I need to estimate the FFO / Net debt ratio for 2022 based on S&P methodology. First, let me understand S&P's methodology for FFO (Funds From Operations): - FFO typically equals: Net income + Depreciation/Amortization + Deferred income taxes + Other non-cash items For S&P specifically, FFO is generally calculated as: - Net income + Depreciation and amortization + Deferred income taxes + Other non-cash charges Let me identify the relevant figures from the data for 2022 (2022-01-01 to 2023-01-01): 1. **Profit Loss (Net Income)**: 14,996,000,000 DKK 2. **Depreciation Amortisation And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss**: 12,283,000,000 DKK 3. **Deferred Tax Assets change**: - 2023-01-01: 13,719,000,000 DKK - 2022-01-01: 13,281,000,000 DKK - Change: 13,719,000,000 - 13,281,000,000 = 438,000,000 DKK (increase in deferred tax assets, which is a use, so negative for FFO) Actually, for FFO, we add back the deferred tax expense. Let me look at the income tax expense and deferred tax liabilities too. 4. **Income Tax Expense Continuing Operations**: 2,613,000,000 DKK 5. **Deferred Tax Liabilities**: - 2023-01-01: 7,414,000,000 DKK - 2022-01-01: 5,616,000,000 DKK - Change: 1,798,000,000 DKK increase For S&P FFO, the standard formula is: FFO = Net Income + Depreciation & Amortization + Deferred Income Taxes + Other non-cash items The "Deferred Income Taxes" component in S&P methodology typically refers to the change in deferred taxes (both assets and liabilities), or more precisely, the portion of income tax expense that is deferred rather than current. Actually, let me use a more standard S&P approach: FFO = Profit Loss + Depreciation Amortisation + (Increase in Deferred Tax Liabilities - Increase in Deferred Tax Assets) + Other non-cash items Or more simply for S&P: FFO = Net Income + D&A + Deferred Tax Expense Where Deferred Tax Expense = Change in Deferred Tax Liabilities - Change in Deferred Tax Assets (or looking at the balance sheet changes) Change in Deferred Tax Assets: 13,719 - 13,281 = 438 increase (negative for cash) Change in Deferred Tax Liabilities: 7,414 - 5,616 = 1,798 increase (positive for cash) Net deferred tax change (source of cash): 1,798 - 438 = 1,360 million DKK But wait - this is the balance sheet approach. The income tax expense is 2,613. The current portion would be roughly: income taxes paid of 1,263. So deferred portion might be around 2,613 - 1,263 = 1,350, which roughly matches. For S&P FFO, I should use: - Net Income: 14,996 + D&A: 12,283 + Deferred tax expense (the non-cash portion): approximately the change in net deferred taxes Actually, standard S&P Global methodology for FFO: FFO = Net income before extraordinary items + Depreciation and amortization + Deferred income taxes + Other non-operating losses/gains adjusted Let me also consider if there are other items. Looking at the cash flow statement adjustments: - Adjustments For Losses Gains On Disposal Of Noncurrent Assets: -10,885 (gain, so subtract) - Change In Derivatives Other Adjustments: -8,687 - Adjustments For Provisions: -1,935 - Other Adjustments To Reconcile Profit Loss: -278 For S&P FFO, we typically add back: - D&A: 12,283 - Deferred taxes: ~1,360 (from balance sheet changes, or we can derive) Let me calculate more carefully using the cash flow approach. The operating cash flow before working capital changes would be: From the cash flow data: Profit Loss: 14,996 + Adjustments For Losses Gains On Disposal Of Noncurrent Assets: -10,885 (this is a gain, so negative adjustment) + Change In Derivatives Other Adjustments: -8,687 + Adjustments For Provisions: -1,935 + Other Adjustments To Reconcile Profit Loss: -278 + Adjustments For Decrease Increase In Inventories: 1,419 + Adjustments For Decrease Increase In Contract Assets...: -1,303 + Adjustments For Decrease Increase In Trade Account Receivable: -2,875 + Adjustments For Decrease Increase In Other Operating Receivables: 2,742 + Adjustments For Increase Decrease In Trade Account Payable: 3,886 + Adjustments For Increase Decrease In Tax Equity Partner Liabilities: -353 + Adjustments For Increase Decrease In Other Operating Payables: -38 + Interest Received: 7,985 + Interest Paid: -8,548 + Income Taxes Paid: -1,263 = Cash Flow From Operating Activities: 11,924 For FFO (S&P), we want to exclude working capital changes and interest/dividends: Start with Operating Cash Flow: 11,924 + Interest Paid (operating): 8,548 + Income Taxes Paid: 1,263 - Interest Received: 7,985 - Working capital changes: - Inventories: -1,419 - Contract assets/liabilities: +1,303 - Trade receivables: +2,875 - Other operating receivables: -2,742 - Trade payables: -3,886 - Tax equity partner liabilities: +353 - Other operating payables: +38 Wait, let me be more careful. S&P FFO is: Funds from operations = Cash flow from operating activities + Increase in operating working capital uses - Decrease in operating working capital sources + Interest paid - Interest received (if classified as operating) + Income taxes paid Actually, let me use the more direct S&P formula: FFO = Net Income + D&A + Deferred Income Taxes + Other non-cash items Where: - Net Income = 14,996 - D&A = 12,283 - Deferred Income Taxes = Change in deferred tax liabilities - Change in deferred tax assets = 1,798 - 438 = 1,360 But wait, I need to check if the income tax expense already includes this. The total income tax expense is 2,613. If cash taxes paid are 1,263, then deferred tax expense is 2,613 - 1,263 = 1,350. This is close to my balance sheet calculation of 1,360. Actually, for S&P methodology, they typically define FFO as: FFO = Net income + Depreciation & amortization + Deferred income taxes + Other non-cash items "Other non-cash items" would include things like gains/losses on disposals, provisions, etc. But S&P is somewhat specific. Let me look at what they typically include. Standard S&P FFO calculation: 1. Start with net income: 14,996 2. Add D&A: +12,283 3. Add deferred income taxes: +1,360 (approximate, using balance sheet change) 4. Add other non-cash items (like gains/losses on asset sales, etc. that are non-operating) For "other non-cash items" in S&P context, this typically includes: - Gains/losses on disposals of investments: -331 (loss/gain, need to check sign) Looking at the P&L: "Gains Losses On Disposals Of Investments" = 331 (positive = gain) In the cash flow adjustments: "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" = -10,885. This seems to include more than just the 331 gain. Let me check... Actually the 331 is "Gains Losses On Disposals Of Investments" in the P&L section. But the cash flow adjustment is -10,885 for "Adjustments For Losses Gains On Disposal Of Noncurrent Assets". This is likely much larger because it includes disposals of PPE, not just investments. For S&P FFO, we add back gains on disposal (subtract them from net income since they're non-recurring/non-operating): - Gains on disposals: -331 (from investments) and potentially more from the -10,885 adjustment Actually, let me re-read. The cash flow adjustment of -10,885 means there was a gain of 10,885 that needs to be subtracted. This is likely the total gain on disposal of non-current assets. But wait, looking at the P&L structure: - Profit Loss From Operating Activities: 19,774 - Gains Losses On Disposals Of Investments: 331 - Share Of Profit Loss Of Associates Non Core: 40 - Finance Income: 15,514 - Finance Costs: -18,050 = Profit Loss Before Tax: 17,609 So the 331 is already in the net income. For S&P FFO, we want to exclude non-operating and non-recurring items. Let me try a cleaner approach using S&P's typical formula: FFO = Net income from continuing operations + Depreciation and amortization + Deferred income taxes + Other non-cash items in net income - Gain (or + loss) on asset sales and other non-operating items Actually, S&P Global Ratings methodology for FFO: FFO = Funds from operations = net income from continuing operations + depreciation and amortization + deferred income taxes + other non-cash items Where "other non-cash items" are items like: - Stock-based compensation - Provisions - Impairments (if not already in D&A) - Gains/losses on asset sales (if included in net income) But importantly, S&P excludes: - Gains on asset sales (subtract these) - Interest income/expense (keep these in, or adjust depending on definition) Actually, I need to be more careful. Let me look at what S&P typically does for FFO/Net Debt. For S&P, FFO is typically: Net income + D&A + Deferred taxes + Other non-cash expenses - Gain on asset sales + Other adjustments Let me calculate using the direct approach with available data: Net income: 14,996 + D&A: 12,283 + Deferred tax expense (non-cash portion): approximately 1,360 (from balance sheet: 1,798 - 438) - Gain on disposals of investments: -331 - Share of profit of associates (non-cash, but this is already in net income... actually we add back if it's equity method? No, equity method earnings are typically excluded or kept depending on cash received) Actually, for S&P FFO: - Equity in earnings of unconsolidated affiliates: S&P typically DEDUCTS equity earnings (since it's non-cash) and ADDS dividends received. From the data: - Share Of Profit Loss Of Associates And Joint Ventures Core Business: 114 - Share Of Profit Loss Of Associates And Joint Ventures Non Core Business: 40 Total equity earnings: 154 Dividends received from investments: "Dividends Received And Capital Reduction Classified As Investing Activities" = 23 So adjustment: -154 + 23 = -131 (remove equity earnings, add dividends) But wait, this is getting complicated. Let me try a different approach - use the cash flow statement and adjust to get FFO. Cash Flow From Operating Activities: 11,924 To get to FFO from CFO (S&P methodology): - Subtract: Changes in working capital (operating) - Add back: Interest paid (if included in CFO) - Add back: Income taxes paid (if included in CFO) - Subtract: Interest received (if included in CFO) - Add/Subtract: Other items Actually, S&P FFO is typically BEFORE working capital changes and BEFORE interest and taxes. Let me calculate: CFO: 11,924 + Interest Paid (operating): 8,548 + Income Taxes Paid: 1,263 - Interest Received (operating): 7,985 = 13,750 (this is roughly operating cash flow before interest and taxes, but still after working capital) Now adjust for working capital: + Decrease in inventories (source): -1,419 (actually increase was source? Let me check: adjustment was +1,419, meaning inventory decrease) Wait: "Adjustments For Decrease Increase In Inventories" = 1,419. Positive means inventory decreased (source of cash). To remove working capital effects: - Inventory decrease: -1,419 (was a source, so subtract to exclude) - Contract assets/liabilities: +1,303 (was a use, so add back) - Trade receivables increase: +2,875 (was a use, so add back) - Other receivables decrease: -2,742 (was a source, so subtract) - Trade payables increase: -3,886 (was a source, so subtract) - Tax equity partner liabilities decrease: +353 (was a use, so add back) - Other payables decrease: +38 (was a use, so add back) Working capital adjustment total: -1,419 + 1,303 + 2,875 - 2,742 - 3,886 + 353 + 38 = -3,478 So: 13,750 + 3,478 = 17,228 Hmm, but this includes the gain/loss on disposals and other items. Let me check. Actually, let me verify by working from net income up: Net income: 14,996 + D&A: 12,283 + Provisions adjustment (non-cash): -1,935 (wait, this is negative, meaning provisions decreased... actually in cash flow it's an adjustment of -1,935, meaning provision decrease was added back? No, let me re-read) Looking at cash flow adjustments: "Adjustments For Provisions" = -1,935. This means provisions decreased, which reduced profit but was not a cash flow? Actually no - if provisions decrease (used), it's a cash outflow or non-cash reversal. Actually in indirect method: - If provisions increase: add back (expense without cash) - If provisions decrease: subtract (cash use without expense, or reversal of expense) So -1,935 means provisions decreased, which is subtracted from net income to get CFO. For FFO, we want to add back the provision expense (non-cash), so if provisions decreased, this was a cash use or non-cash gain. Let me think... Actually, I think the cleanest S&P approach is: FFO = Net income + D&A + Deferred taxes + Other non-cash charges Where "Other non-cash charges" includes things like: - Asset impairment (already in D&A?) - Stock compensation - Non-cash restructuring charges - Provisions (if non-cash) - Less: gains on asset sales From the data, let me identify: - D&A: 12,283 (includes impairment) - Deferred taxes: ~1,360 - Provisions change: need to check if non-cash. The cash flow shows -1,935 adjustment. Actually, let me look at this differently. The cash flow from operations is 11,924. This includes: - Net income: 14,996 - Various adjustments to reconcile to cash For S&P FFO, a common practical formula is: FFO = CFO + Cash interest paid + Cash taxes paid - Working capital changes Or: FFO = EBIT + D&A - Cash taxes paid Let me try: EBIT = Profit Loss From Operating Activities + Finance Income - Finance Costs? No wait... Profit Loss From Operating Activities: 19,774 (this is EBIT if no other interpretation) Actually this is before interest and taxes, so yes EBIT ≈ 19,774 Wait, let me check: Profit Loss From Operating Activities: 19,774 - Gains on disposals: 331 - Share non-core associates: 40 + Finance Costs: 18,050 - Finance Income: 15,514 = Profit Before Tax: 17,609? Let me verify: 19,774 + 331 + 40 + ... Actually looking at structure: Profit Loss From Operating Activities: 19,774 + Gains Losses On Disposals Of Investments: 331 + Share Of Profit Loss Non Core: 40 + Finance Income: 15,514 - Finance Costs: -18,050 = 17,609. Yes: 19,774 + 331 + 40 + 15,514 - 18,050 = 17,609. Correct. So EBIT = 19,774 (but this includes some non-operating items?) For S&P, FFO = EBIT + D&A - Cash taxes... no wait, that's not right. Standard S&P: FFO = Net income + D&A + Deferred taxes + Other non-cash - Gain on sales Let me use: Net income: 14,996 + D&A: 12,283 + Deferred tax expense (non-cash): Let's calculate as change in deferred tax liabilities - change in deferred tax assets = (7,414 - 5,616) - (13,719 - 13,281) = 1,798 - 438 = 1,360 But I need to be careful. Is the deferred tax expense already reflected in the income tax expense of 2,613? Yes. And is the 2,613 already in net income? Yes (subtracted to get from 17,609 to 14,996). So the non-cash portion of tax is 1,360. The cash portion is roughly 1,263 (taxes paid). 1,360 + 1,263 = 2,623 ≈ 2,613. Close enough (difference due to other items). So add back deferred tax: +1,360 Other non-cash items / adjustments: - Gains on disposals: -331 (subtract this gain as it's non-operating/non-recurring) - Share of profit associates (equity method): -154 (this is non-cash earnings, but we typically keep or adjust based on dividends) Actually for S&P, equity earnings are typically REMOVED from FFO and dividends received are ADDED. But this gets complicated. Let me try a simpler verified approach. S&P Global typically calculates FFO as: FFO = Net income from continuing operations + Depreciation & amortization + Deferred income taxes + Other non-cash items in net income - Gain (or + loss) on asset sales/divestitures + Other adjustments "Other non-cash items in net income" might include: - Provisions: Looking at cash flow, the provision adjustment was -1,935. This means provision expense was negative (i.e., income). For FFO, if there was a provision reversal (non-cash income), we'd subtract it. Actually, let me look at what the -1,935 provision adjustment means. In indirect method: CFO = Net income + Adjustments If adjustment for provisions is -1,935, and assuming this means "add back provision expense", then provision expense was -1,935 (i.e., a reversal of 1,935). This reduced net income but didn't use cash (actually increased cash by reducing provision). Wait, I need to be more careful. A negative adjustment means... in standard indirect method: - Depreciation: positive adjustment (add back) - Gain on sale: negative adjustment (subtract) So "Adjustments For Provisions" = -1,935 means... if provisions decreased, this could be: - If provision expense was negative (reversal), we subtract it from net income (it was a credit to P&L) - Or if it's an adjustment for cash use... Actually, looking at typical cash flow statements: "Adjustments for provisions" usually means adding back the provision charge. If it's negative, then the provision charge was negative (i.e., a release). So provision release of 1,935 increased net income but didn't generate cash. For FFO, we should subtract this release (since it's non-cash income). Similarly, "Other Adjustments To Reconcile Profit Loss" = -278, likely other non-cash income. And "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" = -10,885. This is a gain of 10,885 that needs to be subtracted. But wait, the P&L only shows 331 for investments. The 10,885 likely includes gains on PPE disposals (like asset sales). For S&P FFO, we want to exclude gains on asset sales. Let me recalculate more carefully: Net income: 14,996 + D&A: 12,283 (definitely add) + Deferred tax expense: 1,360 (add non-cash tax) - Gain on disposals of non-current assets: -10,885 (subtract the gain... wait, I need to add back the negative adjustment? No) Let me think. The cash flow statement already adjusted for these. But for FFO, we're working from net income. Actually, let me use the verified formula from S&P documentation: FFO = Net income + Depreciation and amortization + Deferred income taxes + Other non-cash items Where for "Other non-cash items" we consider items that are: 1. Included in net income 2. Non-cash 3. Not financing-related From our data, items to potentially adjust: - Gain on disposals of non-current assets: 10,885 (from cash flow adjustment, this is the amount of gain) - Provision release: 1,935 (non-cash income) - Other adjustments: 278 (non-cash income) - Equity in earnings of associates: 154 (non-cash, but operating?) Actually, I realize the cash flow adjustment of -10,885 for "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" tells us that the gain was 10,885 (positive in P&L, so subtracted in cash flow). But where is this 10,885 in the P&L? Looking at the detailed P&L: - "Other Income": 14,119 - "Other Expense By Nature": 4,963 The gain on disposals might be in Other Income or might be separate. The 331 is explicitly "Gains Losses On Disposals Of Investments". The 10,885 might include gains on PPE, which could be in Other Income or separate. Actually, looking more carefully at the P&L structure, I think the 10,885 gain is the total gain on disposal of non-current assets, which would include PPE and possibly other items. This might be partly in "Other Income" or separate line items. For S&P FFO, let me use: FFO = Net income + D&A + Deferred taxes - Gain on asset sales + Other non-cash expenses = 14,996 + 12,283 + 1,360 - 10,885 + ? Wait, if I subtract the gain of 10,885, I get: 14,996 + 12,283 + 1,360 - 10,885 = 17,754 But I need to check if there are other items. The provision release of 1,935 was non-cash income, so subtract: 17,754 - 1,935 = 15,819 Other adjustments of 278 (non-cash income): 15,819 - 278 = 15,541 But wait - I need to be more careful about what's already in D&A and what's separate. Let me try yet another approach. S&P sometimes calculates FFO as: FFO = Cash flow from operating activities + Increase in operating working capital uses (or - decrease) - Decrease in operating working capital sources (or + increase) + Cash interest paid - Cash interest received (if in CFO) + Cash taxes paid From our data: CFO: 11,924 + Interest paid: 8,548 + Income taxes paid: 1,263 - Interest received: 7,985 = 13,750 (operating cash flow before interest and tax) Now for working capital: Working capital sources/uses in CFO: - Inventories decrease: +1,419 (source) - Contract assets/liabilities: -1,303 (use) - Trade receivables increase: -2,875 (use) - Other receivables decrease: +2,742 (source... wait, the adjustment is +2,742, meaning decrease was positive for cash? Let me check: "Adjustments For Decrease Increase In Other Operating Receivables" = 2,742. Positive means decrease in receivables (source of cash). Actually, I need to reverse all working capital changes to get pre-working capital cash flow: To remove working capital effects: - If inventory decreased (source +1,419): to remove, subtract 1,419 - If contract assets/liabilities net use (-1,303): to remove, add 1,303 - If trade receivables increased (use -2,875): to remove, add 2,875 - If other receivables decreased (source +2,742): to remove, subtract 2,742 - If trade payables increased (source +3,886): to remove, subtract 3,886 - If tax equity partner liabilities decreased (use -353): to remove, add 353 - If other payables decreased (use -38): to remove, add 38 Net working capital adjustment to remove: -1,419 + 1,303 + 2,875 - 2,742 - 3,886 + 353 + 38 = -3,478 So: 13,750 - (-3,478)? No wait, I need to think more carefully. CFO includes working capital changes. To get FFO (which excludes working capital changes), I need to REVERSE the working capital effects. CFO = Net income + Non-cash adjustments + Working capital changes + Interest received - Interest paid - Taxes paid Actually, let me verify: 11,924 = 14,996 + (-10,885 - 8,687 - 1,935 - 278 + 1,419 - 1,303 - 2,875 + 2,742 + 3,886 - 353 - 38) + 7,985 - 8,548 - 1,263 Let me calculate adjustments: -10,885 - 8,687 - 1,935 - 278 + 1,419 - 1,303 - 2,875 + 2,742 + 3,886 - 353 - 38 = -24,307 Then: 14,996 - 24,307 + 7,985 - 8,548 - 1,263 = 14,996 - 24,307 - 1,826 = -11,137... That doesn't equal 11,924. I made an error. Let me recheck. The interest and taxes might be part of the adjustments or separate. Looking at the cash flow items, the structure seems to be: Net income: 14,996 + Adjustments (non-cash, working capital): various = Cash flow before interest and tax: ? + Interest received: 7,985 - Interest paid: -8,548 - Income taxes paid: -1,263 = CFO: 11,924 So: Cash flow before interest and tax = 11,924 - 7,985 + 8,548 + 1,263 = 13,750 And: 14,996 + non-cash adjustments + working capital changes = 13,750 So: non-cash adjustments + working capital changes = 13,750 - 14,996 = -1,246 Let me verify: -10,885 - 8,687 - 1,935 - 278 + 1,419 - 1,303 - 2,875 + 2,742 + 3,886 - 353 - 38 = -24,307? That seems way off. Wait, I need to re-add: -10,885 - 8,687 = -19,572 -19,572 - 1,935 = -21,507 -21,507 - 278 = -21,785 -21,785 + 1,419 = -20,366 -20,366 - 1,303 = -21,669 -21,669 - 2,875 = -24,544 -24,544 + 2,742 = -21,802 -21,802 + 3,886 = -17,916 -17,916 - 353 = -18,269 -18,269 - 38 = -18,307 Hmm, -18,307 ≠ -1,246. There's a discrepancy. Let me check if I missed something. Actually, I think the issue is that "Change In Derivatives Other Adjustments" of -8,687 might include interest-related derivatives or other items that are financing, not operating. Or my understanding of the signs is wrong. Let me try a completely different, more direct approach using the standard S&P formula without trying to reconcile the cash flow statement: **Standard S&P FFO Formula:** FFO = Net income + D&A + Deferred income taxes + Other non-cash items Where: - Net income = 14,996 - D&A = 12,283 - Deferred income taxes = Change in deferred tax liabilities - Change in deferred tax assets Deferred tax liabilities: 7,414 (2023) - 5,616 (2022) = 1,798 increase Deferred tax assets: 13,719 (2023) - 13,281 (2022) = 438 increase Net deferred tax liability increase = 1,798 - 438 = 1,360. This is a non-cash credit to tax expense, so add 1,360. Other non-cash items: This is tricky. S&P typically includes things like: - Provisions (if non-cash expense) - Impairments (if not in D&A) - Gains/losses on asset sales (if non-cash/non-operating) But D&A of 12,283 already includes impairment. Let me check if there are separate impairments... the line says "Depreciation Amortisation And Impairment Loss Reversal Of Impairment Loss" so yes, impairments are included. For other non-cash items, I need to look at what's in net income that's non-cash: - Equity in earnings of associates: 114 + 40 = 154 (non-cash, but operating? S&P typically excludes equity earnings and includes dividends) - Gain on disposals of investments: 331 (non-operating, non-cash) - Finance income/costs: includes non-cash items like fair value changes Actually, for a cleaner S&P FFO, let me use what I think is most standard: FFO = Net income from continuing operations + D&A + Deferred taxes + Other non-cash items Where "Other non-cash items" = items that reduced net income but didn't use cash, or increased net income but didn't generate cash. From the cash flow adjustments, the non-cash items that adjusted net income were: - Gains on disposals: -10,885 (gain, reduced net income adjustment) - Derivatives and other: -8,687 - Provisions: -1,935 (release, increased net income) - Other: -278 But these are adjustments TO net income to GET to CFO. So if net income already includes a gain of 10,885, the adjustment subtracts it. For FFO, we want to START from net income and add back non-cash expenses, subtract non-cash gains. Actually, I think the most reliable S&P approach for this data is: FFO = EBIT + D&A - Cash taxes Where EBIT = Profit Loss From Operating Activities adjusted for non-operating items... or just use: FFO = Profit Loss From Operating Activities + D&A - Cash taxes paid? No, that's double counting D&A. Let me try: FFO = EBITDA - Cash taxes EBITDA = Profit Loss From Operating Activities + D&A = 19,774 + 12,283 = 32,057 Wait, that's already given: "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense" = 32,057. Yes! So EBITDA = 32,057 But this includes other income/expenses that might be non-operating or non-recurring. For S&P FFO from EBITDA: FFO = EBITDA - Cash taxes paid (approximate) Cash taxes paid = 1,263 (from cash flow) But wait, we also need to subtract interest paid if it's in EBITDA? No, EBITDA is before interest. Actually, let me check: "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense" = 32,057. This is essentially EBITDA. But this includes: - Other Income: 14,119 - Other Expense By Nature: 4,963 And the operating profit includes gains/losses that might be non-recurring. For S&P, a more refined FFO from EBITDA: FFO = EBITDA - Cash taxes ± adjustments for non-recurring items But actually, standard S&P is: FFO = Net income + D&A + Deferred taxes + Other non-cash Let me go with my best estimate: Net income: 14,996 + D&A: 12,283 + Deferred taxes (non-cash): 1,360 - Gain on asset sales (non-operating, non-recurring): -10,885 (this is the total from cash flow, but let me verify if this is correct) Hmm, but 10,885 seems very large. Let me check if this makes sense. If I subtract 10,885: 14,996 + 12,283 + 1,360 - 10,885 = 17,754 If I also adjust for provision release (non-cash income): -1,935 → 15,819 And other non-cash: -278 → 15,541 This seems reasonable. But I need to check if the 10,885 gain is really non-operating. Actually, looking at Ørsted's business - they build and sell wind farms. Gains on disposal of non-current assets might actually be part of normal operations (selling completed projects). This is a business model decision. For S&P, if asset sales are part of normal operations, we might not adjust. But typically, S&P still adjusts for gains/losses on asset sales in FFO. Let me try a different approach - look at what equity research or rating agencies actually use for Ørsted. Actually, I recall that for renewable energy companies like Ørsted, FFO typically includes: - Operating cash flows - Add back working capital changes - Add back interest paid - Add back taxes paid And the gain on farm-downs (selling stakes in projects) is often treated as operating or separately. Given the complexity, let me use the most standard S&P formula with available data: **FFO = Net income + D&A + Deferred income taxes + Other non-cash items** Where I'll define: - Net income: 14,996 - D&A: 12,283 - Deferred taxes: 1,360 (from balance sheet changes) - Other non-cash: I'll include provision changes and other items From cash flow adjustments, the "non-cash" or "non-operating" items that affected net income: - Gains on disposals: 10,885 (but this might be operating for Ørsted) - Derivatives: 8,687 (fair value changes, typically financing/hedging) - Provisions: 1,935 (release) - Other: 278 For S&P, "Other non-cash items" typically includes items like provisions, fair value changes on derivatives if operating, etc. Actually, I think I'm overcomplicating this. Let me use a simplified but standard approach: **FFO = CFO + Interest paid + Current taxes paid - Working capital changes ± Other adjustments** Or from the cash flow: CFO: 11,924 + Interest paid: 8,548 + Income taxes paid: 1,263 - Interest received: 7,985 (this is typically excluded from FFO or kept depending on definition) = Before interest and tax: 13,750 Then add back working capital uses / subtract sources: Working capital was net source of: let's calculate +1,419 (inventory decrease) -1,303 (contract) -2,875 (receivables increase) +2,742 (other receivables decrease) +3,886 (payables increase) -353 (tax equity decrease) -38 (other payables decrease) = +3,478 (net source) So to get pre-working capital: 13,750 + 3,478 = 17,228 But this includes the non-cash adjustments (gains, derivatives, provisions, etc.). To get "pure" FFO, we need to think about what S&P wants. Actually, S&P FFO is typically AFTER non-cash adjustments but BEFORE working capital and interest. So 17,228 might be close, but we need to adjust for non-recurring/non-operating items. The non-cash adjustments in CFO were: - Gains on disposals: -10,885 - Derivatives: -8,687 - Provisions: -1,935 - Other: -278 These adjusted net income to get to "cash flow before working capital". If we reverse the working capital, we get back to "net income + non-cash adjustments". For FFO, S&P typically: - Excludes gains on asset sales (subtract them if in net income) - Excludes fair value gains on derivatives (if financing) - Includes provision changes (if operating) - Includes D&A (always) Hmm. Let me try yet another formula. Some S&P documents define FFO as: FFO = Net income + Depreciation & amortization + Deferred taxes + Other non-cash expenses - Gain on asset sales + Loss on asset sales For Ørsted 2022: = 14,996 + 12,283 + 1,360 - 10,885 (gain on non-current assets) - 331 (gain on investments) + other items = 14,996 + 12,283 + 1,360 - 10,885 - 331 = 17,423 But wait, is the 10,885 already in net income? The cash flow adjustment suggests yes. And the 331 is separately stated in P&L. Actually, I realize the 10,885 might already include the 331. Let me assume they're separate or the 331 is part of 10,885. If I use: 14,996 + 12,283 + 1,360 - 10,885 = 17,754 Then for provisions: if the -1,935 was a release (income), subtract it: 15,819 This seems like a reasonable FFO estimate. But let me also consider: should I add back interest expense? No, S&P FFO is typically before interest but after tax... actually no, standard FFO is from net income so it's after interest and after tax. Wait, I need to clarify. S&P's FFO is typically: - After interest expense (i.e., include interest expense in the calculation, don't add it back) - After taxes - Before working capital changes - Before non-recurring items Actually, looking at S&P's published methodology more carefully: "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 and AFTER taxes. So my calculation of ~15,000-18,000 is in the right ballpark. Let me also check if there's a simpler formula using EBITDA: FFO ≈ EBITDA - Interest expense - Cash taxes + Other adjustments EBITDA: 32,057 - Finance Costs: 18,050 + Finance Income: 15,514 - Taxes: 2,613 = 26,908... this doesn't match net income path. Actually: EBITDA 32,057 - D&A 12,283 = EBIT 19,774. Then - Finance costs 18,050 + Finance income 15,514 = 17,238. Then - Tax 2,613 = 14,625 ≈ Net income 14,996. Close but not exact due to other items. Let me try: FFO = EBITDA - Cash interest paid - Cash taxes paid = 32,057 - 8,548 - 1,263 = 22,246 But this is too high and not standard S&P. Going back to standard S&P: FFO = Net income + D&A + Deferred taxes + Other non-cash I'll use: - Net income: 14,996 - D&A: 12,283 - Deferred taxes: 1,360 - Less: Gain on asset sales (non-operating portion): I'll estimate 10,885 (from cash flow) + 331 (investments) = 11,216, but this might double count. Let me use just the explicit gains. Actually, for Ørsted, gains on selling project stakes are often considered operating. Let me be more conservative and only subtract the 331 investment gain. FFO = 14,996 + 12,283 + 1,360 - 331 = 28,308 But this seems high. Let me check if S&P typically includes or excludes these gains. For Ørsted specifically, I recall that rating agencies treat farm-down gains as part of FFO because they're integral to the business model. But they might adjust the timing. Actually, let me look at this from a different angle. The "Other Income" of 14,119 is quite large. This likely includes farm-down gains and other items. For a more accurate FFO, let me use the cash flow approach and adjust: CFO: 11,924 + Interest paid: 8,548 + Taxes paid: 1,263 - Interest received: 7,985 = 13,750 (cash flow before interest and tax) Now, this includes working capital and non-cash adjustments. To get FFO, I want to remove working capital but keep the non-cash adjustments (or adjust them). Working capital was net source of 3,478. So pre-working capital was 13,750 + 3,478 = 17,228? No wait - if working capital was a source (positive for cash), then pre-working capital cash flow would be lower. Actually: CFO = Pre-working capital cash flow + Working capital source So: Pre-working capital = CFO - Working capital source = 11,924 - 3,478 = 8,446? That can't be right with interest and taxes. Let me re-think. The structure is: CFO = Net income + Non-cash adjustments + Working capital changes + Interest received - Interest paid - Taxes paid Or: CFO = (Net income + Non-cash adjustments + Working capital changes) + Interest received - Interest paid - Taxes paid Actually no, interest and taxes are usually part of net income and cash flows. Let me just use: Pre-interest, pre-tax, pre-working capital cash flow = Net income + Non-cash adjustments From before: 14,996 + (-10,885 - 8,687 - 1,935 - 278) for non-cash, non-working-capital items... but these include working capital too. I think the items are mixed. Let me separate: Non-cash, non-working capital: -10,885 (gains) - 278 (other) = -11,163 Working capital: 1,419 - 1,303 - 2,875 + 2,742 + 3,886 - 353 - 38 = 3,478 Provisions and derivatives: -1,935 - 8,687 = -10,622... wait, are these non-cash or working capital? Actually "Change In Derivatives Other Adjustments" likely includes fair value changes (non-cash) and margin/collateral movements (working capital-like). Given the complexity, let me use a simplified standard approach: **FFO = Net income + D&A + Deferred taxes** = 14,996 + 12,283 + 1,360 = 28,639 This is the most basic S&P FFO, sometimes called "adjusted FFO" before other items. But S&P typically also adjusts for non-recurring/non-operating items. If I subtract major gains: - Gain on disposals of investments: 331 - Gains on other non-current assets: ? From the cash flow, total gain on non-current asset disposals was 10,885. But this might include normal operations. For a conservative estimate, let me subtract all gains: 28,639 - 10,885 - 331 = 17,423 Or if I only subtract investment gains (clearly non-operating): 28,639 - 331 = 28,308 I think for Ørsted, given their business model of building and selling wind farms, the 10,885 gain on non-current assets might actually be operating (farm-downs). Let me check if this is in "Other Income". "Other Income": 14,119. This is quite large and likely includes farm-down gains. For S&P rating purposes, I believe they typically treat Ørsted's farm-down gains as part of FFO but may smooth them or use a lower number. Let me try to find a middle ground. I'll use: FFO = Net income + D&A + Deferred taxes - Gain on investments (clearly non-operating) = 14,996 + 12,283 + 1,360 - 331 = 28,308 But I should also consider if there are other non-cash items to add back. The "Other Expense By Nature" of 4,963 might include some non-cash items, but it's likely mostly cash. Actually, let me look at this more carefully. The basic EBITDA is 32,057. If I subtract cash interest and cash taxes: 32,057 - 8,548 (interest paid) - 1,263 (taxes paid) = 22,246 But this is not standard FFO. Standard FFO from net income adds back D&A and deferred taxes because these are non-cash. Let me verify with another formula: FFO = EBIT + D&A - Cash taxes (approximate) EBIT = 19,774 (operating profit) + some adjustments... actually 19,774 is already EBIT. 19,774 + 12,283 - 1,263 = 30,794? No, D&A is already above EBIT. Wait, "Profit Loss From Operating Activities" = 19,774. This is after D&A but before interest and tax. So it's EBIT. EBITDA = EBIT + D&A = 19,774 + 12,283 = 32,057. Correct. For S&P FFO: Net income + D&A + Deferred taxes = EBIT - Interest - Taxes + D&A + Deferred taxes = 19,774 - 18,050 + 15,514 - 2,613 + 12,283 + 1,360 = 19,774 - 18,050 + 15,514 = 17,238 (EBT + finance income - finance costs adjustment... messy) Actually: Net income = 14,996 = EBIT 19,774 + Finance income 15,514 - Finance costs 18,050 - Tax 2,613 = 19,774 + 15,514 - 18,050 - 2,613 = 14,625? Hmm, 14,625 ≠ 14,996. Difference of 371. This might be due to the gains on disposals and equity earnings being in different places, or rounding. Let me check: 19,774 + 331 + 40 + 15,514 - 18,050 - 2,613 = 14,996. Yes! The operating profit 19,774 doesn't include the gains and associate earnings that are below the line. So EBIT (as S&P might define it, operating only) would be 19,774 - some items? Actually 19,774 is "Profit Loss From Operating Activities" which might include some non-operating items. For FFO, S&P typically uses "Net income from continuing operations" which includes all items below EBIT. OK, I'm going to settle on a calculation. Let me use the most common S&P formula: **FFO = Net income + D&A + Deferred taxes + Other non-cash items** With: - Net income: 14,996 - D&A: 12,283 - Deferred taxes: 1,360 (from balance sheet: increase in deferred tax liabilities 1,798 - increase in deferred tax assets 438) For "Other non-cash items", I'll consider: - Equity earnings of associates: 154 (non-cash, but operating; S&P typically excludes equity earnings and includes dividends of 23) - Gains on asset sales: 331 (investments) + possibly part of 10,885 Actually, let me check the dividend from associates: "Dividends Received And Capital Reduction Classified As Investing Activities" = 23. This is in investing, not operating. For S&P FFO, the standard adjustment for equity earnings is: - Subtract equity earnings (non-cash) - Add dividends received (cash) So: -154 + 23 = -131 But this is minor. Let me include it. Also for gains: I'll subtract the 331 gain on investments as clearly non-operating/non-recurring. For the 10,885 gain on non-current assets: This is trickier. If it's farm-downs (normal business), keep it. If it's asset sales, subtract. Given Ørsted's business, I'll assume 50% is normal (keep) and 50% is non-recurring (subtract), or just keep it all for a more standard "as reported" FFO. Let me calculate two versions: **FFO (basic, as S&P often reports)**: 14,996 + 12,283 + 1,360 = 28,639 **FFO (adjusted for non-recurring)**: 28,639 - 331 (investment gains) - 131 (net equity adjustment) - 1,935 (provision release) - 278 (other) = 24,964 Or if I subtract half of 10,885: 28,639 - 5,443 - 331 = 22,865 I think for this exercise, I should use the basic S&P FFO: 28,639 or slightly adjusted. Actually, let me reconsider. Looking at S&P's actual rating reports for European utilities/renewables, they often report FFO that excludes working capital, interest, and taxes but includes operating cash flows before these. A common practical formula is: FFO = EBITDA - Cash taxes +/− Other non-cash or non-recurring items Or: FFO = Operating cash flow + Interest paid + Taxes paid - Working capital changes Let me use: 11,924 + 8,548 + 1,263 - 7,985 + working capital adjustment Wait, I already calculated pre-interest, pre-tax, pre-working capital as roughly 17,228 or similar. Let me try: CFO 11,924 + Interest paid 8,548 + Taxes paid 1,263 - Interest received 7,985 = 13,750. This is after working capital. To remove working capital: working capital was net source of 3,478, so pre-working capital = 13,750 - 3,478 = 10,272? That seems too low. Actually no: if working capital was a source (helped cash flow), then without it, cash flow would be lower. 13,750 - 3,478 = 10,272. But this should equal net income + non-cash adjustments. Net income 14,996 + non-cash adjustments (-10,885 - 8,687 - 1,935 - 278 = -21,785) = -6,789. That doesn't match. I think my working capital calculation is wrong, or the items are categorized differently. Let me try yet again. From the cash flow statement structure: Net income: 14,996 Adjustments to reconcile: - Gains/losses on disposals: -10,885 - Derivatives and other: -8,687 - Provisions: -1,935 - Other: -278 - Inventories: 1,419 - Contract assets/liabilities: -1,303 - Trade receivables: -2,875 - Other receivables: 2,742 - Trade payables: 3,886 - Tax equity liabilities: -353 - Other payables: -38 Subtotal before interest/tax: ? Interest received: 7,985 Interest paid: -8,548 Taxes paid: -1,263 CFO: 11,924 Let me verify the subtotal: 14,996 - 10,885 - 8,687 - 1,935 - 278 + 1,419 - 1,303 - 2,875 + 2,742 + 3,886 - 353 - 38 = -3,311 Then: -3,311 + 7,985 - 8,548 - 1,263 = -5,137 ≠ 11,924 I'm clearly making sign errors or categorization errors. Let me re-read the items. Actually, I think "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" = -10,885 means this is the adjustment amount. If it's negative, and assuming the standard format where gains are subtracted, then there was a gain of 10,885. But wait - the sum doesn't work. Let me check if these are all additions or if some are presented differently. Looking at the data format: "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" 2022-01-01 - 2023-01-01: -10885000000 DKK The negative sign might indicate the nature of the adjustment (gain vs loss), not the mathematical sign in the cash flow. In many European annual reports, the cash flow statement shows: Net income + Depreciation - Gain on sale + Increase in payables - Increase in receivables = Cash flow before interest and tax So the signs in the data might already indicate the mathematical operation. Let me try adding all adjustments as presented (with their signs): 14,996 + (-10,885) + (-8,687) + (-1,935) + (-278) + 1,419 + (-1,303) + (-2,875) + 2,742 + 3,886 + (-353) + (-38) + 7,985 + (-8,548) + (-1,263) = 14,996 - 10,885 - 8,687 - 1,935 - 278 + 1,419 - 1,303 - 2,875 + 2,742 + 3,886 - 353 - 38 + 7,985 - 8,548 - 1,263 Calculate step by step: 14,996 - 10,885 = 4,111 4,111 - 8,687 = -4,576 -4,576 - 1,935 = -6,511 -6,511 - 278 = -6,789 -6,789 + 1,419 = -5,370 -5,370 - 1,303 = -6,673 -6,673 - 2,875 = -9,548 -9,548 + 2,742 = -6,806 -6,806 + 3,886 = -2,920 -2,920 - 353 = -3,273 -3,273 - 38 = -3,311 -3,311 + 7,985 = 4,674 4,674 - 8,548 = -3,874 -3,874 - 1,263 = -5,137 This is NOT 11,924. So either: 1. I'm misreading the signs 2. Some items are not part of the operating cash flow reconciliation 3. There's missing data Given that this is tagged data from an annual report, the signs might be indicating debit/credit rather than addition/subtraction in the cash flow. Let me try with all positive (absolute values) or different sign interpretation. Actually, looking at standard IFRS cash flow statements, "Interest received" and "Interest paid" are often shown as gross amounts, not adjustments. Let me see if the 7,985 and 8,548 are already included or separate. Actually, I think the issue might be that some of these "adjustments" are already the cash flow effects, not reconciling items. For example, "Interest Received Classified As Operating Activities" = 7,985 might be the actual cash received, not an adjustment to net income. Similarly, "Income Taxes Paid Classified As Operating Activities" = 1,263 is cash paid. So the reconciliation might be: Net income: 14,996 ± Adjustments (non-cash and working capital): various = Cash flow before interest and tax: X + Interest received: 7,985 - Interest paid: -8,548 - Taxes paid: -1,263 = CFO: 11,924 So: X = 11,924 - 7,985 + 8,548 + 1,263 = 13,750 And: 14,996 + adjustments = 13,750 So adjustments = -1,246 But my adjustment sum was -21,785 (non-cash) + 3,478 (working capital) = -18,307. Way off. Unless... the signs in the data indicate the nature, not the mathematical operation, and I need to interpret them differently. For example, "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" = -10,885 might mean "Gain of 10,885" which requires a negative adjustment (subtract from net income). But in the data format, the negative sign might already indicate this, or it might indicate a loss. If -10,885 means LOSS of 10,885, then we'd ADD it back. Let me try flipping all signs: 14,996 + 10,885 + 8,687 + 1,935 + 278 - 1,419 + 1,303 + 2,875 - 2,742 - 3,886 + 353 + 38 + 7,985 - 8,548 - 1,263 = 14,996 + 10,885 = 25,881 + 8,687 = 34,568 + 1,935 = 36,503 + 278 = 36,781 - 1,419 = 35,362 + 1,303 = 36,665 + 2,875 = 39,540 - 2,742 = 36,798 - 3,886 = 32,912 + 353 = 33,265 + 38 = 33,303 + 7,985 = 41,288 - 8,548 = 32,740 - 1,263 = 31,477 Still not 11,924. Hmm, let me try a mix. Maybe some items are sources (positive for cash) and some are uses, and the signs indicate this. Actually, I think the most likely explanation is that the data uses a sign convention where: - Positive = source of cash / add to net income - Negative = use of cash / subtract from net income But then "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" = -10,885 would mean... gain on disposal (use of cash? No, gain increases net income but doesn't generate cash, so it's a negative adjustment). Wait, I think I had it right originally. Let me check if maybe some items are financing or investing, not operating. "Interest Received Classified As Operating Activities" - this is operating "Interest Paid Classified As Operating Activities" - this is operating "Income Taxes Paid Classified As Operating Activities" - this is operating Hmm, but in IFRS, interest and dividends can be classified as operating or financing. Here they're operating. Let me try: maybe the "Adjustments" include interest and taxes, and the separate lines are breakdowns? No, that doesn't make sense. Actually, looking more carefully at typical cash flow statement formats: Cash flows from operating activities: Profit before tax: X Adjustments for: Depreciation: X Gain on sale: (X) Interest expense: X Interest income: (X) Working capital changes: X Interest paid: (X) Interest received: X Taxes paid: (X) = Net cash from operating activities: X In this format, interest and tax are shown separately at the bottom, not as adjustments to profit. But in the data, "Interest Paid Classified As Operating Activities" = 8,548. Is this an expense (negative) or cash outflow (positive number to be subtracted)? The sign is not explicit in the data format. Given the data format "Label: value", I think positive values are always positive, and the interpretation depends on the label. "Interest Paid" is a cash outflow, so 8,548 is the amount paid (outflow). But in the cash flow statement, it might be shown as (8,548) or as 8,548 with an implied negative. I think the issue is that the data extracts values without the bracket notation, so I need to infer signs from context. For "Interest Paid Classified As Operating Activities" = 8,548, this is likely shown as negative in the cash flow (outflow), but the data gives the absolute value or signed value. Given the label includes "Paid", it's an outflow. Similarly "Received" is inflow, "Taxes Paid" is outflow. Let me assume: - Outflows: Interest paid, Taxes paid (negative in cash flow) - Inflows: Interest received (positive in cash flow) - Adjustments: signs indicate direction (positive = add back, negative = subtract) With this, let me try: all "adjustments" are mathematical additions to net income, with their signs. "Paid" items are subtracted, "Received" items are added. Net income: 14,996 + Adjustments with their signs: -10,885 (gain, subtract) -8,687 (derivatives, whatever) -1,935 (provisions, release so subtract?) -278 (other) +1,419 (inventory decrease, add) -1,303 (contract, use so subtract?) -2,875 (receivables increase, subtract) +2,742 (other receivables decrease, add) +3,886 (payables increase, add) -353 (tax equity decrease, subtract?) -38 (other payables decrease, subtract?) + Interest received: +7,985 - Interest paid: -8,548 - Taxes paid: -1,263 I calculated this as -5,137 before. Not 11,924. Unless... the "Adjustments For..." items are not all additions. Some might be already the cash flow effect, not the adjustment to net income. Actually, I think I need to move on and use a simpler approach. Let me calculate FFO using the standard formula without relying on the cash flow reconciliation: **FFO = Net income + D&A + Deferred income taxes** = 14,996 + 12,283 + 1,360 = 28,639 For "Other non-cash items", let me add: - Provision expense (non-cash): Looking at the P&L, "Other Expense By Nature" = 4,963. This might include some provisions. But the cash flow shows -1,935 adjustment, suggesting provision release. I'll ignore as small. - Other items: minor I'll also consider subtracting non-recurring gains: - Gain on disposals of investments: 331 FFO = 28,639 - 331 = 28,308 or keep at 28,639 Now for **Net Debt**: Net Debt = Total Debt - Cash and Cash Equivalents Total Debt = Short-term borrowings + Long-term borrowings + Current lease liabilities + Non-current lease liabilities + Hybrid capital? Actually, for S&P, debt typically includes: - Short-term borrowings: 2,830 - Long-term borrowings: 60,451 - Lease liabilities (current): 569 - Lease liabilities (non-current): 7,697 - Hybrid capital: sometimes included, sometimes excluded (treated as equity by some, debt by others) S&P typically treats hybrid capital as 50% debt or 100% equity depending on features. For Ørsted's hybrid capital, S&P likely treats it as equity or 50% equity. Let me check: Hybrid Capital = 19,793 (2023) or 17,984 (2022). For year-end 2022, use 17,984. Actually, for the ratio at end of 2022, I should use 2022 balance sheet (which is 2023-01-01 in the data, since fiscal year 2022 ends Jan 1, 2023... wait, that's odd. Let me check dates. The data shows: "Cash" 2023-01-01: 16,178 "Cash" 2022-01-01: 8,624 And for income: "Revenue" 2022-01-01 - 2023-01-01: 132,277 So the fiscal year 2022 runs from 2022-01-01 to 2023-01-01. The balance at 2023-01-01 is year-end 2022. For Net Debt at year-end 2022 (i.e., 2023-01-01 balance): Debt items at 2023-01-01: - Short-term borrowings: 2,830 - Long-term borrowings: 60,451 - Current lease liabilities: 569 - Non-current lease liabilities: 7,697 Total debt (standard): 2,830 + 60,451 + 569 + 7,697 = 71,547 Cash and cash equivalents: 16,178 Net debt = 71,547 - 16,178 = 55,369 But wait, I should check if there are other debt-like items: - Current derivative financial liabilities: 33,438 (these are fair value, not principal) - Non-current derivative financial liabilities: 24,121 (fair value) - Collateral and trading derivatives: these are gross, not net debt For S&P, derivatives at fair value are typically not included in debt (they're operating/financing but not principal debt). Hybrid capital: 19,793. S&P treatment varies. If treated as 100% equity, exclude. If 50% equity/50% debt, include 9,897 as debt. Also, "Current Financial Assets At Fair Value Through Profit Or Loss Classified As Held For Trading" = 25,197. These are liquid investments, potentially included as "cash-like" if very liquid. For conservative net debt, I'll use: Debt = 71,547 Cash = 16,178 + possibly 25,197 (trading assets) = 41,375 if very liquid But standard is just cash: 16,178 Net debt = 71,547 - 16,178 = 55,369 Or if including hybrid as 50% debt: 55,369 + 9,897 = 65,266 Let me check S&P's typical treatment for Ørsted. I believe they treat hybrid as equity for net debt purposes, or mention it separately. Actually, looking at the equity section, Hybrid Capital is listed under Equity. So it's equity for accounting. S&P might treat it as equity or "hybrid" with equity content. For standard Net Debt, I'll use: 55,369 Now, FFO / Net Debt: If FFO = 28,639 and Net Debt = 55,369: Ratio = 28,639 / 55,369 = 0.517 or 51.7% If FFO = 28,308 (less investment gains): 28,308 / 55,369 = 51.1% If I use a lower FFO by subtracting more gains (say half of 10,885 = 5,443): FFO = 28,639 - 5,443 = 23,196 Ratio = 23,196 / 55,369 = 41.9% This range of 42-52% seems reasonable for Ørsted in 2022. But let me also consider if EBITDA-based FFO is more appropriate. Some practitioners use: FFO = EBITDA - Cash taxes - Cash interest + Other items = 32,057 - 1,263 - 8,548 + ? = 22,246 But this seems low for "funds from operations" since we haven't added back working capital uses. Actually, S&P's FFO is specifically from net income, not EBITDA. So 28,639 or adjusted is correct. Let me also try the "cash flow" approach to FFO: CFO = 11,924 + Interest paid = 8,548 + Taxes paid = 1,263 - Interest received = 7,985 = 13,750 (before interest and tax, after working capital) To get pre-working capital, I'd need to adjust working capital. But as I struggled with this, let me use a simpler approximation. Working capital change was roughly (from balance sheet): Current assets 2023: 112,728 vs 2022: 86,829 = increase 25,899 Current liabilities 2023: 74,868 vs 2022: 86,968 = decrease 12,100 Net working capital change: assets up 25,899, liabilities down 12,100... this is messy due to classification. From the cash flow adjustments, the net working capital effect was roughly: 1,419 - 1,303 - 2,875 + 2,742 + 3,886 - 353 - 38 = 3,478 (source) So pre-working capital cash flow from operations = 13,750 - 3,478 = 10,272? No, if working capital helped by 3,478, then without it, cash flow would be lower: 13,750 - 3,478 = 10,272. But this 10,272 includes non-cash adjustments (gains, derivatives, etc.). To get FFO, we want to remove these too. Non-cash adjustments in the cash flow: -10,885 - 8,687 - 1,935 - 278 = -21,785 If these reduced cash flow (negative adjustments), then without them, cash flow would be higher: 10,272 + 21,785 = 32,057. Hey, that's EBITDA! 32,057 - 8,548 (interest) - 1,263 (taxes) = 22,246. This is after interest and tax, before working capital. But FFO is typically after tax, after interest, before working capital. So 22,246? No wait, that doesn't match my earlier calculation. Actually: 32,057 (EBITDA) - 8,548 (interest paid, not expense) - 1,263 (taxes paid, not expense) = 22,246. This is not a standard measure. The standard S&P FFO from net income path: 14,996 + 12,283 + 1,360 = 28,639. Let me verify: 28,639 - 22,246 = 6,393 difference. This is roughly the difference between tax expense (2,613) and taxes paid (1,263) = 1,350, plus interest expense vs interest paid, plus other items. Actually, interest expense in P&L: Finance Costs 18,050 - Finance Income 15,514 = net 2,536. But interest paid is 8,548 and received is 7,985, net paid 563. Big difference due to fair value changes, accruals, etc. For S&P FFO, the net income path is more standard: 28,639. Let me finalize with: FFO = 28,639 (or slightly adjusted) Net Debt = 55,369 FFO/Net Debt = 28,639 / 55,369 = 0.517 But I want to check if I should include trading assets as cash. "Current Financial Assets At Fair Value Through Profit Or Loss Classified As Held For Trading" = 25,197. These are likely liquid securities. If cash-like = 16,178 + 25,197 = 41,375 Net debt = 71,547 - 41,375 = 30,172 FFO/Net Debt = 28,639 / 30,172 = 0.949 This is very different. S&P typically includes liquid trading securities as cash if they're readily convertible. But for standard "Net Debt", cash is usually just "Cash And Cash Equivalents" = 16,178. However, looking at Ørsted's business, they have significant trading activities in energy markets. The 25,197 might be margin accounts or trading positions, not truly excess cash. Let me also consider: should I include current derivative assets as cash? 23,433. Probably not, these are fair value of derivatives. I'll stick with standard cash: 16,178. Net debt = 55,369. For FFO, let me also consider if I should use a lower number by excluding farm-down gains. The "Other Income" of 14,119 is quite large. If this includes 10,885 of farm-down gains, and I exclude those: Adjusted FFO = 28,639 - 10,885 = 17,754 (if all farm-downs excluded) Or = 28,639 - 331 = 28,308 (if only investment gains excluded) For S&P, they typically publish both "FFO" and "adjusted FFO". The standard FFO includes recurring items. Given that Ørsted's farm-downs are recurring (they regularly sell stakes in projects), I'll include them in FFO. Final calculation: FFO = 14,996 + 12,283 + 1,360 = 28,639 Net Debt = 71,547 - 16,178 = 55,369 FFO / Net Debt = 28,639 / 55,369 = 0.5173 Or approximately 51.7%, or 0.52x. Wait, I should double-check my debt calculation. Are there other borrowings? "Shortterm Borrowings": 2,830 "Longterm Borrowings": 60,451 Any other debt? - "Current Derivative Financial Liabilities": 33,438 - these are mark-to-market, not borrowings - "Noncurrent Derivative Financial Liabilities": 24,121 - same - "Collateral Posted In Relation To Trading Of Derivatives": this is cash collateral, already in cash/debt? - Lease liabilities: 569 + 7,697 = 8,266 Total debt-like: 2,830 + 60,451 + 8,266 = 71,547. Yes. But wait, I should check if "Non Current Tax Equity Liabilities" or "Current Tax Equity Liabilities" are debt-like. These are tax equity partnership liabilities, which are a form of financing. "Non Current Tax Equity Liabilities": 14,490 "Current Tax Equity Liabilities": 1,903 Total tax equity liabilities: 16,393 These represent tax equity partner interests in projects. Are they debt? They're typically classified as liabilities but are more like equity in economic substance (partnership interests). For S&P net debt, tax equity liabilities are often included as debt-like obligations or treated separately. If included: Total debt = 71,547 + 16,393 = 87,940 Net debt = 87,940 - 16,178 = 71,762 FFO/Net Debt = 28,639 / 71,762 = 0.399 This is significantly different. Let me check S&P's typical treatment. For US renewable energy projects, tax equity (partnership flip structures) is typically not treated as debt by S&P because it's non-recourse and structured as equity. However, the "liability" classification suggests it might be debt-like. Looking at the balance sheet, "Tax Equity Liabilities" are separate from borrowings. For conservative net debt, I might include them. But actually, looking more carefully: "Non Current Tax Equity Liabilities" and "Current Tax Equity Liabilities" - these are likely obligations to tax equity partners, similar to non-controlling interests but structured as liabilities due to partnership accounting. For standard Net Debt calculation, I'll exclude these as they're not borrowings. Final answer: FFO / Net Debt = 28,639 / 55,369 = 0.517 Let me round to reasonable precision: 0.52 or 51.7%. Actually, I want to do one more verification. Let me see if there's an alternative FFO calculation that gives a similar result. From EBITDA: 32,057 Less: Interest paid (not expense): 8,548? No, S&P FFO doesn't work this way. From the cash flow: If I could properly calculate pre-working capital, pre-interest, pre-tax cash flow, it should equal roughly EBITDA ± other items. Actually, let me try yet another approach. S&P sometimes calculates FFO as: FFO = Operating cash flow before working capital changes - Interest paid - Taxes paid + Interest received Wait, no. Let me look up the exact S&P formula. Standard S&P Global Ratings FFO: "Funds from operations (FFO) are cash flows from operating activities before changes in working capital, plus dividends received from unconsolidated affiliates, minus cash tax payments." Or: FFO = Cash flow from operating activities before working capital changes - Cash tax payments + Dividends from affiliates Hmm, this is different from what I used. Let me recalculate. Cash flow from operating activities before working capital changes = ? From my earlier attempt, this was roughly 17,228 or similar, but I had calculation issues. Let me try: Net income + Non-cash adjustments (excluding working capital) Non-cash adjustments from cash flow statement: - Gains/losses on disposal: -10,885 - Derivatives and other: -8,687 - Provisions: -1,935 - Other: -278 These sum to: -21,785 Net income + these = 14,996 - 21,785 = -6,789. This can't be right for pre-working capital cash flow. Unless... these are not all non-cash. The "Change In Derivatives Other Adjustments" of -8,687 might include cash collateral movements (working capital-like). Let me try separating: - Gains on disposal: -10,885 (non-cash, non-recurring) - Provisions: -1,935 (non-cash) - Other: -278 (non-cash) - Derivatives: -8,687 (mixed) If derivatives include cash collateral, it's not pure non-cash. Actually, looking at the financing activities: "Collateral Posted In Relation To Trading Of Derivatives" = 48,885 and "Collateral Released" = 52,143. These are financing, not operating. So the -8,687 in operating might be fair value changes, not cash collateral. Let me try a different interpretation: maybe the signs in the data are all positive values, and I need to determine the sign from the label context. "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" = 10,885. The label says "Losses Gains" - if losses, positive adjustment (add back); if gains, negative adjustment (subtract). The value 10,885 is the magnitude. But which is it? Given the negative sign in the data (-10,885), and assuming this indicates a gain (since gains are subtracted), I'll keep my interpretation. But let me try: what if -10,885 means a LOSS of 10,885? Then we'd ADD it back. Net income + 10,885 + 8,687 + 1,935 + 278 - 1,419 + 1,303 + 2,875 - 2,742 - 3,886 + 353 + 38 + 7,985 - 8,548 - 1,263 I calculated this as 31,477 before. Still not 11,924. Hmm. What if some items are investing or financing, not operating? "Transactions With Associates And Joint Ventures Classified As Investing Activities" = 54. This is investing, not in CFO. "Dividends Received And Capital Reduction Classified As Investing Activities" = 23. Also investing. So these are correctly excluded from CFO. Let me try yet again with different sign assumptions. What if: - "Adjustments For..." items: positive value means add to net income, negative means subtract - "Interest Received": positive means add - "Interest Paid": positive means subtract (but data shows positive 8,548) - "Taxes Paid": positive means subtract (but data shows positive 1,263) If the data values are always positive magnitudes, and I need to apply signs based on "received" vs "paid": Net income: 14,996 + (-10,885) [gain, subtract] + (-8,687) [derivatives, assume negative] + (-1,935) [provisions, release so subtract? or add?] + (-278) [other] + 1,419 [inventory decrease, add] + (-1,303) [contract, use so subtract?] + (-2,875) [receivables increase, subtract] + 2,742 [other receivables decrease, add] + 3,886 [payables increase, add] + (-353) [tax equity decrease, subtract?] + (-38) [other payables decrease, subtract?] + 7,985 [interest received, add] + (-8,548) [interest paid, subtract] + (-1,263) [taxes paid, subtract] This is what I did, getting -5,137. What if provisions release is ADDED (positive adjustment)? The label says "Adjustments For Provisions" = -1,935. If this is the cash flow adjustment amount, and it's negative, it means... Actually, I think I need to accept that either: 1. The data has some formatting I don't understand 2. There are additional items not shown 3. The fiscal year is odd (Jan 1 to Jan 1) Given the fiscal year is 2022-01-01 to 2023-01-01, this is a 365-day year (2022 was not a leap year, 365 days from Jan 1 to Jan 1... actually 2022-01-01 to 2023-01-01 is 365 days). And the balance at 2023-01-01 is year-end 2022. I'll proceed with my FFO and Net Debt calculations, noting that the cash flow reconciliation has issues I can't resolve. One more check: maybe "Cash Flows From Used In Operating Activities" = 11,924 is actually the sum, and my calculation error is elsewhere. Let me try: 14,996 (net income) is the starting point. What if I use profit before tax? Profit Loss Before Tax: 17,609 - Tax expense: 2,613 = Net income: 14,996. Correct. Cash flow from operating activities: 11,924 + Tax paid: 1,263 + Interest paid: 8,548 - Interest received: 7,985 = 13,750 (before interest and tax, after working capital) Working capital effect from balance sheet: Current assets excl cash: 2022: 86,829 - 8,624 = 78,205; 2023: 112,728 - 16,178 = 96,550. Increase = 18,345 (use) Current liabilities: 2022: 86,968; 2023: 74,868. Decrease = 12,100 (use? or source?) Actually liabilities decreased, which is a use of cash (paid down). Net working capital use: 18,345 + 12,100 = 30,445? That seems too large. Hmm, but current liabilities include debt and other items. Let me exclude borrowings and leases: Current liabilities excl borrowings and leases: 2022: 86,968 - 19,493 - 720 = 66,755; 2023: 74,868 - 2,830 - 569 = 71,469. Increase = 4,714 (source). Current assets excl cash and trading securities: 2022: 78,205 - 21,228 = 56,977; 2023: 96,550 - 25,197 = 71,353. Increase = 14,376 (use). Net working capital use: 14,376 - 4,714 = 9,662. This is getting too complicated. Let me just use my original FFO and Net Debt. Final numbers: FFO = 28,639 (Net income 14,996 + D&A 12,283 + Deferred taxes 1,360) Net Debt = 55,369 (Debt 71,547 - Cash 16,178) FFO / Net Debt = 28,639 / 55,369 = 0.517 I'll express this as a ratio, typically shown as percentage or multiple. S&P usually shows FFO/Net Debt as a percentage. 0.517 = 51.7% Or as a multiple: 0.52x Actually, looking at S&P reports, they typically show: - FFO/Debt (%) - FFO/Net Debt (%) - Debt/EBITDA (x) As percentages: 51.7% or 0.52 when expressed as decimal ratio. Wait, I want to double-check my deferred tax calculation. I used balance sheet changes: Deferred tax liabilities: 7,414 - 5,616 = 1,798 increase Deferred tax assets: 13,719 - 13,281 = 438 increase Net: 1,360 increase in deferred tax liabilities net of assets But the income tax expense is 2,613, and taxes paid are 1,263. So deferred tax expense = 2,613 - 1,263 = 1,350. Close to 1,360. Actually, the tax expense might include current and deferred portions for different jurisdictions, and the balance sheet change includes FX, acquisitions, etc. So 1,360 is reasonable. One more item: should I add back the "Share Of Profit Loss Of Associates" as non-cash? These are 114 + 40 = 154. They're already in net income, and for S&P FFO, we typically subtract equity earnings and add dividends. Dividends received: 23 (from investing activities) Net adjustment: -154 + 23 = -131 FFO adjusted = 28,639 - 131 = 28,508 Minor difference. I'll use 28,639 or 28,508. Also, the "Other Comprehensive Income" and items in equity might affect this, but for standard FFO, no. Let me also verify my debt figure. Are there bank overdrafts or other borrowings? Looking through the data: - "Shortterm Borrowings": 2,830 - "Longterm Borrowings": 60,451 Any other debt-like? - "Current Derivative Financial Liabilities": 33,438 - fair value, not principal - "Noncurrent Derivative Financial Liabilities": 24,121 - fair value, not principal - "Non Current Tax Equity Liabilities": 14,490 - tax equity, not debt - "Current Tax Equity Liabilities": 1,903 - tax equity, not debt Total principal debt: 62,281 + leases 8,266 = 70,547? Wait, I had 71,547 before. 2,830 + 60,451 + 569 + 7,697 = 71,547. Yes. But 2,830 + 60,451 = 63,281. Plus 569 + 7,697 = 71,547. Correct. Cash: 16,178. Net debt: 55,369. Actually, let me also check if "Cash And Cash Equivalents" = 16,178 matches "Cash" = 16,178. Yes, same. And 2022 beginning cash: 8,624. Final ratio: 28,639 / 55,369 = 0.5173 I'll round to 0.52 or express more precisely. Given this is an estimate, I'll provide 0.52 or 51.7%. But the question asks for FFO/Net Debt ratio, which is typically expressed as a percentage or decimal. Looking at S&P methodology papers, they typically express FFO/Net Debt as a percentage (e.g., "FFO to debt of 40%"). So 51.7% or 0.52. Actually, I want to do one more sanity check. Is 55% FFO/Net Debt reasonable for Ørsted in 2022? Ørsted is a major renewable energy company. In 2022, they had high earnings due to energy prices and farm-downs. Their debt increased significantly for growth investments. A 50%+ FFO/Net Debt ratio would be quite strong, suggesting low leverage. But Ørsted has been investing heavily, so debt has grown. Actually, looking at their 2022 annual report or rating reports, I recall Ørsted's metrics were decent but not extremely strong due to high capex. Let me check if my FFO is too high. The 28,639 includes D&A of 12,283, which is a large add-back. But D&A is correct. Net income 14,996 is also high due to good operating performance and gains. If I exclude farm-down gains (say 10,000 of the 14,119 Other Income), adjusted net income might be 5,000, and FFO would be 5,000 + 12,283 + 1,360 = 18,643. Then FFO/Net Debt = 18,643 / 55,369 = 33.7%. This seems more realistic for a capital-intensive renewable developer. But S&P's standard FFO typically includes recurring gains. Farm-downs are recurring for Ørsted. I'll stick with my calculation but note it's an estimate. Final answer: 0.52 (or 51.7% as percentage, but ratio is typically shown as decimal or percentage). Actually, looking at the format "FFO / Net debt ratio", this is typically expressed as a percentage (e.g., 52%) or as a multiple (0.52x). S&P uses percentage. But the question says "ratio", so I'll provide as decimal 0.52 or percentage 51.7. Hmm, let me re-read: "estimate the FFO / Net debt ratio for 2022, based on S&P methodology" In finance, "FFO/Net Debt ratio" is typically expressed as a percentage (FFO divided by Net Debt, times 100). But sometimes as a raw ratio. I'll provide 0.52 as the decimal ratio, or 51.7 if percentage. Actually, looking at S&P's published methodology, they state metrics like "FFO to debt" and "Debt to EBITDA". The "FFO to debt" is typically expressed as a percentage. For example: "We consider FFO to debt of more than 30% to be strong." So 51.7% would be "51.7" or "0.517" depending on convention. I'll provide 0.52 as a rounded decimal, or more precisely 0.517. Let me see if I can get a more precise number. Using exact values: FFO = 14,996 + 12,283 + 1,360 = 28,639 Net Debt = 2,830 + 60,451 + 569 + 7,697 - 16,178 = 55,369 Ratio = 28,639 / 55,369 = 0.517236... Rounded: 0.52 Or if I use slightly adjusted FFO (excluding investment gains): FFO = 28,639 - 331 = 28,308 Ratio = 28,308 / 55,369 = 0.51126... Or 0.51. Given the estimation nature, I'll use 0.52. Wait, I want to check one more thing. Should I include hybrid capital in debt? Hybrid capital: 19,793 at 2023-01-01, 17,984 at 2022-01-01. S&P's treatment of hybrid capital: They assign "equity content" based on features. For Ørsted's hybrids, I believe S&P treats them as having significant equity content, possibly 100% or 50%. If 50% equity content: 50% of 19,793 = 9,897 treated as debt. Net debt with 50% hybrid = 55,369 + 9,897 = 65,266 FFO/Net Debt = 28,639 / 65,266 = 0.439 or 43.9% If 100% equity: 55,369, ratio = 51.7% For conservative estimate, maybe include 50%: 0.44 or 44%. But standard "Net Debt" typically excludes hybrid capital if it's classified as equity in accounts. Given the data shows Hybrid Capital under Equity, I'll exclude it from debt. Final answer: 0.52 (or 51.7%). Actually, I want to make one more adjustment. The "Other Income" of 14,119 is quite large. For S&P FFO, they might want to exclude non-recurring or non-operating portions. If I assume 50% of Other Income is non-recurring gains (farm-downs, etc.): Other Income = 14,119 Other Expense = 4,963 Net other = 9,156 If 50% is non-recurring gain: 4,578 Adjusted net income = 14,996 - 4,578 = 10,418 FFO = 10,418 + 12,283 + 1,360 = 24,061 Ratio = 24,061 / 55,369 = 0.435 or 43.5% This is getting too speculative. Let me stick with standard FFO. Actually, I realize I should check if S&P's FFO includes or excludes "Other Income" items. Standard FFO starts from net income which already includes Other Income. If Other Income is operating (like farm-downs), it's included. For Ørsted, farm-down gains are part of normal operations, so included in standard FFO. Final answer: 0.52 Hmm, but I want to verify this against any published metrics. Unfortunately I don't have access to Ørsted's actual S&P rating report. Let me try one more calculation using a slightly different approach that might be more standard: FFO = Cash flow from operating activities + Increase in working capital uses (or - decrease) - Decrease in working capital sources (or + increase) + Cash interest paid - Cash interest received (if included in CFO) + Cash taxes paid Wait, this is wrong. Let me think again. Standard: FFO = Cash flow from operating activities BEFORE changes in working capital and BEFORE interest and taxes. Or: FFO = CFO + Working capital uses - Working capital sources + Interest paid - Interest received + Taxes paid From my data: CFO: 11,924 Working capital: net source of 3,478 (from my earlier calc, but let me verify) Actually, I couldn't verify working capital. Let me use a different approach. From the balance sheet, rough working capital change: Current assets (excl cash, excl trading assets, excl derivatives): 2022: 86,829 - 8,624 - 21,228 - 14,078 = 42,899? Let me be more careful. Current assets 2022: 86,829 total - Cash: 8,624 - Trading assets: 21,228 - Derivatives: 14,078 - Contract assets: 0 (2 is negligible) - Trade receivables: 9,565 - Other receivables: 16,134 - Tax assets: 1,200 = 86,829 - 8,624 - 21,228 - 14,078 - 0 - 9,565 - 16,134 - 1,200 = 16,000? Doesn't sum right. Let me just use the totals: Current assets 86,829 to 112,728 = increase 25,899 Current liabilities 86,968 to 74,868 = decrease 12,100 Net: assets up 25,899, liabilities down 12,100. But this includes debt and other items. If I look at operating working capital (receivables, payables, inventory, etc.): Trade receivables: 9,565 to 12,701 = up 3,136 (use) Other receivables: 16,134 to 20,289 = up 4,155 (use) Contract assets: 0 to 408 = up 408 (use) Inventories: 15,998 to 14,103 = down 1,895 (source) Trade payables: 20,231 to 20,641 = up 410 (source) Other payables: 4,768 to 7,518 = up 2,750 (source) Contract liabilities: 2,440 to 2,269 = down 171 (use? or source?) Net operating WC: use of 3,136 + 4,155 + 408 - 1,895 - 410 - 2,750 + 171 = 2,825 (approximate use) This is very different from my 3,478 source from cash flow. I must have misinterpreted the cash flow signs. Given this confusion, I'll trust my direct FFO calculation (Net income + D&A + Deferred taxes) more than the cash flow reconciliation. Final answer: FFO / Net Debt = 0.52 (or 51.7%) I'll express as 0.52. 0.52