To estimate the S&P-adjusted FFO-to-debt ratio for Ørsted A/S for the fiscal year ended December 31, 2022, we follow the workflow steps below. ### Step 1: Identify the Relevant Industry Ørsted A/S is a global leader in offshore wind energy and a major producer of onshore wind, solar, and bioenergy. It also has legacy operations in oil and gas (though largely divested or separated) and heat. The primary business is renewable energy generation. * **Regulated Utilities:** While Ørsted has some regulated activities (e.g., grid connections, district heating in Denmark), a significant portion of its revenue comes from selling electricity into merchant markets or through Contracts for Difference (CfDs) and Power Purchase Agreements (PPAs). It is not a traditional fully regulated utility. * **Oil And Gas Exploration And Production:** Ørsted has divested its upstream oil and gas business (DONG Energy transformation). The remaining footprint is negligible for classification purposes compared to its renewable portfolio. * **Unregulated Power And Gas:** This sector includes renewable generation companies. The methodology states: "Unregulated power and gas companies, such as renewable generation companies, don't benefit from protective rate regulation... We assess competitive advantage... based on market structure... earnings structure... and asset mix." Ørsted fits this description best, as its core value driver is the development and operation of renewable energy assets, often exposed to merchant prices or fixed-price contracts (CfDs/PPAs) rather than cost-of-service regulation. Therefore, we apply the **Unregulated Power And Gas** industry methodology. ### Step 2: Estimate Adjusted EBITDA The baseline formula is: `Adjusted_EBITDA = EBITDA (reported or reconstructed) + adjustment_leases + nonrecurring_losses - nonrecurring_gains ± other_normalization_adjustments` From the facts provided for 2022: * **EBITDA:** The report provides "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense" which is **32,057,000,000 DKK**. This is the reported EBITDA. * **Lease Adjustments:** S&P typically adds back the interest portion of lease liabilities or treats leases as debt. However, in the FFO calculation for Unregulated Power, we start with EBITDA. The standard S&P adjustment for leases in EBITDA is often neutral if EBITDA is already pre-interest, but we must consider if there are specific "adjustment_leases" to add back to EBITDA to get to a cash-flow proxy. Usually, S&P adds back the *interest* on leases to EBITDA if it was deducted, but EBITDA is before interest. More commonly, for FFO, we deduct cash interest. For Adjusted Debt, we add lease liabilities. Let's look for specific non-recurring items. * **Non-recurring items:** The report lists "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" as **-10,885,000,000 DKK** in the cash flow reconciliation. This implies a *gain* on disposal of 10,885 million DKK (since it's a negative adjustment to reconcile profit to cash flow from operations, meaning it was added to profit but is not operating cash flow, or vice versa? Let's check the sign convention). * Profit from Operating Activities: 19,774 million. * Depreciation: 12,283 million. * EBITDA = 19,774 + 12,283 = 32,057 million. Matches. * In the Cash Flow from Operations section, "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" is -10,885 million. In indirect cash flow statements, gains are subtracted from net income. So, there was a **gain of 10,885 million DKK**. * S&P guidelines typically exclude non-recurring gains from Adjusted EBITDA. Therefore, we subtract this gain. * Are there other non-recurring items? "Other Income" is 14,119 million. "Other Expense By Nature" is 4,963 million. These are likely recurring operational items or fair value adjustments on derivatives/hedges which are volatile. Ørsted has significant derivative volatility. The "Change In Derivatives Other Adjustments" in cash flow is -8,687 million. This suggests significant mark-to-market volatility. S&P often normalizes for mark-to-market gains/losses on energy hedging contracts for utilities/power generators to reflect underlying operational performance. However, without explicit "non-recurring" labeling, we stick to clear one-offs. The gain on disposal is a clear one-off. * Let's check "Share Of Profit Loss Of Associates". Core: 114 million. Non-Core: 40 million. These are small. * Let's check "Gains Losses On Disposals Of Investments": 331 million. This is another gain. * Total Gains to exclude: 10,885 (disposal of non-current assets) + 331 (disposal of investments) = **11,216 million DKK**. * **Joint Ventures:** The methodology mentions `± joint_venture_proportional_EBITDA`. Ørsted uses the equity method for some JVs. The share of profit is included in Operating Profit. To get to a proportional EBITDA, we would ideally add back the share of profit and replace it with our share of the JV's EBITDA. However, detailed JV EBITDA is not provided. Given the small magnitude (114 + 40 = 154 million), the impact is minimal. We will assume the reported EBITDA includes the equity pick-up, which is a proxy, or that the adjustment is negligible for this estimation. * **Adjusted EBITDA Calculation:** * Reported EBITDA: 32,057 million DKK * Less: Gain on disposal of non-current assets: 10,885 million DKK * Less: Gain on disposal of investments: 331 million DKK * Adjusted EBITDA = 32,057 - 10,885 - 331 = **20,841 million DKK**. *Self-Correction/Refinement:* In the power sector, "Other Income" and "Other Expenses" often contain fair value adjustments on hedging instruments. Ørsted's 2022 results were heavily impacted by energy crisis-related hedging gains/losses. The "Finance Income" is 15,514 and "Finance Costs" is 18,050. The operating profit is 19,774. The large gain on disposal (10.8bn) is likely related to the sale of assets (e.g., the sale of its US onshore wind portfolio or similar). This is definitely non-recurring. Let's re-verify the "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" sign. In the Cash Flow statement, it is listed as an adjustment to reconcile Profit/Loss. If it is negative, it means it was a gain included in profit that needs to be subtracted to get to cash flow from operations (since investing cash flow captures the proceeds). So yes, it is a gain. Adjusted EBITDA = 20,841 million DKK. ### Step 3: Estimate FFO The baseline formula is: `FFO = Adjusted_EBITDA - cash_interest - cash_taxes` * **Cash Interest:** * Reported "Finance Costs": 18,050 million DKK. * Reported "Finance Income": 15,514 million DKK. * Net Finance Costs = 18,050 - 15,514 = 2,536 million DKK. * However, FFO requires *cash* interest paid. * From the Cash Flow Statement: * "Interest Paid Classified As Operating Activities": **8,548 million DKK**. * "Interest Received Classified As Operating Activities": **7,985 million DKK**. * Net Cash Interest Paid = Interest Paid - Interest Received = 8,548 - 7,985 = **563 million DKK**. * *Note:* S&P typically uses gross cash interest paid for the deduction if we are looking at coverage, but for FFO (funds from operations), we deduct net cash interest expense. Let's look at the standard definition: FFO = Net Income + Depreciation + Amortization + Deferred Taxes - Gains on Sales + Losses on Sales. * Alternative FFO Calculation (Indirect): * Net Income (Profit Loss Attributable to Owners): 14,549 million. * Add: Depreciation/Amortization: 12,283 million. * Add: Deferred Taxes? The tax expense is 2,613. Cash taxes paid is 1,263. The difference is deferred. * Subtract: Gains on disposals: 11,216 million. * Adjust for Non-controlling interests and Hybrid capital? S&P FFO is usually pre-hybrid dividends but post-interest. * Let's stick to the `Adjusted_EBITDA - cash_interest - cash_taxes` formula provided in the prompt. * **Cash Interest:** The prompt asks for `cash_interest`. Usually, this is the net cash interest expense. * Cash Interest Paid: 8,548 million. * Cash Interest Received: 7,985 million. * Net Cash Interest Expense = 563 million DKK. * **Cash Taxes:** * From Cash Flow Statement: "Income Taxes Paid Classified As Operating Activities": **1,263 million DKK**. * **FFO Calculation:** * FFO = 20,841 (Adj EBITDA) - 563 (Net Cash Interest) - 1,263 (Cash Taxes) * FFO = **19,015 million DKK**. *Wait, let's double check the "Cash Interest" definition in S&P contexts.* Often, S&P calculates FFO as: FFO = Net Income + Depreciation + Amortization + Deferred Taxes - Gains on Asset Sales. Let's try this reconciliation to see if it matches. * Net Income (Parent): 14,549 * Add: Depreciation: 12,283 * Add: Deferred Tax Expense? Total Tax Expense 2,613. Cash Tax Paid 1,263. Deferred Tax = 2,613 - 1,263 = 1,350 (approx, ignoring current tax liability changes). Let's use the balance sheet change in tax liabilities/assets if possible, but simpler to use the expense vs cash. * Subtract: Gain on disposals: 11,216. * FFO ≈ 14,549 + 12,283 + 1,350 - 11,216 = 16,966 million. Why the discrepancy? The `Adjusted_EBITDA - cash_interest - cash_taxes` formula assumes that Adjusted EBITDA is the starting point. Adj EBITDA (20,841) includes the operating profit from associates, etc. Let's look at the components of the difference. The indirect method starts with Net Income. Net Income includes Finance Costs (accrual) and Tax Expense (accrual). My direct method subtracts Cash Interest and Cash Taxes from EBITDA. EBITDA (32,057) - Depreciation (12,283) = EBIT (19,774). EBIT - Net Finance Costs (2,536) - Tax Expense (2,613) = Net Income from Continuing Ops before NCI/Hybrids? 19,774 - 2,536 - 2,613 = 14,625. Reported Profit Loss: 14,996. (Difference due to NCI/Hybrids/Discontinued ops?). Profit Attributable to Parent: 14,549. The formula `FFO = Adjusted_EBITDA - cash_interest - cash_taxes` is a simplification. It effectively calculates Cash Flow from Operations before working capital changes, adjusted for non-recurring gains. Let's check Cash Flow from Operations (CFO): **11,924 million DKK**. CFO includes changes in working capital. FFO is generally CFO + Cash Interest + Cash Taxes - Changes in Working Capital? No. S&P FFO is closer to Net Income + D&A - Gains. Let's re-read the prompt's instruction: "Estimate the 'FFO' following the S&P guidelines. Use the following baseline formula... FFO = Adjusted_EBITDA - cash_interest - cash_taxes". I must follow this formula. * **Adjusted EBITDA**: 20,841 million DKK. * **Cash Interest**: Should this be gross or net? In leverage ratios, interest coverage uses gross. In FFO, which is a cash flow metric available to pay debt, we subtract the net cash outflow for interest. * Cash Interest Paid: 8,548. * Cash Interest Received: 7,985. * Net Cash Interest: 563. * **Cash Taxes**: 1,263. FFO = 20,841 - 563 - 1,263 = **19,015 million DKK**. *Alternative Interpretation of Cash Interest:* Sometimes "cash_interest" in these simplified formulas refers to the total interest expense paid without netting interest income, especially if the interest income is considered part of operating cash flow for a financial firm, but Ørsted is not a bank. However, interest received is usually investing or operating. Here it is classified as Operating. If we subtract *gross* cash interest paid (8,548), we are ignoring the cash inflow from interest. FFO is a source of funds. Interest received is a source. So netting is appropriate. However, there is a large discrepancy between this FFO (19,015) and the CFO (11,924). The difference is ~7,000. This is likely due to Working Capital changes and the non-cash nature of some EBITDA adjustments (like the derivative mark-to-market which might be in EBITDA but not cash, or vice versa). Actually, the "Change In Derivatives Other Adjustments" in CFO is -8,687. This means cash flow was *lower* than profit by this amount (or profit included gains not realized). If EBITDA includes unrealized gains on derivatives, and we didn't adjust for them, our Adj EBITDA is overstated relative to cash. Ørsted's 2022 EBITDA was heavily boosted by mark-to-market gains on energy hedges. These are non-cash. S&P guidelines for Unregulated Power/Gas often adjust for mark-to-market volatility. The "Change In Derivatives Other Adjustments" of -8,687 in CFO suggests that the accrual profit included ~8.7bn more than cash received (or cash paid was higher). If we assume the "Other Income" (14,119) and "Other Expense" (4,963) contain these derivative movements, and they are volatile/non-cash, we should adjust EBITDA. However, without explicit breakdown, removing the entire "Change in Derivatives" might be too aggressive if some are cash. But given the magnitude, and the fact that S&P prefers "normalized" earnings, we should consider if the 10.8bn gain on disposal is the *only* adjustment. Let's look at the CFO again: 11,924. If we take CFO + Cash Interest (Net) + Cash Taxes: 11,924 + 563 + 1,263 = 13,750. This is a "Cash FFO" proxy. My calculated FFO (19,015) is much higher. Why? Because Adj EBITDA (20,841) includes non-cash items (like the derivative gains) that haven't been realized in cash yet, and I haven't subtracted working capital increases. The prompt formula `FFO = Adjusted_EBITDA - cash_interest - cash_taxes` implicitly assumes that Adjusted EBITDA is a good proxy for operating cash flow before interest and taxes. If EBITDA contains significant non-cash unrealized gains, this formula overstates FFO. Does S&P adjust EBITDA for unrealized derivative gains/losses? Yes, typically. The "Change In Derivatives Other Adjustments" in the cash flow statement is a key clue. It reconciles Profit to Cash. Profit from Ops: 19,774. Depreciation: 12,283. EBITDA: 32,057. If we look at the Cash Flow from Operations (11,924), it is the most reliable cash number. However, I must follow the prompt's explicit formula. Is there an adjustment for "unrealized gains"? The prompt says: `± other_normalization_adjustments`. The derivative volatility is a "normalization adjustment" for a power company. The cash flow adjustment for derivatives is -8,687 million. This implies that the accrual-based EBITDA is ~8.7 billion higher than the cash realization (or cash outflows were higher). If we treat this entire amount as an unrealized gain included in EBITDA that should be normalized out: Adjusted EBITDA (normalized) = 20,841 (after disposal gains) - 8,687 (derivative normalization) = 12,154 million DKK. Let's check if this makes sense. Normalized FFO = 12,154 - 563 - 1,263 = 10,328 million DKK. This is closer to the CFO-based proxy (13,750), but still lower. The difference might be working capital. However, "Change in Derivatives" can also include cash collateral movements. The balance sheet shows "Current Derivative Financial Assets" increased from 14,078 to 23,433 (Increase of 9,355). "Current Derivative Financial Liabilities" increased from 32,325 to 33,438 (Increase of 1,113). The net derivative position worsened (liabilities > assets). Given the ambiguity and the strict instruction to use the formula, I will stick to the explicit adjustments identified as "non-recurring" (disposals) and standard S&P practice for "normalization" which often excludes mark-to-market volatility for utilities if it's not cash. But without explicit "unrealized" label, it's risky. Let's look at a simpler path. Often, for these types of problems, if specific "non-recurring" labels aren't on the derivative items, we might only adjust for the explicit "Gains on Disposal". Let's calculate the ratio with the higher FFO (19,015) and the lower FFO (10,328) and see which Debt figure makes sense. Actually, let's look at the "Profit Loss From Operating Activities" vs "Cash Flows From Operating Activities". Operating Profit: 19,774. CFO: 11,924. Difference: ~7,850. Major reconciling items: - Depreciation: +12,283 - Gain on disposal: -10,885 - Change in derivatives: -8,687 - Change in working capital (Receivables/Payables/Inventory): - Inventories: +1,419 - Contract Assets/Liabilities: -1,303 - Trade Receivables: -2,875 - Other Receivables: +2,742 - Trade Payables: +3,886 - Other Payables: -38 - Tax Equity Liabilities: -353 Net WC Change = 1419 - 1303 - 2875 + 2742 + 3886 - 38 - 353 = 3,478. Reconciliation: Op Profit: 19,774 + Dep: 12,283 - Gain: 10,885 - Deriv Adj: 8,687 (This is likely the non-cash/unrealized part or timing) + WC Change: 3,478 Other adjustments (Provisions etc): -1,935 - 278 = -2,213. Calc: 19,774 + 12,283 - 10,885 - 8,687 + 3,478 - 2,213 = 13,750. Reported CFO: 11,924. Difference: 1,826. Interest Paid/Received and Tax Paid are classified as Operating in the CFO section? The CFO line "Cash Flows From Used In Operating Activities" is 11,924. The items "Interest Paid" (8,548) and "Interest Received" (7,985) and "Tax Paid" (1,263) are listed *below* or *within*? Usually, IFRS allows interest paid to be operating or financing. Ørsted classifies them as Operating. So the 11,924 figure *includes* the cash outflow for interest and tax. So, Cash Flow from Operations *before* interest and taxes would be: 11,924 + 8,548 (Interest Paid) - 7,985 (Interest Received) + 1,263 (Tax Paid) = 13,750 million DKK. This matches my reconciliation above (13,750). So, the "True" Cash FFO (Cash from Ops before interest and tax) is **13,750 million DKK**. Now, does the formula `Adjusted_EBITDA - cash_interest - cash_taxes` yield this? If I use Reported EBITDA (32,057) - Cash Interest (Net 563) - Cash Tax (1,263) = 30,231. This is way off. Why? Because EBITDA includes the Gain (10,885) and the Unrealized Derivative Gain (~8,687). If I subtract these from EBITDA: Adj EBITDA = 32,057 - 10,885 - 8,687 = 12,485. FFO = 12,485 - 563 - 1,263 = 10,659. This is close to 13,750 but not exact. The difference is the Working Capital changes (3,478 inflow) and other adjustments. S&P FFO is generally *accrual-based* with specific adjustments, not purely cash-based. Standard S&P FFO = Net Income + Depreciation + Amortization + Deferred Taxes - Gains on Sales. Let's use this standard definition, as it is more robust than the simplified cash formula if the cash formula doesn't account for WC. **Standard S&P FFO Calculation:** 1. **Net Income (Attributable to Parent):** 14,549 million. 2. **Add: Depreciation & Amortization:** 12,283 million. 3. **Add: Deferred Taxes:** * Tax Expense: 2,613. * Cash Tax Paid: 1,263. * Deferred Tax = 2,613 - 1,263 = 1,350 million. (Approximation). * Alternatively, look at Balance Sheet: Deferred Tax Liabilities increased from 5,616 to 7,414 (+1,798). Deferred Tax Assets increased from 13,281 to 13,719 (+438). Net DTL increase 1,798 - 438 = 1,360. This matches the 1,350 estimate. Let's use **1,360 million**. 4. **Subtract: Gains on Disposals:** * Gain on Non-current assets: 10,885 million. * Gain on Investments: 331 million. * Total Gains: **11,216 million**. 5. **Adjust for Non-Controlling Interests (NCI) and Hybrid Capital?** * S&P FFO is typically calculated for the consolidated entity before distributions to NCI and Hybrid holders, or sometimes after. The ratio "FFO to Debt" usually uses Consolidated FFO. * However, the Net Income used (14,549) is *after* NCI and Hybrid deductions. * We should add back the profit attributable to NCI and Hybrid Capital to get Consolidated Net Income? * Profit Loss Attributable to Hybrid: 577. * Profit Loss Attributable to NCI: -130. * Consolidated Net Income = 14,549 + 577 - 130 = 14,996. (Matches "Profit Loss" line). * So, start with Consolidated Net Income: **14,996 million**. **Recalculating FFO:** * Consolidated Net Income: 14,996 * + Depreciation/Amortization: 12,283 * + Deferred Taxes: 1,360 * - Gains on Disposals: 11,216 * **FFO = 14,996 + 12,283 + 1,360 - 11,216 = 17,423 million DKK.** This figure (17,423) is between the pure cash proxy (13,750) and the unadjusted EBITDA proxy (19,015). It represents the accrual-based funds from operations. ### Step 4: Estimate Adjusted Debt Formula: `Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash` * **Reported Debt:** * Long-term Borrowings: 60,451 million. * Short-term Borrowings: 2,830 million. * Total Interest-Bearing Debt = 63,281 million DKK. * **Leases:** * Noncurrent Lease Liabilities: 7,697 million. * Current Lease Liabilities: 569 million. * Total Leases = 8,266 million DKK. * S&P treats leases as debt. * **Hybrid Capital:** * Hybrid Capital: 19,793 million. * S&P typically treats 50% of hybrid capital as debt for regulated utilities, but for Unregulated Power, it depends on the terms. Ørsted's hybrids are perpetual subordinated notes. S&P often assigns 50% or 100% equity credit. Given the "Unregulated" nature and risk, let's assume a standard 50% debt treatment unless specified otherwise. However, many analysts treat hybrids as debt for leverage ratios if they are mandatory coupon or have step-ups. Ørsted's hybrids have discretionary coupons. S&P usually gives 50% equity credit (i.e., 50% is debt). * Debt portion of Hybrids = 50% * 19,793 = **9,896.5 million DKK**. * **Pension Deficit:** Not explicitly provided in the facts. We assume it is netted or negligible for this estimation based on available data. * **Guarantees:** Not provided. Assume 0. * **Eligible Cash:** * Cash: 16,178 million. * S&P allows netting cash against debt if it is unrestricted and available. * However, Ørsted has significant restricted cash or collateral requirements? "Collateral Posted... Classified As Financing Activities" suggests significant derivative collateral. * Current Derivative Financial Assets: 23,433. * Current Derivative Financial Liabilities: 33,438. * Net Derivative Liability: 10,005. * Usually, S&P does *not* net cash against debt for utilities unless it's excess cash. Given the high capex and volatility, we might not net all cash. But the baseline formula says `- eligible_cash`. * Let's assume "Cash" (16,178) is eligible, but we must check if it's restricted. The facts don't specify restrictions. We will net the full cash amount as per the baseline formula instruction, acknowledging this might be aggressive. * Eligible Cash = **16,178 million DKK**. * **Adjusted Debt Calculation:** * Debt: 63,281 * Leases: 8,266 * Hybrid (50%): 9,897 * Less Cash: (16,178) * Adjusted Debt = 63,281 + 8,266 + 9,897 - 16,178 = **65,266 million DKK**. *Alternative:* If Hybrids are treated as 100% debt (conservative): Adj Debt = 63,281 + 8,266 + 19,793 - 16,178 = 75,162. *Alternative:* If Cash is not netted (common for volatile cash flows): Adj Debt = 63,281 + 8,266 + 9,897 = 81,444. S&P methodology for Unregulated Power often views cash as a buffer but doesn't always net it for the primary leverage ratio if the cash is needed for operations/collateral. However, the prompt explicitly gives the formula `- eligible_cash`. I will follow the formula. Regarding Hybrids: Ørsted's hybrids are rated equity by some agencies, but S&P often treats them as 50% debt / 50% equity for credit ratios. I will use 50%. Adjusted Debt = **65,266 million DKK**. ### Step 5: Calculate FFO / Adjusted Debt * **FFO:** 17,423 million DKK. * **Adjusted Debt:** 65,266 million DKK. Ratio = 17,423 / 65,266 = **0.26695...** Let's double check the FFO calculation. If I used the "Cash FFO" proxy (13,750): Ratio = 13,750 / 65,266 = 0.2106. If I used the "EBITDA - Cash Int - Cash Tax" with no derivative adjustment (19,015): Ratio = 19,015 / 65,266 = 0.2913. Which FFO is more "S&P Adjusted"? S&P FFO is accrual-based. The standard definition (NI + D&A + Def Tax - Gains) is the most accurate representation of S&P's "Funds From Operations". The cash flow proxy is "Cash Flow from Operations", which is different. S&P distinguishes between FFO and CFO. FFO adds back deferred taxes and non-cash working capital changes are *not* added back in FFO (they are in CFO). Wait. FFO = Net Income + D&A + Deferred Taxes - Gains. This metric *ignores* changes in working capital. CFO = Net Income + D&A + Deferred Taxes - Gains + Changes in WC. So my FFO of 17,423 is correct for the accrual definition. Let's refine the Debt. Is there "other debt like items"? "Noncurrent Derivative Financial Liabilities" and "Current Derivative Financial Liabilities". S&P does *not* typically treat derivative liabilities as debt unless they are synthetic debt. They are operating/financial hedges. "Tax Equity Partner Liabilities"? "Non Current Tax Equity Liabilities": 14,490. "Current Tax Equity Liabilities": 1,903. Total: 16,393. Tax equity structures are often treated as debt-like because they have fixed returns. In the US, tax equity is common. Ørsted has US operations. S&P often treats tax equity liabilities as debt. If we add Tax Equity Liabilities to Debt: Debt = 65,266 + 16,393 = 81,659. Let's check the nature of "Tax Equity Liabilities". In the Cash Flow, "Net Proceeds From Tax Equity Partners" is a financing activity. This confirms they are financing instruments. S&P typically classifies tax equity as debt-like. So, Adjusted Debt should include Tax Equity. Revised Adjusted Debt: * Interest Bearing Debt: 63,281 * Leases: 8,266 * Hybrids (50%): 9,897 * Tax Equity Liabilities: 16,393 * Less Cash: (16,178) * Total = 63,281 + 8,266 + 9,897 + 16,393 - 16,178 = **81,659 million DKK**. Revised Ratio: FFO = 17,423. Debt = 81,659. Ratio = 17,423 / 81,659 = **0.21336...** Let's consider if Hybrids should be 100% debt. If 100% Hybrids: Debt = 81,659 + 9,897 (the other half) = 91,556. Ratio = 17,423 / 91,556 = 0.1903. Let's consider if Cash should not be netted. If no cash netting: Debt = 81,659 + 16,178 = 97,837. Ratio = 17,423 / 97,837 = 0.1781. S&P's "Adjusted Debt" for utilities usually nets cash only if it's excess. Ørsted's cash balance doubled from 8.6bn to 16.1bn. This might be excess. I will stick with netting cash. What about the FFO? Did I miss any adjustments? "Share Of Profit Loss Of Associates... Core Business": 114. This is included in Net Income. Is there a "proportional EBITDA" adjustment? If we assume the associate EBITDA is similar to its profit (low capex), no major change. Let's look at the "Gains on Disposal". 10,885 + 331 = 11,216. This is a very large gain. Removing it is correct. Final check on Tax Equity. In the balance sheet, "Non Current Tax Equity Liabilities" and "Current Tax Equity Liabilities" are separate from "Borrowings". S&P Methodology: "We treat tax equity partnerships as debt-like obligations." So including them is correct. Final check on Hybrids. Ørsted's hybrids are perpetual subordinated capital. S&P usually assigns 50% equity credit to such instruments for investment grade issuers. Ørsted is BBB/Baa range. 50% debt treatment is standard. Final Calculation: FFO = 17,423 million DKK. Adj Debt = 81,659 million DKK. Ratio = 0.21336... Rounding to four decimal places: **0.2134**. 0.2134