I'll work through this step-by-step for ENI S.P.A., an integrated oil and gas company. ## Step 1: Identify the relevant industry ENI S.P.A. is a major integrated oil and gas company. Based on the methodologies provided, it falls under **Oil And Gas Exploration And Production** (E&P), though as an integrated company it also has downstream operations. I'll apply the E&P methodology where relevant, but use general corporate baseline formulas for financial metrics since the E&P methodology doesn't provide specific EBITDA/FFO/debt formulas. ## Step 2: Estimate 2021 Adjusted_EBITDA First, I need to reconstruct EBITDA for 2021. From the data: For 2021 (period 2021-01-01 to 2022-01-01): - Profit Loss From Operating Activities: 12,341,000,000 EUR - Depreciation And Amortisation Expense: 7,063,000,000 EUR - Impairment Loss Reversal: 167,000,000 EUR - Write Off Of Tangible And Intangible Assets: 387,000,000 EUR EBITDA = Profit Loss From Operating Activities + Depreciation And Amortisation Expense + Impairment Loss Reversal + Write Off Of Tangible And Intangible Assets Wait - let me check the signs. "Impairment Loss Reversal" is positive 167M in 2021, which is a gain. "Write Off" is 387M, which is a loss. Actually, let me recalculate more carefully. Operating profit already includes D&A, impairments, and write-offs. So: EBITDA = Operating Profit + D&A + Impairments (losses) - Reversals (gains) + Write-offs But looking at the signs: "Impairment Loss Reversal" is positive 279M in 2020-2021, 167M in 2021-2022. This is a reversal (gain), so it would have been added back to get to operating profit. Let me use: EBITDA = Operating Profit + D&A + Impairment losses - Impairment reversals + Write-offs Actually, standard approach: Start from operating profit and add back D&A, and any impairment losses (not reversals), and write-offs if they were below operating profit. Looking more carefully at the structure: "Profit Loss From Operating Activities" is EBIT. To get EBITDA, add back D&A. EBITDA = 12,341,000,000 + 7,063,000,000 = 19,404,000,000 EUR But we need to adjust for nonrecurring items. The E&P methodology mentions we should normalize. Let me check for nonrecurring items: - Impairment Loss Reversal: 167,000,000 (gain - nonrecurring) - Write Off Of Tangible And Intangible Assets: 387,000,000 (loss - nonrecurring) - Other Operating Income Expense: 903,000,000 (this includes related party of 735M) Actually, let me look at "Other Operating Income Expense" - this is -1,736,000,000 in 2022 and 903,000,000 in 2021. The negative in 2022 suggests expense, positive in 2021 suggests income. For S&P purposes, we need to identify nonrecurring gains/losses. Let me use a cleaner approach: Reported EBITDA = Operating Profit + D&A = 12,341 + 7,063 = 19,404 million EUR Adjustments for nonrecurring: - Impairment reversal (gain): -167 million (subtract this gain) - Write-offs (loss): +387 million (add back this loss) Net nonrecurring adjustment: +387 - 167 = +220 million But wait - write-offs may already be in operating profit. Let me check if operating profit includes these. Actually, looking at typical ENI reporting and the data structure, "Profit Loss From Operating Activities" should be after all these items. So: EBITDA = 12,341 + 7,063 = 19,404 For Adjusted EBITDA, I need to normalize. The S&P E&P methodology mentions using price assumptions and focusing on underlying performance. Let me check if there are clear nonrecurring items. From the E&P methodology: "We use our price assumptions for oil and natural gas when assessing the financial risk profile." However, since we're working with actual reported data, I'll make standard adjustments: Adjusted_EBITDA_2021 = EBITDA + nonrecurring_losses - nonrecurring_gains Nonrecurring items to consider: - Impairment Loss Reversal: 167M (gain, subtract) - Write Off Of Tangible And Intangible Assets: 387M (loss, add back) - Other Income Expense From Investments: 223M (this is below operating line) Actually, "Other Operating Income Expense" of 903M in 2021 - need to check if nonrecurring. This seems to include related party transactions of 735M. Let me be more careful. The E&P methodology says for integrated companies, we assess competitive advantage based on various factors. For financial metrics, I'll use standard corporate approach. Looking at cash flow statement approach for FFO later, let me first establish EBITDA. For 2021: - Revenue And Other Income: 77,771 million - Total Purchases Services And Other Costs: 55,549 million - Employee Benefits Expense: 2,888 million - D&A: 7,063 million - Impairment: 167 million (reversal, so negative expense) - Other Operating: 903 million Gross profit approach: 77,771 - 55,549 = 22,222 Less: Employee benefits 2,888 = 19,334 Less: D&A 7,063 = 12,271... close to 12,341 operating profit Difference is about 70M, likely other items. Let me use: EBITDA = Operating Profit + D&A = 12,341 + 7,063 = 19,404 million EUR For adjustments, I'll consider: - Lease adjustments: Right-of-use assets are 4,821 million at start 2022 (end 2021). Current lease liabilities 948M, noncurrent 4,389M. Total lease liabilities ~5,337M. The E&P methodology doesn't specifically mention lease adjustments, but general practice adds back lease expense or handles lease debt. Actually, for S&P, operating leases are typically capitalized. But in the data, we already have right-of-use assets and lease liabilities under IFRS 16, so leases are already on balance sheet. For nonrecurring items in 2021: - Write Off Of Tangible And Intangible Assets: 387M (add back - nonrecurring loss) - Impairment Loss Reversal: 167M (subtract - nonrecurring gain) Adjusted_EBITDA_2021 = 19,404 + 387 - 167 = 19,624 million EUR But wait - are these already in operating profit? Yes. So if operating profit includes 387M loss and 167M gain, then EBITDA (which adds back D&A only) still includes them. To normalize, we adjust. Actually, let me reconsider: Write-offs and impairments are typically below EBITDA (i.e., they are part of operating profit but not EBITDA). So EBITDA already excludes them. No wait - EBITDA is before these items. Standard calculation: EBITDA = Revenue - COGS - SGA (excluding D&A). So EBITDA is before impairment losses, write-offs, etc. Actually no - EBITDA is Earnings Before Interest, Taxes, Depreciation and Amortization. It's also before impairments and write-offs of fixed assets. So: EBITDA = Operating Profit + D&A + Impairment losses - Impairment reversals + Write-offs? No, that's double counting. Let me think again. Operating Profit (EBIT) = Revenue - COGS - Operating Expenses - D&A - Impairment losses + Impairment reversals - Write-offs So: EBITDA = EBIT + D&A + Impairment losses - Impairment reversals + Write-offs? No, that's wrong too. If EBIT already deducted D&A, then EBIT + D&A gets to pre-D&A. But impairments and write-offs are also deducted to get EBIT. Actually, impairments and write-offs of tangible/intangible assets are part of operating expenses, often grouped with D&A or separate. From the data: "Depreciation And Amortisation Expense" is separate line item. "Impairment Loss Reversal" and "Write Off Of Tangible And Intangible Assets" are also separate. So: Operating Profit = Revenue - Costs - D&A - Impairment losses + Impairment reversals - Write-offs - Other operating items Thus: EBITDA = Operating Profit + D&A + Impairment losses - Impairment reversals + Write-offs Wait, but "Impairment Loss Reversal" is positive 167M in 2021, meaning it's a gain (reversal of previous loss). So in the income statement, it's added. And "Write Off" is 387M, a loss, so subtracted. So: EBITDA = 12,341 + 7,063 + 0 - 167 + 387? No, that's not right either. Let me use: EBITDA = Operating Profit + D&A = 12,341 + 7,063 = 19,404 This assumes D&A is the only thing added back. But if impairments and write-offs were part of operating expenses and not in D&A, then they're still in EBITDA. Actually, looking at standard practice: EBITDA includes addbacks for nonrecurring items. But for S&P Adjusted EBITDA, we want normalized. Let me check the cash flow statement for another approach. "Adjustments For Depreciation And Amortisation Expense" is 7,063M in 2021. "Adjustments For Impairment Loss Reversal" is 167M. "Write Off Of Tangible Or Intangible Assets" is 387M. In cash flow from operations, these are added back to net income. So operating profit already includes these as deductions (or in case of reversal, as addition). So: EBITDA = Operating Profit + D&A = 19,404. This is correct because D&A is added back, and operating profit already reflects impairments and write-offs. For Adjusted EBITDA, S&P would normalize for nonrecurring items: - Add back write-offs (387M) - nonrecurring loss - Subtract impairment reversal (167M) - nonrecurring gain Adjusted_EBITDA_2021 = 19,404 + 387 - 167 = 19,624 million EUR Hmm, but actually S&P might treat write-offs as normal for E&P. Let me reconsider. In the E&P methodology, they mention "adjusted unit earnings" and use various metrics. For integrated companies, they look at historical ratios. Let me try a different approach using the cash flow data to cross-check. Cash Flows From Operating Activities 2021: 12,861 million This includes working capital changes and other items. Actually, let me look at what S&P typically does for integrated oil & gas. They often use Funds From Operations (FFO) which starts from net income and adds back D&A, deferred taxes, etc. For step 3, FFO = Adjusted EBITDA - cash interest - cash taxes. But S&P also has alternative: FFO = Net Income + D&A + Deferred Taxes + Other non-cash items - nonrecurring gains. Let me proceed with my calculation but be prepared to adjust. Actually, re-reading the general formula: FFO = Adjusted_EBITDA - cash_interest - cash_taxes This implies Adjusted_EBITDA is a proxy for operating cash flow before working capital changes. For 2021: - Finance Costs: 4,216 million (total, including related party 46M) - Finance Income: 3,723 million (total, including related party 79M) - Net finance cost: 4,216 - 3,723 = 493M, but "Finance Income Cost" shows -788M Looking at "Finance Income Cost": -788M in 2021. This is net finance expense. Cash interest would be interest paid: from cash flow, "Interest Paid Classified As Operating Activities" = 792M in 2021. Cash taxes: "Income Taxes Paid Refund Classified As Operating Activities" = 3,726M in 2021. But wait - we need cash interest and cash taxes from the EBITDA, not from cash flow statement directly. Actually, the formula FFO = Adjusted_EBITDA - cash_interest - cash_taxes is a simplified version. Let me recalculate more carefully using reported data and standard S&P adjustments. For integrated oil & gas, S&P typically makes these adjustments to EBITDA: - Add back nonrecurring losses, subtract nonrecurring gains - Proportional EBITDA from JVs (equity accounted investments) - Operating lease expense addback (if not capitalized) From the data, ENI has "Investment Accounted For Using Equity Method" of 5,887M at start 2022 (end 2021), and "Share Of Profit Loss Of Equity Accounted Investments" of -1,091M in 2021 (loss). For proportional consolidation, we'd add back the equity income and add proportional EBITDA. But this is complex. Let me use a simpler approach based on available data. First, let me establish 2021 and 2022 figures clearly: **2021 (period 2021-01-01 to 2022-01-01):** - Revenue And Other Income: 77,771M - Total Purchases Services And Other Costs: 55,549M - Employee Benefits Expense: 2,888M - Depreciation And Amortisation Expense: 7,063M - Impairment Loss Reversal: 167M (gain) - Write Off Of Tangible And Intangible Assets: 387M (loss) - Other Operating Income Expense: 903M - Profit Loss From Operating Activities: 12,341M Check: 77,771 - 55,549 - 2,888 - 7,063 + 167 - 387 + 903 = 12,954? Doesn't match 12,341. Let me try: 77,771 - 55,549 = 22,222 gross 22,222 - 2,888 (employee) = 19,334 19,334 - 7,063 (D&A) = 12,271 12,271 + 167 (impairment reversal) = 12,438 12,438 - 387 (write-off) = 12,051 12,051 + 903 (other operating income) = 12,954 Still doesn't match 12,341. There's a difference of 613M. Looking at "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss Trade Receivables": 279M in 2021. This might be part of other operating. Actually, let me look at the line "Other Operating Income Expense" more carefully. In 2021 it's 903M, in 2022 it's -1,736M. This is quite volatile. Also "Other Income And Revenues": 1,196M in 2021, 1,175M in 2022. This is before operating profit. Actually, "Revenue And Other Income" = "Revenue From Contracts With Customers" + "Other Income And Revenues" = 76,575 + 1,196 = 77,771. ✓ So "Other Income And Revenues" is already in revenue. For costs: "Total Purchases Services And Other Costs" = 55,549M. This likely includes most operating costs. The difference might be due to how items are classified. Let me just use reported operating profit and work from there. EBITDA_2021 = Operating Profit + D&A = 12,341 + 7,063 = 19,404M For Adjusted EBITDA, I need to consider: 1. Nonrecurring items: Write-offs 387M (add back), Impairment reversal 167M (subtract) 2. Joint ventures: Share of profit/loss is below operating line, so doesn't affect EBITDA 3. Leases: Already capitalized under IFRS 16 But wait - for S&P, when leases are capitalized, the lease depreciation is in D&A and interest is in finance costs. So EBITDA already includes the lease expense as depreciation. No further adjustment needed typically. However, some S&P analysts add back the lease depreciation to get "pre-lease" EBITDA or make other adjustments. Let me check if there's specific guidance. The general formula says "adjustment_leases (if any)". For IFRS 16, this might mean adding back lease depreciation to get comparable EBITDA. Actually, for S&P's Adjusted EBITDA with capitalized leases, they often use a "EBITDA before lease adjustments" or make specific adjustments. Let me assume no additional lease adjustment since we're using reported IFRS 16 numbers. For JVs: The proportional EBITDA adjustment would add ENI's share of JV EBITDA. We have "Share Of Profit Loss Of Equity Accounted Investments" of -1,091M in 2021. This is already below operating profit. For proportional consolidation, we'd add this back and add proportional EBITDA. But the formula says "± joint_venture_proportional_EBITDA". This is complex without detailed JV data. Let me check if ENI's equity investments generate significant EBITDA. "Investment Accounted For Using Equity Method" is 5,887M at end 2021. Share of loss is -1,091M. For S&P, they sometimes use "proportional EBITDA" meaning add back the equity income and replace with proportional share of EBITDA. But without JV financials, this is hard. I'll assume minimal JV adjustment or use equity income as proxy. Actually, looking at cash flow: "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method" is -1,091M in 2021. This is added back in cash flow (since it's non-cash). So FFO will include this. For EBITDA, since it's below operating line, it doesn't affect EBITDA. Let me proceed with: Adjusted_EBITDA_2021 = 19,404 + 387 - 167 = 19,624M Or, if write-offs are considered normal for E&P: 19,404M Given the E&P industry has regular asset write-offs and impairments due to reserve changes, I need to judge what's "nonrecurring". Looking at history: Write-offs were 329M in 2020, 387M in 2021, 599M in 2022. These are somewhat regular. Impairment reversals: 3,183M in 2020 (large), 167M in 2021, 1,140M in 2022. Also somewhat regular. For S&P, they typically normalize these to some extent. Let me use reported EBITDA as base and make minimal adjustments, or use a "cleaner" EBITDA from cash flow. Actually, let me try using the cash flow approach to derive a cleaner EBITDA: Cash Flow From Operations 2021: 12,861M Add: Increase Decrease In Working Capital: 3,146M (positive means cash outflow, so add back) Add: Income Taxes Paid: 3,726M Add: Interest Paid: 792M Less: Interest Received: 28M Less: Dividends Received: 857M This gets to approximate EBITDA: 12,861 + 3,146 + 3,726 + 792 - 28 - 857 = 19,640M Close to my 19,624M! The difference is 16M, likely rounding or other items. So Adjusted_EBITDA_2021 ≈ 19,624M or about 19,640M. Let me use 19,624M with the nonrecurring adjustments, or simplify to 19,500M range. Actually, let me recalculate with working capital more carefully. "Increase Decrease In Working Capital" 2021: 3,146M (this is the adjustment, positive means use of cash) From cash flow: "Cash Flows From Used In Operating Activities" = Net income + adjustments + working capital change. Let me try: Net income 2021 = Profit Loss = 5,840M Add back D&A: 7,063M Add back impairment reversal: -167M (this is a gain, so subtract) Add back write-offs: 387M Add back undistributed JVs: -1,091M (loss, so add back? No, it's a loss already deducted) Actually from cash flow statement adjustments: - Adjustments For Depreciation And Amortisation Expense: 7,063M - Adjustments For Impairment Loss Reversal: 167M (this is subtracted because it's a gain) - Write Off Of Tangible Or Intangible Assets: 387M (added back) - Adjustments For Undistributed Profits: -1,091M (this is subtracted because it's a loss? No, wait) "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method" 2021: -1,091M In cash flow, this is added to net income. Since it's a loss, adding a negative number reduces cash flow? That doesn't make sense. Actually, in cash flow from operations, we start with net income and add back non-cash items and adjust for working capital. Share of loss in equity investments is (5,840) * equity method loss = already deducted in net income? No, net income is 5,840 which includes -1,091 share of loss. Wait: "Profit Loss" 2021 is 5,840M. This is after finance costs, JVs, etc. Operating profit is 12,341M. Then: - Finance income: 3,723M - Finance costs: 4,216M - Net finance: -788M (per "Finance Income Cost") - Share of JV loss: -1,091M - Other investment income: 223M - Investment income total: -868M - PBT: 12,341 - 788 - 868 = 10,685? But PBT is 10,685M. ✓ Then tax: 4,845M Net income: 10,685 - 4,845 = 5,840M. ✓ So net income 5,840M includes share of JV loss -1,091M. In cash flow, "Adjustments For Undistributed Profits" of -1,091M means we add back the loss (since it's non-cash). So +(-1,091) = -1,091M? That would reduce CFO. Actually, I think the sign convention in the data might be that negative means loss, and in cash flow we add back the absolute value. Let me check: "Adjustments For Undistributed Profits" 2020: -1,733M, 2021: -1,091M, 2022: 1,841M. In 2022, share of profit is 1,841M (positive). In cash flow, "Adjustments For Undistributed Profits" is also 1,841M. Since profit is added to net income but not cash, we subtract it. So positive adjustment means subtract. Thus in 2021, -1,091M means add back 1,091M (the loss). So CFO = 5,840 + 7,063 + 167 + 387 + 1,091 + ... + working capital changes = 12,861M Let me verify: 5,840 + 7,063 = 12,903 + 167 (impairment reversal, subtract from net income because it's gain but non-cash? Actually reversal increases net income but not cash, so subtract) Wait, I'm getting confused with signs. Let me just use: CFO = 12,861M for 2021. Add back working capital use 3,146M = 15,007M (approx operating cash before WC) Add back taxes paid 3,726M = 18,733M Add back interest paid 792M = 19,525M Less interest received 28M = 19,497M Less dividends received 857M = 18,640M Hmm, this doesn't match. Dividends received are typically not in EBITDA. Actually, for EBITDA proxy from CFO: CFO + WC change + cash taxes + cash interest - interest received - dividends received (if in CFO) = approximate EBITDA 12,861 + 3,146 + 3,726 + 792 - 28 - 857 = 19,640M This is close to my 19,624M. The 16M difference is minor. I'll use **Adjusted_EBITDA_2021 = 19,640M EUR** (rounded from cash flow reconstruction, or 19,624M from income statement). Let me use 19,500M as conservative or 19,640M. Actually, let me use a cleaner approach. The formula says "EBITDA (reported or reconstructed)". Let me reconstruct from operating profit: EBITDA = Operating Profit + D&A = 12,341 + 7,063 = 19,404M For adjustments: - Nonrecurring: Write-offs 387M (add), Impairment reversal 167M (subtract) = +220M - Leases: Already capitalized, no addback needed for EBITDA - JVs: Not in operating profit, so no adjustment needed for EBITDA Adjusted_EBITDA_2021 = 19,404 + 220 = 19,624M But wait - the write-offs and impairment reversals: are they in operating profit? Yes. Are they in EBITDA? No, because EBITDA is before these items. Actually, let me recheck. D&A is 7,063M. Are impairment and write-offs separate or included? From the data, these are separate line items. So: Operating Profit = Revenue - Costs - D&A ± Impairments ± Write-offs ± Other So EBIT = Revenue - Cash Costs - D&A - Impairment losses + Reversals - Write-offs - Other Thus EBITDA = EBIT + D&A = Revenue - Cash Costs - Impairment losses + Reversals - Write-offs - Other So EBITDA already includes the impairment and write-off effects! Therefore, to normalize EBITDA, we need to add back impairment losses, subtract reversals, and add back write-offs. In 2021: Impairment reversal (gain) of 167M means EBITDA is higher by 167M than "normalized". Write-off (loss) of 387M means EBITDA is lower by 387M. So Adjusted_EBITDA = EBITDA + 387 - 167 = 19,404 + 220 = 19,624M Or if we consider these as normal operations: Adjusted_EBITDA = 19,404M Given E&P industry nature, I'll treat write-offs and impairments as somewhat normal but make partial adjustments. Let me use **19,500M as conservative** or **19,624M**. I'll use **19,624M** with the explicit adjustments. ## Step 3: Estimate 2021 FFO FFO = Adjusted_EBITDA - cash_interest - cash_taxes From cash flow statement 2021: - Interest Paid: 792M - Income Taxes Paid: 3,726M But wait - are these the right cash interest and cash taxes? The formula uses cash amounts, not accrual. From the data: "Interest Paid Classified As Operating Activities" = 792M "Income Taxes Paid Refund Classified As Operating Activities" = 3,726M FFO_2021 = 19,624 - 792 - 3,726 = 15,106M But let me cross-check with actual CFO and other data. CFO 2021 = 12,861M CFO = Net Income + D&A + other non-cash - working capital changes 12,861 = 5,840 + 7,063 + ... + WC changes From earlier: 5,840 + 7,063 + 167 + 387 + 1,091 + ... - 3,146 (WC use) + other = 12,861 5,840 + 7,063 = 12,903 + 167 (impairment reversal, but this is gain so subtract? Or add back if it's non-cash gain) Actually, let me just verify: 12,903 + 167 + 387 + 1,091 = 14,548 Then + other adjustments: "Other Adjustments To Reconcile Profit Loss" = -194M 14,548 - 194 = 14,354 Then + provisions adjustment? "Adjustments For Provisions" = -406M 14,354 - 406 = 13,948 Then working capital: -3,146M (use of cash) 13,948 - 3,146 = 10,802... not matching 12,861. I'm missing items. Let me look at all adjustments: - D&A: 7,063M - Impairment reversal: 167M - Write-offs: 387M - Undistributed JVs: -1,091M (wait, this is loss, so add back +1,091M?) - Losses on disposal: -102M - Dividend income: 230M (subtract, not operating) - Interest income: 75M (subtract, not operating) - Interest expense: 794M (add back? No, this is finance cost) - Income tax expense: 4,845M (add back) - Other: -194M - Working capital: 3,146M Actually, the standard approach is: Net income 5,840M + D&A 7,063M = 12,903M + Impairment reversal (-167M, because it's a gain) = 12,736M? Or +167M if we're adding back the non-cash component? I think the data uses "adjustments" as positive for expenses, negative for income. So "Adjustments For Impairment Loss Reversal" of 167M means subtract 167M (since it's a gain). Let me try: 5,840 + 7,063 - 167 + 387 + 1,091 - 102 - 230 - 75 + 794 + 4,845 - 194 - 406 + 3,146 + ... This is getting messy. Let me just use the reported CFO and derive FFO from there. S&P FFO typically = CFO + working capital changes - capitalized interest + other items Or: FFO = Net Income + D&A + Deferred Taxes + Other non-cash - nonrecurring gains From data, let me use: FFO = Net Income + D&A + deferred tax change + other non-cash items Actually, the formula given is FFO = Adjusted_EBITDA - cash_interest - cash_taxes. This is a simplified version. Using my Adjusted_EBITDA of 19,624M: - Cash interest: Need to determine. "Interest Paid" is 792M, but this includes lease interest? - Cash taxes: 3,726M But wait - in the cash flow, "Interest Paid" might include lease interest. Under IFRS 16, lease interest is part of financing activities or operating activities? Looking at cash flow: "Payments Of Lease Liabilities Classified As Financing Activities" = 939M in 2021. This includes principal and interest. Actually, for IFRS 16, lease payments are split: interest portion can be in operating or financing, principal in financing. From the data: "Payments Of Lease Liabilities Classified As Financing Activities" = 939M. This suggests total lease payments are financing, which is unusual. Let me check: "Current Lease Liabilities" 2022 start (end 2021): 948M. "Noncurrent Lease Liabilities": 4,389M. Total ~5,337M. Lease depreciation would be in D&A. Lease interest would be in finance costs. For cash interest, I need to separate operating interest from lease interest. "Finance Costs" 2021: 4,216M total, 46M related party. "Finance Income" 2021: 3,723M total, 79M related party. "Finance Income Cost" (net): -788M. Cash interest paid: 792M. This is much less than accrual finance costs of 4,216M. The difference includes capitalized interest, lease interest, non-cash items, etc. For S&P purposes, cash interest is typically the actual interest paid. I'll use 792M. But wait - is this too low? Let me check 2022: Interest paid 851M, Finance costs 9,333M. Also big difference. The finance costs include foreign exchange losses, fair value changes, etc. The cash interest is just the actual coupon/interest payments. For cash taxes: 3,726M in 2021. Income tax expense was 4,845M. The difference is timing. FFO_2021 = 19,624 - 792 - 3,726 = 15,106M Let me cross-check with alternative FFO calculation: FFO = Net Income + D&A + deferred tax increase + other non-cash Deferred tax: "Net Deferred Tax Assets" 2021 start: 2,713M? No, 2022 start (end 2021) is 2,713M, 2021 start (end 2020) is not directly given but we can infer. Actually, "Net Deferred Tax Assets" 2022-01-01: 2,713M. "Net Deferred Tax Liabilities" 2022-01-01: 4,835M. So net deferred tax liability position. "Net Deferred Tax Assets" 2023-01-01: 4,569M. "Net Deferred Tax Liabilities" 2023-01-01: 5,094M. Change in deferred tax assets: 4,569 - 2,713 = 1,856M increase Change in deferred tax liabilities: 5,094 - 4,835 = 259M increase Net deferred tax change: assets up 1,856, liabilities up 259, so net benefit of 1,597M? This is complex. I'll stick with FFO = 15,106M for 2021. Actually, let me verify with another approach. S&P sometimes uses: FFO = CFO + increase in working capital - decrease in working capital - capitalized interest + ... CFO 2021 = 12,861M Working capital use = 3,146M (positive means cash used, so add back to get pre-WC cash flow) = 12,861 + 3,146 = 16,007M (approx operating cash before WC changes) Then subtract cash interest and cash taxes? No, CFO already includes these. Actually, CFO includes interest paid and taxes paid. So: CFO before interest and taxes = 12,861 + 792 + 3,726 = 17,379M Then FFO = this minus working capital change? = 17,379 - 3,146 = 14,233M? No, that's backwards. Let me think: CFO = EBIT + D&A - cash taxes - cash interest ± WC changes ± other So CFO + cash taxes + cash interest = EBIT + D&A ± WC = EBITDA ± WC (approximately) 12,861 + 3,726 + 792 = 17,379M = approximate EBITDA + WC changes 17,379 - 3,146 (WC use) = 14,233M? No, WC use means cash outflow, so EBITDA was higher. Actually: CFO = EBITDA - cash interest - cash taxes - WC_use + WC_source - other So: EBITDA = CFO + cash interest + cash taxes + WC_use - WC_source = 12,861 + 792 + 3,726 + 3,146 = 20,525M? This is higher than my 19,624M. Difference of 901M. This could be due to dividends received, interest received, or other items in CFO. CFO includes: - Dividends received: 857M - Interest received: 28M - Interest paid: -792M (already accounted) - Taxes paid: -3,726M (already accounted) So CFO before these = 12,861 - 857 - 28 + 792 + 3,726 = 16,494M? No, that's wrong too. Let me just use the formula as given: FFO = Adjusted_EBITDA - cash_interest - cash_taxes. With Adjusted_EBITDA = 19,624M, cash interest = 792M, cash taxes = 3,726M: FFO_2021 = 19,624 - 792 - 3,726 = **15,106M** ## Step 4: Estimate 2021 Adjusted_Debt Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash Reported debt 2021 (end of year, i.e., 2022-01-01): - Shortterm Borrowings: 2,299M - Current Portion Of Longterm Borrowings: 1,781M - Longterm Borrowings: 23,714M Total reported debt = 2,299 + 1,781 + 23,714 = 27,794M Related party debt: - Shortterm Borrowings Related Parties: 233M - Current Portion Longterm Related Parties: 21M - Longterm Borrowings Related Parties: 5M Total related party debt = 259M Is related party debt already in total? The data shows both "Shortterm Borrowings" and "Shortterm Borrowings Related Parties Member". Usually these are separate or included. Let me assume the main figure excludes related parties, or check. "Shortterm Borrowings" 2022-01-01: 2,299M "Shortterm Borrowings Related Parties Member" 2022-01-01: 233M These could be additive or the 2,299M includes 233M. Given the pattern, likely additive or separate. Let me check totals. Total current liabilities: 43,152M Sum of items: ST borrowings 2,299 + Current LT 1,781 + Current leases 948 + Trade payables 21,720 + Tax current 648 + Other current 15,756 = 43,152M. ✓ So the 2,299M is total ST borrowings, and 233M related party is a subset or additional. The "Member" notation suggests this is a breakdown. So total ST borrowings including related parties = 2,299M, of which 233M is related party? Or 2,299M + 233M = 2,532M? Given the pattern where "Trade And Other Current Payables" is 21,720M and "Related Parties Member" is 2,298M, and 21,720 + 2,298 = 24,018M but total is shown as 21,720M... wait, no, the related party is likely included in the total. Actually, looking at "Trade And Other Current Payables" 2022-01-01: 21,720M, and "Trade And Other Current Payables Related Parties Member" 2022-01-01: 2,298M. The 2,298M is likely included in 21,720M. Similarly, "Shortterm Borrowings" 2,299M likely includes 233M related party. So total debt = 2,299 + 1,781 + 23,714 = 27,794M (related party already included) Leases: Already capitalized under IFRS 16. The debt includes lease liabilities: - Current Lease Liabilities: 948M - Noncurrent Lease Liabilities: 4,389M Total lease liabilities = 5,337M But these are already in the debt figures? No, lease liabilities are separate from borrowings. Total debt-like liabilities: - ST borrowings: 2,299M - Current LT borrowings: 1,781M - Current lease liabilities: 948M - LT borrowings: 23,714M - Noncurrent lease liabilities: 4,389M Total = 33,131M For S&P Adjusted Debt, we add leases if not already in debt. But under IFRS 16, lease liabilities are on balance sheet. Do we double count? The formula says "+ leases". This suggests if leases are not in reported debt, add them. Under IFRS 16, they are in liabilities, so may already be captured. But S&P typically treats lease liabilities as debt-like and includes them. Since they're not in "borrowings", I'll include them. Pension deficit: "Noncurrent Provisions For Employee Benefits" = 819M. This is likely pension and other post-employment benefits. Need to check if deficit. From data: "Noncurrent Provisions For Employee Benefits" 2022-01-01: 819M. This is a provision, not necessarily a deficit. For S&P, pension deficit = liability - plan assets. Without plan assets data, I'll use this as proxy or check if there's more. Actually, 819M seems small for ENI's pension obligations. This might be net of assets or just the provision. Other debt-like items: - "Other Current Liabilities": 15,756M - includes what? - "Other Noncurrent Liabilities": 2,246M For S&P, we might include certain provisions or guarantees. But without specifics, I'll focus on main items. Hybrid debt: Need to check for perpetual bonds. From equity section: "Increase Decrease Through Net Issue Reimbursement Of Perpetual Subordinated Bonds Equity" = 2,000M in 2021. These are equity-classified but debt-like. Also "Decrease Through Coupon Payment On Perpetual Subordinated Bonds Equity" = 61M in 2021. The perpetual bonds are in equity but S&P may treat as hybrid debt. From equity: "Other Reserves" includes these. "Increase Decrease Through Net Issue Reimbursement Of Perpetual Subordinated Bonds Equity" = 2,000M in 2021. Total perpetual bonds outstanding? From 2020: 3,000M issued. In 2021: 2,000M more. Total ~5,000M? Or some reimbursed. Actually, looking at 2020-2021: "Increase Decrease Through Net Issue Reimbursement Of Perpetual Subordinated Bonds Equity" = 3,000M. Then 2021-2022: 2,000M. This is annual flow. End of 2020: "Other Reserves" = 1,564M. End of 2021: 4,688M. Increase of 3,124M, which includes 2,000M perpetuals plus other items. End of 2022: 6,289M. Increase of 1,601M, includes 2,000M perpetuals less other changes. Actually, let me check if perpetuals are still outstanding. The coupon payments suggest yes. For S&P hybrid treatment: typically 50% of hybrid equity is treated as debt if it's debt-like. Let me assume perpetual subordinated bonds of approximately 5,000M total, with 50% treated as debt = 2,500M. Eligible cash: Cash and Cash Equivalents = 8,254M (2022-01-01, i.e., end 2021) Related party cash: 2M, likely included. Also "Current Financial Assets At Fair Value Through Profit Or Loss" = 6,301M - this is liquid investments, could be included as cash-like. "Other Current Financial Assets" = 4,308M - some may be liquid. For S&P, eligible cash typically includes cash and highly liquid investments. Let me use: - Cash and equivalents: 8,254M - Current financial assets at FVTPL: 6,301M (liquid investments) - Other current financial assets: 4,308M (less liquid, but some may be) Conservative: Cash = 8,254M Moderate: Cash + FVTPL = 14,555M Liberal: + Other = 18,863M I'll use moderate: 14,555M or conservative 8,254M. Actually, S&P typically uses "cash and liquid investments". FVTPL financial assets are usually liquid. Let me use 14,555M. Adjusted_Debt_2021 = 27,794 (borrowings) + 5,337 (leases) + 819 (pension) + 2,500 (hybrid) - 14,555 (cash and liquid) = 33,131 + 819 + 2,500 - 14,555 = 21,895M Or if leases already in debt calculation: 27,794 + 5,337 = 33,131 total debt-like liabilities. Let me recalculate: Reported debt (borrowings only): 27,794M + Lease liabilities: 5,337M + Pension provision: 819M + Hybrid equity portion: 2,500M - Cash and liquid investments: 14,555M = 21,895M If using only cash (not FVTPL): 27,894M Let me check with net debt concept. ENI's reported net debt is typically around 20-25B EUR in this period. Actually, looking at ENI's actual reports, 2021 net debt was around 25B EUR. My calculation of 21,895M with cash+FVTPL seems reasonable, or 28,395M with just cash. Let me use **Adjusted_Debt_2021 = 22,000M** (rounded) or more precisely 21,895M. Actually, let me reconsider hybrid treatment. S&P treats perpetuals as 100% equity or 50% debt depending on features. These are "Perpetual Subordinated Bonds Equity" - explicitly equity-classified. S&P might treat as 100% equity if deeply subordinated, or 50% if intermediate. Given they're called "equity" and in "Other Reserves", likely 100% equity for S&P, or 50% if hybrid. Let me be conservative and include 50%: 2,500M. But actually, looking at the equity section, these are in "Other Reserves" not equity attributable separately. The 2,000M issuance in 2021 increased other reserves. Total Other Reserves 2021: 4,688M. This includes various items. I'll use hybrid debt portion = 2,500M as estimate. Adjusted_Debt_2021 = 33,131 + 819 + 2,500 - 14,555 = 21,895M. Round to **21,900M**. ## Step 5: Calculate 2021 Adjusted_Debt / Adjusted_EBITDA 21,900 / 19,624 = **1.12x** Or if using more conservative cash: (33,131 + 819 + 2,500 - 8,254) = 28,196M, ratio = 1.44x Let me check which is more appropriate. S&P typically uses "cash and liquid investments" or just "cash and equivalents" depending on liquidity. Given the FVTPL assets are current and at fair value, likely liquid. But let me check: "Current Financial Assets At Fair Value Through Profit Or Loss" - these are current, so liquid. I'll use **1.1x to 1.4x range**. Let me settle on **1.2x** with moderate cash treatment, or **1.4x** conservative. Actually, let me recalculate with exact figures: - Borrowings: 2,299 + 1,781 + 23,714 = 27,794M - Leases: 948 + 4,389 = 5,337M - Total debt-like: 33,131M - Less cash 8,254M = 24,877M gross debt - Less FVTPL 6,301M = 18,576M - Plus pension 819M = 19,395M - Plus hybrid 2,500M = 21,895M Adjusted_Debt / Adjusted_EBITDA = 21,895 / 19,624 = **1.12x** Or without hybrid: 19,395 / 19,624 = 0.99x Given uncertainty, let me use **1.1x** as central estimate, with range 1.0-1.4x. ## Step 6: Calculate 2021 FFO / Adjusted_Debt 15,106 / 21,895 = **0.69** or 69% Or with conservative debt: 15,106 / 28,196 = 0.54 I'll use **0.69 or 0.70** (70%). ## Step 7: Estimate 2022 Adjusted_EBITDA For 2022 (period 2022-01-01 to 2023-01-01): - Profit Loss From Operating Activities: 17,510M - Depreciation And Amortisation Expense: 7,205M - Impairment Loss Reversal: 1,140M (gain) - Write Off Of Tangible And Intangible Assets: 599M (loss) EBITDA = 17,510 + 7,205 = 24,715M Adjustments: - Add back write-offs: 599M - Subtract impairment reversal: 1,140M Net: -541M Adjusted_EBITDA_2022 = 24,715 + 599 - 1,140 = 24,174M Or using cash flow approach: CFO 2022 = 17,460M + Working capital change: 1,279M (use, so add back) = 18,739M + Cash taxes 8,488M + Cash interest 851M = 28,078M - Interest received 116M - Dividends received 1,545M = 26,417M Hmm, this doesn't match. Let me try: CFO + taxes + interest - interest received - dividends received = EBITDA approx? 17,460 + 8,488 + 851 - 116 - 1,545 = 25,138M Close to 24,715M. Difference of 423M, likely other items. Using income statement: Adjusted_EBITDA_2022 = **24,174M** or round to **24,200M**. ## Step 8: Estimate 2022 FFO FFO_2022 = Adjusted_EBITDA - cash_interest - cash_taxes = 24,174 - 851 - 8,488 = 14,835M Wait, this is lower than 2021 FFO of 15,106M despite higher EBITDA, because much higher taxes. Cross-check: CFO 2022 = 17,460M. FFO should be higher than CFO (since CFO includes working capital and other items). Actually, FFO is typically lower than CFO if working capital is source of cash. CFO 2022 = 17,460M. Working capital use was 1,279M. So pre-WC cash flow = 18,739M. FFO = 14,835M. Difference of 3,904M. This includes dividends received 1,545M, interest received 116M, and other items. Actually, standard S&P FFO = CFO + working capital changes - capitalized interest + other. Let me not overcomplicate. FFO_2022 = **14,835M** or approximately **14,800M**. ## Step 9: Estimate 2022 Adjusted_Debt End 2022 (2023-01-01): - ST Borrowings: 4,446M - Current LT Borrowings: 3,097M - LT Borrowings: 19,374M Total borrowings = 26,917M Lease liabilities: - Current: 884M - Noncurrent: 4,067M Total leases = 4,951M Total debt-like = 31,868M Pension: "Noncurrent Provisions For Employee Benefits" = 786M Hybrid: Perpetual bonds. Issuance 2022: 2,000M? No, "Increase Decrease Through Net Issue Reimbursement Of Perpetual Subordinated Bonds Equity" = 0 in 2022? Let me check. Actually, looking at 2022: "Increase Decrease Through Net Issue Reimbursement Of Perpetual Subordinated Bonds Equity" not shown separately, but "Other Reserves" changed from 4,688M to 6,289M to 8,785M. Increase of 2,496M in 2022, includes various items. From cash flow: no issuance mentioned. So hybrid debt likely same ~5,000M total, 2,500M at 50%. Cash and liquid: - Cash: 10,155M - FVTPL: 8,251M - Other current financial assets: 1,504M (some liquid) Total liquid = 19,910M or conservative 18,406M (cash + FVTPL) Adjusted_Debt_2022 = 31,868 + 786 + 2,500 - 18,406 = 16,748M Or with just cash: 31,868 + 786 + 2,500 - 10,155 = 24,999M Or with cash + FVTPL: 31,868 + 786 + 2,500 - 18,406 = 16,748M This is a big range. Let me check ENI's actual net debt. Given strong cash generation in 2022, net debt likely decreased significantly. Using moderate: **16,750M** or round to **17,000M**. Actually, let me recheck. "Cash And Cash Equivalents" 2023-01-01: 10,155M. "Current Financial Assets At Fair Value Through Profit Or Loss" 2023-01-01: 8,251M. These are clearly liquid. Adjusted_Debt_2022 = 31,868 + 786 + 2,500 - 18,406 = **16,748M** ## Step 10: Calculate 2022 Adjusted_Debt / Adjusted_EBITDA 16,748 / 24,174 = **0.69x** Or with conservative cash: 24,999 / 24,174 = 1.03x Using moderate: **0.69x** or approximately **0.7x** ## Step 11: Calculate 2022 FFO / Adjusted_Debt 14,835 / 16,748 = **0.89** or 89% Or with conservative debt: 14,835 / 24,999 = 0.59 Using moderate: **0.89 or 0.90** (90%) ## Step 12: Classify year-on-year credit trend Let me summarize with moderate assumptions: | | 2021 | 2022 | |---|---|---| | Adjusted_EBITDA | 19,624M | 24,174M | | FFO | 15,106M | 14,835M | | Adjusted_Debt | 21,895M | 16,748M | | Adj_Debt/Adj_EBITDA | 1.12x | 0.69x | | FFO/Adj_Debt | 0.69 | 0.89 | **Signal 1: Leverage (Adj_Debt/Adj_EBITDA)** Change: 0.69 - 1.12 = **-0.43x** Threshold: ≤ -0.2x is Improving -0.43x < -0.2x, so **Improving** **Signal 2: Cash-flow coverage (FFO/Adj_Debt)** Change: 0.89 - 0.69 = **+0.20** (or +20 percentage points) Wait, let me recheck: 0.89 - 0.69 = 0.20. But the threshold is in decimal terms: ≥ +0.03 is Improving. 0.20 > 0.03, so **Improving** Both signals show **Improving**. But wait - I need to double-check my FFO calculation. FFO went from 15,106M to 14,835M, a decrease, while Adjusted_Debt also decreased. The ratio improved because debt decreased more. However, is FFO/Debt improvement due to debt reduction or FFO stability? Let me verify FFO. Actually, let me recheck FFO_2022. Adjusted_EBITDA_2022 = 24,174M. Cash interest 851M. Cash taxes 8,488M. FFO = 24,174 - 851 - 8,488 = 14,835M. ✓ But cash taxes increased significantly from 3,726M to 8,488M, reflecting higher profits. This is correct. Now, with both signals Improving: - Signal 1: -0.43x change (strongly Improving) - Signal 2: +0.20 change (strongly Improving) Both agree: **Improving** However, let me sanity check with conservative assumptions: Conservative (cash only, no FVTPL): | | 2021 | 2022 | |---|---|---| | Adj_Debt | 28,196M | 24,999M | | Adj_Debt/Adj_EBITDA | 1.44x | 1.03x | | FFO/Adj_Debt | 0.54 | 0.59 | Signal 1: 1.03 - 1.44 = -0.41x → **Improving** Signal 2: 0.59 - 0.54 = +0.05 → **Improving** Still both Improving. Very conservative (include all current financial assets as cash): 2021: Cash + all financial assets = 8,254 + 6,301 + 4,308 = 18,863M Debt-like = 33,131 + 819 + 2,500 = 36,450M Adj_Debt = 36,450 - 18,863 = 17,587M Ratio 2021 = 17,587 / 19,624 = 0.90x 2022: Cash + FVTPL + other = 10,155 + 8,251 + 1,504 = 19,910M Debt-like = 31,868 + 786 + 2,500 = 35,154M Adj_Debt = 35,154 - 19,910 = 15,244M Ratio 2022 = 15,244 / 24,174 = 0.63x Signal 1: 0.63 - 0.90 = -0.27x → **Improving** Signal 2: FFO/Debt 2021 = 15,106 / 17,587 = 0.86; 2022 = 14,835 / 15,244 = 0.97; change = +0.11 → **Improving** All scenarios show Improving. The key driver is that ENI's debt decreased significantly while EBITDA increased strongly, leading to much better leverage metrics. Let me verify debt decrease: Total borrowings went from 27,794M to 26,917M (slight decrease), but cash increased from 8,254M to 10,155M (or more with liquid assets). Also lease liabilities decreased from 5,337M to 4,951M. The main improvement is from EBITDA growth (19,624M to 24,174M, +23%) and cash accumulation, not massive debt reduction. Actually, let me recheck: Is Adjusted_Debt really down that much? 2021: Borrowings 27,794 + Leases 5,337 = 33,131. Less cash 8,254 = 24,877. Plus pension 819 = 25,696. Plus hybrid 2,500 = 28,196. Less FVTPL 6,301 = 21,895. 2022: Borrowings 26,917 + Leases 4,951 = 31,868. Less cash 10,155 = 21,713. Plus pension 786 = 22,499. Plus hybrid 2,500 = 24,999. Less FVTPL 8,251 = 16,748. Yes, the increase in liquid investments (FVTPL from 6,301M to 8,251M, cash from 8,254M to 10,155M) drives much of the net debt reduction, combined with slightly lower gross debt. This is consistent with ENI's strong 2022 performance due to high oil and gas prices. Final check: Are my EBITDA figures reasonable? 19.6B and 24.2B for ENI? ENI's actual 2022 adjusted EBITDA was around 24-25B EUR, so yes, this matches. Given both signals clearly show improvement, and they agree, the classification is: Improving