I'll work through this step-by-step, analyzing ERG S.P.A. based on the provided financial data. ## Step 1: Identify the Relevant Industry for ERG S.P.A. ERG S.P.A. is an Italian renewable energy company. Based on the methodology descriptions: - It's not a regulated utility (no rate regulation mentioned) - It's not oil & gas E&P - It's not transportation infrastructure ERG S.P.A. fits best into **"Unregulated Power And Gas"** - specifically as 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_EBITDA For Unregulated Power and Gas, I need to follow the general baseline formula with any industry-specific modifications. **EBITDA (reported or reconstructed):** From the data, I have: - "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense" (EBITDA) 2022: 499,430,000 EUR Let me verify this by reconstructing from operating profit: - Operating profit (Profit Loss From Operating Activities): 220,814,000 EUR - Depreciation: 176,689,000 EUR - Amortisation: 58,741,000 EUR - Impairment reversal: -43,185,000 EUR (this reduces expenses, so it's a gain) Wait - let me check: EBITDA = Operating profit + D&A - impairment reversal (since reversal is a gain) = 220,814,000 + 176,689,000 + 58,741,000 - 43,185,000 = 413,059,000? That doesn't match. Let me re-read: "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense" is explicitly given as 499,430,000 EUR. Actually, looking more carefully: the impairment reversal of 43,185,000 is likely already reflected in the operating profit. The explicit EBITDA figure of 499,430,000 should be used. Let me verify: Revenue 713,840,000 + Other Income 12,678,000 - Other Purchase Expense 15,188,000 - Services Expense 156,792,000 - Impairment Loss on Receivables 300,000 - Employee Benefits 54,808,000 = 499,430,000. Yes, this matches! So **EBITDA = 499,430,000 EUR** **Adjustments needed:** - **Leases**: For Unregulated Power and Gas, S&P capitalizes operating leases. Looking at the data: - Right-of-use assets 2022: 126,663,000; 2023: 154,311,000 - Lease liabilities (noncurrent): 122,663,000 (2022), 150,955,000 (2023) - Lease liabilities (current): 6,282,000 (2022), 6,362,000 (2023) Total lease liabilities: 128,945,000 (2022), 157,317,000 (2023) However, under IFRS 16, leases are already on balance sheet. The question is whether S&P makes additional adjustments. For IFRS reporters, IFRS 16 is already implemented, so operating leases are capitalized. But S&P may still adjust for operating lease expense if needed. Looking at cash flow: "Payments Of Lease Liabilities Classified As Financing Activities" = 8,337,000. This suggests some lease treatment. For S&P methodology with IFRS 16, typically the lease adjustment to EBITDA involves adding back the lease depreciation and subtracting the lease interest to get a comparable EBITDAR-like figure, or they may use a multiplier approach. However, since IFRS 16 is already in place, and the company reports right-of-use assets, the EBITDA likely already includes lease depreciation in operating expenses. Actually, under S&P methodology for IFRS 16 reporters, they typically make an adjustment to "de-leverage" the EBITDA by adding back the lease depreciation and subtracting an estimated lease interest, or they use a different approach. Let me check if there's explicit guidance. For simplicity and given the data available, I'll note that with IFRS 16, the explicit EBITDA of 499,430,000 likely already reflects lease accounting. S&P's standard adjustment for IFRS 16 is to add back the depreciation of right-of-use assets and subtract lease interest to create a comparable metric. But without explicit lease interest split, this is complex. Looking at the data more carefully: Depreciation is 176,689,000 and Right-of-use assets are 126,663,000 to 154,311,000. The change in ROU assets suggests depreciation of roughly (126,663,000 + 154,311,000)/2 * depreciation rate... this gets complicated. Let me check if "Purchase Of Right Of Use Assets Classified As Investing Activities" (23,467,000) gives us a clue. This suggests some lease-related investing activity. For S&P purposes, I'll use a simplified approach: since IFRS 16 is implemented, and S&P typically adjusts by adding back lease-related depreciation and interest to get to an "as if operating lease" EBITDA, but given complexity, I'll check if there's a better way. Actually, re-reading S&P methodology: "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." But no specific lease adjustment is mentioned for this sector. Given IFRS 16 is in place, and the EBITDA is reported as 499,430,000, I'll use this as base but note that S&P may further adjust. For lease adjustment specifically, S&P Global typically adds back 1/3 of operating lease expense or uses a multiplier on lease liabilities. With IFRS 16, the "lease expense" is split into depreciation and interest. Let me try a different approach: use the explicit EBITDA and make minimal adjustments unless clearly required. - **Nonrecurring items**: Looking at the data: - "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss Intangible Assets And Property Plant And Equipment": 43,185,000 EUR (gain) - "Impairment Loss Recognised In Profit Or Loss Trade Receivables": 300,000 EUR (loss, very small) The impairment reversal of 43,185,000 is a nonrecurring gain that should be subtracted from EBITDA for normalization. - **Pension adjustments**: - "Noncurrent Provisions For Employee Benefits": 4,289,000 (2022), 3,723,000 (2023) - The change is relatively small. "Adjustments For Increase Decrease In Employee Benefit Liabilities" in cash flow: 66,000 (small) No significant pension deficit indicated. No cash pension contributions explicitly stated. - **Joint ventures**: - "Share Of Profit Loss Of Associates And Joint Ventures Accounted For Using Equity Method": 0 - "Share Of Profit Loss Of Non Current Investments Other Than Investments Accounted For Using Equity Method": 2,294,000 The equity method investments show 0, but there's a small non-current investment profit. For EBITDA purposes, if we need proportional EBITDA from JVs, we'd need more data. Given the small amounts and that equity method is 0, I'll assume no material JV EBITDA adjustment needed. - **Other normalization adjustments**: - "Other Adjustments For Noncash Items": -198,570,000 (negative, meaning it's a gain or non-cash income) Looking at this: In the cash flow statement, "Other Adjustments For Noncash Items" is -198,570,000. This is a large negative number. This could include various items. Let me investigate what this might be. Actually, looking at the P&L: "Profit Loss From Discontinued Operations" is 294,131,000 - this is a very large gain from discontinued operations! This is clearly nonrecurring. Also: "Cash Flows From Losing Control Of Subsidiaries Or Other Businesses Classified As Investing Activities" = 1,264,826,000 (proceeds from sale/disposal) So the -198,570,000 in "Other Adjustments For Noncash Items" likely relates to gains/losses from disposals, discontinued operations, or other non-cash items. For Adjusted EBITDA, we need to normalize by removing nonrecurring gains and adding nonrecurring losses. **Calculating Adjusted_EBITDA:** Base EBITDA: 499,430,000 Nonrecurring adjustments: - Impairment reversal (gain): -43,185,000 (subtract this gain) - Profit from discontinued operations: This is below operating profit, so not in EBITDA. But wait - is it? Let me check: EBITDA is "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense". Discontinued operations are typically below operating profit. Let me verify the structure. Actually, "Profit Loss From Operating Activities" is 220,814,000, then we have Finance items, then "Profit Loss Before Tax" is 186,535,000. Then tax, then "Profit Loss From Continuing Operations" 88,966,000, then "Profit Loss From Discontinued Operations" 294,131,000, then total "Profit Loss" 383,098,000. So discontinued operations are below the line and not in EBITDA. Good. But what about the "Other Adjustments For Noncash Items" of -198,570,000 in the cash flow? This is in operating cash flow reconciliation. Let me trace this. Looking at cash flow from operations: - Start with Profit Loss: 383,098,000 - Add back D&A and impairment reversal: 278,615,000 - Provisions changes: 38,978,000 - 17,675,000 = +21,303,000 net - Undistributed profits of investments: 2,294,000 - Employee benefits: 66,000 - Finance costs: 36,573,000 - Income tax expense: 97,569,000 - Other noncash items: -198,570,000 Sum before working capital: 383,098,000 + 278,615,000 + 21,303,000 + 2,294,000 + 66,000 + 36,573,000 + 97,569,000 - 198,570,000 = 620,948,000? But stated "Cash Flows From Used In Operations Before Changes In Working Capital" is 616,360,000. Close but not exact - difference of 4,588,000, likely rounding or other items. The -198,570,000 "Other Adjustments For Noncash Items" is large and negative. This likely includes gains on disposal of subsidiaries/businesses. The "Cash Flows From Losing Control Of Subsidiaries" is 1,264,826,000 in investing activities. The gain on this disposal would be in operating activities as a non-cash or reconciling item. Actually, looking more carefully: The gain on disposal of subsidiaries would be deducted from operating profit to get to cash basis (since it's a non-operating gain). This explains the large negative "Other Adjustments For Noncash Items." For EBITDA normalization: Do we need to adjust for gains on disposal of subsidiaries? These are typically non-operating and nonrecurring. However, EBITDA starts from operating profit, which typically excludes such gains. Let me verify if the gain on disposal is in operating profit or not. In IFRS, gains on disposal of subsidiaries are typically NOT in operating profit (they are "other income" or below operating profit). But looking at the P&L structure, we have "Other Income" of 12,678,000 which is in operating activities. The large gain might be classified differently. Actually, looking at the line items: "Cash Flows From Losing Control Of Subsidiaries Or Other Businesses Classified As Investing Activities" = 1,264,826,000. This is the cash proceeds. The gain would be proceeds minus book value of net assets sold. This gain could be in "Other Income" or elsewhere. But "Other Income" is only 12,678,000, which seems too small to contain this gain. So the gain might be netted off in the "Other Adjustments For Noncash Items." For S&P Adjusted EBITDA, we want to normalize operating performance. The gain on sale of subsidiaries is clearly nonrecurring and should be excluded. However, since EBITDA is based on operating profit before D&A, and such gains are typically not in operating profit, we may not need to adjust EBITDA further. Wait - let me re-check. "Profit Loss From Operating Activities" is 220,814,000. This includes "Other Income" of 12,678,000. If the gain on disposal is not in operating profit, then EBITDA is clean. But then what is the -198,570,000 in "Other Adjustments For Noncash Items"? Let me think... It could include: - Gain on disposal of subsidiaries (if classified as operating) - Changes in fair value of derivatives - Other non-cash items Looking at: "Adjustments For Gains Losses On Change In Fair Value Of Derivatives" = 34,549,000 (separate line item) Hmm, let me re-examine. The cash flow reconciliation has both "Adjustments For Gains Losses On Change In Fair Value Of Derivatives" (34,549,000) and "Other Adjustments For Noncash Items" (-198,570,000) as separate items. Actually, looking at the structure again, I think "Other Adjustments For Noncash Items" might include the gain on discontinued operations or other items. But for EBITDA purposes, since we start with 499,430,000 which is pre-impairment, pre-D&A operating figure, and the large gains appear to be below operating profit or non-cash reconciling items, the EBITDA may already be relatively clean. However, I need to check if "Other Income" of 12,678,000 includes any nonrecurring items. The description says "Nota -2 Altri proventi" (Other income). This could include various items. Let me take a more pragmatic approach. For S&P Adjusted EBITDA: - Start with reported EBITDA: 499,430,000 - Subtract nonrecurring gains: impairment reversal of 43,185,000 - Check if other items need adjustment The impairment reversal is clearly a nonrecurring gain that inflated operating profit. So: Adjusted_EBITDA = 499,430,000 - 43,185,000 = 456,245,000 But wait - is the impairment reversal already in the 499,430,000? Let me verify. The EBITDA is "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense". The operating profit is after the impairment reversal. So yes, EBITDA includes the effect of the impairment reversal (since it's before D&A but after other operating items... actually, impairment of fixed assets is typically part of operating activities, and reversal would be too). Actually, looking more carefully: "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss Intangible Assets And Property Plant And Equipment" - this is an impairment reversal on non-current assets. In the P&L, this would typically be part of operating profit. And since EBITDA is before D&A but after other operating items, the impairment reversal is in EBITDA. So yes, subtract 43,185,000 for normalization. Are there other nonrecurring items in EBITDA? - "Other Income" 12,678,000 - could include some nonrecurring items, but without detail, hard to say - "Impairment Loss Recognised In Profit Or Loss Trade Receivables" 300,000 - this is small and could be considered normal business For conservative S&P adjustment, I'll subtract the impairment reversal and consider if other items need adjustment. Actually, let me also consider: does S&P add back lease depreciation for IFRS 16 reporters? Under S&P methodology, for IFRS 16, they typically make an adjustment to create comparability. The standard approach is to add back the depreciation of right-of-use assets and subtract an estimated lease interest (or use a fixed charge coverage approach). However, looking at the data, I don't have an explicit split of lease depreciation. But I can estimate: - ROU assets 2022: 126,663,000; 2023: 154,311,000 - Average ROU assets: ~140,487,000 - If we assume similar depreciation rate to PPE (PPE 2022: 1,921,624,000; 2023: 2,120,073,000; depreciation 176,689,000; rate ~8.7%) - Estimated ROU depreciation: 140,487,000 * 8.7% ≈ 12,219,000 (very rough) But actually, lease terms are typically shorter, so depreciation might be higher. Without explicit data, this is speculative. For S&P Global Ratings methodology with IFRS 16, they typically adjust debt by adding 8x lease expenses (or using reported lease liabilities) and adjust EBITDA by adding back lease depreciation. But given complexity, let me see if there's a simpler path. Actually, re-reading the S&P methodology excerpt provided: it mentions "adjustment_leases (if any)" in the baseline formula. For Unregulated Power and Gas, there's no specific lease adjustment mentioned in the industry section. The general corporate approach would apply. Given that IFRS 16 is already implemented and leases are on balance sheet, and the EBITDA already reflects this accounting, I'll use the reported EBITDA with minimal lease adjustment. However, S&P typically does make an adjustment for operating leases even under IFRS 16 to ensure comparability with pre-IFRS 16 reporters or US GAAP reporters. For practical purposes, given data limitations, I'll proceed with: - Base EBITDA: 499,430,000 - Less: impairment reversal (nonrecurring gain): 43,185,000 - Adjusted_EBITDA = 456,245,000 Wait - I need to also consider if there are other items. Let me look at "Other Adjustments For Noncash Items" again. In the cash flow, this is -198,570,000, which is large. If this includes items that were in operating profit, they would affect EBITDA. Let me try to understand what's in this -198,570,000. Looking at the cash flow reconciliation: Profit Loss: 383,098,000 + D&A etc: 278,615,000 + provisions: 21,303,000 (net) + undistributed profits: 2,294,000 + employee benefits: 66,000 + finance costs: 36,573,000 + income tax: 97,569,000 + other noncash: -198,570,000 = 620,948,000 (but reported as 616,360,000, difference 4,588,000) Actually wait, I need to check: "Adjustments For Decrease In Provisions" is 17,675,000 - is this a positive or negative adjustment? In cash flow terms, decrease in provisions is a negative adjustment (use of provisions). Let me re-read: "Adjustments For Increase In Provisions" 38,978,000 and "Adjustments For Decrease In Provisions" 17,675,000. If both are positive numbers in the list, then net is 38,978,000 - 17,675,000 = +21,303,000? Or is "Decrease" already shown as a negative? Looking at standard cash flow presentation, "Adjustments For Decrease In Provisions" as a positive number would mean it's added back (which is wrong). Actually, in the data, both are shown as positive numbers, so the net effect in the reconciliation is +38,978,000 - 17,675,000 = +21,303,000. But this doesn't make complete sense for cash flow. Let me just accept the reported "Cash Flows From Used In Operations Before Changes In Working Capital" = 616,360,000 as given. Back to EBITDA: The -198,570,000 "Other Adjustments For Noncash Items" is a deduction from profit to get to operating cash flow before working capital. This suggests it's a gain or non-cash income that needs to be subtracted. What could this be? Possibilities: 1. Gain on disposal of subsidiaries/businesses (if included in profit before tax) 2. Gain on disposal of assets 3. Fair value gains on financial instruments 4. Other non-cash income Given that "Cash Flows From Losing Control Of Subsidiaries" is 1,264,826,000 in investing activities, there was definitely a major disposal. The gain on this would be proceeds minus net assets disposed. If the net assets were around 1,000,000,000+, the gain could be 200,000,000+. But is this gain in operating profit? Looking at the P&L structure: - Operating profit: 220,814,000 - Finance income: 75,622,000 - Finance costs: 112,195,000 - Finance income/cost net: -36,573,000 - Share of profit of investments: 2,294,000 - Profit before tax: 186,535,000 The operating profit of 220,814,000 seems to not include the large gain (otherwise it would be much higher). So the gain is likely below operating profit or in discontinued operations. Actually, wait. "Profit Loss From Discontinued Operations" is 294,131,000. This is after tax. The pre-tax amount would be higher. Could the -198,570,000 relate to discontinued operations gain that needs to be reversed in continuing operations cash flow? Yes, likely! In IFRS, when you present discontinued operations separately, the gain on disposal of discontinued operations is shown separately. In the cash flow statement, you need to eliminate this from operating cash flow (since the cash effect is in investing activities). So "Other Adjustments For Noncash Items" of -198,570,000 likely includes the elimination of the gain on disposal of discontinued operations. Since this gain is NOT in operating profit/EBITDA (it's in discontinued operations below the line), it doesn't affect our EBITDA calculation. Good. So my Adjusted_EBITDA calculation: - Base EBITDA: 499,430,000 - Less: impairment reversal (nonrecurring gain in operating activities): 43,185,000 - Adjusted_EBITDA = 456,245,000 But wait - I need to check if there are other nonrecurring items. What about "Other Income" of 12,678,000? Is this recurring? "Altri proventi" in Italian could include various items. Without more detail, I'll assume it's recurring or immaterial for adjustment. Also, I should check if S&P adds back operating lease depreciation for IFRS 16. Let me think about this more carefully. Under IFRS 16, lease expense is replaced by: - Depreciation of ROU assets (operating) - Interest on lease liabilities (financing) EBITDA under IFRS 16 includes the depreciation of ROU assets as part of "depreciation and amortization" which is added back to get EBITDA. Wait - no. EBITDA is before depreciation and amortization. So if operating profit includes depreciation of ROU assets, then EBITDA (which adds back D&A) would exclude this depreciation. Actually, let me re-read: "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense" - this explicitly says it's BEFORE D&A. So the D&A of ROU assets is already added back in this EBITDA figure. But then, what about the lease interest? It's in finance costs, not in EBITDA. So EBITDA is "clean" of lease effects except that operating profit no longer includes lease rental expense (it's replaced by depreciation, which is added back). For S&P comparability with pre-IFRS 16 or US GAAP companies, they might want to adjust EBITDA to include a "lease expense" proxy. But actually, S&P's typical approach is to add debt for leases and keep EBITDA as reported under IFRS 16, or to make specific adjustments. Given the complexity and that the explicit EBITDA is provided, I'll use 456,245,000 as Adjusted_EBITDA, but let me also consider if we need to add anything for leases. Actually, looking at S&P's general approach: for IFRS 16 reporters, they typically DON'T adjust EBITDA further for leases, but they DO add lease liabilities to debt. The EBITDA is considered to already reflect the economics appropriately (with D&A added back, the lease cost is "removed" from EBITDA, which is similar to pre-IFRS 16 where lease rent was not in EBITDA anyway). Wait - that's wrong. Pre-IFRS 16, operating lease rent was IN operating profit and thus in EBITDA. Post-IFRS 16, depreciation of ROU assets is in operating profit but added back to get EBITDA, and interest is below EBITDA. So EBITDA post-IFRS 16 is HIGHER than pre-IFRS 16 by the amount of lease depreciation (since pre-IFRS 16 had lease rent in EBITDA, post-IFRS 16 has nothing in EBITDA for leases). For S&P comparability, they typically adjust by: - Adding back lease depreciation and subtracting estimated lease interest, OR - Using a fixed charge approach, OR - Just adding lease liabilities to debt and accepting the EBITDA as is Given the provided methodology doesn't specify a lease EBITDA adjustment for Unregulated Power and Gas, and the baseline formula says "adjustment_leases (if any)", I'll check if any is needed. For now, I'll proceed with Adjusted_EBITDA = 456,245,000, but let me also consider an alternative if S&P would capitalize leases in EBITDA. Actually, I realize I should look more carefully at whether the 499,430,000 EBITDA is truly "clean." Let me verify by another approach: Revenue: 713,840,000 + Other Income: 12,678,000 - Other Purchase Expense: 15,188,000 - Services Expense: 156,792,000 - Impairment on receivables: 300,000 - Employee benefits: 54,808,000 = Operating profit before D&A and impairment reversal on fixed assets Wait, I need to check if impairment reversal on fixed assets is before or after this EBITDA line. Actually, the line "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense" is 499,430,000. This should equal: Revenue + Other Income - Operating Expenses (excluding D&A and impairment) Let me verify: 713,840,000 + 12,678,000 - 15,188,000 - 156,792,000 - 300,000 - 54,808,000 = 499,430,000. Yes! This matches exactly. So the impairment reversal of 43,185,000 is NOT in this EBITDA figure. It's deducted after this line to get to operating profit. Let me verify: 499,430,000 - 58,741,000 (amortization) - 176,689,000 (depreciation) + 43,185,000 (impairment reversal) = 307,185,000? But operating profit is 220,814,000. Hmm, that doesn't match. Wait: 499,430,000 - 58,741,000 - 176,689,000 + 43,185,000 = 307,185,000, not 220,814,000. There's a difference of 86,371,000. What explains this? Looking more carefully, maybe the impairment reversal is already included in the 499,430,000? Or maybe there are other items I'm missing. Actually, re-reading: "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense" - this is EBITDA in the traditional sense. But the calculation should be: Operating profit (220,814,000) + D&A (176,689,000 + 58,741,000) - impairment reversal (43,185,000) = 220,814,000 + 235,430,000 - 43,185,000 = 413,059,000 But reported EBITDA is 499,430,000. Difference is 86,371,000. Hmm, let me check if there's something else. Maybe the impairment reversal is a negative expense (i.e., income) that's already in the 499,430,000? Actually, I think I misread the P&L structure. Let me re-examine. Looking at the line items that make up operating activities: - Revenue: 713,840,000 - Other Income: 12,678,000 - Other Purchase Expense: -15,188,000 - Services Expense: -156,792,000 - Impairment Loss on Receivables: -300,000 - Employee Benefits: -54,808,000 Sum: 713,840,000 + 12,678,000 - 15,188,000 - 156,792,000 - 300,000 - 54,808,000 = 499,430,000 This is EBITDA! So these are the items before D&A. The impairment reversal on fixed assets (43,185,000) must be AFTER this, i.e., it's part of the D&A section or below. Wait, but "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss Intangible Assets And Property Plant And Equipment" - this is a reversal of impairment on fixed assets. In standard P&L presentation, this would be: - Operating income (EBITDA): 499,430,000 - Less: Depreciation: 176,689,000 - Less: Amortization: 58,741,000 - Plus: Impairment reversal: 43,185,000 = Operating profit (EBIT): 307,185,000 But reported "Profit Loss From Operating Activities" is 220,814,000, not 307,185,000. There's still a difference of 86,371,000. Let me look for what else might be in operating profit. Maybe "Other Income" includes or excludes certain items? Or maybe there are other expenses not listed in my explicit check? Looking at all operating-related items in the data: - "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 Are there other operating expenses? "Cost of sales" or similar? I don't see "Cost Of Sales" explicitly, but "Other Purchase Expense" might be part of it. Actually, looking at the note reference: "Disclosure Of Cost Of Sales Explanatory" refers to "Nota -3 Costi per acquisti" (Purchase costs). This suggests "Other Purchase Expense" is the cost of sales or similar. Hmm, but 713,840,000 revenue minus various costs = 499,430,000 seems high margin (70%). For a renewable energy company, this might be plausible if they have long-term contracts and low variable costs. Let me check if there's "Cost of sales" separate from "Other Purchase Expense." I don't see it explicitly. Actually, I wonder if the 86,371,000 difference relates to other items that are in EBITDA but I haven't accounted for, or if the impairment reversal is treated differently. Let me try another approach: look at the cash flow reconciliation which starts from Profit Loss and adds back items to get to cash flow before working capital. Profit Loss: 383,098,000 + D&A and impairment reversal: 278,615,000 = 661,713,000 But "Cash Flows From Used In Operations Before Changes In Working Capital" is 616,360,000. The difference between 661,713,000 and 616,360,000 is 45,353,000, which should be explained by other adjustments. Looking at other adjustments listed: - Increase in provisions: 38,978,000 - Decrease in provisions: -17,675,000? (or +17,675,000?) - Impairment reversal current assets: 0 - Undistributed profits of investments: 2,294,000 - Employee benefits: 66,000 - Finance costs: 36,573,000 - Income tax expense: 97,569,000 - Other noncash: -198,570,000 If I sum these with signs: +38,978,000 - 17,675,000 + 0 + 2,294,000 + 66,000 + 36,573,000 + 97,569,000 - 198,570,000 = -38,765,000 Then 661,713,000 - 38,765,000 = 622,948,000, not 616,360,000. Still off by 6,588,000. Hmm, maybe "Adjustments For Decrease In Provisions" is a positive number in the data but should be subtracted? Let me assume both provision numbers are absolute values and I need to determine signs. Actually, in standard cash flow presentation under IFRS, the reconciliation from net income to operating cash flow typically shows: - Profit before tax: 186,535,000 - Adjustments for: - D&A: 235,430,000 (176,689,000 + 58,741,000) - Impairment reversal: -43,185,000 - Other items... But the data shows "Adjustments For Depreciation And Amortisation Expense And Impairment Loss Reversal" as 278,615,000. This is 235,430,000 + 43,185,000 = 278,615,000. So they're adding back D&A AND adding back the impairment reversal (or rather, the net effect is presented as a single positive number). Wait, that means the 278,615,000 = 176,689,000 + 58,741,000 + 43,185,000? That would be adding the impairment reversal, not subtracting it. But in cash flow terms, if impairment reversal reduced expenses (increased profit), you need to subtract it to get back to cash basis. Unless... the 43,185,000 is already included in the 278,615,000 as a negative (i.e., the presentation is "adjustments for D&A and impairment reversal" where impairment reversal is a negative adjustment). Actually, looking at the 2021 figure: 228,310,000 = 156,184,000 + 50,110,000 + 22,016,000 = 228,310,000. Yes! It's D&A plus impairment reversal. So they're adding back all of these, treating impairment reversal as a "positive" adjustment (i.e., it increased profit, so add it back? No, that doesn't make sense). Wait, in 2021: 156,184,000 + 50,110,000 + 22,016,000 = 228,310,000. If impairment reversal increased profit, you should SUBTRACT it in cash flow reconciliation, not add it. Unless... the 22,016,000 is actually an impairment loss, not reversal? Let me re-read: "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss Intangible Assets And Property Plant And Equipment" - this is explicitly a REVERSAL (negative impairment, i.e., gain). But in 2021, the amount is 22,016,000, and in 2022 it's 43,185,000. And "Adjustments For Depreciation And Amortisation Expense And Impairment Loss Reversal" is 228,310,000 in 2021 and 278,615,000 in 2022. If this line is adding back D&A and also adding back impairment reversal, that would be wrong for cash flow purposes (you should subtract a gain). Unless the presentation is that this is the total "non-cash items" adjustment where impairment reversal is treated as a non-cash negative expense (i.e., it reduced expenses, so to get back to "cash basis" you add it back? No, that still doesn't make sense). Actually, I think I need to interpret this differently. In some cash flow presentations, "adjustments for depreciation and amortization" is presented as the total non-cash expense add-back. If there's an impairment reversal, it might be netted against impairments in the current period. But here, "Impairment Loss Recognised In Profit Or Loss Trade Receivables" is 300,000 in 2022 and 8,420,000 in 2021. The "Adjustments For Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss Current Assets" is 0 in 2022 and 8,442,000 in 2021. Hmm, in 2021: impairment on trade receivables is 8,420,000 and adjustment for impairment reversal on current assets is 8,442,000. These are close but not exact. I think the cash flow presentation in this data might have some netting or presentation differences from what I expect. Let me just use the explicit EBITDA figure of 499,430,000 and adjust for what I can clearly identify. Given the complexity, let me take a more straightforward approach: **Adjusted_EBITDA = 499,430,000** (reported EBITDA) For S&P purposes, I need to normalize. The main item I can identify is: - Impairment reversal on fixed assets: 43,185,000 (this is a gain that likely reduced operating expenses or increased operating income) But wait - is this impairment reversal IN the 499,430,000? Let me check by looking at whether it's included in "Other Income" or separate. Actually, looking at the structure: "Other Income" is 12,678,000. The impairment reversal on fixed assets of 43,185,000 is separate. If it's not in "Other Income", where is it? It might be a reduction in "Operating Expenses" or part of a separate line. In many IFRS presentations, impairment reversal is shown as a separate line item or netted against impairment losses. If it's a reversal of previous impairment, it might be presented as "net impairment gain" or similar. Given the explicit EBITDA line of 499,430,000 and the explicit operating profit of 220,814,000, and knowing that: Operating profit = EBITDA - D&A ± impairment items If 499,430,000 - 58,741,000 - 176,689,000 + 43,185,000 = 307,185,000 ≠ 220,814,000 There's missing information. The difference of 86,371,000 might be other operating expenses not explicitly listed, or other items. Let me check if "Other Purchase Expense" and "Services Expense" are the only operating expenses. Maybe there's "Cost of sales" embedded somewhere. Actually, looking at the note: "Disclosure Of Cost Of Sales Explanatory" refers to "Nota -3 Costi per acquisti". And "Other Purchase Expense" is 15,188,000. This seems very low for a company with 713M revenue. For a renewable energy company, maybe they have very low variable costs (fuel is free for wind/solar). But still, 70% EBITDA margin seems high but possible for renewables with long-term contracts. Given I can't perfectly reconcile, let me use the explicit figures as given and make reasonable adjustments. Actually, I just realized: maybe the 499,430,000 EBITDA includes the impairment reversal? Let me test: If EBITDA includes 43,185,000 impairment reversal as part of "income", then "clean" EBITDA would be 499,430,000 - 43,185,000 = 456,245,000. Then operating profit = 456,245,000 - 235,430,000 = 220,815,000 ≈ 220,814,000. YES! This matches! So the 499,430,000 DOES include the impairment reversal of 43,185,000. The presentation must be that the impairment reversal is included in the operating income/EBITDA, and then D&A is deducted to get operating profit. Wait, but then: 456,245,000 (clean EBITDA) - 235,430,000 (D&A) = 220,815,000 operating profit. But reported operating profit is 220,814,000. This matches! So the correct interpretation is: - "Clean" operating performance: 456,245,000 - Plus impairment reversal: 43,185,000 - Reported EBITDA: 499,430,000 - Less D&A: 235,430,000 - Reported operating profit: 220,814,000 (or 220,815,000 with rounding) Actually, that still doesn't make complete sense because impairment reversal on fixed assets is typically NOT in EBITDA (it's not part of operating performance, it's a one-off). But in this presentation, it seems to be included. For S&P Adjusted EBITDA, I should: 1. Start with reported EBITDA: 499,430,000 2. Subtract nonrecurring gain (impairment reversal): 43,185,000 3. Adjusted_EBITDA = 456,245,000 This gives a "normalized" EBITDA that excludes the one-off impairment reversal. Are there other adjustments? Let me check "Other Income" of 12,678,000. If this includes nonrecurring items, I should adjust. But without detail, I'll assume it's recurring. Also, for Unregulated Power and Gas, S&P mentions they adjust for long-term PPAs like regulated utilities. But no specific adjustment formula is given, and I don't have PPA details. So **Adjusted_EBITDA = 456,245,000 EUR** ## Step 3: Estimate FFO **Baseline formula: FFO = Adjusted_EBITDA - cash_interest - cash_taxes** For Unregulated Power and Gas, I need to check if there are modifications. The methodology doesn't specify a different FFO formula, so I'll use the baseline. **Cash interest:** Looking at the data: - "Finance Costs" P&L: 112,195,000 - "Finance Income" P&L: 75,622,000 - Net finance cost: -36,573,000 (reported as "Finance Income Cost") But this is accrual accounting. For cash interest, I need actual cash paid. From cash flow: - "Interest Paid Classified As Financing Activities": 29,146,000 - "Adjustments For Finance Costs" in operating cash flow: 36,573,000 The "Adjustments For Finance Costs" is the accrual finance cost added back in cash flow reconciliation. But actual cash interest paid is 29,146,000 (in financing activities). Wait - under IFRS, interest paid can be classified as operating or financing. Here, 29,146,000 is in financing activities. Is there also interest in operating activities? Looking at operating cash flow: "Cash Flows From Used In Operating Activities Continuing Operations" is 502,520,000. This is after various adjustments but before... actually, let me check if interest paid is deducted in operating cash flow. Actually, looking at standard IFRS cash flow presentation, operating cash flow typically includes interest paid (unless classified as financing). Here, "Interest Paid Classified As Financing Activities" suggests it's in financing, not operating. But then, is the operating cash flow before or after interest? Looking at the reconciliation: Profit Loss: 383,098,000 + various adjustments = 616,360,000 (before working capital) ± working capital etc - income taxes paid: 91,854,000 = 502,520,000? No wait, let me check. Actually "Cash Flows From Used In Operations Before Changes In Working Capital" = 616,360,000 "Increase Decrease In Working Capital And Other Operating Activities" = 113,840,000 (this is a positive, meaning source of cash) "Income Taxes Paid Classified As Operating Activities" = 91,854,000 (negative, use of cash) So: 616,360,000 + 113,840,000 - 91,854,000 = 638,346,000? But "Cash Flows From Used In Operating Activities Continuing Operations" is 502,520,000. Hmm, that doesn't match. Let me re-read: "Increase Decrease In Working Capital And Other Operating Activities" - if this is 113,840,000, is it a positive or negative? The wording "Increase Decrease" is ambiguous. In cash flow terms, a decrease in working capital is a source of cash (positive), increase is use (negative). Actually, looking at 2021: "Increase Decrease In Working Capital And Other Operating Activities" = 456,520,000, and "Cash Flows From Used In Operating Activities Continuing Operations" = -40,849,000 (negative, meaning cash used). With profit-based starting point of 415,671,000 + working capital 456,520,000 - taxes 38,010,000 = 834,181,000, but reported is -40,849,000. This doesn't match, so my interpretation is wrong. Actually, I think "Cash Flows From Used In Operations Before Changes In Working Capital" might already include some items, and the signs might be different than I think. Let me try: 616,360,000 (before working capital) - 113,840,000 (increase in working capital, negative for cash) - 91,854,000 (taxes) = 410,666,000? Not 502,520,000. Or: 616,360,000 + 113,840,000 - 91,854,000 = 638,346,000? Not matching. I think the issue is that "Increase Decrease In Working Capital And Other Operating Activities" of 113,840,000 might already be net of various items, or the presentation is different. Actually, looking more carefully at the data structure, I see "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 546,114,000? But "Cash Flows From Used In Operating Activities" = 458,926,000. Hmm, 502,520,000 + 43,594,000 = 546,114,000 ≠ 458,926,000. So discontinued operations might be subtracted or have different sign. Actually, "Cash Flows From Used In Operating Activities Discontinued Operations" = 43,594,000 - if this is positive (source of cash), and continuing is 502,520,000 (source), total should be 546,114,000. But it's 458,926,000. Difference is 87,188,000. This is getting too complex. Let me focus on what I need: cash interest and cash taxes. From the data: - "Income Taxes Paid Classified As Operating Activities": 91,854,000 (2022) - "Interest Paid Classified As Financing Activities": 29,146,000 (2022) For cash interest, is 29,146,000 the total? Under IFRS, companies can classify interest paid as operating or financing. Here, it's explicitly in financing activities. There might also be interest received in operating or investing. "Finance Income" P&L is 75,622,000. Cash interest received might be different. For S&P FFO calculation, I need "cash interest paid" net of "cash interest received" or just gross interest paid? Typically, FFO uses cash interest paid (gross) or sometimes net interest. Looking at S&P methodology: "FFO = Adjusted_EBITDA - cash_interest - cash_taxes". This suggests cash interest paid (expense), not net of interest received. But wait - in the cash flow reconciliation, "Adjustments For Finance Costs" is 36,573,000. This is the net finance cost (accrual) added back. The actual cash interest paid is 29,146,000 in financing activities. The difference might be accrual adjustments, capitalized interest, or interest received. For S&P purposes, I'll use: - Cash interest paid: 29,146,000 (from financing activities) - But I need to check if there's also interest paid in operating activities. Looking at the operating cash flow items, I don't see explicit "interest paid" in operating. Actually, in the reconciliation "Adjustments For Finance Costs" = 36,573,000. If this is added back to profit, and then we need to subtract actual cash interest to get to cash basis... but the cash flow statement already shows the result. Let me think differently. The "Cash Flows From Used In Operations Before Changes In Working Capital" of 616,360,000 is roughly: Profit 383,098,000 + D&A adjustments 278,615,000 + other non-cash items ≈ 616,360,000 This is BEFORE working capital changes and BEFORE taxes paid and interest paid (if interest is in financing). So this 616,360,000 is essentially "cash-based operating profit before working capital and taxes and interest." Actually, for FFO purposes, S&P defines it as funds from operations, which is roughly operating cash flow before working capital changes. The standard S&P FFO formula is: FFO = Net income + D&A + deferred taxes + other non-cash items - gain on sale + adjustments Or more commonly for corporates: FFO = EBIT + D&A - cash interest - cash taxes (with various adjustments) Given the baseline formula provided: FFO = Adjusted_EBITDA - cash_interest - cash_taxes So I need: - Adjusted_EBITDA: 456,245,000 - Cash interest: ? - Cash taxes: ? For cash taxes: "Income Taxes Paid Classified As Operating Activities" = 91,854,000. This seems clear. For cash interest: I need to determine the actual cash outflow for interest. "Interest Paid Classified As Financing Activities" = 29,146,000. But is this the total interest paid, or is there more? Looking at the P&L: Finance Costs 112,195,000, Finance Income 75,622,000, net 36,573,000 expense. The cash interest paid of 29,146,000 is much less than 112,195,000. This could be because: - 112,195,000 includes non-cash items (accretion, fair value changes, amortization of fees) - Some interest is capitalized - Some is paid but classified differently Also, 29,146,000 is classified as financing, not operating. Under IFRS, interest paid can be operating or financing. For S&P FFO, I think we want the actual cash interest paid, regardless of classification. So 29,146,000 might be it, or there might be more. But wait - "Adjustments For Finance Costs" in the cash flow reconciliation is 36,573,000. This is the P&L finance cost (net) added back. If the cash flow statement is prepared with interest paid in financing activities, then the operating cash flow before working capital would not yet deduct interest. Actually, let me check: "Cash Flows From Used In Operations Before Changes In Working Capital" = 616,360,000. If this is calculated as: Profit 383,098,000 + D&A 278,615,000 + ... + finance costs 36,573,000 + ... Then adding back finance costs means we're before interest deduction. And if interest paid is in financing activities, then the operating cash flow is indeed before interest. For S&P FFO, we want to deduct cash interest. So: FFO = 456,245,000 - cash_interest - 91,854,000 What is cash_interest? If we use 29,146,000 (explicitly paid and classified as financing), then: FFO = 456,245,000 - 29,146,000 - 91,854,000 = 335,245,000 But wait - is the 29,146,000 the NET interest paid (after interest received), or gross? The description says "Interest Paid", suggesting gross interest paid, not net. However, in the cash flow statement, there might also be "Interest Received" in investing or operating activities. I don't see it explicitly. Actually, looking at investing activities: "Increase Decrease In Other Current Financial Assets" = -257,149,000. This could include interest-bearing deposits. For simplicity, let me use 29,146,000 as cash interest paid. But I should also consider if S&P uses "cash interest" as net interest paid (interest paid minus interest received). Looking at S&P general methodology, they typically use gross interest paid for FFO to debt, but sometimes net. For conservatism and standard practice, I'll use the explicit "Interest Paid" figure. But actually, I realize I need to check if there's capitalized interest. The "Finance Costs" P&L is 112,195,000, but cash paid is only 29,146,000. The difference is 83,049,000. This is large. Possibilities: 1. Non-cash finance costs (accretion, fair value changes, FX): could be significant 2. Capitalized interest: if company is constructing assets, interest might be capitalized 3. Interest added to debt (payment-in-kind): possible but less likely Looking at investing activities: "Purchase Of Property Plant And Equipment" = 307,048,000. This is significant capex. Some interest might be capitalized. Also, "Purchase Of Right Of Use Assets" = 23,467,000. Under IFRS 16, this is a lease-related investing outflow. For S&P purposes, capitalized interest is still interest and should be included in cash interest if it's paid. But if it's capitalized, it's not in P&L finance costs, and might not be in "interest paid." Actually, capitalized interest would still be paid in cash, so it should be in "interest paid" if it's paid. Unless the company is accruing it and adding to asset cost without cash payment (which would be unusual). Let me look at this differently. The "Adjustments For Finance Costs" of 36,573,000 is the P&L net finance cost. If I add this back to profit, I get pre-finance cost figure. Then if I subtract actual cash interest paid (29,146,000), I get a figure that's before non-cash finance costs and after cash interest. For FFO, S&P wants: operating cash generation before working capital but after cash interest and cash taxes. So the formula Adjusted_EBITDA - cash_interest - cash_taxes makes sense. Given data limitations, I'll use: - Cash interest = 29,146,000 (explicit interest paid) - Cash taxes = 91,854,000 (explicit taxes paid) But wait - I need to check if there are other interest-related cash flows. "Payments For Early Redemption Fees" = 2,900,000. This is like interest expense, a financing cost. Should it be included in cash interest? Probably yes, as it's a cost of debt. Also, looking at financing activities: "Repayments Of Noncurrent Borrowings" = 350,218,000. This includes principal repayment. For S&P FFO, should I include the 2,900,000 early redemption fee in cash interest? It's a financing cost similar to interest. Let me include it for conservatism, or check S&P practice. S&P typically includes "interest paid" and similar financing costs in cash interest. Early redemption fees are typically treated as part of debt repayment or as a separate financing cost. For FFO purposes, I think it's cleaner to stick with explicit "Interest Paid" of 29,146,000. Actually, let me reconsider. The baseline formula says "cash_interest". Early redemption fees are not interest, they're fees. So I'll exclude them. So: **FFO = 456,245,000 - 29,146,000 - 91,854,000 = 335,245,000 EUR** Wait, I need to double-check this. Let me also consider if S&P includes dividends from investments in FFO. The data shows "Share Of Profit Loss Of Non Current Investments" = 2,294,000. This is equity pickup, not cash dividend. "Undistributed profits" adjustment in cash flow is 2,294,000, suggesting these are not yet cash. For FFO, S&P typically excludes equity earnings and includes only cash dividends received. Since no cash dividends are explicitly mentioned, I'll exclude. Also, I should check if "Finance Income" of 75,622,000 includes cash interest received. If so, should I net this against cash interest paid? In some definitions, "cash interest" means net cash interest (paid minus received). Looking at S&P methodology for utilities: they sometimes use "funds from operations" which is more like operating cash flow before working capital changes, after interest and taxes. If interest received is part of operations, it might be included. But for simplicity and given the baseline formula "cash_interest" (singular, suggesting expense), I'll use gross interest paid. Actually, re-reading: "FFO = Adjusted_EBITDA - cash_interest - cash_taxes". This uses "cash_interest" not "net cash interest" or "cash interest paid". I interpret this as cash interest expense, i.e., interest paid. Let me also verify by looking at the relationship between P&L and cash flow: - P&L Finance Costs: 112,195,000 - Cash Interest Paid: 29,146,000 - Difference: 83,049,000 (non-cash or capitalized or other) This large difference suggests significant non-cash finance costs (like fair value changes on derivatives, FX gains/losses, accretion of debt discount, etc.). For S&P FFO, we want to start from EBITDA (which is before all finance costs), then subtract only the CASH portion of interest, leaving the non-cash portion "added back" effectively. So my calculation seems correct: FFO = 456,245,000 - 29,146,000 - 91,854,000 = 335,245,000 But let me cross-check with an alternative FFO calculation from cash flow: "Cash Flows From Used In Operations Before Changes In Working Capital" = 616,360,000 This includes: - Profit 383,098,000 + D&A and impairment reversal 278,615,000 + other adjustments (net) If I adjust this to S&P FFO: - Start with 616,360,000 - Subtract working capital and other items to get to "operating cash flow before working capital after interest and taxes"... actually, this is already before working capital. Hmm, but 616,360,000 includes various adjustments. Let me see if it matches my FFO calculation. 616,360,000 is before working capital changes and before some other items. It includes the profit-based adjustments but not working capital. My FFO of 335,245,000 is quite different from 616,360,000. Why? Because: - 616,360,000 starts from reported profit 383,098,000 (which includes discontinued operations gain of 294,131,000, non-cash items, etc.) - My Adjusted_EBITDA of 456,245,000 is from continuing operations, normalized The 616,360,000 includes the gain on disposal and other items that I normalized out. If I adjust 616,360,000: - Subtract gain on disposal (non-cash portion): -198,570,000 adjustment includes some, but not all - The discontinued operations cash flow is separate Actually, let me try: FFO should be roughly operating cash flow before working capital changes, after interest and taxes, for CONTINUING operations. "Cash Flows From Used In Operating Activities Continuing Operations" = 502,520,000. This is AFTER working capital changes and AFTER taxes paid. To get to "before working capital": 502,520,000 + working capital changes - taxes paid? No, this is confusing. Let me use a cleaner approach. The standard S&P FFO from cash flow is: FFO = Net cash from operating activities + after-tax interest paid + working capital changes - nonrecurring cash items Or: FFO = Operating cash flow before working capital - cash interest - cash taxes (from EBITDA basis) Actually, I think my EBITDA-based approach is more consistent with the baseline formula provided. Let me stick with: **FFO = 335,245,000 EUR** But I want to double-check the cash interest figure. Let me see if there's another way to estimate it. From the cash flow reconciliation, "Adjustments For Finance Costs" = 36,573,000. This is the P&L finance cost (net of income) added back. If the actual cash outflow for interest (net) was different, it's reflected in the difference between this accrual and cash. But "Interest Paid" of 29,146,000 is only part of the cash flow. There might also be "Interest Received" somewhere. Looking at investing activities, I don't see explicit "Interest Received." There might be some in "Other Current Financial Assets" or included in operating activities. For S&P's standard definition, if they use "cash interest" as a reduction from EBITDA, they typically mean cash interest paid on debt (gross), not net of interest received. Given the ambiguity, let me use 29,146,000 as cash interest paid, but also consider if I should add any other financing costs. Actually, looking at financing activities again: - Interest Paid: 29,146,000 - Payments For Early Redemption Fees: 2,900,000 - Payments Of Lease Liabilities: 8,337,000 (this includes principal + interest) The lease payments of 8,337,000 include interest portion. Under IFRS 16, lease interest is part of finance costs. Is this included in the 29,146,000 "Interest Paid"? Probably not, as it's "Payments Of Lease Liabilities" separate from "Interest Paid." So total cash outflows similar to interest: 29,146,000 + 2,900,000 + part of 8,337,000 = ? For S&P FFO, lease payments are typically NOT subtracted as interest (they're debt service). The interest portion of leases might be considered, but it's complex. Given the baseline formula is "cash_interest" (singular), I'll stick with 29,146,000. But wait - I should also consider if S&P includes capitalized interest in "cash interest." If interest is capitalized into PP&E, it's not in P&L finance costs, but it's still a cash outflow. However, it's typically not in "interest paid" either (it's in capex). For FFO purposes, capitalized interest is usually excluded from cash interest (it's considered part of capex). So my FFO = 335,245,000 seems reasonable. Let me also try an alternative: if cash interest should include the full P&L finance cost that represents cash paid. The P&L finance cost is 112,195,000. If 83,049,000 is non-cash, then cash is 29,146,000. This matches my figure. Actually, I want to verify: is 29,146,000 the NET interest paid (after deducting interest received), or GROSS? The line says "Interest Paid Classified As Financing Activities" - this suggests gross interest paid, classified as financing outflow. There might be "Interest Received" classified as investing inflow. Looking at investing activities, I don't see explicit "Interest Received." But "Increase Decrease In Other Current Financial Assets" = -257,149,000. This is a large outflow. If this includes interest-bearing deposits, the interest received might be netted in this. Given ambiguity, I'll use 29,146,000 as the cash interest expense for FFO. **FFO = 456,245,000 - 29,146,000 - 91,854,000 = 335,245,000 EUR** ## Step 4: Estimate Adjusted_Debt **Baseline formula: Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash** For Unregulated Power and Gas, S&P 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." But I don't have specific PPA data, so I'll focus on what I can measure. **Reported debt:** Looking at liability items: - "Other Noncurrent Financial Liabilities": 2,064,088,000 (2022) - this is likely long-term debt - "Noncurrent Financial Liabilities At Fair Value Through Profit Or Loss": 44,763,000 (2022) - "Other Current Financial Liabilities": 1,342,688,000 (2022) - "Current Financial Liabilities At Fair Value Through Profit Or Loss": 170,857,000 (2022) Total financial liabilities: 2,064,088,000 + 44,763,000 + 1,342,688,000 + 170,857,000 = 3,622,396,000 But wait, "Other Current Financial Liabilities" might include trade payables or other non-debt items. Let me look more carefully. Actually, looking at the current liabilities section: - "Trade And Other Current Payables To Trade Suppliers": 254,374,000 - "Current Financial Liabilities At Fair Value Through Profit Or Loss": 170,857,000 - "Other Current Financial Liabilities": 1,342,688,000 - "Current Lease Liabilities": 6,282,000 - "Other Current Nonfinancial Liabilities": 39,477,000 - "Current Tax Liabilities": 19,798,000 The "Other Current Financial Liabilities" of 1,342,688,000 is quite large. This likely includes short-term borrowings, current portion of long-term debt, and possibly other items. Similarly, noncurrent: - "Other Noncurrent Financial Liabilities": 2,064,088,000 - likely bonds, loans - "Noncurrent Financial Liabilities At Fair Value Through Profit Or Loss": 44,763,000 - "Noncurrent Lease Liabilities": 122,663,000 For S&P debt calculation, I need to identify what's truly "debt-like." **Leases:** Under IFRS 16, lease liabilities are already on balance sheet: - Noncurrent lease liabilities: 122,663,000 - Current lease liabilities: 6,282,000 - Total lease liabilities: 128,945,000 But wait - S&P typically adds leases to debt even if they're already on balance sheet? Actually, with IFRS 16, lease liabilities ARE on balance sheet, so they might already be included in "reported debt" if the company classifies them as financial liabilities. Looking at the classification: "Noncurrent Lease Liabilities" and "Current Lease Liabilities" are separate from "Other... Financial Liabilities." So they might not be in the debt figures above. For S&P Adjusted Debt with IFRS 16, the standard approach is: - Reported debt (as defined by S&P, typically interest-bearing debt) - Plus: lease liabilities (if not already included in reported debt, or if using pre-IFRS 16 approach) Actually, under IFRS 16, lease liabilities are financial liabilities and should be included in debt. But companies might report them separately. Let me look at what "reported debt" typically means for S&P. It's usually: - Short-term borrowings - Current portion of long-term debt - Long-term debt - Notes/bonds Excluding: trade payables, deferred tax liabilities, provisions, lease liabilities (sometimes), etc. For IFRS 16 reporters, S&P typically: - Includes lease liabilities in adjusted debt (either as reported or with a multiplier adjustment) - May adjust EBITDA to add back lease depreciation Given the complexity, let me estimate reported debt as: - Other Noncurrent Financial Liabilities: 2,064,088,000 - Noncurrent Financial Liabilities At FVTPL: 44,763,000 - Other Current Financial Liabilities: 1,342,688,000 - Current Financial Liabilities At FVTPL: 170,857,000 But "Other Current Financial Liabilities" might include non-debt items. Let me see if I can find a better breakdown. Actually, looking at the cash flow: - "Repayments Of Noncurrent Borrowings": 350,218,000 - "Cash Flows From Used In Increase Decrease In Current Borrowings": -1,000,134,000 (negative means reduction in borrowings) This suggests current borrowings decreased by 1,000,134,000. Looking at 2021 to 2022 changes in current financial liabilities: - Other Current Financial Liabilities: 1,342,688,000 (2022) vs ? (2021) - I don't have 2021 explicitly for this item, but I can infer from total changes. Actually, I have "Other Current Financial Liabilities" 2022: 1,342,688,000. For 2021, I'd need to look at total current liabilities or other data. From the balance sheet changes and cash flow, I can work backwards, but this is getting complex. Let me try a different approach: use total interest-bearing debt as the sum of explicit debt items, and make reasonable assumptions. **Reported debt estimate:** - Long-term debt: 2,064,088,000 (Other Noncurrent Financial Liabilities) + 44,763,000 (Noncurrent FVTPL) = 2,108,851,000 - Short-term debt: 1,342,688,000 (Other Current Financial Liabilities) + 170,857,000 (Current FVTPL) = 1,513,545,000 But "Other Current Financial Liabilities" of 1,342,688,000 seems very large. Is this all debt? Looking at current liabilities total: 1,885,284,000. This includes: - Trade payables: 254,374,000 - Short-term provisions: 51,809,000 - Current financial liabilities: 170,857,000 + 1,342,688,000 = 1,513,545,000 - Lease liabilities: 6,282,000 - Other nonfinancial: 39,477,000 - Tax liabilities: 19,798,000 Sum: 254,374 + 51,809 + 1,513,545 + 6,282 + 39,477 + 19,798 = 1,885,285,000 ≈ 1,885,284,000. Good. So "Other Current Financial Liabilities" = 1,342,688,000 is indeed part of current liabilities, and likely represents short-term borrowings, current portion of long-term debt, etc. But is it all "debt" for S&P purposes? S&P typically excludes trade payables and some other operating liabilities from debt. The "Other Current Financial Liabilities" might include some non-debt items (like accrued interest, derivative liabilities, etc.). For a conservative estimate, I'll assume most of this is debt-like. But let me also check if there's a better way. Looking at the note reference: "Disclosure Of Borrowings Explanatory" refers to "Nota -33 Passività finanziarie correnti e non correnti" (Current and noncurrent financial liabilities). This suggests the financial liabilities are explicitly disclosed as borrowings. So my debt estimate: - Noncurrent borrowings: 2,064,088,000 + 44,763,000 = 2,108,851,000 - Current borrowings: 1,342,688,000 + 170,857,000 = 1,513,545,000 - Total reported debt: 3,622,396,000 But wait - this seems very high compared to total liabilities of 4,435,222,000. Debt would be 82% of total liabilities, which might be reasonable for a capital-intensive renewable energy company. However, I need to check if "Other Noncurrent Financial Liabilities" includes items that are not debt (like deferred income, grants, etc.). In IFRS, "financial liabilities" typically means contractual obligations to deliver cash or another financial asset, which is essentially debt. Let me also check the equity: 1,568,622,000. Debt to equity would be 3,622,396 / 1,568,622 = 2.3x, which is high but possible. Actually, looking at the industry (renewables), these companies often have high leverage with project finance debt. So this might be reasonable. **Leases:** As discussed, IFRS 16 lease liabilities: - Noncurrent: 122,663,000 - Current: 6,282,000 - Total: 128,945,000 For S&P Adjusted Debt, with IFRS 16, they typically include lease liabilities in debt. But are they already in my "reported debt" figure? Looking at the balance sheet presentation, lease liabilities are separate from "Other... Financial Liabilities." So they're likely NOT in my 3,622,396,000 figure. I should add them. But wait - S&P's approach for IFRS 16 is sometimes to use a multiplier (like 8x lease expense) rather than the reported lease liability. This is because IFRS 16 lease liabilities might not be comparable to traditional debt metrics. However, given the data and the baseline formula, I'll add the reported lease liabilities. **Pension deficit:** - "Noncurrent Provisions For Employee Benefits": 4,289,000 (2022) - This is relatively small. Is it a pension deficit? Possibly, but it's small. S&P typically includes pension deficits (funded status, not just provision). Without more detail, I'll note this is small and may or may not be a deficit. The change from 2021 (3,723,000 in 2023, 4,289,000 in 2022 - wait, let me check dates). Looking at data: "Noncurrent Provisions For Employee Benefits" 2023-01-01: 3,723,000 and 2022-01-01: 4,289,000. Wait, the dates are point-in-time, so 2022-01-01 is beginning of 2022, and 2023-01-01 is end of 2022. So at end of 2022: 3,723,000. This is very small relative to total debt. For S&P, pension deficit = liability - plan assets. I don't have plan assets data. I'll assume this provision approximates any deficit, or is small enough to ignore. **Guarantees, hybrid debt, other debt-like items:** No explicit data on guarantees or hybrid debt. For PPAs, S&P mentions making adjustments "as we do for regulated utilities." For regulated utilities, they might capitalize PPAs as debt if they're take-or-pay contracts with debt-like characteristics. But without specific PPA data, I cannot make this adjustment. **Eligible cash:** - "Cash And Cash Equivalents": 860,352,000 (2022-01-01, i.e., beginning of 2022? Or end?) Wait, let me check dates. The data shows: - "Cash And Cash Equivalents" 2023-01-01: 392,811,000 - "Cash And Cash Equivalents" 2022-01-01: 860,352,000 So 2022-01-01 is beginning of 2022, 2023-01-01 is end of 2022. For debt at end of 2022, I should use end-of-period cash: 392,811,000. But wait - I need to check my debt figures. I used 2022-01-01 figures for debt, which is beginning of 2022. For 2022 year-end debt, I should use 2023-01-01 figures. Let me re-collect end-of-2022 (i.e., 2023-01-01) debt figures: - "Other Noncurrent Financial Liabilities" 2023-01-01: 1,751,255,000 - "Noncurrent Financial Liabilities At Fair Value Through Profit Or Loss" 2023-01-01: -0.0 (essentially 0) - "Other Current Financial Liabilities" 2023-01-01: 389,716,000 - "Current Financial Liabilities At Fair Value Through Profit Or Loss" 2023-01-01: 76,644,000 - "Noncurrent Lease Liabilities" 2023-01-01: 150,955,000 - "Current Lease Liabilities" 2023-01-01: 6,362,000 Total financial liabilities at end-2022: 1,751,255,000 + 0 + 389,716,000 + 76,644,000 = 2,217,615,000 Plus lease liabilities: 150,955,000 + 6,362,000 = 157,317,000 Total with leases: 2,374,932,000 Cash at end-2022: 392,811,000 **Adjusted_Debt calculation:** Reported debt (interest-bearing): 2,217,615,000 + Lease liabilities: 157,317,000 + Pension deficit/provision: ~3,723,000 (small, but let's include) + Other debt-like items: not identifiable - Eligible cash: 392,811,000 Adjusted_Debt = 2,217,615,000 + 157,317,000 + 3,723,000 - 392,811,000 = 1,985,844,000 Wait, this seems low compared to my earlier calculation. Let me verify the debt figures. End-of-2022 debt: - Noncurrent financial liabilities: 1,751,255,000 - Current financial liabilities: 389,716,000 + 76,644,000 = 466,360,000 - Total: 2,217,615,000 This is much lower than beginning-of-2022 figure of 3,622,396,000. The company reduced debt significantly during 2022. Looking at cash flow: "Repayments Of Noncurrent Borrowings" = 350,218,000, and "Cash Flows From Used In Increase Decrease In Current Borrowings" = -1,000,134,000 (reduction). So yes, significant debt reduction. Also, "Cash Flows From Losing Control Of Subsidiaries" = 1,264,826,000 (proceeds from sale). This likely was used to repay debt. For S&P metrics, they typically use end-of-period or average debt. The baseline formula says "Adjusted_Debt" without specifying, but typically it's end-of-period or sometimes average. For FFO to debt, S&P typically uses end-of-period debt or sometimes a point-in-time measure. Given the workflow asks for 2022 metrics, I should use end-of-2022 (i.e., 2023-01-01) figures. But wait - I need to check if "Other Noncurrent Financial Liabilities" truly represents debt. Let me verify with total liabilities. End-of-2022 total liabilities: 3,171,703,000 Equity: 2,054,682,000 Total: 5,226,385,000 (matches assets) Debt-like items at end-2022: - Noncurrent financial liabilities: 1,751,255,000 - Current financial liabilities: 466,360,000 - Lease liabilities: 157,317,000 - Provisions (employee benefits): 3,723,000 - Deferred tax: 197,262,000 (not debt for S&P) - Other provisions: various, not typically debt Total debt-like: ~2,378,000,000 This seems reasonable. Let me also check if there are "Liabilities Included In Disposal Groups Classified As Held For Sale" = 89,421,000. These are held for sale and might be excluded from adjusted debt if the sale is proceeding. For S&P, liabilities in disposal groups might be excluded if the sale is highly probable and will result in debt reduction. Actually, looking at assets held for sale: 226,086,000 at end-2022. This suggests a disposal is planned. The associated liabilities of 89,421,000 might be netted or excluded. For conservatism, I'll include them in debt (they're still obligations until sold). **Revised Adjusted_Debt:** Reported debt: 2,217,615,000 + Lease liabilities: 157,317,000 + Pension provision: 3,723,000 - Eligible cash: 392,811,000 = 1,985,844,000 But I need to check if S&P uses "gross debt" or "net debt" approach. The baseline formula subtracts eligible cash, so it's net debt approach. Also, should I include all cash as "eligible"? S&P typically excludes restricted cash or cash in jurisdictions where it can't be easily accessed. Without specific data, I'll assume all cash is eligible. Wait - I should also check if there are "Current Financial Assets" that should be deducted. The company has: - "Current Financial Assets At Fair Value Through Profit Or Loss": 141,568,000 - "Other Current Financial Assets": 211,136,000 These are financial assets, not cash. S&P typically doesn't subtract these from debt unless they're highly liquid and clearly available for debt repayment. For conservative approach, I'll only subtract "Cash And Cash Equivalents." Let me also verify my debt figure by looking at total financial liabilities more carefully. Actually, I want to double-check: is "Other Current Financial Liabilities" of 389,716,000 at end-2022 all debt? Or does it include trade payables or other operating items? Looking at current liabilities at end-2022: - Short-term provisions: 38,730,000 - Trade payables: 123,002,000 - Current FVTPL financial liabilities: 76,644,000 - Other current financial liabilities: 389,716,000 - Current lease liabilities: 6,362,000 - Other current nonfinancial liabilities: 59,628,000 - Current tax liabilities: 52,311,000 Total: 38,730 + 123,002 + 76,644 + 389,716 + 6,362 + 59,628 + 52,311 = 746,393,000 ≈ 746,394,000 (matches "Current Liabilities") So "Other Current Financial Liabilities" = 389,716,000 is indeed a separate item from trade payables. It's likely short-term borrowings, current portion of long-term debt, etc. Similarly for noncurrent: - Employee benefits provision: 3,723,000 - Deferred tax: 197,262,000 - Provisions for discontinued operations: 84,691,000 - Decommissioning provision: 92,613,000 - Other long-term provisions: 24,401,000 - Noncurrent FVTPL: ~0 - Other noncurrent financial liabilities: 1,751,255,000 - Noncurrent lease liabilities: 150,955,000 - Other noncurrent nonfinancial: 30,989,000 Total: 3,723 + 197,262 + 84,691 + 92,613 + 24,401 + 0 + 1,751,255 + 150,955 + 30,989 = 2,335,889,000? But "Noncurrent Liabilities" is 2,335,888,000. Close enough. So my debt figure of 2,217,615,000 (financial liabilities) + 157,317,000 (leases) = 2,374,932,000 seems correct for gross debt-like items. **Final Adjusted_Debt:** 2,374,932,000 + 3,723,000 - 392,811,000 = 1,985,844,000 Wait, I need to check if the 3,723,000 pension is already in the financial liabilities or provisions. It's in "Noncurrent Provisions For Employee Benefits," which is separate from financial liabilities. So yes, add it. But is it a "deficit"? S&P typically uses pension deficit (liability - assets), not just the provision. If there are plan assets, the net deficit might be less. Without data, I'll use the provision as a proxy, or exclude it as immaterial. Given it's only 3,723,000 out of 1,985,844,000 (0.2%), it won't materially affect the result. I'll include it for completeness. **Adjusted_Debt = 1,985,844,000 EUR** (or approximately 1,986,000,000) Actually, let me reconsider if I should use beginning-of-year or end-of-year debt, or average. S&P typically uses end-of-year debt for point-in-time ratios, or sometimes average. For FFO to debt, which is a flow/stock ratio, end-of-period is common but average can also be used. Given the workflow asks for 2022 metrics and the data provides both beginning and end of year, I could use average debt. But the standard S&P approach for this ratio is typically end-of-period debt. However, looking at the cash flow, the company had significant changes during the year (debt reduction, asset sales). Using end-of-period might be more representative of the going-forward capital structure. Let me also check if I need to make any PPA adjustments. The methodology 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." For regulated utilities, S&P might capitalize fixed obligations. But without specific PPA data, I cannot make this adjustment. I'll proceed without it. ## Step 5: Calculate FFO / Adjusted_Debt FFO = 335,245,000 Adjusted_Debt = 1,985,844,000 Ratio = 335,245,000 / 1,985,844,000 = 0.1688 Let me double-check my calculations: **Adjusted_EBITDA verification:** - Reported EBITDA: 499,430,000 - Impairment reversal (nonrecurring gain): 43,185,000 - Adjusted_EBITDA: 456,245,000 Wait, I need to verify: is the impairment reversal a gain or a loss? "Impairment Loss Reversal" means reversing a previous impairment, which is a gain (reduces expenses, increases profit). So yes, subtract from EBITDA to normalize. **FFO verification:** - Adjusted_EBITDA: 456,245,000 - Cash interest: 29,146,000 - Cash taxes: 91,854,000 - FFO: 335,245,000 **Adjusted_Debt verification:** - Noncurrent financial liabilities (debt): 1,751,255,000 - Current financial liabilities (debt): 466,360,000 - Total reported debt: 2,217,615,000 - Lease liabilities: 157,317,000 - Pension: 3,723,000 - Gross adjusted debt: 2,378,655,000 - Less cash: 392,811,000 - Net adjusted debt: 1,985,844,000 Ratio: 335,245 / 1,985,844 = 0.1688 or 16.88% Let me recalculate more precisely: 335,245,000 / 1,985,844,000 = 0.168817... Rounded to four decimal places: 0.1688 But wait - I want to sanity check this. Is this reasonable for a renewable energy company? For renewable energy companies with long-term contracts, FFO to debt of ~17% might be reasonable, though perhaps a bit low. This would suggest moderate leverage. Let me verify if my debt figure is correct. The company had significant debt reduction during 2022 due to asset sales. End-of-year debt of ~2.0 billion with FFO of 335 million gives coverage of ~17%. Actually, I want to re-check: did I use the correct cash figure? "Cash And Cash Equivalents" at end-2022 is 392,811,000. But there are also "Current Financial Assets At Fair Value Through Profit Or Loss" of 141,568,000 and "Other Current Financial Assets" of 211,136,000. Should any of these be considered "eligible cash"? S&P typically includes only cash and cash equivalents as eligible, unless other items are highly liquid and clearly available. For conservative approach, I'll exclude these. But actually, looking at S&P methodology, they sometimes include "liquid financial assets" if they're readily convertible to cash. Without specific liquidity data, I'll stick with explicit cash. Let me also check if I should use average debt instead of end-of-period. If I use average of beginning and end: Beginning debt (2022-01-01): - Noncurrent financial: 2,064,088,000 + 44,763,000 = 2,108,851,000 - Current financial: 1,342,688,000 + 170,857,000 = 1,513,545,000 - Total financial: 3,622,396,000 - Leases: 128,945,000 - Pension: 4,289,000 - Gross: 3,755,630,000 - Cash: 860,352,000 - Net: 2,895,278,000 Average debt: (2,895,278,000 + 1,985,844,000) / 2 = 2,440,561,000 FFO / average debt = 335,245 / 2,440,561 = 0.1374 This is quite different! S&P typically uses end-of-period debt for this ratio, not average. Let me verify with S&P methodology. Actually, looking at S&P general methodology, for FFO to debt, they typically use "adjusted debt" at the end of the period, or sometimes a weighted average. For simplicity and consistency with the baseline formula, I'll use end-of-period. But I want to double-check my end-of-period debt once more. Looking at the data: End of 2022 (2023-01-01): - Other Noncurrent Financial Liabilities: 1,751,255,000 - Noncurrent Financial Liabilities At FVTPL: -0.0 (0) - Other Current Financial Liabilities: 389,716,000 - Current Financial Liabilities At FVTPL: 76,644,000 - Noncurrent Lease Liabilities: 150,955,000 - Current Lease Liabilities: 6,362,000 - Noncurrent Provisions For Employee Benefits: 3,723,000 - Cash And Cash Equivalents: 392,811,000 Total debt = 1,751,255 + 0 + 389,716 + 76,644 + 150,955 + 6,362 + 3,723 = 2,378,655 Less cash = 392,811 Net = 1,985,844 Yes, this is correct. One more check: should I include "Deferred Tax Liabilities" in debt? S&P typically excludes deferred tax from adjusted debt (it's a non-cash liability). Good, I excluded it. Should I include "Provisions For Discontinued Operations" (84,691,000) or "Decommissioning" (92,613,000)? These are provisions, not financial liabilities. S&P typically doesn't include these in debt unless they're debt-like (e.g., nuclear decommissioning funds might be treated differently). For standard corporate debt, these are excluded. What about "Other Noncurrent Nonfinancial Liabilities" (30,989,000)? Likely not debt. So my debt figure seems reasonable. Let me recalculate the final ratio: 335,245,000 / 1,985,844,000 = 0.168817... Rounded to four decimal places: 0.1688 Actually, let me verify my FFO once more. I used cash taxes of 91,854,000. But "Income Taxes Paid Classified As Operating Activities" is 91,854,000. Is this the total cash tax? There might be taxes paid in financing or investing activities, or tax refunds. Also, "Income Tax Expense Continuing Operations" P&L is 97,569,000. The cash paid is 91,854,000, which is close. The difference might be timing or deferred taxes. For S&P FFO, cash taxes paid is typically the right measure. 91,854,000 seems correct. And cash interest: I used 29,146,000. But "Finance Costs" P&L is 112,195,000. Is the cash really that low? Looking at financing activities: "Interest Paid Classified As Financing Activities" = 29,146,000. This is explicit. But also "Payments Of Lease Liabilities Classified As Financing Activities" = 8,337,000. This includes principal and interest. The interest portion of lease payments is not in the 29,146,000. Should I include lease interest in "cash interest"? For S&P FFO calculation with IFRS 16, this is a gray area. If I include lease interest, I need to estimate it. Estimated lease interest: total lease liabilities 157,317,000 at end, 128,945,000 at beginning. Average ~143,131,000. At say 4% interest rate, annual interest ~5,725,000. But this is very rough. If I add estimated lease interest of ~5,700,000 to cash interest: Total cash interest = 29,146,000 + 5,700,000 = 34,846,000 FFO = 456,245,000 - 34,846,000 - 91,854,000 = 329,545,000 Ratio = 329,545 / 1,985,844 = 0.1659 This changes the result slightly. But without explicit lease interest data, this is speculative. Actually, under IFRS 16, the "Interest Paid" of 29,146,000 might already include some lease interest if the company classifies it there. Or it might not. Given the ambiguity, and that S&P typically uses explicit "interest paid" figures when available, I'll stick with 29,146,000. But let me also consider: should I use "Finance Costs" from P&L (112,195,000) as a proxy for cash interest? No, because it includes non-cash items. Alternatively, should I use the cash flow reconciliation "Adjustments For Finance Costs" = 36,573,000? This is the net finance cost (accrual) added back. If I subtract the actual cash interest from this, I get the non-cash portion. Actually, 36,573,000 is the P&L net finance cost (Finance Income 75,622,000 - Finance Costs 112,195,000 = -36,573,000, shown as expense). This is added back in cash flow reconciliation. If cash interest paid is 29,146,000, and this is classified as financing, then in operating cash flow, we've added back 36,573,000 (the accrual), but we haven't deducted any cash interest (since it's in financing). So the operating cash flow before working capital of 616,360,000 is "after adding back accrual finance costs but before any cash finance costs." For FFO, we want to deduct CASH finance costs, not accrual. So deducting 29,146,000 from Adjusted_EBITDA is correct. But wait - is 29,146,000 the NET cash interest (paid minus received), or just interest paid? The description says "Interest Paid", suggesting gross paid. If there's interest received, it might be in "Finance Income" cash portion. Looking at investing activities, I don't see explicit "Interest Received." But "Finance Income" P&L of 75,622,000 likely includes some cash interest received. If I assume cash interest received is roughly the cash portion of finance income, and if finance income is mostly cash (unlikely, it might include fair value gains), then net cash interest might be lower. For conservative S&P approach, using gross interest paid is safer (gives lower FFO, more conservative). Actually, I realize I should check if S&P uses "cash interest paid" or "cash interest paid less received" for FFO. In their standard methodology, it's typically "cash interest" meaning the net cash outflow for interest. But in the baseline formula provided, it's "cash_interest" which is ambiguous. Given the formula is "Adjusted_EBITDA - cash_interest - cash_taxes", and EBITDA is before ALL finance costs, using gross interest paid is more conservative and likely what's intended. Let me finalize with: FFO = 335,245,000 Adjusted_Debt = 1,985,844,000 Ratio = 0.1688 Actually, I want to do one more verification of my Adjusted_EBITDA. Let me see if there are other nonrecurring or normalization items I missed. Looking at the P&L: - "Other Income" 12,678,000: could this include nonrecurring items? Possibly, but no detail. - "Profit Loss From Discontinued Operations" 294,131,000: this is below EBITDA, so doesn't affect EBITDA. - "Other Comprehensive Income" items: these don't affect EBITDA. Looking at cash flow items that might indicate nonrecurring operating items: - "Cash Flows From Losing Control Of Subsidiaries" 1,264,826,000: this is investing, not operating. - "Cash Flows Used In Obtaining Control Of Subsidiaries" 392,232,000: investing. For operating items, the "Other Adjustments For Noncash Items" of -198,570,000 is large. I determined this likely relates to gain on disposal of subsidiaries, which is not in EBITDA. But let me verify if any of it might be in EBITDA. If the gain on disposal is presented as "Other Income" or similar in operating activities, then it would be in EBITDA. But "Other Income" is only 12,678,000, which is too small to contain a large gain. Actually, wait. Could the gain on disposal of subsidiaries be part of the EBITDA? Let me think about how IFRS presents this. In IFRS 5, when a subsidiary is held for sale or disposed of, the results of discontinued operations are presented separately. The gain on disposal would typically be part of "discontinued operations" below the operating profit line. But in the operating section, if the subsidiary was part of operations until disposal, its operating results might be in operating profit. However, the gain on disposal itself (proceeds minus book value) is typically a separate line item, often in "other income" or as a separate gain. Given "Other Income" is only 12,678,000, and the cash proceeds are 1,264,826,000, the gain is likely much larger and presented separately (probably in discontinued operations or as a separate gain below operating profit). So my conclusion that the impairment reversal is the main nonrecurring item in EBITDA seems correct. One more item: "Impairment Loss Recognised In Profit Or Loss Trade Receivables" = 300,000. This is small and likely normal business (credit losses). I'll leave it. **Final verification:** Adjusted_EBITDA = 499,430,000 - 43,185,000 = 456,245,000 FFO = 456,245,000 - 29,146,000 - 91,854,000 = 335,245,000 Adjusted_Debt = 2,217,615,000 + 157,317,000 + 3,723,000 - 392,811,000 = 1,985,844,000 FFO / Adjusted_Debt = 335,245,000 / 1,985,844,000 = 0.168817... ≈ 0.1688 Let me also consider if I should use a different cash figure. The company has "Current Financial Assets At Fair Value Through Profit Or Loss" of 141,568,000 and "Other Current Financial Assets" of 211,136,000. If these are highly liquid (like short-term deposits or marketable securities), S&P might include them as "eligible cash." But the baseline formula says "eligible_cash", not just "cash and cash equivalents." Without specific eligibility information, I'll use the explicit cash figure. If I include these as eligible cash: Eligible cash = 392,811,000 + 141,568,000 + 211,136,000 = 745,515,000 Adjusted_Debt = 2,378,655,000 - 745,515,000 = 1,633,140,000 Ratio = 335,245 / 1,633,140 = 0.2053 This is quite different! But these financial assets might not be readily available for debt repayment. For conservative approach, I'll stick with explicit cash and cash equivalents. Actually, looking at S&P methodology more carefully, they do sometimes include "liquid investments" as part of eligible cash if they're readily convertible. But without knowing the nature of these assets, I'll exclude them. Given all this analysis, my final answer is: 0.1688