# S&P Adjusted Debt-to-EBITDA Analysis for TenneT Holding B.V. (2022)

## Step 1: Identify the Relevant Industry

Based on the company information and methodology guidelines:
- **Company Description:** TenneT Holding B.V. is a transmission system operator (TSO)
- **Principal Activities:** Electricity transmission
- **Regulatory Status:** Subject to comprehensive regulation by a regulatory body

**Relevant Industry Methodology:** **Regulated Utilities**

TenneT operates as a regulated electricity transmission network operator, which falls squarely within the "Regulated Utilities" sector methodology provided in the S&P guidelines.

---

## Step 2: Estimate Adjusted_Debt

### Baseline Components (as of 2022-01-01):

**Reported Debt:**
- Long-term Borrowings: €12,366 million
- Short-term Borrowings: €1,339 million
- Current Bank Overdrafts: €64 million
- **Total Reported Debt: €13,769 million**

**Lease Obligations:**
- Current Lease Liabilities: €169 million
- Non-current Lease Liabilities: €235 million
- **Total Lease Liabilities: €404 million**

**Pension Adjustments:**
- Noncurrent Recognised Liabilities Defined Benefit Plan: €351 million
- Net Pension Deficit: €351 million (liability position)

**Hybrid Capital:**
- Hybrid Capital: €2,125 million
- S&P typically includes a portion (commonly 50%) of hybrid capital in adjusted debt for regulated utilities
- **Hybrid Adjustment: €2,125 × 50% = €1,062.5 million**

**Eligible Cash (to be deducted):**
- Cash and Cash Equivalents: €3,204 million

### Adjusted Debt Calculation:

```
Adjusted_Debt = Reported_Debt + Lease_Liabilities + Pension_Deficit + (Hybrid_Capital × 50%) - Cash
Adjusted_Debt = 13,769 + 404 + 351 + 1,062.5 - 3,204
Adjusted_Debt = 12,782.5 million EUR
```

---

## Step 3: Estimate Adjusted_EBITDA

### Reported EBITDA (reconstructed from P&L for fiscal year ended 2021-01-01 to 2022-01-01):

**Starting with Operating Loss:**
- Profit Loss From Operating Activities: €-275 million

**Add back D&A:**
- Depreciation And Amortisation Expense: €1,165 million

**Calculated EBITDA:**
```
EBITDA = Operating_Loss + D&A
EBITDA = -275 + 1,165
EBITDA = 890 million EUR
```

### Adjustments per S&P Regulated Utilities Methodology:

**1. Add back Lease Adjustments:**
- Reported rent/lease expense is already included in operating expenses
- Operating lease adjustment (estimated as portion of lease liabilities × discount rate)
- Conservative estimate: €404 million × 5% ≈ €20 million
- **Lease Adjustment: €20 million**

**2. Share of Profit/Loss from JVs:**
- Share of Profit Loss Of Associates And Joint Ventures: €62 million (undistributed profit adjustment)
- **JV Adjustment: +€62 million**

**3. Nonrecurring Items:**
- Other Gains Losses: €-4 million (loss on disposal)
- Miscellaneous Other Operating Expense: €303 million
  - These are operating expenses; no clear indication they are nonrecurring
- **Nonrecurring Adjustment: €4 million (add back the loss)**

**4. Pension Adjustments:**
- For regulated utilities, pension obligations may be normalized
- Adjustment for defined benefit pension expense: estimated as part of operating expense normalization
- **Pension Normalization: €0 million** (included in normal operations for regulated utility)

### Adjusted EBITDA Calculation:

```
Adjusted_EBITDA = EBITDA + Lease_Adjustment + JV_Adjustment + Nonrecurring_Items
Adjusted_EBITDA = 890 + 20 + 62 + 4
Adjusted_EBITDA = 976 million EUR
```

---

## Step 4: Calculate Adjusted Debt / Adjusted EBITDA

```
Adjusted_Debt / Adjusted_EBITDA = 12,782.5 / 976
Adjusted_Debt / Adjusted_EBITDA = 13.10
```

---

## Verification and Reasonableness Check:

For a regulated electricity transmission system operator:
- High leverage ratios (8-10x and above) are not uncommon due to the capital-intensive nature of network infrastructure
- The ratio of 13.10x reflects:
  - Substantial debt financing for network infrastructure
  - Inclusion of 50% of hybrid capital as debt-like
  - Modest EBITDA generation relative to asset base (typical for transmission operators with cost-of-service regulation)
  - This is consistent with the utility sector profile

<answer>13.10</answer>