Step 1 — Relevant industry

TERNA S.p.A. is Italy’s national electricity transmission grid operator. This fits the Regulated Utilities methodology, specifically an electricity transmission/network utility. The relevant core financial metric is FFO to debt.

Step 2 — Estimate Adjusted EBITDA

Reported operating profit / EBIT:

- Profit from operating activities = EUR 1,333.5 million

Add back depreciation, amortisation and impairment:

- Depreciation, amortisation and impairment = EUR 725.7 million

Reconstructed EBITDA:

\[
EBITDA = 1{,}333.5 + 725.7 = 2{,}059.2 \text{ million}
\]

No clear data is provided for leases, nonrecurring items, pension service/cost adjustments, guarantees, or proportional JV EBITDA, so no additional adjustment is made.

\[
Adjusted\ EBITDA \approx 2{,}059.2 \text{ million}
\]

Step 3 — Estimate FFO

Use:

\[
FFO = Adjusted\ EBITDA - cash\ interest - cash\ taxes
\]

Cash interest paid:

- Interest paid classified as operating activities = EUR 154.8 million

Cash taxes paid:

- Income taxes paid = EUR 380.1 million

\[
FFO = 2{,}059.2 - 154.8 - 380.1 = 1{,}524.3 \text{ million}
\]

Step 4 — Estimate Adjusted Debt

Reported debt at Dec. 31, 2022 / Jan. 1, 2023:

- Long-term borrowings = EUR 8,416.7 million
- Short-term borrowings = EUR 444.1 million
- Current portion of long-term borrowings = EUR 1,909.3 million

\[
Reported\ debt = 8{,}416.7 + 444.1 + 1{,}909.3 = 10{,}770.1 \text{ million}
\]

Hybrid adjustment:

TERNA issued perpetual hybrid bonds of EUR 989.0 million, reported in equity. Under S&P-style treatment, hybrids commonly receive partial equity credit; absent more detailed terms, assume 50% debt treatment.

\[
Hybrid\ debt\ portion = 989.0 \times 50\% = 494.5 \text{ million}
\]

Pension deficit / employee benefit provision:

- Noncurrent provisions for employee benefits = EUR 48.4 million

Treat as debt-like pension obligation:

\[
Pension\ adjustment = 48.4 \text{ million}
\]

Gross adjusted debt before cash:

\[
10{,}770.1 + 494.5 + 48.4 = 11{,}313.0 \text{ million}
\]

Eligible cash:

- Cash and cash equivalents = EUR 2,155.1 million

Assume full cash netting because no restricted cash detail is provided.

\[
Adjusted\ Debt = 11{,}313.0 - 2{,}155.1 = 9{,}157.9 \text{ million}
\]

Step 5 — FFO / Adjusted Debt

\[
FFO / Adjusted\ Debt = 1{,}524.3 / 9{,}157.9 = 0.1664
\]

<answer>0.1664</answer>