I'll analyze ERG S.P.A. step by step to estimate the S&P-adjusted debt-to-EBITDA ratio for 2022. ## Step 1: Identify the Relevant Industry ERG S.P.A. is an Italian renewable energy company. Based on the provided methodologies: - It is NOT a regulated utility (no rate regulation) - It is NOT oil and gas E&P (no hydrocarbon exploration/production) - It IS **unregulated power and gas** - specifically a renewable generation company The methodology states: "Unregulated power and gas companies, such as renewable generation companies, don't benefit from protective rate regulation. However, they may benefit from policy support and gain competitive strength from fixed-price or feed-in tariffs, or from long-term contractual arrangements with creditworthy off-takers." ## Step 2: Estimate Adjusted_Debt For unregulated power and gas, I need to follow S&P guidelines. Let me identify the components from the balance sheet (2022-01-01 values, which represent end of 2022 fiscal year): **Reported Debt Components:** - Noncurrent financial liabilities: Other Noncurrent Financial Liabilities = 2,064,088,000 EUR - Current financial liabilities: Other Current Financial Liabilities = 1,342,688,000 EUR - Current financial liabilities at FVTPL = 170,857,000 EUR - Noncurrent financial liabilities at FVTPL = 44,763,000 EUR **Leases:** - Noncurrent Lease Liabilities = 122,663,000 EUR - Current Lease Liabilities = 6,282,000 EUR **Pension/Employee Benefits:** - Noncurrent Provisions For Employee Benefits = 4,289,000 EUR **Cash and Equivalents:** - Cash And Cash Equivalents = 860,352,000 EUR Let me calculate total reported debt first: - Total debt = 2,064,088,000 + 1,342,688,000 + 170,857,000 + 44,763,000 = 3,622,396,000 EUR **Total leases** = 122,663,000 + 6,282,000 = 128,945,000 EUR **Pension deficit** = 4,289,000 EUR (this is a provision for employee benefits, treated as debt-like) **Eligible cash** = 860,352,000 EUR For unregulated power and gas with long-term PPAs, S&P notes: "we make adjustments to account for those obligations." However, no specific PPA debt-like obligation data is provided in the facts. **Adjusted_Debt calculation:** Adjusted_Debt = (Reported Debt + Leases + Pension deficit) - Eligible Cash Adjusted_Debt = (3,622,396,000 + 128,945,000 + 4,289,000) - 860,352,000 Adjusted_Debt = 3,755,630,000 - 860,352,000 Adjusted_Debt = **2,895,278,000 EUR** Wait - let me re-check. The S&P methodology mentions that for unregulated power and gas with long-term PPAs, they make adjustments similar to regulated utilities. But without specific PPA data, I'll proceed with standard adjustments. Actually, let me verify my debt figure. Looking more carefully: - "Other Noncurrent Financial Liabilities" = 2,064,088,000 EUR (2022-01-01) - "Other Current Financial Liabilities" = 1,342,688,000 EUR (2022-01-01) - "Current Financial Liabilities At Fair Value Through Profit Or Loss" = 170,857,000 EUR (2022-01-01) - "Noncurrent Financial Liabilities At Fair Value Through Profit Or Loss" = 44,763,000 EUR (2022-01-01) Total = 2,064,088,000 + 1,342,688,000 + 170,857,000 + 44,763,000 = 3,622,396,000 EUR Adjusted_Debt = 3,622,396,000 + 128,945,000 + 4,289,000 - 860,352,000 = **2,895,278,000 EUR** ## Step 3: Estimate Adjusted_EBITDA From the income statement for 2022-01-01 to 2023-01-01 (fiscal year 2022): **Reported EBITDA** is directly provided: - "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense" = 499,430,000 EUR Let me verify this by reconstructing: - Revenue: 713,840,000 - Other Income: 12,678,000 - Total income = 726,518,000 Expenses: - Other Purchase Expense: 15,188,000 - Services Expense And Miscellaneous Other Operating Expense: 156,792,000 - Impairment Loss Recognised In Profit Or Loss Trade Receivables: 300,000 - Employee Benefits Expense: 54,808,000 Total expenses (operating) = 15,188,000 + 156,792,000 + 300,000 + 54,808,000 = 227,088,000 Operating profit before D&A = 726,518,000 - 227,088,000 = 499,430,000 ✓ This matches the reported EBITDA figure. **Adjustments needed for S&P:** For unregulated power and gas, I need to consider: - Lease adjustments: Add back operating lease expense or adjust EBITDA for leases. Under IFRS 16, leases are capitalized, so EBITDA already includes the lease depreciation/amortization rather than lease expense. The EBITDA figure of 499,430,000 should already reflect this. Looking at the cash flow statement: - "Adjustments For Depreciation And Amortisation Expense And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss Non Current Assets" = 278,615,000 This includes: - Depreciation Expense: 176,689,000 - Amortisation Expense: 58,741,000 - Impairment Loss Reversal: 43,185,000 Total D&A = 176,689,000 + 58,741,000 = 235,430,000 Plus reversal 43,185,000 = 278,615,000 Operating profit (EBIT) = 220,814,000 EBITDA = EBIT + D&A - impairment reversal? Actually: 220,814,000 + 235,430,000 - 43,185,000 = 413,059,000? That doesn't match. Let me recalculate: Operating profit = 220,814,000 Add back: Depreciation 176,689,000 + Amortization 58,741,000 = 235,430,000 Less: Impairment reversal (43,185,000) - this is a gain 220,814,000 + 235,430,000 - 43,185,000 = 413,059,000? Still wrong. Wait - the impairment reversal is already in the operating profit. Let me check: Profit Loss From Operating Activities = 220,814,000 If we add back D&A (235,430,000) and subtract the reversal (since it's a gain that boosted operating profit): 220,814,000 + 235,430,000 - 43,185,000 = 413,059,000 But reported EBITDA is 499,430,000. Actually, looking more carefully at the line: "Adjustments For Depreciation And Amortisation Expense And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss Non Current Assets" = 278,615,000 This is a cash flow adjustment. The impairment reversal of 43,185,000 is subtracted in the cash flow (it's a non-cash gain). So: From operating profit 220,814,000: - Add depreciation and amortization: 235,430,000 - Subtract impairment reversal: (43,185,000) - wait, this is already included in the 278,615,000? 278,615,000 = 176,689,000 + 58,741,000 + 43,185,000? No, 176,689,000 + 58,741,000 = 235,430,000. Plus 43,185,000 = 278,615,000. So the adjustment adds back D&A and also adds back the impairment reversal (which was a negative expense, i.e., a gain, so it was subtracted to get to operating profit). Operating profit = Revenue + Other income - expenses + impairment reversal - D&A Actually, let me trace through: Revenue: 713,840,000 Other Income: 12,678,000 Expenses: 15,188,000 + 156,792,000 + 300,000 + 54,808,000 = 227,088,000 = 499,430,000 before D&A and impairment Then: 499,430,000 - 176,689,000 - 58,741,000 + 43,185,000 = 307,185,000? But operating profit is 220,814,000. Hmm, let me check: 499,430,000 - 235,430,000 + 43,185,000 = 307,185,000. Not 220,814,000. There must be other operating expenses not listed. The difference is 307,185,000 - 220,814,000 = 86,371,000 of other unlisted expenses. Anyway, the key point is that **EBITDA = 499,430,000 EUR** is directly reported. **Lease adjustment for EBITDA:** Under IFRS 16, the EBITDA already excludes lease depreciation (it's added back). However, S&P typically adjusts EBITDA to add back the lease depreciation and subtract the lease interest to get a "clean" EBITDA. But with IFRS 16, reported EBITDA is already pre-lease depreciation. Actually, for IFRS 16, EBITDA includes depreciation of right-of-use assets in depreciation expense, but this is already added back in the EBITDA calculation. The lease payment itself is split into principal (financing) and interest. The interest portion is in finance costs. Looking at finance costs: 112,195,000 total. This includes lease interest. For S&P purposes, we typically want to adjust EBITDA to reflect operating lease expense rather than the IFRS 16 treatment. However, the standard approach now with IFRS 16 is to use reported EBITDA and add debt for leases. Actually, S&P methodology states for leases: they capitalize operating leases and add to debt. For EBITDA, they typically make no adjustment or add back the lease depreciation and amortization if it was subtracted. Given IFRS 16, the reported EBITDA of 499,430,000 should be appropriate as-is for S&P purposes, since D&A includes ROU asset depreciation but EBITDA is before D&A. **Nonrecurring items:** - Impairment reversal of 43,185,000 - this is a gain, should we normalize it out? - "Other Adjustments For Noncash Items" = -198,570,000 (this includes various items) For S&P, we typically normalize out nonrecurring gains/losses. The impairment reversal is a nonrecurring gain. However, looking at 2021, there was also a reversal of 22,016,000. This seems somewhat recurring. Actually, the S&P methodology says to make "nonrecurring_losses - nonrecurring_gains" adjustments. The impairment reversal is a nonrecurring gain. But wait - in the cash flow, "Adjustments For Depreciation And Amortisation Expense And Impairment Loss Reversal" = 278,615,000. This adds back the reversal (since it's a non-cash gain that reduced operating profit). For EBITDA purposes, since EBITDA is already before this item, we don't need to adjust EBITDA for it. The EBITDA of 499,430,000 is the right starting point. Let me check if there are other adjustments needed: **Discontinued operations:** - Profit Loss From Discontinued Operations = 294,131,000 This is a significant item. For S&P adjusted EBITDA, we typically want ongoing operations. However, the EBITDA of 499,430,000 is from operating activities, which likely includes or excludes discontinued operations? Looking at the structure: "Profit Loss From Operating Activities" = 220,814,000 is for continuing operations (before finance costs). The discontinued operations is a separate line below. So EBITDA of 499,430,000 should be for continuing operations. But wait - let me verify with the cash flow: "Cash Flows From Used In Operating Activities Continuing Operations" = 502,520,000 "Cash Flows From Used In Operating Activities Discontinued Operations" = 43,594,000 The operating cash flow from continuing operations is 502,520,000, close to EBITDA of 499,430,000 (difference due to working capital, taxes, etc.). Actually, for S&P, when there are discontinued operations that are being sold/spun off, we might want to include or exclude depending on timing. Given the large discontinued operations profit, and that assets held for sale are 776,220,000 at 2022-01-01, this seems like a major divestiture. However, for the 2022 fiscal year, the EBITDA is 499,430,000 as reported. If discontinued operations contributed to this EBITDA, we should consider normalizing. Looking more carefully: The EBITDA line doesn't specify "continuing" or not. But "Profit Loss From Operating Activities" is 220,814,000, and then discontinued operations is separate below. Actually, I think the EBITDA of 499,430,000 includes all operations, and then discontinued operations are separated below the operating profit line. Let me re-read: "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense" = 499,430,000 "Profit Loss From Operating Activities" = 220,814,000 Then below that: "Finance Income" etc. "Share Of Profit Loss..." "Profit Loss Before Tax" = 186,535,000 Then "Profit Loss From Continuing Operations" = 88,966,000 Then "Profit Loss From Discontinued Operations" = 294,131,000 So the operating activities and EBITDA are before the separation into continuing/discontinued. The 499,430,000 should include both. For S&P purposes, if discontinued operations are being divested, we might want to exclude them. But without specific breakout, and given the methodology typically uses reported figures, I'll use 499,430,000. However, let me think about this more. The "Cash Flows From Used In Operating Activities Continuing Operations" = 502,520,000 and "Cash Flows From Used In Operating Activities Discontinued Operations" = 43,594,000. Total operating cash flow = 546,114,000, but reported as 458,926,000? Wait: 502,520,000 + 43,594,000 = 546,114,000, but "Cash Flows From Used In Operating Activities" = 458,926,000. Hmm, 502,520,000 + 43,594,000 doesn't equal 458,926,000. Let me re-read: "Cash Flows From Used In Operating Activities Discontinued Operations" = 43,594,000 - this is positive (used in = negative, but the value is positive 43,594,000, meaning cash generated?). Actually the label says "Cash Flows From Used In" - the positive number 43,594,000 might represent cash generated from discontinued operations. 502,520,000 (continuing, positive = generated) + 43,594,000 (discontinued, positive = generated?) = 546,114,000, but total is 458,926,000. Actually, re-reading: "Cash Flows From Used In Operating Activities" = 458,926,000. The wording "From Used In" suggests this could be negative (used in). But the number is positive. Let me check: "Cash Flows From Used In Operating Activities Continuing Operations" = 502,520,000 - positive means cash generated. Hmm, but then total should be higher, not lower. Unless discontinued is negative (used in operations). Wait: "Cash Flows From Used In Operating Activities Discontinued Operations" = 43,594,000. If this is "used in" (i.e., cash used), it would be negative for the total. But the number is shown as positive. I think the convention here is that "Cash Flows From" = positive when cash is generated, and "Used In" = negative when cash is used. The label combines both. The positive value 43,594,000 likely means cash generated from discontinued operations. But then 502,520,000 + 43,594,000 = 546,114,000 ≠ 458,926,000. Unless continuing operations "502,520,000" is actually cash used? No, the label says "From Used In" which is confusing. Looking at 2021: "Cash Flows From Used In Operating Activities Continuing Operations" = -40,849,000 (negative, cash used). "Cash Flows From Used In Operating Activities Discontinued Operations" = -217,916,000 (negative). Total = -258,765,000, but reported as 177,067,000. That doesn't add up either. -40,849,000 + (-217,916,000) = -258,765,000 ≠ 177,067,000. Hmm, I think the "From" vs "Used In" might indicate direction. Perhaps "Cash Flows From... Continuing Operations" = 502,520,000 (positive, generated) and "Cash Flows... Discontinued Operations" is actually used in, so -43,594,000? But it's shown as positive. Actually, re-reading: "Cash Flows From Used In Operating Activities Discontinued Operations" = 43,594,000. Maybe this is negative in the actual flow (used in), but displayed as absolute? For 2021: continuing = -40,849,000 (used in), discontinued = -217,916,000 (used in), total = 177,067,000 (generated)? That makes no sense. I think there may be a sign convention issue. Let me just use the directly reported EBITDA and not try to parse the cash flow. **Adjusted_EBITDA = 499,430,000 EUR** But wait - I need to consider if there are adjustments for: - Noncontrolling interests: Profit Loss Attributable To Noncontrolling Interests = 4,158,000. For EBITDA, this is already included in the total. - Joint ventures: Share Of Profit Loss Of Associates And Joint Ventures = 0 (equity method) - Non-current investments other than equity method: 2,294,000 - this is investment income, not in EBITDA For S&P, if there are significant non-recurring items, we adjust. Let me look for non-recurring losses/gains: The impairment reversal of 43,185,000 is a gain. If we consider this non-recurring, we should subtract it from EBITDA. However, in 2021 there was also 22,016,000 reversal. This might be somewhat normalized. Also, "Other Adjustments For Noncash Items" = -198,570,000 in cash flow. This is large and negative. What does it contain? Looking at the P&L, there might be gains on sale of assets. The "Cash Flows From Losing Control Of Subsidiaries Or Other Businesses Classified As Investing Activities" = 1,264,826,000 - this is proceeds from sale of subsidiaries. And "Cash Flows Used In Obtaining Control Of Subsidiaries Or Other Businesses" = 392,232,000. There was significant M&A activity. The -198,570,000 "Other Adjustments For Noncash Items" likely includes gains/losses on these transactions. For S&P adjusted EBITDA, we typically want to normalize these non-recurring items. However, without detailed breakdown, and given the complexity, let me proceed with reported EBITDA and note that significant adjustments may be warranted. Actually, let me reconsider. The S&P methodology for unregulated power and gas says: "Adjusted_EBITDA = EBITDA (reported or reconstructed) + adjustment_leases (if any) + nonrecurring_losses - nonrecurring_gains ± pension_adjustments ± joint_venture_proportional_EBITDA ± other_normalization_adjustments" For leases under IFRS 16: Since EBITDA is already before depreciation of ROU assets, no EBITDA adjustment is typically needed (the lease expense is replaced by depreciation, which is already added back in EBITDA). For nonrecurring items: The impairment reversal of 43,185,000 is a nonrecurring gain. I should subtract this. Also, looking at "Other Income" = 12,678,000 - this might include some non-recurring items. And "Other Adjustments For Noncash Items" = -198,570,000 - this large negative in cash flow suggests significant non-cash gains that reduced operating profit or increased it. Actually, in cash flow from operations, we add back non-cash items. A negative "Other Adjustments For Noncash Items" means we're subtracting non-cash gains (since they inflated profit but didn't generate cash). So the -198,570,000 represents non-cash gains that need to be subtracted from profit to get to cash flow. These likely include gains on sales, fair value adjustments, etc. For EBITDA, these items might already be excluded or included. Let me think... If these are gains below operating profit (e.g., in financing or investing), they don't affect EBITDA. If they're in operating profit, they do. Given the complexity and lack of detailed breakdown, I'll make a conservative adjustment for the impairment reversal: Adjusted_EBITDA = 499,430,000 - 43,185,000 (impairment reversal, nonrecurring gain) = **456,245,000 EUR** But wait - is the impairment reversal already in the EBITDA? Let me check: EBITDA = 499,430,000 Operating profit = 220,814,000 Difference = 278,616,000 ≈ D&A of 235,430,000 + 43,186,000? Actually 235,430,000 + 43,186,000 = 278,616,000. Yes! So: EBITDA 499,430,000 - D&A 235,430,000 + impairment reversal 43,185,000 = 307,185,000... but operating profit is 220,814,000. 307,185,000 - 220,814,000 = 86,371,000 difference. There are other operating expenses of 86,371,000 not explicitly listed. The impairment reversal is a positive (gain) that is included in operating profit. So: Operating profit = (Revenue + Other Income - Operating Expenses) - D&A + Impairment Reversal Or more precisely: Operating profit before D&A = 499,430,000 Less: D&A = 235,430,000 Add: Impairment reversal = 43,185,000 Less: Other unlisted expenses = 86,371,000 = Operating profit 220,814,000 So the impairment reversal is already reflected in operating profit and EBITDA. EBITDA includes it because EBITDA is before the reversal is added back? No wait - the reversal is not part of D&A, it's a separate line. Actually, "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss Intangible Assets And Property Plant And Equipment" - this is a reversal of prior impairment, recorded as a negative expense or gain. In the P&L structure, this would be: Revenue Less: Operating expenses (including D&A, impairments) If impairment reversal is 43,185,000, it's a credit (reduction of expense). So: EBITDA = Revenue - Cash operating expenses = 499,430,000 Then: EBIT = EBITDA - D&A + Impairment reversal = 499,430,000 - 235,430,000 + 43,185,000 = 307,185,000 But reported operating profit is 220,814,000. So there must be other depreciation/amortization or expenses. Actually, I think the "Amortisation Expense" and "Depreciation Expense" might not be the total D&A in the P&L. There could be other depreciation included in cost of sales or other lines. Given the direct EBITDA figure is provided and matches the definition, I'll use it as the base. For S&P adjustment: The impairment reversal is a nonrecurring gain. Should I normalize it out? Looking at 2021: impairment reversal was 22,016,000. In 2022: 43,185,000. This is somewhat recurring, though volatile. For conservative S&P analysis, I could subtract the 2022 reversal: Adjusted_EBITDA = 499,430,000 - 43,185,000 = 456,245,000 Or I could use reported EBITDA as-is, noting that S&P often uses reported figures when nonrecurring items are not clearly identifiable. Given the methodology emphasizes "nonrecurring_losses - nonrecurring_gains", and impairment reversals are typically considered nonrecurring, I'll subtract it. But actually, for renewable energy with long-term assets, impairment reversals might be more recurring due to revaluation of wind/solar assets. Let me check if this is typical. Given two consecutive years of reversals (2021: 22M, 2022: 43M), this seems somewhat normalized. I'll use reported EBITDA but note the issue. Actually, let me be more careful. The S&P methodology says to use "EBITDA (reported or reconstructed)". If reported EBITDA includes the reversal, and the reversal is nonrecurring, I should adjust. Adjusted_EBITDA = 499,430,000 - 43,185,000 = **456,245,000 EUR** Wait - I need to think about this more carefully. Is the impairment reversal included in EBITDA or not? EBITDA is "Earnings Before Interest, Taxes, Depreciation and Amortization". The impairment reversal is NOT depreciation or amortization. It's a reversal of prior impairment. In standard EBITDA calculation: - Start with operating profit - Add back D&A - Add back impairment (if impairment was an expense) - But subtract impairment reversal? Actually, no. EBITDA typically starts from operating profit and adds back D&A. If operating profit already includes the reversal, then EBITDA = Operating profit + D&A - Reversal? No, that would subtract the gain. Let me think again. Standard EBITDA: = Operating profit + Depreciation + Amortization + Impairment losses - Impairment reversals? No, typically: = EBIT + D&A + Impairment losses (as these are non-cash) But impairment reversal is a gain, not a loss. So: EBITDA = EBIT + D&A - Impairment reversal? Actually, the standard is: EBITDA = Operating profit before D&A and impairment Or: EBITDA = Operating profit + D&A - Impairment losses + Impairment reversals? I'm getting confused. Let me use the direct reported figure. The company reports "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense" = 499,430,000. This is their definition of pre-DA operating profit, which is effectively EBITDA. This 499,430,000 includes all operating items except interest, taxes, D&A. The impairment reversal is NOT D&A, so it should be included in this figure. For S&P purposes, is this reversal nonrecurring? Yes, typically impairment reversals are nonrecurring. So S&P-adjusted EBITDA should subtract this nonrecurring gain: Adjusted_EBITDA = 499,430,000 - 43,185,000 = 456,245,000 But wait - I also need to consider if there are other nonrecurring items. The "Other Income" of 12,678,000 might include some nonrecurring items. And the large "Other Adjustments For Noncash Items" of -198,570,000 suggests significant non-cash gains. However, without detailed breakdown, I'll make the impairment reversal adjustment and proceed. Actually, let me reconsider whether to adjust. S&P methodology says "nonrecurring_losses - nonrecurring_gains". If I can't identify all nonrecurring items clearly, using reported EBITDA with minimal adjustments is acceptable. Let me use a more conservative approach: reported EBITDA of 499,430,000, with no adjustment for impairment reversal (since it may be somewhat normalized, and 2021 also had a reversal). But actually, for strict S&P methodology, I should identify and adjust for nonrecurring items. Let me subtract the reversal: Adjusted_EBITDA = 499,430,000 - 43,185,000 = **456,245,000 EUR** Hmm, but I want to double-check. Let me see if this makes sense with the cash flow. Cash flow from operations before working capital = 616,360,000 = EBITDA + other non-cash adjustments 616,360,000 - 499,430,000 = 116,930,000 difference This includes: adjustments for provisions (38,978,000 - 17,675,000 = 21,303,000 net), finance costs 36,573,000, income tax 97,569,000, other noncash -198,570,000, undistributed profits 2,294,000, employee benefits 66,000. Sum: 21,303,000 + 36,573,000 + 97,569,000 - 198,570,000 + 2,294,000 + 66,000 = -40,765,000 That doesn't equal 116,930,000. Actually, cash flow from operations before working capital should be: Operating profit + non-cash adjustments 220,814,000 + 278,615,000 + 38,978,000 - 17,675,000 + 0 + 2,294,000 + 66,000 + 36,573,000 + 97,569,000 - 198,570,000 = 220,814,000 + 278,615,000 + 21,303,000 + 0 + 2,294,000 + 66,000 + 36,573,000 + 97,569,000 - 198,570,000 = 220,814,000 + 237,850,000 = 458,664,000? But reported is 616,360,000. Hmm, I think the "Other Adjustments For Noncash Items" = -198,570,000 might be included in the 278,615,000 or might be separate. Actually, looking at the line: "Adjustments For Depreciation And Amortisation Expense And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss Non Current Assets" = 278,615,000 And "Other Adjustments For Noncash Items" = -198,570,000 is separate. Let me recalculate: 220,814,000 + 278,615,000 + 21,303,000 + 0 + 2,294,000 + 66,000 + 36,573,000 + 97,569,000 - 198,570,000 = 220,814,000 + 278,615,000 = 499,429,000 (this is EBITDA!) + 21,303,000 + 2,294,000 + 66,000 + 36,573,000 + 97,569,000 - 198,570,000 = 499,429,000 + 116,935,000 - 198,570,000 = 417,794,000? Still not 616,360,000. Wait, I think I misread. Let me check: "Adjustments For Increase In Provisions" = 38,978,000, "Adjustments For Decrease In Provisions" = 17,675,000. These are adjustments, not cash flows. In cash flow statement, increase in provisions is added back (non-cash expense), decrease is subtracted (non-cash gain). So: 38,978,000 - 17,675,000 means net add 21,303,000. But "Adjustments For Decrease In Provisions" = 17,675,000 - is this a positive number in the cash flow? If provisions decreased, that's a use of cash or a non-cash gain? Actually, if provisions decrease, it means expense was recognized but not paid, or prior provision was released. In cash flow, we need to adjust. I think the sign convention is: "Adjustments For Increase In Provisions" = add back (positive), "Adjustments For Decrease In Provisions" = subtract (but shown as positive number, meaning we subtract it). So in the calculation: +38,978,000 and -17,675,000. Let me try: 220,814,000 + 278,615,000 + 38,978,000 - 17,675,000 + 0 + 2,294,000 + 66,000 + 36,573,000 + 97,569,000 - 198,570,000 = 220,814,000 + 278,615,000 + 21,303,000 + 2,294,000 + 66,000 + 36,573,000 + 97,569,000 - 198,570,000 = 220,814,000 + 237,850,000 = 458,664,000? No wait: 278,615,000 + 21,303,000 + 2,294,000 + 66,000 + 36,573,000 + 97,569,000 - 198,570,000 = 237,850,000 220,814,000 + 237,850,000 = 458,664,000 But reported "Cash Flows From Used In Operations Before Changes In Working Capital" = 616,360,000. Difference = 157,696,000. Hmm, maybe the starting point is not operating profit but something else? Or maybe I have signs wrong. Actually, re-reading: "Adjustments For Finance Costs" = 36,573,000. This is finance costs, which are after operating profit. In cash flow from operations, we add back finance costs because they're not operating cash flow. But wait - "Profit Loss From Operating Activities" = 220,814,000 is already before finance costs. So why add back finance costs? Unless... "Profit Loss From Operating Activities" in IFRS includes finance costs? No, operating profit is before finance costs. Actually, let me check: "Profit Loss From Operating Activities" might be EBIT, not operating profit. In some IFRS presentations, "operating profit" includes finance income/costs. Looking at the sequence: - Profit Loss From Operating Activities = 220,814,000 - Finance Income = 75,622,000 - Finance Costs = 112,195,000 - Finance Income Cost = -36,573,000 (net) - Share Of Profit Loss... = 2,294,000 - Profit Loss Before Tax = 186,535,000 220,814,000 - 36,573,000 + 2,294,000 = 186,535,000. Yes! So "Profit Loss From Operating Activities" = EBIT (earnings before interest and taxes). It's operating profit including all operating items. Then EBITDA = EBIT + D&A - impairment reversal (since reversal was a gain that reduced expenses, i.e., increased EBIT). 220,814,000 + 235,430,000 - 43,185,000 = 413,059,000? But reported EBITDA is 499,430,000. Hmm, 499,430,000 - 220,814,000 = 278,616,000. And 278,615,000 is the adjustment line. So: EBIT 220,814,000 + adjustments 278,615,000 = 499,429,000 ≈ 499,430,000 EBITDA. The adjustment of 278,615,000 includes D&A and impairment reversal. Specifically: = Depreciation 176,689,000 + Amortization 58,741,000 + Impairment reversal 43,185,000 = 278,615,000 So EBITDA = EBIT + D&A + Impairment reversal? 220,814,000 + 176,689,000 + 58,741,000 + 43,185,000 = 499,429,000. Yes! Wait, this means the impairment reversal is ADDED to get to EBITDA. That means the reversal was subtracted in EBIT (as a reduction of expense, i.e., a gain that increased EBIT). So to get back to "before" all non-cash items, we add it back? Actually, no. Let me think again. If there was an impairment loss (expense), it reduces EBIT. To get EBITDA, we add it back. If there was an impairment reversal (gain), it increases EBIT. To get EBITDA, we should subtract it, not add it. But here: EBIT 220,814,000 + D&A 235,430,000 + reversal 43,185,000 = 499,429,000. This suggests the reversal was a negative expense in EBIT (i.e., it increased EBIT), and to get to "before impairment" we subtract it, not add it. Hmm, I'm confused. Let me think of it this way: Start with Revenue - Expenses = Profit If expenses include: - Cash operating expenses: 500,000,000 - D&A: 235,430,000 - Impairment reversal: -43,185,000 (negative expense = gain) Total expenses = 500,000,000 + 235,430,000 - 43,185,000 = 692,245,000 Revenue = 713,840,000 + 12,678,000 = 726,518,000 EBIT = 726,518,000 - 692,245,000 = 34,273,000? But EBIT is 220,814,000. So my numbers are wrong. Actually, there are other expenses. Let me use the reported figures. EBITDA = 499,430,000 Less: D&A = 235,430,000 Add: Impairment reversal = 43,185,000? = EBIT 307,185,000? But EBIT is 220,814,000. Difference is 86,371,000. So there are other non-cash or operating items of 86,371,000 that reduce EBIT but aren't in the explicit lines. Actually, looking back at the expense lines: - Other Purchase Expense: 15,188,000 - Services Expense And Miscellaneous Other Operating Expense: 156,792,000 - Impairment Loss Recognised In Profit Or Loss Trade Receivables: 300,000 - Employee Benefits Expense: 54,808,000 Total explicit: 227,088,000 Revenue + Other Income = 726,518,000 726,518,000 - 227,088,000 = 499,430,000. This matches EBITDA! So EBITDA = Revenue + Other Income - Cash Operating Expenses = 499,430,000 Then EBIT = EBITDA - D&A + Impairment reversal (non-current assets) - Impairment loss (receivables) - Other non-cash items = 499,430,000 - 235,430,000 + 43,185,000 - 300,000 - 86,071,000? = 220,814,000. So: 499,430,000 - 235,430,000 + 43,185,000 - 300,000 = 306,885,000. 306,885,000 - 220,814,000 = 86,071,000 other items. These "other items" of 86,071,000 might include other depreciation, amortization, or expenses not explicitly listed. Anyway, the key point is: **EBITDA of 499,430,000 is correct as reported.** For S&P adjustment, the impairment reversal of 43,185,000 is a nonrecurring gain that is included in EBITDA (since EBITDA is before it is subtracted to get EBIT... wait, no, it's added to get EBIT). Actually from above: EBIT = EBITDA - D&A + Impairment reversal - other items. So the impairment reversal INCREASES EBIT relative to EBITDA. This means it was a gain. For EBITDA calculation: if we want "clean" EBITDA excluding nonrecurring items, we should subtract this gain from EBITDA. Adjusted_EBITDA = 499,430,000 - 43,185,000 = **456,245,000 EUR** I'll use this figure. ## Step 4: Calculate Adjusted_Debt / Adjusted_EBITDA Adjusted_Debt = 2,895,278,000 EUR Adjusted_EBITDA = 456,245,000 EUR Ratio = 2,895,278,000 / 456,245,000 = **6.35** Wait, let me recalculate: 2,895,278,000 / 456,245,000 = 6.345... Let me recheck my debt calculation. I want to make sure I have the right components. Debt at 2022-01-01 (end of 2022 fiscal year): - Other Noncurrent Financial Liabilities: 2,064,088,000 - Other Current Financial Liabilities: 1,342,688,000 - Current Financial Liabilities At FVTPL: 170,857,000 - Noncurrent Financial Liabilities At FVTPL: 44,763,000 Total debt = 3,622,396,000 Leases: - Noncurrent Lease Liabilities: 122,663,000 - Current Lease Liabilities: 6,282,000 Total leases = 128,945,000 Pension/Employee benefits: - Noncurrent Provisions For Employee Benefits: 4,289,000 Cash: - Cash And Cash Equivalents: 860,352,000 Adjusted_Debt = 3,622,396,000 + 128,945,000 + 4,289,000 - 860,352,000 = 2,895,278,000 Hmm, I should double-check if there are other debt-like items. Looking at "Non Current Provisions For Decommissioning Restoration And Rehabilitation Costs" = 60,908,000. This is a provision, not a financial liability. S&P typically includes decommissioning provisions as debt-like if they're not already included in financial liabilities. Also "Longterm Miscellaneous Other Provisions" = 15,782,000. For S&P, environmental and decommissioning provisions are typically included as debt-like obligations. Let me add these: Decommissioning provision: 60,908,000 Other long-term provisions: 15,782,000 Total additional provisions = 76,690,000 Adjusted_Debt = 2,895,278,000 + 60,908,000 + 15,782,000 = 3,031,968,000? Wait, I need to be careful. The S&P baseline says "other_debt_like_items". Decommissioning provisions are typically debt-like. But let me check if these are already included somewhere. The "Other Noncurrent Financial Liabilities" might include some provisions, or they might be separate. Actually, looking at the balance sheet structure: - Noncurrent Liabilities total = 2,526,148,000 Components listed: - Noncurrent Provisions For Employee Benefits: 4,289,000 - Deferred Tax Liabilities: 107,268,000 - Non Current Provisions For Discontinued Operations: 74,903,000 - Longterm Provision For Decommissioning Restoration And Rehabilitation Costs: 60,908,000 - Longterm Miscellaneous Other Provisions: 15,782,000 - Noncurrent Financial Liabilities At FVTPL: 44,763,000 - Other Noncurrent Financial Liabilities: 2,064,088,000 - Noncurrent Lease Liabilities: 122,663,000 - Other Noncurrent Nonfinancial Liabilities: 31,484,000 Sum: 4,289,000 + 107,268,000 + 74,903,000 + 60,908,000 + 15,782,000 + 44,763,000 + 2,064,088,000 + 122,663,000 + 31,484,000 = 2,526,148,000. ✓ So "Other Noncurrent Financial Liabilities" = 2,064,088,000 is pure financial debt, and the provisions are separate. For S&P, decommissioning provisions are typically treated as debt-like. Let me include them. Also, "Non Current Provisions For Discontinued Operations" = 74,903,000 - this might be debt-like or not, depending on nature. And "Deferred Tax Liabilities" = 107,268,000 - typically not debt-like for S&P. Let me include decommissioning and other long-term provisions as debt-like: Additional debt-like items = 60,908,000 + 15,782,000 = 76,690,000 Adjusted_Debt = 2,895,278,000 + 76,690,000 = 2,971,968,000 Hmm, but I need to check S&P methodology more carefully. For unregulated power and gas, do they specifically mention any adjustments? The methodology says: "For unregulated power and gas companies that enter into long-term power purchase agreements (PPAs), we make adjustments to account for those obligations, as we do for regulated utilities under our ratios and adjustments criteria." Without specific PPA data, I'll proceed with standard adjustments. Actually, let me reconsider the decommissioning provision. For renewable energy (wind/solar), decommissioning costs are typically for end-of-life asset removal. These are legally required and should be included as debt-like. Revised Adjusted_Debt = 3,622,396,000 + 128,945,000 + 4,289,000 + 60,908,000 + 15,782,000 - 860,352,000 = 2,971,968,000 Now, ratio = 2,971,968,000 / 456,245,000 = 6.51 Let me also check if I should include "Non Current Provisions For Discontinued Operations" = 74,903,000. If this is for discontinued operations that are being divested, it might not be part of ongoing debt. But if it's a liability being retained, it might be. Given the complexity, let me use a more standard approach: include only clear financial debt + leases + pension, and standard debt-like items. Actually, looking at S&P methodology for E&P (which has similar long-term asset characteristics), they mention decommissioning provisions. For unregulated power and gas, similar logic should apply. Let me include decommissioning provision but not discontinued operations provision (since those operations are being discontinued). Adjusted_Debt = 3,622,396,000 + 128,945,000 + 4,289,000 + 60,908,000 - 860,352,000 = 2,956,186,000 Wait, I had 15,782,000 for "Longterm Miscellaneous Other Provisions" - should I include this? It's small, let me include it for conservatism. Adjusted_Debt = 2,971,968,000 Ratio = 2,971,968,000 / 456,245,000 = 6.514... ≈ 6.51 But let me reconsider whether to adjust EBITDA for the impairment reversal. If I don't adjust: Ratio = 2,971,968,000 / 499,430,000 = 5.95 This is a significant difference. Let me think about which is more appropriate. Looking at 2021 data: - EBITDA = 396,680,000 - Impairment reversal = 22,016,000 If I adjusted 2021: 396,680,000 - 22,016,000 = 374,664,000 The 2022 reversal is 43,185,000 vs 22,016,000 in 2021, so roughly doubled. This suggests some volatility but also some normalization. For S&P, the standard approach is to normalize out nonrecurring items. Impairment reversals are generally nonrecurring. I'll subtract it. Final calculation: Adjusted_Debt = 2,971,968,000 EUR Adjusted_EBITDA = 456,245,000 EUR Ratio = 2,971,968,000 / 456,245,000 = 6.514... Let me recalculate precisely: 2,971,968,000 / 456,245,000 = 6.514035... Rounded to two decimal places: **6.51** Wait, let me double-check my arithmetic: 2,971,968,000 / 456,245,000 = 2971968 / 456.245 456.245 × 6 = 2737.47 456.245 × 6.5 = 2965.5925 456.245 × 6.51 = 2970.15495 456.245 × 6.514 = 2970.98993 456.245 × 6.515 = 2971.446175 2971.968 - 2971.446175 = 0.521825 So 6.515 + 0.521825/456.245 = 6.515 + 0.00114 = 6.51614... Hmm, let me recalculate more carefully. 2,971,968,000 / 456,245,000 Divide numerator and denominator by 1000: 2,971,968 / 456.245 Long division: 2971968 / 456.245 First, 456.245 × 6000 = 2,737,470 Subtract: 2,971,968 - 2,737,470 = 234,498 456.245 × 500 = 228,122.5 Subtract: 234,498 - 228,122.5 = 6,375.5 456.245 × 10 = 4,562.45... too much 456.245 × 13 = 5,931.185 Subtract: 6,375.5 - 5,931.185 = 444.315 456.245 × 0.9 = 410.6205... too much 456.245 × 0.97 = 442.55765 Subtract: 444.315 - 442.55765 = 1.75735 456.245 × 0.0038 = 1.733731 ... So 6000 + 500 + 13 + 0.97 + 0.0038... = 6513.9738... Wait, that's wrong. Let me restart. 2,971,968 / 456.245 = 2971968 / 456245 × 1000/1000... no. Actually: 2,971,968 / 456.245 = 2971968 / 456.245 Let me multiply numerator and denominator by 1000: 2,971,968,000 / 456,245 Now divide: 456,245 × 6 = 2,737,470 2,971,968 - 2,737,470 = 234,498 Bring down 0: 2,344,980 456,245 × 5 = 2,281,225 2,344,980 - 2,281,225 = 63,755 Bring down 0: 637,550 456,245 × 1 = 456,245 637,550 - 456,245 = 181,305 Bring down 0: 1,813,050 456,245 × 3 = 1,368,735 1,813,050 - 1,368,735 = 444,315 Bring down 0: 4,443,150 456,245 × 9 = 4,106,205 4,443,150 - 4,106,205 = 336,945 So: 6.5139... 456,245 goes into 2,971,968 about 6.5139 times. So 2,971,968,000 / 456,245,000 = 6.5139... ≈ **6.51** Hmm wait, I think I made an error. Let me recheck: 2,971,968 / 456.245: 456.245 × 6.5 = 2,965.5925 2,971.968 - 2,965.5925 = 6.3755 6.3755 / 456.245 = 0.01397... So 6.5 + 0.01397 = 6.51397... Yes, 6.51 when rounded to two decimal places. But let me verify my debt figure once more. I want to make sure about the decommissioning provision. Actually, rethinking: for S&P Global Ratings, the standard debt adjustment includes: - Reported debt (short-term + long-term interest-bearing debt) - Capitalized operating leases (present value of lease obligations) - Pension deficit (funded status of defined benefit plans) - Guarantees and other debt-like items For the decommissioning provision: this is typically a non-debt provision, but it is a debt-like obligation. S&P does include asset retirement obligations (AROs) in adjusted debt. However, looking at the S&P methodology provided for unregulated power and gas, it specifically mentions: "For unregulated power and gas companies that enter into long-term power purchase agreements (PPAs), we make adjustments to account for those obligations, as we do for regulated utilities under our ratios and adjustments criteria." It does NOT specifically mention decommissioning provisions. But the general corporate methodology would include AROs. Let me check if I should be more conservative and exclude decommissioning, or include it. For renewable energy companies, decommissioning provisions are typically material and should be included. I'll keep them. But actually, let me reconsider my entire debt calculation to make sure I have the right base. Looking at 2022-01-01 balance sheet (which is end of fiscal year 2022, since fiscal year is 2022-01-01 to 2023-01-01): Financial liabilities: - Other Noncurrent Financial Liabilities: 2,064,088,000 - Other Current Financial Liabilities: 1,342,688,000 - Current Financial Liabilities At FVTPL: 170,857,000 - Noncurrent Financial Liabilities At FVTPL: 44,763,000 Are there any other financial liabilities? Looking through the list, I don't see other explicit debt items. Total financial debt = 3,622,396,000 Leases: - Noncurrent Lease Liabilities: 122,663,000 - Current Lease Liabilities: 6,282,000 Total = 128,945,000 Pension: - Noncurrent Provisions For Employee Benefits: 4,289,000 Decommissioning: - Longterm Provision For Decommissioning Restoration And Rehabilitation Costs: 60,908,000 Other provisions: - Longterm Miscellaneous Other Provisions: 15,782,000 Cash: - Cash And Cash Equivalents: 860,352,000 Adjusted_Debt = 3,622,396,000 + 128,945,000 + 4,289,000 + 60,908,000 + 15,782,000 - 860,352,000 = 3,832,320,000 - 860,352,000 = 2,971,968,000 Yes, this is correct. Now for EBITDA, let me reconsider the impairment reversal adjustment. Actually, I realize I need to be more careful. The EBITDA figure of 499,430,000 is "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense". In standard terminology, this is: Revenue - Operating Expenses (cash) = EBITDA Or equivalently: EBIT + D&A = EBITDA But from the numbers: EBIT = 220,814,000 D&A = 235,430,000 (176,689,000 + 58,741,000) EBIT + D&A = 456,244,000 But reported EBITDA is 499,430,000. The difference is 43,186,000, which equals the impairment reversal. So: EBITDA = EBIT + D&A + Impairment reversal? This would mean the impairment reversal was subtracted in the EBIT calculation (as a negative expense, i.e., a gain). Actually, yes. If the impairment reversal is a gain, it increases EBIT. So: EBIT = (Revenue - Cash Expenses - D&A + Impairment Reversal - Other losses) Then EBITDA = EBIT + D&A - Impairment Reversal? No, to get EBITDA from EBIT, we add back D&A. The impairment reversal is not part of D&A, it's a separate item. If it was a gain that increased EBIT, and we want EBITDA (which is before non-cash items), we should subtract it. But the reported "EBITDA" of 499,430,000 includes it (since it's before D&A, and the reversal is not D&A). Actually, I think the issue is definitional. The company's "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense" might be calculated as: Revenue - Cash operating expenses + Impairment reversal Where the impairment reversal is considered part of operating activities but not part of D&A. For S&P purposes, we want "clean" EBITDA excluding nonrecurring items. So we should subtract the impairment reversal. Adjusted_EBITDA = 499,430,000 - 43,185,000 = 456,245,000 But wait - this equals EBIT + D&A = 220,814,000 + 235,430,000 = 456,244,000. So actually, the "clean" EBITDA excluding the nonrecurring impairment reversal is exactly EBIT + D&A. This makes sense! The reported 499,430,000 includes the one-off gain, and the sustainable EBITDA is 456,245,000. I'll use 456,245,000. Final calculation: Adjusted_Debt / Adjusted_EBITDA = 2,971,968,000 / 456,245,000 = 6.51397... ≈ **6.51** Actually, let me round more carefully: 6.51397... the third decimal is 3, so we round down to 6.51. Wait, 6.51397... the digit in the thousandths place is 3 (6.513...), so yes, round to 6.51. But let me verify once more: 2,971,968,000 / 456,245,000 = 2971968 / 456.245 Using calculator-style: 456.245 × 6.51 = 2,970.15495 2971.968 - 2970.15495 = 1.81305 1.81305 / 456.245 = 0.00397... So 6.51 + 0.00397 = 6.51397... Yes, 6.51 when rounded to two decimal places. Hmm, but I want to double-check if I should include the "Longterm Miscellaneous Other Provisions" of 15,782,000. This seems like a catch-all provision. For S&P, only specific debt-like items are included. Miscellaneous provisions might not qualify. If I exclude it: Adjusted_Debt = 2,971,968,000 - 15,782,000 = 2,956,186,000 Ratio = 2,956,186,000 / 456,245,000 = 6.479... ≈ 6.48 This is close to 6.51. Given the ambiguity, let me include it (more conservative for debt). Actually, let me reconsider whether to include decommissioning at all. Looking at S&P's general corporate methodology, they typically include: - Debt as reported - Capitalized lease obligations - Pension deficits (to the extent not already included in debt) - Hybrid instruments (equity portion treated as debt) - Guarantees and other contingent liabilities For decommissioning/asset retirement obligations, S&P's treatment varies. In some sectors (like E&P), they are explicitly included. For utilities, they might be included in the rate base. For renewable energy, decommissioning provisions are similar to AROs and should likely be included. I'll keep my calculation with decommissioning included. Final answer: **6.51** But wait - I want to do one more verification. Let me check if the 2022-01-01 date represents beginning or end of fiscal year 2022. The fiscal year is "2022-01-01 - 2023-01-01". So 2022-01-01 is the beginning, and 2023-01-01 is the end. But the balance sheet values at "2022-01-01" would be beginning of year (end of 2021). And "2023-01-01" would be end of 2022. Wait, this is critical! Let me re-read the data: "Service Concession Rights" 2023-01-01: 956,240,000.0 EUR "Service Concession Rights" 2022-01-01: 681,610,000.0 EUR The fiscal year is 2022-01-01 to 2023-01-01. So: - 2022-01-01 = beginning of fiscal year 2022 (same as end of fiscal year 2021) - 2023-01-01 = end of fiscal year 2022 For debt-to-EBITDA for fiscal year 2022, I should use: - EBITDA for the period 2022-01-01 to 2023-01-01 - Debt at the END of the period, i.e., 2023-01-01 Oh no! I've been using 2022-01-01 balance sheet values, which are beginning of year, not end of year! Let me recalculate using 2023-01-01 values for debt. Debt at 2023-01-01 (end of fiscal year 2022): - Other Noncurrent Financial Liabilities: 1,751,255,000 - Other Current Financial Liabilities: 389,716,000 - Current Financial Liabilities At FVTPL: 76,644,000 - Noncurrent Financial Liabilities At FVTPL: 0 (or -0.0) Total debt = 1,751,255,000 + 389,716,000 + 76,644,000 + 0 = 2,217,615,000 Leases at 2023-01-01: - Noncurrent Lease Liabilities: 150,955,000 - Current Lease Liabilities: 6,362,000 Total = 157,317,000 Pension at 2023-01-01: - Noncurrent Provisions For Employee Benefits: 3,723,000 Decommissioning at 2023-01-01: - Longterm Provision For Decommissioning Restoration And Rehabilitation Costs: 92,613,000 Other long-term provisions at 2023-01-01: - Longterm Miscellaneous Other Provisions: 24,401,000 Cash at 2023-01-01: - Cash And Cash Equivalents: 392,811,000 Adjusted_Debt = 2,217,615,000 + 157,317,000 + 3,723,000 + 92,613,000 + 24,401,000 - 392,811,000 = 2,495,669,000 - 392,811,000 = 2,102,858,000 This is much lower! The company significantly reduced debt during 2022. Now, EBITDA for fiscal year 2022 is still 499,430,000 (or adjusted 456,245,000). Ratio = 2,102,858,000 / 456,245,000 = 4.609... ≈ **4.61** Or with unadjusted EBITDA: 2,102,858,000 / 499,430,000 = 4.210... ≈ 4.21 Hmm, this is a huge difference. Which is correct? For S&P debt-to-EBITDA, the standard is to use: - Debt at year-end (or average debt, but typically year-end) - EBITDA for the fiscal year So I should use 2023-01-01 debt with 2022 fiscal year EBITDA. But wait - I need to verify the dates more carefully. Let me re-read the problem. The facts show: "Revenue" 2022-01-01 - 2023-01-01: 713,840,000.0 EUR This is clearly fiscal year 2022 (Jan 1, 2022 to Jan 1, 2023). And balance sheet items show: "Service Concession Rights" 2023-01-01: 956,240,000.0 EUR "Service Concession Rights" 2022-01-01: 681,610,000.0 EUR So 2022-01-01 is the older balance, 2023-01-01 is the newer balance. For fiscal year 2022, the ending balance sheet is 2023-01-01. I made an error using 2022-01-01 as the year-end balance. Let me correct. Recalculating with correct year-end debt: **Debt at 2023-01-01:** - Other Noncurrent Financial Liabilities: 1,751,255,000 - Other Current Financial Liabilities: 389,716,000 - Current Financial Liabilities At FVTPL: 76,644,000 - Noncurrent Financial Liabilities At FVTPL: 0 Total reported debt = 2,217,615,000 **Leases:** - Noncurrent Lease Liabilities: 150,955,000 - Current Lease Liabilities: 6,362,000 Total = 157,317,000 **Pension:** - Noncurrent Provisions For Employee Benefits: 3,723,000 **Decommissioning:** - Longterm Provision For Decommissioning Restoration And Rehabilitation Costs: 92,613,000 **Other long-term provisions:** - Longterm Miscellaneous Other Provisions: 24,401,000 **Cash:** - Cash And Cash Equivalents: 392,811,000 **Adjusted_Debt** = 2,217,615,000 + 157,317,000 + 3,723,000 + 92,613,000 + 24,401,000 - 392,811,000 = 2,495,669,000 - 392,811,000 = **2,102,858,000 EUR** **Adjusted_EBITDA** = 499,430,000 - 43,185,000 (impairment reversal) = **456,245,000 EUR** (or 499,430,000 if not adjusting) **Ratio** = 2,102,858,000 / 456,245,000 = 4.609... ≈ **4.61** Or with unadjusted EBITDA: 2,102,858,000 / 499,430,000 = 4.210... ≈ **4.21** Let me recalculate 2,102,858,000 / 456,245,000 more precisely: 2,102,858 / 456.245 456.245 × 4 = 1,824.98 2,102.858 - 1,824.98 = 277.878 456.245 × 0.6 = 273.747 277.878 - 273.747 = 4.131 456.245 × 0.009 = 4.106205 4.131 - 4.106205 = 0.024795 So 4 + 0.6 + 0.009 = 4.609, plus a bit more. 0.024795 / 456.245 = 0.000054... So 4.609054... ≈ **4.61** Hmm, but I want to verify if I should use average debt or year-end debt. S&P typically uses year-end debt for simplicity, though some analysts use average. Also, I need to consider if there were significant divestitures during the year that affect the comparability. The company had discontinued operations with profit of 294,131,000 and assets held for sale of 776,220,000 at 2022-01-01 and 226,086,000 at 2023-01-01. The significant reduction in debt from 3.6B to 2.2B likely relates to the sale of subsidiaries (cash inflow of 1,264,826,000 from losing control of subsidiaries). For S&P, when there are major divestitures, they might pro-forma the debt or use average. But standard is year-end. Actually, looking more carefully at the debt reduction: the company repaid significant debt during 2022. The cash flow shows: - Repayments Of Noncurrent Borrowings: 350,218,000 - Cash Flows From Used In Increase Decrease In Current Borrowings: -1,000,134,000 (negative means reduction) Total debt repayment = 1,350,352,000 Plus proceeds from losing control of subsidiaries: 1,264,826,000 This explains the debt reduction. For year-end 2022, the debt is 2,217,615,000 (reported debt only). I'll use year-end figures as is standard. Now, one more consideration: should I include "Noncurrent Assets Or Disposal Groups Classified As Held For Sale" and associated liabilities? At 2023-01-01: - Noncurrent Assets Or Disposal Groups Classified As Held For Sale: 226,086,000 - Liabilities Included In Disposal Groups Classified As Held For Sale: 89,421,000 These are held for sale, meaning they're being divested. S&P might exclude them from debt if the sale is imminent and certain. If I exclude the 89,421,000 liabilities from debt: Adjusted_Debt = 2,102,858,000 - 89,421,000 = 2,013,437,000 Ratio = 2,013,437,000 / 456,245,000 = 4.413... ≈ 4.41 But this is speculative. I'll include them as debt until they're actually sold. Actually, looking at the 2022-01-01 balances: - Noncurrent Assets Or Disposal Groups Classified As Held For Sale: 776,220,000 - Liabilities Included In Disposal Groups Classified As Held For Sale: 23,790,000 The assets decreased significantly (776M to 226M), suggesting sales occurred. The liabilities increased (23.8M to 89.4M), suggesting new held-for-sale items. For conservatism, I'll include all liabilities. Final answer with corrected year-end debt: **4.61** But let me also consider: should I use the unadjusted EBITDA to be more comparable to S&P's typical practice when nonrecurring items are not clearly distinguishable? With unadjusted EBITDA: 2,102,858,000 / 499,430,000 = 4.210... ≈ **4.21** The difference is material (4.61 vs 4.21). Looking at S&P methodology again: "Adjusted_EBITDA = EBITDA (reported or reconstructed) + adjustment_leases (if any) + nonrecurring_losses - nonrecurring_gains ± pension_adjustments ± joint_venture_proportional_EBITDA ± other_normalization_adjustments" The impairment reversal is clearly a nonrecurring gain. I should subtract it. Adjusted_EBITDA = 499,430,000 - 43,185,000 = 456,245,000 Final ratio = 2,102,858,000 / 456,245,000 = **4.61** Let me do one final verification of the arithmetic: 2,102,858,000 / 456,245,000 = 2102858 / 456.245 456.245 × 4.6 = 2,098.727 2102.858 - 2098.727 = 4.131 4.131 / 456.245 = 0.00905... So 4.6 + 0.00905 = 4.60905... Rounded to two decimal places: **4.61** 4.61