# S&P Adjusted Debt-to-EBITDA Analysis for TERNA S.p.A.

## Step 1: Identify the Relevant Industry

TERNA is described as "RETE ELETTRICA NAZIONALE SOCIETA' PER AZIONI" (National Electricity Grid Company), which operates as the Italian transmission system operator. Based on the company's description and business model, TERNA is clearly a **Regulated Utility** in the electricity transmission/distribution sector.

The company operates under a regulatory framework in Italy, manages critical electricity transmission infrastructure, and derives revenue from regulated tariffs rather than competitive market forces. This aligns perfectly with the "Regulated Utilities" methodology.

## Step 2: Estimate Adjusted_Debt

### Components of Adjusted Debt:

**Reported Debt (as of December 31, 2022):**
- Long-term borrowings: €8,835,000,000
- Short-term borrowings: €1,947,000,000
- Current portion of long-term borrowings: €1,640,000,000
- Total reported debt: €12,422,000,000

**Adjustments required under Regulated Utilities methodology:**

1. **Hybrid Instruments:** According to the data, there is a "Capital Instruments Bonds Hybrid Perpetual" recognized in equity of €989,000,000 as of 2023-01-01. Under S&P methodology, hybrid instruments typically have a portion treated as debt. The standard treatment is to include 50% of hybrid instruments as debt for S&P-adjusted metrics.
   - Hybrid debt adjustment: €989,000,000 × 50% = €494,500,000

2. **Operating Leases:** The data does not provide specific lease obligations. The notes do not indicate material lease-related liabilities requiring adjustment.

3. **Pension Obligations:** 
   - Noncurrent provisions for employee benefits (2022-01-01): €60,800,000
   - The data shows pension-related items, but no material unfunded pension deficit is evident from the balance sheet presentation.

4. **Cash and Cash Equivalents (eligible offsets):**
   - Cash and cash equivalents (2022-01-01): €1,566,800,000
   - Current financial assets (2022-01-01): €980,600,000
   - Total eligible cash: €2,547,400,000

**Adjusted Debt Calculation:**

Adjusted_Debt = Total Reported Debt + Hybrid Debt Adjustment - Eligible Cash
Adjusted_Debt = €12,422,000,000 + €494,500,000 - €2,547,400,000
Adjusted_Debt = €10,369,100,000

## Step 3: Estimate Adjusted_EBITDA

### Components of Adjusted EBITDA:

**Reported EBITDA (reconstructed from P&L):**

Starting with operating profit and adding back D&A:
- Profit/Loss from operating activities (2022): €1,333,500,000
- Depreciation, amortisation and impairment loss (2022): €725,700,000

Reported EBITDA = €1,333,500,000 + €725,700,000 = €2,059,200,000

**Adjustments under Regulated Utilities methodology:**

1. **Non-recurring items:** 
   - The statement shows "Profit Loss From Discontinued Operations" of -€20,300,000, which should be normalized out.
   
2. **Operating lease adjustments:** Not material based on available data.

3. **Pension adjustments:** Limited material adjustments required.

4. **Other normalization adjustments:** 
   - The company shows gains/losses on disposals of property, plant and equipment of -€6,900,000 (expense), which is already reflected in the operating profit but may need consideration.
   - Finance costs and finance income are excluded from EBITDA calculation.

**Adjusted EBITDA Calculation:**

Starting from operating profit:
- Operating profit (2022): €1,333,500,000
- Add back: Depreciation & amortisation (2022): €725,700,000
- Add back: Loss from discontinued operations (non-recurring): €20,300,000

Adjusted_EBITDA = €1,333,500,000 + €725,700,000 + €20,300,000
Adjusted_EBITDA = €2,079,500,000

## Step 4: Calculate the Adjusted Debt / Adjusted EBITDA Ratio

**Calculation:**

Adjusted_Debt / Adjusted_EBITDA = €10,369,100,000 / €2,079,500,000

Adjusted_Debt / Adjusted_EBITDA = 4.98

**Rounding to two decimal places:**

Adjusted_Debt / Adjusted_EBITDA = 4.98

<answer>4.98</answer>