Let’s go through the steps one by one. --- **Step 1 – Identify the relevant industry** EDP, S.A. is a large European utility with generation, distribution, and supply of electricity and gas. Its activities include both regulated networks and unregulated generation. Based on the provided methodology, EDP fits within **Regulated Utilities** (though it also has unregulated power and gas operations). However, the description gives a methodology for regulated utilities as the primary lens for such integrated utilities, and S&P would apply the medial or standard volatility table depending on cash flow mix. For now, I’ll proceed with the **baseline adjustments** from the methodology unless specific sector adjustments are required. We note that for FFO, the core formula is unchanged, but adjustments may be needed for pension, leases, and joint ventures. --- **Step 2 – Estimate Adjusted EBITDA** From the income statement we can reconstruct EBITDA: - **Profit before income tax and CESE** = **1,619,773,000 EUR** - Add back: **Finance Costs** = 1,753,220,000 EUR - Less: **Finance Income** = (843,000,000) EUR That gives **EBIT** = 1,619,773,000 + 1,753,220,000 - 843,000,000 = **2,529,993,000 EUR** (This matches "Profit Loss Before Financial Income And Financial Expenses, Income Tax ..." given.) Now add back **Depreciation, Amortisation and Impairment**: - D&A = 1,979,007,000 EUR So **EBITDA (reported)** = 2,529,993,000 + 1,979,007,000 = **4,509,000,000 EUR**. Check from data: "Profit Loss Before Provisions Amortisation And Impairment ..." = 4,523,539,000 EUR. Difference is **Provisions** (14,539,000 EUR) — yes, so EBITDA before provisions = 4,523,539,000 EUR. Provisions are non-cash, so including them: EBITDA = 4,523,539,000 – 14,539,000 + 0 = 4,509,000,000 EUR. --- **Adjustments**: - **Leases**: Right-of-use assets exist (1,320,270,000 EUR as of 2023), so lease depreciation must be removed; but S&P’s method adds back lease expense (interest + depreciation) for Adjusted EBITDA. Given no explicit split, simplified approach: Add back lease interest portion later in interest. For EBITDA, we must remove lease depreciation—but not given directly, so leave as is for now, unless S&P adds lease expense. However, in baseline formula: *adjustment_leases* = add back operating lease expense in EBITDA if not already included. Usually, IFRS 16 puts depreciation and interest separately—so EBITDA already excludes interest, but depreciation of right-of-use is part of D&A. Common S&P adjustment: Add back lease depreciation for adjusted EBITDA and treat lease debt separately. We’ll add it back: **+1320m?** Wait, that's asset, not depreciation. We don't have the exact lease depreciation. Given no exact number, skip explicit lease adjustment (will reflect in debt instead). - **Non-recurring items**: "Gains Losses On Disposal And Scope Effects Except Asset Rotation" = -4,377,000 EUR (loss). Add back if non-recurring: +4,377,000. - **Pension**: Non-current provisions for employee benefits decreased from 940m to 644m; likely includes pension. The changes in OCI show remeasurement gains, but no need for EBITDA adjustment unless significant. - **Joint ventures**: "Joint Ventures And Associates" = 239,429,000 EUR income included above EBITDA. S&P often excludes JV income from EBITDA unless proportional consolidation used. So subtract 239,429,000 EUR for unadjusted EBITDA if equity-accounted. Given listed as part of "Profit Loss Before Provisions Amortisation ...", it’s included. So **Adjusted EBITDA = 4,509,000,000 – 239,429,000 + 4,377,000 = 4,273,948,000 EUR**. --- **Step 3 – Estimate FFO** **Formula**: FFO = Adjusted EBITDA – cash interest – cash taxes. - **Cash interest**: Finance Costs = 1,753,220,000 EUR (includes lease interest). Finance Income = 843,000,000 EUR, mostly interest received. Net interest = 910,220,000 EUR (given as "Adjustments For Finance Income Cost" in cash flow). We'll take this as cash net interest: 910,220,000 EUR. - **Cash taxes**: Income tax expense = 398,490,000 EUR. Adjust for deferred tax: Deferred tax liabilities increase from 989,078,000 to 1,244,593,000 = +255,515,000, Deferred tax assets increase from 1,509,092,000 to 1,784,292,000 = +275,200,000. Net deferred tax liability change = +255,515,000 – (+275,200,000) = –19,685,000 (net DTA increase). Thus cash taxes = 398,490,000 – (–19,685,000) = 418,175,000 EUR. Add CESE (51,534,000 EUR) which in FFO is treated as tax-like: total cash taxes = 469,709,000 EUR. So **FFO** = 4,273,948,000 – 910,220,000 – 469,709,000 = **2,894,019,000 EUR**. --- **Step 4 – Estimate Adjusted Debt** **Formula**: Adjusted Debt = reported debt + leases + pension deficit + guarantees + hybrid portion + other – eligible cash. - Reported debt (long-term + current borrowings): Long-term borrowings = 15,782,604,000 Current borrowings = 4,239,869,000 Total = 20,022,473,000 EUR. - Leases: Right-of-use assets 1,320,270,000 EUR → approximate lease liability same = 1,320,270,000. - Pension deficit: Non-current employee benefits provision = 644,299,000 + current 126,767,000 = 771,066,000. - Guarantees: Collateral deposits non-current and current = 23,765,000 + 29,336,000 = 53,101,000. - Hybrid: Not present. - Other debt-like: "Institutional Partnerships In North America" = 2,212,162,000 (treated as debt by S&P). Also "Other Noncurrent Financial Liabilities" 5,159,496,000 and current other financial liabilities 3,600,893,000 — but those may include derivatives; exclude unless specified. I’ll only include the institutional partnerships and collateral deposits. - Cash adjustment: Cash and equivalents 4,900,205,000 EUR, but S&P caps eligible cash. Use full for now (no cap info). So **Adjusted Debt** = 20,022,473,000 + 1,320,270,000 + 771,066,000 + 53,101,000 + 2,212,162,000 – 4,900,205,000 = **19,478,867,000 EUR**. --- **Step 5 – FFO / Adjusted Debt** = 2,894,019,000 / 19,478,867,000 = **0.1486** (rounded to 4 decimals). --- 0.1486