I'll work through this step-by-step for ENGIE. ## Step 1: Identify the Relevant Industry for ENGIE ENGIE is a French multinational electric utility company. Based on the provided methodologies, ENGIE fits into multiple categories: - **Regulated Utilities** (gas and electricity distribution/network activities) - **Unregulated Power And Gas** (generation, supply, and trading activities) Given ENGIE's integrated nature with significant regulated utility operations (distribution networks) and unregulated activities (generation, supply, renewable energy), I need to apply the general corporate baseline formulas with appropriate sector-specific adjustments. Looking at ENGIE's business: it's a multi-utility with regulated networks, unregulated generation, and energy services. The methodology mentions "Multi-utilities" under Regulated Utilities. However, ENGIE also has significant unregulated power and gas activities. For a company like ENGIE with mixed operations, I'll apply the general baseline formulas with relevant adjustments from both methodologies, particularly focusing on: - Debt adjustments (leases, pensions, hybrids) - EBITDA normalization (non-recurring items, joint ventures) ## Step 2: Estimate Adjusted_Debt ### Baseline Formula: Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash ### Components from the balance sheet (2022-01-01 values for debt at fiscal year-end 2022): **Reported Debt:** - Long-term borrowings: 30,458,000,000 EUR - Current borrowings and current portion of non-current borrowings: 10,590,000,000 EUR - **Total reported debt = 41,048,000,000 EUR** **Hybrid Debt:** From equity section: "Deeply Subordinated Perpetual Notes" = 3,767,000,000 EUR (2022-01-01) These are hybrid instruments. S&P typically treats 50% of hybrid debt as equity and 50% as debt, or treats the full amount as debt depending on the instrument features. For deeply subordinated perpetual notes, S&P typically counts **50% as debt** (the equity-like portion). - Hybrid debt portion = 3,767,000,000 × 0.50 = 1,883,500,000 EUR **Pension Deficit:** From the comprehensive income: "Gains Losses On Remeasurements Of Defined Benefit Plans" before tax = 2,718,000,000 EUR (positive, meaning gains). However, we need the net pension position. Looking at the balance sheet and equity movements, I need to estimate the pension deficit. The "Other Comprehensive Income Before Tax Gains Losses On Remeasurements Of Defined Benefit Plans" of 2,718M EUR (positive) suggests a pension gain. However, we don't have direct pension liability data. In practice, for utilities, pension deficits are often material. Let me check if there's implicit pension information. From the equity roll-forward: "Other Comprehensive Income" includes pension remeasurements. The "Other Comprehensive Income That Will Not Be Reclassified To Profit Or Loss Net Of Tax" includes pension items after tax effects. Given limited explicit pension liability data in the facts provided, I'll assume pension deficit is **not separately material** or already reflected in provisions. The "Noncurrent Provisions" of 23,394M EUR likely includes pension obligations. Actually, looking more carefully: S&P typically adds pension deficit when it's material and underfunded. Without explicit pension asset/liability split, I'll use **0** for pension deficit as a conservative estimate given data limitations, or note that provisions may already capture this. **Leases:** Operating leases are now mostly on-balance sheet under IFRS 16. The facts don't show separate lease liabilities. Looking at the debt components, leases may already be included in borrowings. I'll assume **0** additional lease adjustment or that they're already in reported debt. **Guarantees:** No explicit guarantee data provided. **0** **Other Debt-like Items:** - Derivative financial liabilities (noncurrent): 24,228,000,000 EUR - Derivative financial liabilities (current): 22,702,000,000 EUR - Current derivative financial assets: 19,373,000,000 EUR - Noncurrent derivative financial assets: 25,616,000,000 EUR For commodity and trading companies, derivatives can be debt-like if they're liability positions. However, S&P typically nets derivative positions or treats them working capital. For a utility with significant trading (ENGIE has energy trading), we need to be careful. Net derivative position = (19,373 + 25,616) - (22,702 + 24,228) = 44,989 - 46,930 = -1,941M EUR (net liability) However, S&P generally doesn't add gross derivative liabilities to debt; they may net or treat as working capital. I'll exclude derivatives from debt adjustment. **Eligible Cash:** Cash and Cash Equivalents = 13,890,000,000 EUR However, S&P typically uses a portion of cash, not all. For utilities, they may deduct 75% or similar. Standard practice is to deduct **75% of cash** for utilities, or full cash if highly certain of availability. Let me use standard S&P practice: eligible cash = 75% of reported cash = 0.75 × 13,890,000,000 = 10,417,500,000 EUR Or more conservatively, some analysts use 100% of cash for strong utilities. I'll use **100%** for now and note sensitivity. Actually, re-reading S&P methodology: for utilities with seasonal working capital, they may adjust. But for general corporate, eligible cash is typically cash and liquid investments minus restricted cash. I'll assume **13,890,000,000 EUR** as eligible cash (assuming no restricted cash). **Adjusted_Debt calculation:** Adjusted_Debt = 41,048,000,000 + 0 + 0 + 0 + 1,883,500,000 + 0 - 13,890,000,000 Adjusted_Debt = **29,041,500,000 EUR** Wait - let me reconsider the hybrid treatment. S&P's standard approach for hybrid capital: - If the hybrid is "deeply subordinated perpetual notes" with deferrable coupons, S&P may treat 50% as equity (i.e., only 50% counts as debt reduction from equity). Actually, looking at this from equity perspective: The notes are in equity at 3,767M. S&P would reclassify 50% to debt. - So add 1,883.5M to debt (as done above). Let me also check if there are other equity items that should be reclassified. ## Step 3: Estimate Adjusted_EBITDA ### Baseline Formula: Adjusted_EBITDA = EBITDA (reported or reconstructed) + adjustment_leases + nonrecurring_losses - nonrecurring_gains ± pension_adjustments ± joint_venture_proportional_EBITDA ± other_normalization_adjustments **Reconstructing EBITDA:** From the income statement: - Current Operating Income Including Operating Mtm = 4,309,000,000 EUR (2022) - Depreciation Amortization And Provisions = 5,187,000,000 EUR (2022) However, "Depreciation Amortization And Provisions" includes more than just D&A. Let me reconstruct more carefully. Alternative approach: EBITDA = Revenue - Purchases And Operating Derivatives - Employee Benefits Expense - Tax Expense Other Than Income Tax Expense + Other Income Wait, that's not right either. Let me use: EBITDA = Operating Profit + Depreciation & Amortization From: "Current Operating Income Including Operating Mtm" = 4,309M This is essentially EBIT before non-recurring items and equity method. But we need to add back D&A. The "Depreciation Amortization And Provisions" of 5,187M includes impairments and other provisions. From cash flow: "Net Depreciation Amortization Impairment And Provisions" = -8,057M (negative means expense). This is the cash flow add-back, which includes: - Depreciation and amortization - Impairment losses - Changes in provisions Let me use a cleaner approach. From the income statement items: Revenue: 93,865M Purchases And Operating Derivatives: -74,535M Employee Benefits Expense: -8,078M Tax Expense Other Than Income Tax: -3,380M Other Income: 1,624M Current Operating Income Including Operating Mtm = 4,309M This 4,309M is after D&A. So to get EBITDA, I need to add back D&A. From "Depreciation Amortization And Provisions" = 5,187M - this is an expense item. But it includes "provisions" which could be operating provisions, not just D&A. Looking at cash flow: "Net Depreciation Amortization Impairment And Provisions" = -8,057M. The negative sign in cash flow means it's added back (i.e., it was an expense). So total D&A + impairments + net provision changes = 8,057M expense. But for EBITDA, we want just D&A, not impairments or provision changes. Let me try: EBITDA = Current Operating Income Including Operating Mtm + Depreciation & Amortization (only) If "Depreciation Amortization And Provisions" = 5,187M is the total expense line, and assuming most is D&A... Actually, looking more carefully at the P&L structure: "Depreciation Amortization And Provisions" is a separate expense line. In French GAAP/IFRS reporting, this typically includes: - Depreciation of PP&E - Amortization of intangibles - Impairment losses - Changes in operating provisions For EBITDA, we add back depreciation and amortization only, not impairments or provision changes. Given the complexity, let me use an alternative: EBITDA from cash flow approach. From cash flow: "Cash Flows From Used In Operations Before Changes In Working Capital" = 12,415M This = EBIT + D&A - taxes paid + other working capital... no wait, it's before working capital changes but after some adjustments. Actually: "Cash Flows From Used In Operations Before Changes In Working Capital" typically equals: EBITDA + changes in provisions - cash taxes - interest paid + other items Let me use a simpler reconstruction: EBITDA = Revenue - Cash Operating Costs (excluding D&A) Or: Start from "Current Operating Income Including Operating Mtm" and add back clean D&A. From the balance sheet: PP&E increased from 51,079M to 55,488M, with capex of 6,379M and disposals. This suggests D&A around 4,000-5,000M. Actually, let me use the direct approach. For utilities, S&P often uses "Current Operating Income" + D&A + other normalizations. Let me define: Reported EBITDA = Current Operating Income Including Operating Mtm + Depreciation & Amortization If we assume "Depreciation Amortization And Provisions" is mostly D&A, say 4,000M of D&A and 1,187M of other provisions/impairments... Actually, from the cash flow add-back: "Net Depreciation Amortization Impairment And Provisions" = 8,057M. This includes impairments of 2,774M (from P&L: "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = 2,774M - wait that's positive, so it's a reversal? No, 2,774M is the expense). Wait: "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = 2,774M. The wording is confusing. Is it "Impairment Loss [and] Reversal"? Or net figure? Looking at 2021: 1,028M. And "Net Depreciation Amortization Impairment And Provisions" = 5,484M in 2021. The 2022 figure of 8,057M vs 2021's 5,484M suggests higher impairments or provision changes. Let me use: D&A ≈ 5,187M (the P&L line) as a proxy for EBITDA add-back, recognizing it's slightly overstated. Reported EBITDA = 4,309M + 5,187M = **9,496M EUR** But wait - "Current Operating Income Including Operating Mtm" already includes the mark-to-market on operating items. For S&P purposes, we may want to exclude or normalize this. Let me check if there's a cleaner "EBITDA" in the data. Actually, let me recalculate from the P&L items more carefully: Revenue: 93,865 - Purchases And Operating Derivatives: -74,535 - Employee Benefits Expense: -8,078 - Depreciation Amortization And Provisions: -5,187 - Tax Expense Other Than Income Tax: -3,380 + Other Income: 1,624 = Current Operating Income Including Operating Mtm: 4,309 Check: 93,865 - 74,535 - 8,078 - 5,187 - 3,380 + 1,624 = 4,309 ✓ So "Current Operating Income Including Operating Mtm" is after all these operating expenses including D&A and provisions. For EBITDA, I want to add back D&A and provisions (non-cash or non-operating items). But "Depreciation Amortization And Provisions" includes: - Depreciation (non-cash, add back for EBITDA) - Amortization (non-cash, add back for EBITDA) - Impairment losses (non-cash, but S&P may treat as non-recurring) - Provision changes (can be operating or non-operating) For S&P Adjusted EBITDA: - Start with reported EBITDA (or reconstruct) - Add back non-recurring losses, subtract non-recurring gains - Make joint venture adjustments Let me define: **Base EBITDA** = Current Operating Income Including Operating Mtm + Depreciation + Amortization + normal provision changes If I add back the full "Depreciation Amortization And Provisions" line: Base EBITDA = 4,309 + 5,187 = 9,496M But this includes impairments. S&P treats impairments as non-recurring (or adjusts for them). From the data: "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = 2,774M If this is a net impairment expense (positive = loss), then: - Non-recurring impairment loss = 2,774M (add back for adjusted EBITDA) Wait, but 2021 was 1,028M. Is this recurring? For utilities, impairments can be recurring to some degree. But S&P typically treats goodwill impairments and asset impairments as non-recurring. Actually, looking at the cash flow: "Net Depreciation Amortization Impairment And Provisions" = 8,057M. This is the add-back in cash flow, suggesting it's all treated as non-cash adjustments. For S&P Adjusted EBITDA, let me use: 1. Start with 9,496M (including all add-backs) 2. Adjust for non-recurring items **Non-recurring items from P&L:** - Impairment Loss: 2,774M (add back - it's non-cash and non-recurring) - Expense Of Restructuring Activities: 230M (add back - non-recurring) - Other Income Expense From Subsidiaries Jointly Controlled Entities And Associates: 91M (this is equity method related, not non-recurring) - Other Non Recurring Items: -1,328M (this is a negative = gain? Or expense?) Wait: "Other Non Recurring Items" = -1,328M. Negative means it's income/gain. So non-recurring items to normalize: - Add back: Impairments 2,774M + Restructuring 230M = 3,004M - Subtract gain: Other Non Recurring Items 1,328M (but it's negative, so it's already a gain... let me re-read) Actually: "Other Non Recurring Items" = -1,328M. In P&L terms, negative expense = income. So this is a gain of 1,328M. But wait - is this already included in "Current Operating Income Including Operating Mtm"? Let me check the P&L structure. Looking at the sequence: - Current Operating Income Including Operating Mtm: 4,309M - Then various items to get to Profit Loss From Operating Activities: 1,127M The items between: - Share Of Profit Loss Of Associates: 1,059M (equity method, not in operating income) - Impairment Loss: 2,774M - Restructuring: 230M - Other Income Expense From Subsidiaries...: 91M - Other Non Recurring Items: -1,328M So: 4,309 + 1,059 - 2,774 - 230 - 91 + 1,328 = 3,601... but Profit Loss From Operating Activities is 1,127M. Hmm, doesn't match. Wait, let me recalculate: 4,309 + 1,059 = 5,368 (this is "Current Operating Income Including Operating Mtm And Share In Net Income Of Equity Method Entities" = 5,367M ✓) Then: 5,367 - 2,774 - 230 + 91 - 1,328 = 1,126 ≈ 1,127M ✓ So the sequence is: 1. Current Operating Income Including Operating Mtm: 4,309M 2. + Share of profit of associates: 1,059M → 5,368M 3. - Impairment losses: 2,774M 4. - Restructuring: 230M 5. + Other from subsidiaries/associates: 91M 6. + Other non-recurring: -1,328M (i.e., minus 1,328M or plus a negative) Wait, "Other Non Recurring Items" = -1,328M. If this is negative, and it's an expense item, then it's a gain (reducing expenses). So: 5,368 - 2,774 - 230 + 91 - (-1,328)? No wait... Let me re-read: "Other Non Recurring Items" = -1,328M. The negative sign suggests this is income (negative expense). But in the calculation above, I used +91 and -1,328 to get to 1,127. Actually: 5,368 - 2,774 - 230 + 91 + (-1,328)? No, 5,368 - 2,774 = 2,594; 2,594 - 230 = 2,364; 2,364 + 91 = 2,455; 2,455 - 1,328 = 1,127. ✓ So "Other Non Recurring Items" at -1,328M is treated as a negative in the sum, meaning it's subtracted. But the value is negative, so subtracting a negative = adding? No, I think the sign convention is: these are all expense items (positive = expense, negative = income/gain reduction). So "Other Non Recurring Items" = -1,328M means it's a gain of 1,328M (negative expense). For S&P Adjusted EBITDA: - Start with base EBITDA = 9,496M (4,309 + 5,187) - This includes all operating items up to Current Operating Income, plus D&A/provisions add-back But wait - the 5,187M "Depreciation Amortization And Provisions" includes items that are already in Current Operating Income. So adding it back is correct for EBITDA. However, for S&P purposes, we want "Adjusted EBITDA" which normalizes for non-recurring items and other adjustments. **Normalization adjustments:** 1. **Non-recurring losses to add back:** - Impairment losses: 2,774M (already excluded from Current Operating Income, but if we want to normalize EBITDA, these are below the line... actually, impairments are below Current Operating Income, not in it) Wait, I need to re-examine. "Current Operating Income Including Operating Mtm" is BEFORE impairments. So impairments are not in this number. So base EBITDA = 4,309 + 5,187 = 9,496M is clean of impairments. But 5,187M includes depreciation, amortization, AND provisions. Some of these provisions may be operating provisions (recurring), some may be non-recurring. For S&P, typical adjustments to get from reported EBITDA to adjusted EBITDA: - Add back non-recurring losses (restructuring, impairments, etc. that were in EBITDA) - Subtract non-recurring gains - Adjust for joint ventures (equity method to proportional) - Adjust for leases if capitalized Since impairments are BELOW Current Operating Income, they're not in my base EBITDA of 9,496M. However, "Depreciation Amortization And Provisions" of 5,187M - the "provisions" part may include non-recurring items. Let me assume 80% is D&A and 20% is provisions. Actually, from cash flow: "Net Depreciation Amortization Impairment And Proportions" = 8,057M. This is much higher than 5,187M. The difference may be due to: - Impairments (2,774M) - Other provision changes 8,057M - 5,187M = 2,870M difference. This roughly equals impairments (2,774M) plus some other items. Actually, I think the 5,187M is the P&L expense, and 8,057M is the cash flow add-back which includes more items (like working capital-related provision changes, impairments, etc.). For cleaner EBITDA, let me use: **Base EBITDA** = Revenue - (Purchases + Employee + Tax other than income tax) + Other Income = 93,865 - 74,535 - 8,078 - 3,380 + 1,624 = 9,496M Wait, that's the same as 4,309 + 5,187. And this excludes the 5,187 because... no, I didn't subtract it. Let me recalculate: Revenue: 93,865 - Purchases: -74,535 - Employee: -8,078 - D&A and Provisions: -5,187 (excluded for EBITDA) - Tax other: -3,380 + Other Income: +1,624 For EBITDA: 93,865 - 74,535 - 8,078 - 3,380 + 1,624 = 9,496M Yes! This is EBITDA before D&A and provisions. So **Base EBITDA = 9,496M EUR** Now, S&P adjustments to this base: **1. Non-recurring items:** - Restructuring expense: 230M (add back - it's in operating expenses but non-recurring) - Other non-recurring items: -1,328M (this is a gain, so subtract it... but is it in operating income?) Actually, "Other Non Recurring Items" = -1,328M is below Current Operating Income, so not in base EBITDA. What about "Other Income Expense From Subsidiaries Jointly Controlled Entities And Associates" = 91M? This is also below Current Operating Income. So base EBITDA of 9,496M is clean of these items. But wait - is "Other Income" of 1,624M recurring? It might include some non-recurring items. Without more detail, I'll treat it as recurring. **2. Joint venture adjustment:** "Share Of Profit Loss Of Associates And Joint Ventures" = 1,059M (equity method income) S&P typically replaces equity method income with proportional EBITDA. For a 50% owned JV, equity income might be 1,059M, but proportional EBITDA would be higher. However, we don't have JV-level data. S&P sometimes adds back equity income and adds proportional debt/EBITDA, or adds proportional EBITDA to group EBITDA. Standard S&P adjustment: Add proportional EBITDA of JVs (based on ownership percentage) and add proportional debt to debt. Without ownership percentages, I'll use a simplified approach: add back equity income (to remove it) and estimate proportional EBITDA. If we assume JVs are valued at equity of 8,498M and generate 1,059M profit, with typical utility EV/EBITDA or profitability, the proportional EBITDA could be 2,000-3,000M. But this is highly uncertain. Let me use a simpler approach: add back equity income and add proportional EBITDA based on typical margins. Actually, for debt-to-EBITDA, S&P's standard practice for JVs: - If JV is significant, include proportional debt and proportional EBITDA - Or, if not material, just add equity income back to EBITDA (conservative) Given data limitations, I'll add back equity income (1,059M) to get closer to proportional EBITDA, but this understates true proportional EBITDA. Better approach: Assume proportional EBITDA = Equity income / typical net income margin × EBITDA margin. Too complex. Simple approach: Add equity income to EBITDA (1,059M), recognizing this is conservative. **3. Other adjustments:** - Mark-to-market on operating items: "Current Operating Income Including Operating Mtm" includes mark-to-market. S&P may normalize this if volatile. Given 2022 was a volatile energy year, there may be significant MTM. Without specific data, I'll leave it. **Adjusted EBITDA calculation:** Base EBITDA: 9,496M + Restructuring expense (non-recurring, was it in base?): Need to check if restructuring is in "Employee Benefits" or separate. It's separate in the P&L (below Current Operating Income), so NOT in base EBITDA. + Other non-recurring losses: Not in base EBITDA. + Equity method income add-back: 1,059M (to approximate proportional EBITDA - but this is income, not EBITDA) Actually, for proper S&P adjustment: We want to replace equity income with proportional EBITDA. If I don't have proportional EBITDA, I can add equity income as a minimum adjustment. Adjusted EBITDA = 9,496M + 1,059M = **10,555M EUR** But wait - is this correct? Equity income is already excluded from base EBITDA (base is before equity income). So I should ADD proportional EBITDA, not equity income. Actually, base EBITDA of 9,496M is from "Current Operating Income Including Operating Mtm" which excludes equity income. So to get to proportional consolidation, I need to add proportional EBITDA of JVs. If JVs earned 1,059M equity income, and assuming 30% net margin, their revenue might be 3,530M. With typical utility EBITDA margin of 40%, EBITDA = 1,412M. At 50% ownership (typical for JVs), proportional EBITDA = 706M. This is too speculative. Let me use a simpler rule: proportional EBITDA ≈ equity income × 2 (assuming 50% net income / EBITDA conversion with 50% ownership). Actually, standard S&P practice when data is limited: add equity income to EBITDA as a proxy (knowing it understates true proportional EBITDA). Adjusted EBITDA = 9,496 + 1,059 = **10,555M EUR** Or, more conservatively, if JVs are at equity and we want to show full proportional: Add equity income (1,059M) and add proportional D&A. If JVs have similar D&A margins, proportional D&A might equal equity income (roughly). So add 2,118M? This is getting too speculative. Let me use the simpler approach and note that true proportional EBITDA would be higher. Actually, re-reading S&P methodology: For unregulated power and gas, they mention "joint_venture_proportional_EBITDA" as an adjustment. The standard is to include proportional EBITDA and proportional debt. Given data limitations, I'll use: Add equity income (1,059M) as minimum proxy for proportional EBITDA contribution. **Final Adjusted EBITDA = 9,496 + 1,059 = 10,555M EUR** But I need to check if there are other items. What about "Other Non Recurring Items" of -1,328M (gain)? This is below operating income, not in EBITDA. Also, S&P typically adjusts for: - Pension adjustments: If pension expense is in operating income, add back service cost, subtract cash contributions. Without data, skip. - Lease adjustments: IFRS 16 already in, so no EBITDA add-back needed. Let me also consider if "Current Operating Income Including Operating Mtm" has clean EBITDA or if MTM distorts it. In 2022, energy prices were very volatile. ENGIE's "Operating Mtm" could be significant. S&P may want to normalize this. However, without specific MTM breakdown, I'll use reported figures. ## Recalculation with Alternative EBITDA Approach Let me cross-check using cash flow data: "Cash Flows From Used In Operations Before Changes In Working Capital" = 12,415M This typically equals: EBITDA - Cash taxes +/− other items From cash flow adjustments: - Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method: 1,059M - Adjustments For Dividend Income: -713M - Net Depreciation Amortization Impairment And Provisions: -8,057M (add back) - Impact Of Changes In Scope: -74M - Adjustments For Gains Losses On Change In Fair Value Of Derivatives: -3,661M - Other Adjustments For Noncash Items: -157M - Adjustments For Income Tax Expense: -83M - Adjustments For Finance Income Cost: -3,003M Starting from Profit Loss: 390M + All adjustments = 12,415M cash flow before WC This is messy. Let me try another approach. From "Profit Loss From Operating Activities" = 1,127M + D&A and non-cash items to get to EBITDA... Actually, "Profit Loss From Operating Activities" = EBIT before financial items and tax. = 1,127M Then EBITDA = 1,127 + D&A (clean) + impairments (if treated as non-cash) + ... If "Net Depreciation Amortization Impairment And Provisions" = 8,057M includes: - D&A: ~5,000M? - Impairments: 2,774M - Other provisions: ~300M Then EBITDA from operating profit = 1,127 + 8,057 - provision changes (cash impact) ≈ 9,000M? This is getting too uncertain. Let me stick with my first approach: **Base EBITDA = 9,496M** ## Final Calculations ### Adjusted_Debt: = Reported debt + Hybrid debt portion - Eligible cash = 41,048M + 1,883.5M - 13,890M = **29,041.5M EUR** Wait - I need to reconsider eligible cash. S&P typically uses 75% of cash for utilities, not 100%, to account for operational needs. Eligible cash = 75% × 13,890M = 10,417.5M Adjusted_Debt = 41,048M + 1,883.5M - 10,417.5M = **32,514M EUR** Or if 100%: 29,041.5M Let me check S&P utility methodology again. For utilities with seasonal working capital, they may adjust differently. But ENGIE is a multi-utility with trading operations. Standard S&P corporate: eligible cash is cash and liquid investments minus restricted cash. I'll use **100%** as more common for strong utilities, or **75%** as conservative. Let me use **75%** as standard S&P practice: 10,417.5M eligible cash. Adjusted_Debt = 41,048 + 1,883.5 - 10,417.5 = **32,514M EUR** ### Adjusted_EBITDA: = 9,496M + 1,059M (equity income proxy for proportional EBITDA) + 230M (restructuring, if in base - but it's not) = Actually, restructuring is NOT in base EBITDA (it's below Current Operating Income) So: 9,496M + 1,059M = **10,555M EUR** But I should add restructuring if it was an operating expense... let me check P&L again. "Expense Of Restructuring Activities" = 230M. This is below "Current Operating Income Including Operating Mtm". So NOT in base EBITDA. For S&P adjusted EBITDA, we add back non-recurring items that were deducted to get to operating income. Since restructuring is below the line, it's not in base EBITDA. However, if "Current Operating Income" is meant to be "current" (recurring) operating income, then restructuring is excluded by definition. So base EBITDA is clean. But wait - is "Current Operating Income Including Operating Mtm" truly clean? The term "Current" suggests it's the recurring measure, excluding non-recurring items like impairments and restructuring. So my base EBITDA of 9,496M is already the "current" or recurring EBITDA, excluding non-recurring items. Then Adjusted EBITDA = 9,496M + proportional EBITDA adjustment. For JV adjustment: S&P replaces equity method with proportional consolidation. Since equity income is excluded from base EBITDA, I need to ADD proportional EBITDA. If I use equity income (1,059M) as a proxy for proportional EBITDA contribution (understating it), then: Adjusted EBITDA = 9,496M + 1,059M = **10,555M EUR** But actually, for debt-to-EBITDA, S&P's full proportional consolidation would add proportional debt and proportional EBITDA. If I only add equity income to EBITDA (not proportional EBITDA), I'm being conservative. Let me try a different approach: Don't adjust for JVs in EBITDA, but also don't add proportional debt. This is the "equity method" approach, which is simpler but less accurate per S&P methodology. If no JV adjustment: Adjusted EBITDA = **9,496M EUR** Then ratio = 32,514 / 9,496 = 3.42x With JV adjustment (equity income added): Adjusted EBITDA = 10,555M Ratio = 32,514 / 10,555 = 3.08x Given S&P's preference for proportional consolidation, let me use a middle ground. Add equity income and add proportional debt for JVs. Proportional debt: If investments at equity = 8,498M, and assuming 50% ownership, proportional assets = ~17,000M, proportional debt might be ~8,000M (assuming similar leverage). But this is too speculative. Let me keep JVs at equity (no adjustment) for simplicity, or use equity income as minimal EBITDA add-back. Actually, re-reading the methodology: "± joint_venture_proportional_EBITDA" - this suggests adding proportional EBITDA and subtracting equity income (to replace it). Since equity income is NOT in base EBITDA, I just add proportional EBITDA. Let me use: proportional EBITDA ≈ 2 × equity income = 2,118M (rough estimate) Adjusted EBITDA = 9,496 + 2,118 = 11,614M This is speculative. Let me use the more conservative 10,555M (adding equity income only). ## Final Ratio Calculation Using: - Adjusted_Debt = 32,514M EUR (with 75% cash) - Adjusted_EBITDA = 10,555M EUR (with equity income add-back) Ratio = 32,514 / 10,555 = **3.08** Or with 100% cash: - Adjusted_Debt = 29,041.5M - Ratio = 29,041.5 / 10,555 = **2.75** Or with no JV EBITDA adjustment and 75% cash: - Adjusted_EBITDA = 9,496M - Ratio = 32,514 / 9,496 = **3.42** Given the range, I need to make a reasonable choice. Let me reconsider: 1. **Cash treatment**: For utilities, S&P often uses 100% of cash if it's truly available. But for companies with trading operations, 75% is safer. Let me use **100%** as ENGIE is investment grade. Adjusted_Debt = 41,048 + 1,883.5 - 13,890 = **29,041.5M** 2. **EBITDA**: Use base 9,496M + add proportional EBITDA for JVs. For JVs: equity income 1,059M. If we assume 50% ownership and similar margins, proportional EBITDA ≈ 2,000-3,000M. Let me use **2,000M** as reasonable. Adjusted_EBITDA = 9,496 + 2,000 = **11,496M** Or more conservatively, if JVs are low-leverage infrastructure with high EBITDA margins, proportional EBITDA could be 3,000M+. Let me try: proportional EBITDA = equity income / 0.30 (30% net margin to EBITDA) = 3,530M at 100%. At 50% ownership = 1,765M proportional EBITDA. Adjusted_EBITDA = 9,496 + 1,765 = **11,261M** Ratio = 29,041.5 / 11,261 = **2.58** This is getting too variable. Let me use a simpler, more defensible approach: **Final approach:** - Adjusted_Debt: Reported debt 41,048M + 50% of hybrid (1,883.5M) - 100% cash (13,890M) = 29,041.5M (Note: S&P might treat hybrids differently, but 50% equity credit is standard) - Adjusted_EBITDA: Base 9,496M + equity income 1,059M (as proxy for proportional EBITDA contribution, conservative) = 10,555M Ratio = 29,041.5 / 10,555 = **2.75** Or if we add full proportional EBITDA estimate (say 2,118M): Ratio = 29,041.5 / 11,614 = **2.50** Given typical S&P treatment for utilities with significant JVs, and the conservative nature of equity income as proxy, let me use **2.75** or round to **2.80** with more conservative EBITDA. Actually, let me recheck: Is "Current Operating Income Including Operating Mtm" already a clean EBITDA-starting point? Revenue 93,865 - Purchases 74,535 - Employee 8,078 - D&A and Provisions 5,187 - Tax other 3,380 + Other income 1,624 = 4,309 Current Operating Income For EBITDA: add back D&A and provisions (5,187) to get 9,496. But "provisions" in this line - are they operating provisions or total provisions? If operating provisions (like bad debt, warranty, etc.), they're part of normal operations and should be in EBITDA. If restructuring or non-operating provisions, they should be excluded. Given the line is "Depreciation Amortization And Provisions" in a utilities context, most provisions are likely operating provisions (regulatory, decommissioning, etc.). So adding back the full 5,187 is reasonable for EBITDA. However, for S&P Adjusted EBITDA, we might want to normalize further. The "Net Depreciation Amortization Impairment And Provisions" cash flow add-back of 8,057M suggests there's more than just the P&L 5,187M. Difference: 8,057 - 5,187 = 2,870M. This roughly equals impairments (2,774M) plus some other items. If I use cash flow based EBITDA: Start from "Cash Flows From Used In Operations Before Changes In Working Capital" = 12,415M + Income taxes paid = 1,504M (to get pre-tax) + Interest paid (financing) = ? - Interest received = ? This gets complicated. Let me stick with P&L-based EBITDA of 9,496M. One more check: Is "Current Operating Income Including Operating Mtm" pre- or post- equity income? It's pre-equity income (equity income is added later to get 5,368M). So base EBITDA is clean. **Final Decision:** - Adjusted_Debt = 29,041.5M EUR (with 100% cash) or 32,514M (with 75% cash) - Adjusted_EBITDA = 10,555M EUR (with equity income add-back as JV proxy) Using 100% cash (more common for utilities with strong liquidity): Ratio = 29,041.5 / 10,555 = 2.75 Using 75% cash: Ratio = 32,514 / 10,555 = 3.08 S&P typically uses 75% for general corporate, 100% for utilities with strong cash flow predictability. ENGIE has trading operations, so 75% might be more appropriate. Let me use **75% cash** = **3.08** But I want to check if there are other debt-like items I missed. Looking at derivatives: - Noncurrent derivative financial liabilities: 24,228M - Current derivative financial liabilities: 22,702M - Total derivative liabilities: 46,930M - Total derivative assets: 44,989M - Net derivative liability: 1,941M For trading companies, S&P may include net derivative liabilities as debt-like if they're structural. But for utilities, this is typically working capital/trading positions, not debt. However, if ENGIE has significant trading operations, S&P might view some derivative positions as debt-like. Without specific guidance, I'll exclude derivatives. Also, "Other Noncurrent Financial Liabilities" = 108M and "Other Current Financial Liabilities" - wait, I don't see this in the facts. There are "Other Current Financial Assets" = 2,495M. Let me recheck debt: - Longterm Borrowings: 30,458M - Current Borrowings And Current Portion Of Noncurrent Borrowings: 10,590M - Total: 41,048M Are there other debt-like items in liabilities? - Noncurrent Provisions: 23,394M (these are operating provisions, not debt) - Deferred Tax Liabilities: 7,738M (not debt) - Other Noncurrent Financial Liabilities: 108M (small) So 41,048M seems complete for reported debt. **Final calculation with 75% cash and conservative EBITDA:** Adjusted_Debt = 32,514M Adjusted_EBITDA = 10,555M (with equity income add-back) Ratio = 32,514 / 10,555 = **3.08** Or with no JV adjustment: Adjusted_EBITDA = 9,496M Ratio = 32,514 / 9,496 = **3.42** Given S&P methodology explicitly mentions joint venture proportional EBITDA adjustment, I should include some JV adjustment. Using equity income as conservative proxy gives 3.08. However, I realize I may be double-counting or misplacing the equity income. Let me re-verify: "Current Operating Income Including Operating Mtm" = 4,309M - this is BEFORE equity income. Then + Share of profit of associates = 1,059M → 5,368M So equity income is NOT in 4,309M, and thus NOT in base EBITDA of 9,496M. For S&P proportional consolidation, I need to ADD proportional EBITDA and also ADD proportional debt. If I don't add proportional debt (because I don't know it), I should be consistent and not add proportional EBITDA, OR add equity income as a minimum. Actually, the standard S&P adjustment is: - Remove equity income from EBITDA (not applicable, it's not in there) - Add proportional EBITDA - Add proportional debt to debt Since I can't calculate proportional EBITDA or debt accurately, I'll use the equity income add-back as a conservative proxy, and NOT add proportional debt (which would increase debt). This is inconsistent but conservative on the ratio (higher EBITDA, same debt = lower ratio). For a more consistent approach: Don't adjust for JVs at all (treat as equity method for both debt and EBITDA). Then: Adjusted_Debt = 32,514M Adjusted_EBITDA = 9,496M Ratio = **3.42** Or with 100% cash: Adjusted_Debt = 29,041.5M Ratio = **3.06** I think **3.42** with 75% cash and no JV adjustment is the most defensible with available data, OR **3.08** with equity income add-back. Let me check industry practice. For integrated utilities like ENGIE, S&P typically does proportional consolidation for significant JVs. ENGIE's equity investments are 8,498M, which is material (7% of non-current assets). Given materiality, I should adjust. Using equity income as proxy for proportional EBITDA contribution: Adjusted_EBITDA = 9,496 + 1,059 = 10,555M Adjusted_Debt = 32,514M (with 75% cash) or 29,041.5M (with 100% cash) With 75% cash: 3.08 With 100% cash: 2.75 I'll use **75% cash** as more standard for S&P utility analysis when trading operations are present. **Final Answer: 3.08** Wait - let me reconsider one more time. The "Other Non Recurring Items" of -1,328M (gain) - should this affect EBITDA? It's below operating income, so no. But what about "Other Income" of 1,624M? Is this recurring? It includes various items, possibly including some gains. Without detail, I'll leave it. Also, should I add back restructuring to EBITDA? It's 230M and is a non-recurring expense. But it's below "Current Operating Income", so not in base EBITDA. If I want to show "before non-recurring" EBITDA, I don't need to add it back since it's already excluded. Actually, "Current Operating Income" by definition excludes non-recurring items. So base EBITDA is already clean. One more item: "Tax Expense Other Than Income Tax" = 3,380M. This includes property taxes, payroll taxes, etc. These are operating expenses and stay in EBITDA. **Final verification:** - Revenue: 93,865M - Less: Operating costs (purchases 74,535 + employee 8,078 + tax other 3,380 - other income 1,624) = 84,369M - EBITDA: 93,865 - 84,369 = 9,496M ✓ This EBITDA margin of 10.1% seems low for a utility. Let me check - ENGIE has significant energy trading and supply activities with thin margins. The "Purchases And Operating Derivatives" of 74,535M includes commodity purchases for trading and supply, which are pass-through or low-margin. For 2021: Revenue 57,866M, Purchases 38,861M, EBITDA = 57,866 - 38,861 - 7,692 - 1,479 + 1,122 + 4,840 (D&A) = ... Actually for 2021: Current Operating Income = 6,116M. Add D&A 4,840M = 10,956M EBITDA. Margin 18.9%. 2022 margin 10.1% reflects higher commodity costs with regulatory/pass-through limitations, or mark-to-market effects. Given 2022 was an extreme energy crisis year, S&P might normalize EBITDA. But without guidance on normalization, I'll use reported. Actually, S&P does mention using their own price assumptions for oil and gas when assessing financial risk profile. For utilities with trading/supply, they might normalize for extreme commodity price years. But I don't have S&P's normalization methodology or price assumptions. I'll use reported. **Final calculation:** Adjusted_Debt = 41,048 + 1,884 - 10,418 = 32,514M (using 75% cash, 50% hybrid equity credit) Adjusted_EBITDA = 9,496 + 1,059 = 10,555M (with equity income as JV proxy) Ratio = 32,514 / 10,555 = **3.08** Rounding: **3.08** 3.08