# S&P FFO-to-Debt Analysis for ENI S.P.A. (2022)

## Step 1: Identify the Relevant Industry

ENI S.P.A. is an integrated energy company with operations in:
- **Oil & Gas Exploration & Production (E&P)** - primary business
- **Gas & Power** - downstream and trading operations
- **Renewable Energy** - emerging segment

The most applicable S&P methodology is **Oil and Gas Exploration and Production** given the company's core business. However, given the integrated nature with significant downstream/midstream operations, elements of the general corporate methodology will apply as well.

---

## Step 2: Estimate Adjusted_EBITDA

### Reconstruct EBITDA from Income Statement (FY 2022):

From the data for period 2022-01-01 to 2023-01-01:

```
Profit from Operating Activities:     17,510 million EUR
+ Depreciation & Amortization:        +7,205 million EUR
+ Impairment Loss (net):              +1,140 million EUR
+ Write-offs of Assets:               +599 million EUR
─────────────────────────────────────────────────────
EBITDA (reconstructed):               26,454 million EUR
```

### Adjustments per S&P Methodology:

For E&P companies integrated with downstream operations:

**Lease Adjustments (IFRS 16):**
- Noncurrent Lease Liabilities (2022): 4,389 million EUR
- Current Lease Liabilities (2022): 948 million EUR
- Right-of-use Assets (2022): 4,821 million EUR
- Lease Expense Normalization: Given IFRS 16 treatment, lease-related adjustments are already largely reflected in operating expenses. Minimal additional adjustment needed.
- **Lease adjustment: ~0 million EUR** (already captured in reported figures)

**Non-recurring Items:**

Non-recurring gains/losses identified:
- Other Operating Income/Expense (2022): -1,736 million EUR (loss)
- Impairment reversals: +1,140 million EUR (already in EBITDA)
- Gains on financial assets: -55 million EUR (loss)
- Other gains/losses on investments: +3,623 million EUR (gains)

**Treatment:** For E&P companies, gains/losses on investments and asset disposals should be normalized. The -1,736 million in other operating expense appears to include non-recurring items. The +3,623 million in investment income appears non-recurring.

Net non-recurring adjustments:
- Remove: -1,736 (other operating loss - appears to include writedowns/provisions)
- Remove: +3,623 (gains on investments - non-recurring)
- **Net adjustment: +1,887 million EUR**

**Pension/Post-Retirement Adjustments:**
- Noncurrent provisions for employee benefits (2022): 819 million EUR
- Changes in benefit liabilities (2022): minimal
- **Pension adjustment: ~0 million EUR** (stable, no major adjustments needed)

**Joint Venture/Associate Adjustments:**
- Investment in equity-accounted investments (2022): 5,887 million EUR
- Share of profit/loss of equity-accounted investments: -1,091 million EUR
- These represent significant associate activities. Given the methodology for E&P companies, we use proportional consolidation:
- **JV adjustment: +1,091 million EUR** (add back equity-accounted losses to arrive at proportional basis)

### Adjusted_EBITDA Calculation:

```
EBITDA (reconstructed):               26,454 million EUR
+ Lease adjustments:                  +0
+ Non-recurring items (net):          +1,887
+ Equity-accounted JV adjustment:     +1,091
─────────────────────────────────────────────────────
Adjusted_EBITDA (FY 2022):            29,432 million EUR
```

---

## Step 3: Estimate FFO

### Cash Interest Calculation:

From the cash flow statement (period 2022-01-01 to 2023-01-01):
- Interest Paid (Operating Activities): 851 million EUR

This is the actual cash interest paid. We can validate against:
- Finance Costs (P&L): 9,333 million EUR
- Interest Expense adjustment: 1,033 million EUR
- The difference reflects non-cash finance costs and accruals

**Cash Interest: 851 million EUR**

### Cash Taxes Calculation:

From the cash flow statement (period 2022-01-01 to 2023-01-01):
- Income Taxes Paid: 8,488 million EUR

Validation:
- Income Tax Expense (P&L): 8,088 million EUR
- Difference of 400 million reflects timing differences
- The cash tax paid of 8,488 is the appropriate measure

**Cash Taxes: 8,488 million EUR**

### FFO Calculation:

```
Adjusted_EBITDA:                      29,432 million EUR
- Cash Interest:                      -851
- Cash Taxes:                         -8,488
─────────────────────────────────────────────────────
FFO (FY 2022):                        20,093 million EUR
```

---

## Step 4: Estimate Adjusted_Debt

### Components of Adjusted Debt:

**Reported Debt (as of 2022-01-01, beginning of fiscal 2022):**
- Short-term Borrowings: 2,299 million EUR
- Current Portion of Long-term Borrowings: 1,781 million EUR
- Long-term Borrowings: 23,714 million EUR
- **Total Reported Debt: 27,794 million EUR**

**Lease Liabilities (IFRS 16):**
- Current Lease Liabilities: 948 million EUR
- Noncurrent Lease Liabilities: 4,389 million EUR
- **Total Lease Liabilities: 5,337 million EUR**

**Pension Deficit:**
- Noncurrent Provisions for Employee Benefits: 819 million EUR
- Net Deferred Tax Assets: 2,713 million EUR (asset, not liability)
- **Pension adjustment: ~0 million EUR** (no underfunded position evident)

**Hybrid Debt/Perpetual Instruments:**
- The data shows "Other Reserves" and "Retained Earnings" related to perpetual subordinated bonds
- Proceeds from perpetual subordinated bonds (2021): 1,985 million EUR
- These are classified as equity but may have debt-like characteristics
- S&P treatment: Typically 50% of perpetual subordinated bonds treated as debt
- **Estimated hybrid debt portion: ~1,000 million EUR**

**Other Debt-like Items:**
- Guarantees: Not explicitly mentioned; assume none
- Asset-backed securitizations: Not mentioned; assume none

**Eligible Cash (to subtract):**
- Cash and Cash Equivalents (2022-01-01): 8,254 million EUR
- Current Financial Assets at Fair Value (2022-01-01): 6,301 million EUR
- Other Current Financial Assets (2022-01-01): 4,308 million EUR
- **Total Cash/Equivalents: 18,863 million EUR**

However, per S&P guidelines, we should apply restrictions:
- Only unrestricted cash is eligible
- Given the nature of the company (oil & gas operations), a portion of current financial assets may be restricted or held for specific purposes
- Conservative approach: Use only Cash and Cash Equivalents
- **Eligible Cash: 8,254 million EUR**

### Adjusted_Debt Calculation:

```
Reported Debt:                        27,794 million EUR
+ Lease Liabilities:                  +5,337
+ Pension Adjustments:                +0
+ Hybrid Debt (50% of perpetuals):    +1,000
+ Other Debt-like Items:              +0
─────────────────────────────────────────────────────
Gross Adjusted Debt:                  34,131 million EUR
- Eligible Cash:                      -8,254
─────────────────────────────────────────────────────
Adjusted_Debt (FY 2022):              25,877 million EUR
```

---

## Step 5: Calculate FFO / Adjusted_Debt Ratio

```
FFO / Adjusted_Debt = 20,093 / 25,877
                    = 0.7759
```

---

## Summary of Calculations:

| Item | Amount (million EUR) |
|------|---------------------|
| Adjusted_EBITDA | 29,432 |
| Cash Interest | 851 |
| Cash Taxes | 8,488 |
| FFO | 20,093 |
| Adjusted_Debt | 25,877 |
| **FFO / Adjusted_Debt** | **0.7759** |

---

<answer>0.7759</answer>