# FFO / Adjusted Debt Ratio Analysis for ACEA S.P.A. (2022)

## Step 1: Identify the Relevant Industry

ACEA S.P.A. is an Italian utility company operating in Rome (Piazzale Ostiense 2). Based on the company's business activities and structure, this company operates in the **Regulated Utilities** sector, specifically as a multi-utility providing water, electricity, and gas services. The company is subject to comprehensive regulation in Italy.

**Industry Classification:** Regulated Utilities (Multi-utilities)

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## Step 2: Estimate Adjusted_EBITDA

### Baseline EBITDA Calculation

From the financial statements for 2022-01-01 to 2023-01-01:
- Operating Profit (EBIT): EUR 565,851,000
- Depreciation & Amortization: EUR 594,636,000

**EBITDA = Operating Profit + D&A**
$$\text{EBITDA} = 565,851,000 + 594,636,000 = 1,160,487,000 \text{ EUR}$$

### Adjustments for Regulated Utilities

Per S&P guidelines for regulated utilities, we need to consider:

1. **Impairment adjustments:** The company reports impairment loss of EUR 113,370,000. For regulated utilities, impairment adjustments related to rate regulation should be evaluated. However, given the nature of Italian regulation, we include a normalization adjustment.

2. **Pension adjustments:** 
   - Actuarial gains on employee benefits: EUR 6,409,000
   - Tax effect: EUR -1,842,000
   - Net pension adjustment: EUR 4,567,000

3. **Provisions adjustments:**
   - Net change in provisions for risks: EUR 14,167,000

4. **Non-recurring items:**
   - The impairment of EUR 113,370,000 is already subtracted in operating profit. We need to add back the non-cash portion for normalization.

### Adjusted_EBITDA Calculation

$$\text{Adjusted_EBITDA} = 1,160,487,000 + 113,370,000 + 4,567,000 + 14,167,000$$
$$\text{Adjusted_EBITDA} = 1,292,591,000 \text{ EUR}$$

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## Step 3: Estimate FFO (Funds From Operations)

FFO = Adjusted_EBITDA - Cash Interest - Cash Taxes

### Cash Interest Paid
From cash flow statement:
$$\text{Interest Paid (Financing Activities)} = 114,121,000 \text{ EUR}$$

### Cash Taxes Paid
From cash flow statement:
$$\text{Income Taxes Paid} = 178,506,000 \text{ EUR}$$

### FFO Calculation

$$\text{FFO} = 1,292,591,000 - 114,121,000 - 178,506,000$$
$$\text{FFO} = 999,964,000 \text{ EUR}$$

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## Step 4: Estimate Adjusted_Debt

### Components of Reported Debt

From balance sheet as of 2023-01-01 (year-end 2022):

**Non-Current Financial Liabilities:** EUR 4,722,263,000
**Current Financial Liabilities:** EUR 619,418,000

**Total Reported Debt = EUR 5,341,681,000**

### Lease Obligations (ROU Assets/Liabilities)
From balance sheet:
- Right-of-use Assets (2022): EUR 53,096,000

For lease adjustment, we use the capitalized lease amount:
$$\text{Lease Adjustment} = 53,096,000 \text{ EUR}$$

### Pension Deficit
From balance sheet (2022):
- Noncurrent Provisions for Employee Benefits: EUR 120,150,000

Pension adjustment: EUR 120,150,000

### Cash and Equivalents (to be deducted)
From balance sheet (2022):
- Cash and Cash Equivalents: EUR 680,820,000

### Adjusted_Debt Calculation

$$\text{Adjusted_Debt} = 5,341,681,000 + 53,096,000 + 120,150,000 - 680,820,000$$
$$\text{Adjusted_Debt} = 4,834,107,000 \text{ EUR}$$

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## Step 5: Calculate FFO / Adjusted_Debt Ratio

$$\text{FFO / Adjusted_Debt} = \frac{999,964,000}{4,834,107,000}$$
$$\text{FFO / Adjusted_Debt} = 0.206846$$

Rounded to four decimal places: **0.2068**

<answer>0.2068</answer>