# S&P Adjusted Debt-to-EBITDA Analysis for REDEIA CORPORACION SA

## Step 1: Industry Identification

REDEIA CORPORACION SA (Red Eléctrica Corporación, S.A.) is a Spanish electricity transmission and distribution company. Based on the company description and financial activities, this entity clearly falls under the **Regulated Utilities** sector, specifically electricity transmission and distribution.

Key indicators:
- Company name and description: "Red Eléctrica" (Red Electric)
- Operates electricity transmission infrastructure in Spain
- Regulated business model with government oversight
- Large fixed asset base (PP&E of €9.6 billion)
- Stable, regulated revenue streams

**Applicable Methodology:** Regulated Utilities

---

## Step 2: Adjusted Debt Calculation

For regulated utilities, the baseline formula is:
```
Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees 
                 + hybrid_debt_portion + other_debt_like_items) - eligible_cash
```

### Components from Balance Sheet (as of 2022-01-01, i.e., Dec 31, 2021):

**Reported Debt:**
- Noncurrent Financial Liabilities (Longterm Borrowings): €5,896,170,000
- Current Borrowings and Current Portion: €1,391,722,000
- **Total reported debt = €7,287,892,000**

**Adjustments to Debt:**

1. **Pension Obligations**: Not explicitly disclosed in detail; no material pension deficit is apparent from the data.

2. **Operating Leases**: The company operates in electricity transmission/distribution and may have operating leases. However, specific lease data is not clearly itemized in the balance sheet. Since it's a regulated utility with substantial PP&E, assuming minimal lease adjustments: **€0** (not material or not disclosed separately).

3. **Hybrid Securities**: No hybrid debt identified in the provided financial statements.

4. **Government Grants (Noncurrent)**: €726,002,000
   - S&P methodology for regulated utilities: Government grants are typically deducted from debt as they represent non-debt financing.
   - **Adjustment: -€726,002,000**

5. **Other Debt-like Items**: No other material debt-like items identified.

**Eligible Cash:**
- Cash and Cash Equivalents (2022-01-01): €1,574,427,000
- **Less: Working capital buffer** (conservative estimate for regulated utility operations, typically 10-15% of current liabilities or minimal)
- For utilities, most cash is available; assume full eligibility: €1,574,427,000

**Adjusted Debt Calculation:**
```
Adjusted_Debt = €7,287,892,000 - €726,002,000 - €1,574,427,000
Adjusted_Debt = €4,987,463,000
```

---

## Step 3: Adjusted EBITDA Calculation

The baseline formula is:
```
Adjusted_EBITDA = EBITDA (reported/reconstructed) + adjustment_leases 
                  + nonrecurring_losses - nonrecurring_gains 
                  ± pension_adjustments ± JV_proportional_EBITDA 
                  ± other_adjustments
```

### Reconstruct EBITDA (Fiscal Year 2021, i.e., 2021-01-01 to 2022-01-01):

**Starting with Operating Profit:**
- Profit/Loss From Operating Activities (2021-01-01 to 2022-01-01): €991,970,000

**Add Back Depreciation and Amortization:**
- Depreciation And Amortisation Expense (2021-01-01 to 2022-01-01): €522,114,000

**Reconstructed EBITDA (before adjustments):**
```
EBITDA = €991,970,000 + €522,114,000 = €1,514,084,000
```

### Adjustments:

1. **Imputation of Subsidies (Operating Impact):**
   - Imputacion De Subvenciones De Inmovilizado... (2021-01-01 to 2022-01-01): €14,717,000
   - This is a non-cash add-back that should be normalized out
   - **Add: €14,717,000**

2. **Deterioro Y Resultado Por Enajenaciones Del Inmovilizado** (Impairment & Asset Sale Results):
   - (2021-01-01 to 2022-01-01): -€730,000
   - This is a one-off gain/loss; adjust out
   - **Add: €730,000**

3. **Participation in Profits of Equity Method Investments:**
   - Participacion En Beneficios (2021-01-01 to 2022-01-01): €29,546,000
   - For regulated utilities with joint ventures, proportional EBITDA is typically adjusted. This represents equity method earnings.
   - **No adjustment needed** (already excluded from operating profit; would require proportional consolidation analysis not detailed here)

4. **Operating Lease Adjustments:**
   - No material lease data disclosed
   - **€0**

5. **Pension/Other Adjustments:**
   - No material pension adjustments identified
   - **€0**

**Adjusted EBITDA (2021 FY):**
```
Adjusted_EBITDA = €1,514,084,000 + €14,717,000 + €730,000
Adjusted_EBITDA = €1,529,531,000
```

---

## Step 4: Calculate Adjusted Debt / Adjusted EBITDA

```
Adjusted_Debt / Adjusted_EBITDA = €4,987,463,000 / €1,529,531,000
                                 = 3.258
```

Rounded to two decimal places: **3.26**

---

<answer>3.26</answer>