! So "Other Adjustments" = 47,579 is the residual after accounting for D&A. But then what about undistributed profits, finance income, etc.? They must be included in "Other Adjustments" or the presentation is confusing. Actually, re-reading the data structure, I think these are ALL separate line items that sum to something, or they're presented hierarchically. Let me assume "Adjustments For Reconcile Profit Loss" = 592,571 is the total, and it equals D&A (544,992) + Other Adjustments (47,579). The other items listed (undistributed profits, finance income, etc.) might be sub-components of "Other Adjustments" or presented for information. But 50,405 + 23,161 + 116,468 + 35,046 + 24,996 + (-708) = 249,368, which doesn't equal 47,579. Unless there are offsets or the signs are different. Let me try with signs: - Undistributed profits: non-cash income, so subtract from net income: -50,405 - Finance income: remove from operating: -23,161 - Finance costs: add back (expense): +116,468 - Provisions: add back (expense): +35,046 - Grants: subtract (income): -24,996 - Gain/loss: if loss of 488 in P&L, add back +488? Or adjustment is -708 Sum with signs: -50,405 - 23,161 + 116,468 + 35,046 - 24,996 - 708 = 52,244. Close to 47,579 but not exact. Difference is 4,665, which equals "Other Operating Income Expense". Hmm, 52,244 + 4,665 = 56,909, not 47,579. Or 52,244 - 4,665 = 47,579. Yes! So "Other Operating Income Expense" of 4,665 might be subtracted. So "Other Adjustments To Reconcile Profit Loss" = 47,579 = undistributed (-50,405) + finance income (-23,161) + finance costs (+116,468) + provisions (+35,046) + grants (-24,996) + gain/loss (-708) - other operating income/expense (-4,665)? Let me check: -50,405 - 23,161 + 116,468 + 35,046 - 24,996 - 708 - 4,665 = 47,579. Yes! That works. So the 47,579 is the net of all these items. Great. Now for S&P FFO, which items are "Other non-cash items"? - Provisions: 35,046 (non-cash, add back) - Undistributed profits: 50,405 (non-cash, but it's income, so subtract from net income for FFO) - Grants: 24,996 (non-cash income, subtract) - Gain/loss: 708 (need to determine; if loss, add back; if gain, subtract) For FFO calculation starting from net income: - Net income already includes: +50,405 undistributed, +24,996 grants, -35,046 provisions, +/- gain/loss - To get FFO, we want to: remove undistributed (-50,405), remove grants (-24,996), add back provisions (+35,046), adjust gain/loss So FFO = Net income + D&A + Deferred taxes + Provisions - Undistributed profits - Grants + Gain/loss adjustment = 681,187 + 544,992 + 21,189 + 35,046 - 50,405 - 24,996 + 708 = 1,207,721 Wait, I need to check gain/loss. The P&L shows 488 (positive number). Is this a gain or loss? "Deterioro YResultado Por Enajenaciones Del Inmovilizado" - "Deterioro" means impairment (loss), "Resultado" means result. Positive 488 likely means net loss of 488. The cash flow adjustment is -708, which might mean we subtract 708, i.e., there was a gain of 708 that needs to be removed? Or the sign convention is different. Actually, let me ignore the gain/loss as it's small (708 vs 1,207,000). So FFO ≈ 1,207,721 - 708 = 1,207,013 or about 1,207 million. Let me also consider: should I add back the "Other Operating Income Expense" of 4,665? This might be a cash item, so no. And what about finance income and finance costs? These are typically excluded from FFO by S&P since FFO is after interest. Net income already includes finance income (+23,161) and finance costs (-116,468), so the net is -93,307 interest expense. FFO keeps this as is (after interest). So my FFO = 1,207,013 For net debt, let me use average of beginning and ending: Beginning (2022-01-01): - Total financial liabilities: 5,953,434 + 2,144,425 = 8,097,859 - Less cash: 1,574,427 - Net debt: 6,523,432 Ending (2023-01-01): - Total financial liabilities: 5,543,755 + 1,705,277 = 8,249,032 - Less cash: 794,824 - Net debt: 7,454,208 Average net debt: (6,523,432 + 7,454,208) / 2 = 6,988,820 FFO / Net Debt = 1,207,013 / 6,988,820 = 0.1727 or 17.27% Or if using year-end net debt: 1,207,013 / 7,454,208 = 0.1619 or 16.19% S&P typically uses average debt for this ratio. So 17.27% or about 0.173. But wait - I want to double-check my FFO. Let me verify with the EBITDA approach: EBITDA = 1,506,546 Less: Interest paid (cash): 123,524 Less: Taxes paid (cash): 363,996 Less: Other non-cash adjustments? = 1,506,546 - 123,524 - 363,996 = 1,019,026 This is lower than my 1,207,013. The difference is 187,987. Where does this come from? The difference between "taxes paid" (363,996) and "tax expense + deferred tax" (188,330 + 21,189 = 209,519) is 154,477. This is timing difference - cash taxes paid exceed tax expense. Also, interest paid (123,524) vs finance costs (116,468) difference is 7,056. And working capital benefit of 574,568 is excluded from EBITDA approach but included in operating CF. Actually, the EBITDA approach gives pre-working-capital, after-interest, after-tax cash flow. While my FFO formula gives a different number. Let me reconcile: FFO from formula (1,207,013) vs FFO from EBITDA-cash interest-cash taxes (1,019,026). Difference = 187,987. This equals roughly: 154,477 (tax timing) + 7,056 (interest timing) + 26,454 (other). Actually, I think the EBITDA approach is closer to what S&P calls "FFO" in practice, while the formula approach gives a more accounting-based number. For S&P credit analysis, they often use: FFO = Net income + D&A + Deferred taxes + Other non-cash items = 681,187 + 544,992 + 21,189 + (provisions 35,046 - undistributed 50,405 - grants 24,996 + ...) = 1,207,013 But they also verify with cash flow. If operating CF is 1,566,829 and FFO is 1,207,013, the difference is working capital (574,568) minus other items (208,384)? Not quite. Actually: 1,566,829 - 1,207,013 = 359,816. This should equal working capital changes plus other cash/non-cash differences. Working capital was +574,568. Other operating cash flows were -469,827. Sum = 104,741. Not 359,816. I'm confused. Let me recalculate operating CF from net income: Net income: 681,187 + Adjustments: 592,571 + Working capital: 574,568 + Other operating: -469,827 = 1,378,499? But stated operating CF is 1,566,829. Difference = 188,330 = tax expense! Ah! I think I see. The "Other Operating Income Expense" of 4,665 might bridge part of this, or the adjustments total is different. Actually, let me check: 681,187 + 592,571 + 574,568 - 469,827 + 4,665 = 1,383,164. Still not 1,566,829. Unless "Other Operating Income Expense" is already in net income and not an adjustment. Let me try: Maybe working capital is -574,568 (use of cash), not source? But positive in cash flow statement typically means source for liabilities increase and assets decrease. Actually, in the indirect method, the sign convention can vary. Let me check: "Increase Decrease In Working Capital" = 574,568. If this is positive, and added to net income, it means cash inflow. But looking at balance sheet: Receivables increased (use of cash), Payables increased (source of cash). Net effect seems positive (source). Hmm, let me just trust the stated operating CF of 1,566,829 and work backwards. If FFO = 1,207,013 (my calculation), and Operating CF = 1,566,829, then the difference is 359,816. This could be: - Working capital benefit: 574,568 - Less: Other non-cash items not in FFO: ? - Less: Cash items in FFO but not in operating CF: ? Actually, I think my FFO might be too high. Let me use a more conservative S&P FFO that aligns better with cash generation. S&P sometimes defines FFO as: FFO = Operating cash flow - Working capital changes + Interest paid (if in operating) - Interest received (if in operating) = 1,566,829 - 574,568 + 123,524 - 15,680 = 1,100,105 This is after interest, after tax, excluding working capital, but adding back interest paid (wait, that makes it pre-interest). Hmm, if I add back interest paid, I'm getting pre-interest. S&P FFO is after interest. Let me try: FFO = Operating CF - Working capital changes = 1,566,829 - 574,568 = 992,261 Or: FFO = Operating CF + Interest paid - Interest received - Working capital changes = 1,566,829 + 123,524 - 15,680 - 574,568 = 1,100,105. But this is pre-interest. For after-interest FFO: 1,100,105 - 123,524 + 15,680 = 992,261. Same as above. So FFO excluding working capital = 992,261. Or if we include sustainable working capital: FFO = Operating CF = 1,566,829. I think for S&P, when working capital is unusually beneficial, they exclude it. So FFO = 992,261 might be appropriate. But let me check if 574,568 is unusually large. It's 28% of revenue, and payables increased significantly. I'll exclude it. So FFO = 992,261 Net debt (average) = 6,988,820 FFO / Net Debt = 992,261 / 6,988,820 = 0.1420 or 14.20% Or if using gross debt (no cash subtraction): 992,261 / (8,097,859 + 8,249,032)/2 = 992,261 / 8,173,446 = 0.1214 S&P uses net debt, so 14.20%. But wait, I want to verify this is in the right ballpark for a utility. FFO/Net Debt of 14-20% is typical for utilities. Let me check if my FFO is reasonable. Actually, I realize I should look at what Red Eléctrica actually reports or what S&P rates them. Red Eléctrica is a regulated utility with stable cash flows. FFO/Net Debt around 15-20% seems reasonable. Let me also try using year-end net debt with this FFO: 992,261 / 7,454,208 = 0.1331 or 13.31% Or with beginning net debt: 992,261 / 6,523,432 = 0.1521 or 15.21% I think S&P uses average, so around 14.2%. But let me reconsider if I should include working capital. For a growing company, some payables increase is normal. If revenue grew 3.2%, maybe 3.2% of payables increase is sustainable. Payables at beginning: 802,655. 3.2% growth = 25,685. Actual increase = 357,521. Excess = 331,836. So maybe sustainable working capital benefit = 25,685, and one-time = 331,836? But this is arbitrary. Actually, looking at the cash flow, "Variacion En Acreedores Comerciales..." = 503,102. This includes more than just trade payables. It might include contract liabilities, accrued expenses, etc. Some of this could be normal business growth. For simplicity, I'll use FFO = Operating CF - Working capital changes = 992,261 as conservative, or FFO = 1,100,000 as moderate. Let me settle on FFO = 1,019,026 from the EBITDA - cash interest - cash taxes approach. This is a common S&P shortcut. FFO / Average Net Debt = 1,019,026 / 6,988,820 = 0.1458 or 14.6% Or using my more detailed FFO of 1,207,013: 1,207,013 / 6,988,820 = 0.1727 or 17.3% Given the uncertainty, let me use a figure around 15-17%. Actually, I want to check one more thing. S&P sometimes reports FFO/Debt as a percentage, and sometimes as a multiple (Debt/FFO). The ratio FFO/Debt is usually expressed as a percentage. Let me also verify my net debt calculation. Should I include all financial liabilities or just borrowings? Looking at S&P's typical practice for utilities: They include long-term debt, short-term debt, and current portion of long-term debt. They may also include finance leases and other debt-like items. For Red Eléctrica, "Other Financial Liabilities" of 57,264 (noncurrent) and 983,432 (current) seem large, especially current. Let me investigate what these are. At 2023-01-01, Other Current Financial Liabilities = 983,432. This increased from 752,703. This is larger than current borrowings of 721,845. Could this include dividends payable? The dividend per share is 1 EUR, shares outstanding roughly 270,540,000 / par value... actually issued capital is 270,540,000, which might be at par. If 1 EUR/share and 270.5 million shares, dividend of 1 EUR/share = 270.5 million. But "Dividendo ACuenta" (interim dividend) is 147,143. So maybe final dividend payable is around 123,000? Not enough to explain 983,432. Could "Other Current Financial Liabilities" include accrued interest? Interest on 8 billion debt at 3% = 240 million annually, so quarterly accrual = 60 million. Not enough. Could it include derivative payables? Current derivative liabilities = 7,053. Not enough. Could it include commercial paper or short-term notes? Possibly, but those should be in "Current Borrowings". Actually, looking at the name "Other Current Financial Liabilities", this might include: - Accrued interest - Finance lease liabilities (current portion) - Derivative liabilities - Dividends payable - Other accrued financial obligations For S&P, if these are debt-like, they should be included. But 983,432 seems very large for these items. Wait - I need to re-check. Is 983,432 in thousands or actual EUR? The data shows "983432000 EUR" in the original, so it's 983,432,000 EUR. Yes, about 1 billion EUR. Actually, looking back at the original data format: "Other Current Financial Liabilities" 2023-01-01: 983432000 EUR. So 983,432,000 EUR. Hmm, let me think about what this could be. Red Eléctrica is an electricity transmission company. They might have: - Payables to grid operators - Regulatory liabilities - Customer deposits - Transmission tariff liabilities These might be classified as "financial liabilities" under IFRS if they have a financing component or are contractual obligations. For S&P analysis, they would examine these carefully. Some might be operating liabilities (excluded from debt), some debt-like (included). Given the uncertainty, let me use both approaches: Approach 1: Strict debt (only borrowings) Net debt avg = 5,565,805 FFO = 1,019,026 Ratio = 18.3% Approach 2: Broad debt (all financial liabilities) Net debt avg = 6,988,820 FFO = 1,019,026 Ratio = 14.6% I think S&P likely uses a broader definition, so 14.6% or with my higher FFO, 17.3%. Let me check one more thing. The "Noncurrent Financial Liabilities" and "Current Financial Liabilities" totals might include items that are not debt. But in IFRS, "financial liabilities" typically means contractual obligations to deliver cash or another financial asset, which includes debt. However, trade payables are usually not classified as "financial liabilities" under IFRS - they're "trade and other payables". In this data, "Trade And Other Current Payables" is separate from "Current Financial Liabilities". So "Current Financial Liabilities" should be debt or debt-like. So my broad debt approach seems correct. Final calculation: FFO = 1,019,026 (EBITDA - cash interest - cash taxes) or FFO = 1,207,013 (net income + D&A + deferred taxes + other non-cash) I'll use FFO = 1,100,000 as a middle estimate, or more precisely let me calculate from operating CF: FFO = Operating CF - Working capital changes + Interest paid - Interest received (if interest is in operating) - ... Actually, let me use the most standard S&P formula I can find in their methodology: "FFO = Net income from continuing operations + depreciation and amortization + deferred income taxes + other non-cash items" = 681,187 + 544,992 + 21,189 + 35,046 (provisions) - 50,405 (undistributed, if we consider it non-cash to remove) - 24,996 (grants, non-cash to remove) + 708 (loss to add back, if it's a loss) = 1,207,721 Let me round to 1,207,721. Average net debt = 6,988,820. Ratio = 1,207,721 / 6,988,820 = 0.1728 or 17.28% Hmm, but I want to verify if undistributed profits should be subtracted. In S&P's formula, "other non-cash items" includes items that are in net income but not cash. Undistributed profits are non-cash income, so they should be SUBTRACTED from net income to get FFO (since FFO is cash-based). Similarly, grants are non-cash income, subtract. Provisions are non-cash expense, add back. So yes, FFO = 1,207,721 seems reasonable. But wait - I need to check if S&P includes equity income in FFO or not. Equity income is part of operating activities for a holding company, but the cash received is only dividends. For FFO, S&P might exclude undistributed equity income. Actually, looking at S&P's treatment of equity-accounted investments: They typically include dividends received in FFO, not the equity income. So excluding undistributed profits is correct. However, for some companies with significant equity investments, S&P might treat them differently. Red Eléctrica's equity income is 50,405 vs net income of 681,187, so about 7.4%. Not huge, but material. Let me also consider: should I use "Comprehensive Income" instead of "Profit Loss"? No, S&P uses net income from continuing operations, not comprehensive income. One more check: My FFO of 1,207,721 vs Operating CF of 1,566,829. The difference is 359,108, which is roughly working capital benefit of 574,568 minus some other items. This seems reasonable - FFO excludes working capital, operating CF includes it. Actually, let me verify: 1,566,829 - 1,207,721 = 359,108. Working capital benefit was 574,568. The difference of 215,460 might be the "Other Operating Income Expense" and other items that are in operating CF but not in FFO, or vice versa. I think my FFO is reasonable. Final answer: FFO / Net Debt = 1,207,721 / 6,988,820 = 0.1728 or 17.3% But I want to also try with year-end net debt: 1,207,721 / 7,454,208 = 0.1620 or 16.2% And with FFO from EBITDA approach: 1,019,026 / 6,988,820 = 0.1458 or 14.6% Given the range of 14.6% to 17.3%, and typical S&P practice, I'll use approximately 15-17%. Let me settle on using average net debt and the more comprehensive FFO calculation: FFO = 1,207,013 (net income + D&A + deferred tax + provisions - undistributed - grants + loss on disposal) Net debt = 6,988,820 (average) Ratio = 0.1727 or 17.3% Or expressed as a percentage: 17.3% But wait, S&P sometimes expresses this as a multiple (Debt/FFO) or as a percentage (FFO/Debt). The ratio "FFO / Net debt" is typically expressed as a percentage. Actually, looking at S&P's published ratios, they often report "FFO to debt" as a percentage. For example, "FFO to debt of 15%" means FFO/debt = 15%. So my answer is approximately 17.3% or 0.173. However, I want to do one more verification. Let me check if I should use gross debt instead of net debt. S&P Global Ratings typically uses "total debt" or "net debt" depending on the context. For the "FFO to debt" ratio, they usually use total debt, not net debt. But sometimes they use net debt for "FFO to net debt". The question asks for "FFO / Net debt ratio", so I should use net debt. But let me verify: S&P's official "Funds From Operations (FFO) To Debt" ratio uses debt, not net debt. However, some variations use net debt. Given the question explicitly asks for "FFO / Net debt", I'll use net debt. Final calculation with rounded numbers: FFO ≈ 1,207 million EUR Net debt (average) ≈ 6,989 million EUR Ratio = 1,207 / 6,989 = 0.1727 Let me also check using beginning and ending net debt with the same FFO: Beginning: 1,207 / 6,523 = 0.1850 Ending: 1,207 / 7,454 = 0.1619 Average of these: (0.1850 + 0.1619) / 2 = 0.1735, close to my 0.1727. I think 0.173 or 17.3% is my best estimate. Actually, let me reconsider one more time if my FFO is too high. The operating cash flow is 1,566,829, and my FFO is 1,207,013. The difference is working capital of 574,568 minus other items. But is working capital truly non-recurring? For a utility with regulated revenues, working capital should be stable. The large benefit in 2022 might be due to: - Increased payables (possibly due to higher capex or operating expenses) - Timing of regulatory payments - Other timing differences If I use FFO = Operating CF = 1,566,829, then ratio = 1,566,829 / 6,988,820 = 0.2242 or 22.4%. This seems high for a utility. Most utilities have FFO/debt in the 15-20% range. If I use FFO = 1,019,026 (EBITDA - cash interest - cash taxes), ratio = 14.6%, which seems more typical. Let me think about which FFO is more correct. The EBITDA approach gives 1,019,026. The net income plus addbacks gives 1,207,013. The difference is 187,987. Where does this come from? Let's see: Net income approach: 681,187 + 544,992 + 21,189 + 35,046 - 50,405 - 24,996 + 708 = 1,207,721 EBITDA approach: 961,554 + 544,992 - 123,524 - 363,996 = 1,019,026 Difference: 188,695. This is roughly tax timing (188,330 - 21,189 = 167,141 current tax expense vs 363,996 cash taxes paid = 196,855 difference) plus interest timing (123,524 paid vs 116,468 expense = 7,056) = 203,911. Close to 188,695. So the EBITDA approach uses cash taxes and cash interest, while the net income approach uses tax expense and implied interest expense. The difference is timing. For S&P FFO, which is correct? S&P's formula says "deferred income taxes", not cash taxes. So they add back deferred tax expense to net income, which gives a number closer to tax expense. But they also say "funds from operations", which suggests cash generation. Actually, I think S&P's FFO is meant to be a normalized cash flow measure, not strictly accounting-based. They add back deferred taxes because they're non-cash, but they don't adjust for timing differences in cash tax payments (which wash out over time). So my net income + D&A + deferred taxes + other non-cash = 1,207,721 is the correct S&P FFO. The difference between this and operating CF is working capital and other timing differences, which S&P excludes from FFO. So I'll stick with FFO = 1,207,013 and ratio = 17.3%. But let me also check if I should use gross debt instead. S&P's "FFO to debt" typically uses total debt, not net debt. If I use total debt (no cash subtraction): Average total debt = (8,097,859 + 8,249,032) / 2 = 8,173,446 FFO / Total Debt = 1,207,013 / 8,173,446 = 0.1477 or 14.8% This is close to my EBITDA-based FFO/net debt ratio of 14.6%. Hmm, interesting. The difference between total debt and net debt is cash. If FFO includes cash generation that accumulates as cash, then using total debt might be more consistent (since FFO doesn't include cash usage for debt repayment). Actually, S&P typically uses "debt" not "net debt" for their published FFO/debt ratio. But the question asks for "FFO / Net debt ratio", so I should use net debt. Let me provide my final answer as approximately 0.173 or 17.3%. Actually, I want to do one more sanity check. Let me look at Red Eléctrica's actual S&P rating and ratios if I can infer them. Red Eléctrica is a regulated Spanish utility with stable cash flows. S&P likely rates them investment grade (BBB+ to A- range). For such utilities, FFO/debt of 15-20% is typical for the rating category. My estimate of 17.3% fits well in this range. Let me also verify by calculating Debt/EBITDA, another common S&P ratio: Average total debt = 8,173,446 EBITDA = 1,506,546 Debt/EBITDA = 5.4x For a utility with FFO/debt of 17.3%, Debt/EBITDA of 5.4x seems reasonable and consistent. Actually, let me recalculate: FFO = 1,207,013, Debt = 8,173,446. FFO/Debt = 14.8%. Debt/EBITDA = 5.4x. These are consistent with BBB rating. If FFO/Net Debt = 17.3%, that's also consistent. I'll provide 0.173 as my final answer, or more precisely 0.1727. Let me round to a reasonable precision: 0.17 or 17%. But since the data is precise, I'll give more digits. Actually, looking at S&P's published ratios, they typically report one decimal place for percentages (e.g., 17.3%). As a ratio, it would be 0.173. But the question asks for "FFO / Net debt ratio", which could be expressed as a decimal or percentage. I'll provide as decimal 0.173 or 17.3%. Wait, the format says "no units", so I should provide just the number. If it's a ratio, 0.173. If it's a percentage, 17.3. S&P typically expresses FFO/Debt as a percentage (e.g., "17%"). But mathematically it's a ratio that can be expressed as 0.17. Given the instruction says "no units", I'll provide 0.173 or 17.3. Since S&P typically uses percentage, but mathematically it's a ratio, I'll provide 0.173. Actually, re-reading S&P methodology, they sometimes report this as "FFO to debt" in percentage points. But the raw ratio is FFO divided by debt. I'll provide: 0.173 Or to be more precise with my calculations: FFO = 1,207,013,000 Net debt = 6,988,820,000 Ratio = 0.1727 Let me use 0.173. But I want to double-check my net debt one more time. Should I include noncontrolling interests or other items? No, net debt is debt minus cash. Should I include current portion of long-term debt in current debt? Yes, already included in "Current Borrowings And Current Portion Of Noncurrent Borrowings". Should I include finance leases? If they're in "Other Financial Liabilities", yes. I have included all financial liabilities. One more check: Are there any bank overdrafts or other debt not in "financial liabilities"? Probably not significant. OK, final answer: 0.173 or 17.3%. I'll provide 0.173. Actually, let me recalculate more carefully with exact numbers: FFO calculation: Net income: 681,187,000 + D&A: 544,992,000 + Deferred tax expense: 21,189,000 (DTL increase 19,839 + DTA decrease 1,350) + Provisions (non-cash): 35,046,000 - Undistributed equity income: 50,405,000 - Grant income (non-cash): 24,996,000 + Loss on disposal/impairment: 708,000? Or -708,000? For the gain/loss: P&L shows 488,000. Cash flow adjustment shows -708,000. I think the P&L "Deterioro YResultado..." of 488,000 is a loss (positive number means expense). The cash flow adjustment of -708,000 might mean we subtract 708, i.e., there was a gain. But the P&L shows a loss. This is confusing. Let me assume the cash flow adjustment is correct: -708,000 means subtract 708,000 from net income. This would mean net income included a gain of 708,000 that we need to remove? But P&L shows 488,000 positive, which if it's a loss, we should add back, not subtract. I think there might be a sign convention issue. Let me ignore this small item and use FFO without it. FFO = 681,187 + 544,992 + 21,189 + 35,046 - 50,405 - 24,996 = 1,207,013 Net debt average: Beginning: (5,953,434 + 2,144,425) - 1,574,427 = 6,523,432 Ending: (5,543,755 + 1,705,277) - 794,824 = 7,454,208 Average: 6,988,820 Ratio: 1,207,013 / 6,988,820 = 0.1727 I'll round to 0.173. Actually, I realize I should check if the question wants 2022 year-end or average. For S&P, they typically use average debt for the year when calculating ratios with flow measures like FFO. But sometimes they use year-end. If using year-end net debt: 1,207,013 / 7,454,208 = 0.1619 If using beginning net debt: 1,207,013 / 6,523,432 = 0.1850 Average: 0.1727 I think average is most appropriate. Final answer: 0.173 Or should I express as percentage 17.3? The question says "ratio", so decimal is more appropriate. Let me provide 0.17 or 0.173. I'll use 0.173 for more precision. Actually, rethinking one more time: Should I include the working capital benefit in FFO? If the payables increase is due to normal operations and is sustainable, then yes. But 574,568 seems large. If I include working capital in FFO: FFO = Operating CF = 1,566,829 FFO/Net Debt = 1,566,829 / 6,988,820 = 0.224 This seems too high. S&P typically excludes working capital changes from FFO because they're not sustainable or are timing-related. So I'll stick with FFO excluding working capital. One more alternative: S&P sometimes calculates FFO as: FFO = Operating cash flow + Interest paid - Interest received - Income taxes paid + Increase in working capital - Decrease in working capital... Actually, that gets us to EBITDA - working capital changes, roughly. Let me try: FFO = EBIT + D&A - Cash taxes = 961,554 + 544,992 - 363,996 = 1,142,550 FFO/Net Debt = 1,142,550 / 6,988,820 = 0.1635 This uses cash taxes instead of tax expense + deferred taxes. The difference is 65,463 (1,207,013 - 1,142,550 = 64,463), which is roughly the tax timing difference. I think the correct S&P FFO uses deferred taxes, not cash taxes. So 1,207,013 is correct. Final answer: 0.173 Let me write this as 0.17 or 0.173. Given the precision of the data, I'll use 0.173. Actually, I want to check one more thing. Should I use "Profit Loss" or "Profit Loss Attributable To Owners Of Parent" for net income? "Profit Loss" = 681,187,000 (total, including NCI) "Profit Loss Attributable To Owners Of Parent" = 664,731,000 "Profit Loss Attributable To Noncontrolling Interests" = 16,456,000 S&P typically uses net income from continuing operations attributable to the parent or total. For consolidated FFO, they might use total net income. But for per-share ratios, they use attributable. For FFO/debt, since debt is at consolidated level, total net income seems appropriate. But S&P sometimes adds back NCI if it's a cash outflow. Actually, NCI of 16,456 is not necessarily a cash dividend. The cash flow shows dividends paid classified as financing of 543,881, which likely includes some to NCI. For simplicity, I'll use total net income of 681,187. But if I use attributable net income of 664,731: FFO = 664,731 + 544,992 + 21,189 + 35,046 - 50,405 - 24,996 = 1,190,557 FFO/Net Debt = 1,190,557 / 6,988,820 = 0.1704 Very similar to 0.1727. The difference is small. I'll stick with total net income and 0.173. Final answer: 0.173 Or to be more precise: 0.1727 ≈ 0.173. Let me also consider if the answer should be in percentage points (17.3). The question says "ratio", which typically means the decimal form. But S&P often quotes this as "17.3%". Given "no units" instruction, I'll provide 0.173. Actually, I want to do one final check. Let me see if there's any other interpretation. Some practitioners calculate FFO as: FFO = Net income + D&A + Interest expense + Deferred taxes + Other non-cash items This is pre-interest FFO, used for "FFO to debt" where debt includes interest-bearing debt. But S&P's standard FFO is after interest. If I calculate pre-interest FFO: = 681,187 + 544,992 + 116,468 + 21,189 + 35,046 - 50,405 - 24,996 = 1,323,481 Pre-interest FFO / Total Debt = 1,323,481 / 8,173,446 = 0.1619 Or Pre-interest FFO / Net Debt = 1,323,481 / 6,988,820 = 0.1894 But S&P FFO is after interest, so this is not the right approach. OK, I'm confident with after-interest FFO of approximately 1,207,013 and ratio of 0.173. Let me provide the final answer. 0.173