I'll work through this step-by-step, identifying the relevant industry and calculating the required metrics. ## Step 1: Identify the Relevant Industry for Acciona SA Based on the data provided, Acciona SA is a Spanish company with significant activities in: - Renewable energy (wind, solar) - "Unregulated Power And Gas" - Infrastructure (construction, concessions) - "Transportation Infrastructure" - Water utilities - "Regulated Utilities" Looking at the revenue breakdown and asset composition, Acciona is primarily an **infrastructure and renewable energy company**. The largest segment appears to be unregulated power (renewables) and infrastructure. Given the diversified nature but with significant unregulated power and infrastructure components, I'll apply the **general corporate baseline** with elements from **Unregulated Power And Gas** and **Transportation Infrastructure** methodologies where relevant. However, since Acciona doesn't fit neatly into any single provided industry methodology, I'll apply the **general corporate baseline formulas** as instructed, while noting key adjustments from relevant sectors. ## Step 2: Estimate Adjusted_EBITDA First, let me reconstruct EBITDA from the income statement data for FY2022 (period 2022-01-01 to 2023-01-01): **Reconstructing EBITDA:** - Revenue: 11,195,000,000 EUR - Other Income: 1,016,000,000 EUR - Changes in Inventories: -72,000,000 EUR - Raw Materials and Consumables Used: -3,483,000,000 EUR - Employee Benefits Expense: -2,077,000,000 EUR - Other Expense by Nature: -4,814,000,000 EUR **Operating Profit (Profit Loss From Operating Activities):** 1,334,000,000 EUR **Add back depreciation/amortization:** - "Dotacion Amortizacion Y Variacion De Provisiones" (Depreciation, amortization and provision changes): 762,000,000 EUR **EBITDA = Operating Profit + Depreciation/Amortization** = 1,334,000,000 + 762,000,000 = 2,096,000,000 EUR Let me verify this by working from revenue: Revenue + Other Income = 12,211,000,000 Less: Changes in inventories (-72) → actually this is negative so add? No, it's already shown as negative. Let me recalculate more carefully: Revenue: 11,195,000,000 + Other Income: 1,016,000,000 + Changes in Inventories: -72,000,000 (expense, so reduces) - Raw Materials: -3,483,000,000 - Employee Benefits: -2,077,000,000 - Other Expense: -4,814,000,000 = Operating profit before depreciation? No, this already includes depreciation. Actually, "Dotacion Amortizacion Y Variacion De Provisiones" is listed separately, so: Gross operating result before this line: 11,195 + 1,016 - 72 - 3,483 - 2,077 - 4,814 = 1,765,000,000? Wait, let me check: 11,195 + 1,016 = 12,211; 12,211 - 72 = 12,139; 12,139 - 3,483 = 8,656; 8,656 - 2,077 = 6,579; 6,579 - 4,814 = 1,765 Then: 1,765 - 762 (depreciation) + 13 (other gains) + 159 (equity method) + ... Actually, looking at the structure: - Profit Loss From Operating Activities: 1,334,000,000 This is EBIT (operating profit). So: EBITDA = EBIT + Depreciation/Amortization = 1,334,000,000 + 762,000,000 = 2,096,000,000 EUR **Adjustments for EBITDA:** 1. **Leases:** Under IFRS 16, leases are already capitalized. Looking at Right-of-Use assets: - 2023-01-01: 548,000,000 EUR - 2022-01-01: 528,000,000 EUR Lease liabilities: - Noncurrent: 439,000,000 (2023) vs 430,000,000 (2022) - Current: 72,000,000 (2023) vs 68,000,000 (2022) Total lease liabilities 2023: 511,000,000; 2022: 498,000,000 The EBITDA already includes the depreciation of right-of-use assets and interest on lease liabilities is in finance costs. For S&P purposes, we typically add back lease-related depreciation and subtract lease payments. However, since IFRS 16 is already applied, the EBITDA reconstruction above should be consistent. Actually, looking more carefully: "Dotacion Amortizacion Y Variacion De Provisiones" at 762M likely includes depreciation of PPE and intangibles, and possibly lease depreciation. For S&P-adjusted EBITDA, we typically want to add back operating lease expense if not already in EBITDA, but under IFRS 16, this is already handled through right-of-use accounting. Let me check if we need lease adjustment: Under IFRS 16, EBITDA includes the depreciation component but not the interest. S&P typically adjusts to treat leases as operating for debt purposes but keeps EBITDA as is for FFO calculations. Actually, S&P's standard approach is to add back lease expense to EBITDA when calculating FFO for pre-IFRS 16, but for IFRS 16, they may adjust differently. For simplicity and following the baseline formula, I'll note that IFRS 16 is applied and the EBITDA figure already reflects the accounting treatment. The key adjustment for S&P is typically to add back the lease depreciation and subtract lease payments for FFO, or to capitalize leases for debt. 2. **Nonrecurring items:** - "Other Gains Losses": 13,000,000 EUR (small, likely nonrecurring) - "Impairment Loss Reversal": -15,000,000 EUR (reversal, so gain) These are relatively small. I'll treat the impairment reversal as a nonrecurring gain to subtract, and other gains/losses may be nonrecurring. Looking at "Other Gains Losses" of 13,000,000 - this could be nonrecurring. Let me subtract this as nonrecurring gain. Actually, let me be more careful. The baseline says: + nonrecurring_losses - nonrecurring_gains "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss": -15,000,000 (this is a reversal, so it's a gain) "Other Gains Losses": 13,000,000 (positive, so gain) These are both gains (or negative losses). So: - 13,000,000 - 15,000,000 = -28,000,000 adjustment Wait, the impairment line is shown as "-15,000,000" which means it's a reversal (negative expense = gain). So this is a nonrecurring gain of 15M. 3. **Pension adjustments:** No explicit pension data visible. The "Other Comprehensive Income" shows defined benefit plan remeasurements of 1,000,000, very small. No pension deficit visible in balance sheet. 4. **Joint venture proportional EBITDA:** - "Resultado De Puesta En Equivalencia Operativa" (Equity method result from operations): 159,000,000 EUR - "Share Of Profit Loss Of Associates And Joint Ventures Accounted For Using Equity Method": -194,000,000 EUR (this is total, including non-operational) The operating portion is 159M. For S&P, we typically want to include proportional EBITDA from JVs. However, we only have the equity-accounted profit, not full proportional EBITDA. The investment in associates/JVs is 1,730,000,000 EUR (2023) and 1,325,000,000 EUR (2022). If we assume typical JV profitability and leverage, this is complex. Given data limitations, I'll note this but may need to approximate. Actually, for FFO calculations, S&P typically includes dividends received from JVs rather than proportional consolidation. Looking at cash flow: "Dividends Received Classified As Operating Activities": 89,000,000 EUR. For EBITDA, the equity method result of 159M (operating) is already in operating profit. S&P sometimes adds back the equity method result and replaces with proportional EBITDA, but this requires more data. Given complexity, I'll use the equity method result as is for now, but note that for more precise calculation, we'd want proportional EBITDA. 5. **Other normalization adjustments:** None apparent. **Adjusted_EBITDA calculation:** Starting EBITDA: 2,096,000,000 + Lease adjustment: Under IFRS 16, S&P typically adjusts by adding back lease depreciation and interest, then subtracting lease payments. But for EBITDA specifically, they may keep as is or adjust. Actually, re-reading S&P methodology: For IFRS 16, they typically calculate "Adjusted EBITDA" by adding back the lease depreciation component to get to a pre-IFRS 16 like EBITDA, or they adjust debt to include leases. Let me think more carefully. The baseline formula says: + adjustment_leases (if any) For post-IFRS 16, the lease "expense" is split into depreciation and interest. The operating profit (EBIT) includes depreciation of right-of-use assets. EBITDA adds back all depreciation including lease depreciation. So EBITDA is already "adjusted" in that sense. However, S&P's standard approach for IFRS 16 companies is to: - Keep EBITDA as reported (which includes the add-back of lease depreciation) - For FFO: start from EBITDA, subtract cash interest (including lease interest), subtract cash taxes, then adjust for lease payments vs lease expense Actually, let me look at this differently. The baseline says "adjustment_leases (if any)". For IFRS 16, there's typically no EBITDA adjustment needed if we're using reported EBITDA, because the depreciation add-back already happened. But wait - reported operating profit under IFRS 16 includes depreciation of right-of-use assets. So when we add back depreciation to get EBITDA, we get a figure that includes the benefit of not having operating lease expense. This is actually comparable to pre-IFRS 16 EBITDA. So: **Adjusted_EBITDA = 2,096,000,000 - 28,000,000 (nonrecurring gains) = 2,068,000,000 EUR** Let me also consider if we should add back the equity method operating result and use proportional consolidation. Given we don't have full JV financials, I'll use the equity method result as included. Actually, re-checking: The 159M equity method operating result is already IN operating profit. The -194M total equity method result includes non-operating items. So operating profit of 1,334M already includes +159M from JVs. For S&P, they sometimes prefer to: - Remove equity method result from EBITDA - Add proportional share of JV EBITDA Without JV financials, this is hard. Let me assume the 159M is approximately the right level, or use dividends received as proxy for FFO later. Let me proceed with: **Adjusted_EBITDA = 2,068,000,000 EUR** ## Step 3: Estimate FFO Baseline: FFO = Adjusted_EBITDA - cash_interest - cash_taxes **Cash interest:** From cash flow statement: "Interest Paid Classified As Operating Activities": 209,000,000 EUR But wait - this includes lease interest? Under IFRS 16, lease interest may be classified as financing or operating. Looking at the cash flow: - "Payments Of Lease Liabilities Classified As Financing Activities": 120,000,000 EUR This suggests lease payments are in financing activities. The interest paid in operating activities (209M) likely includes interest on debt but possibly also lease interest if classified there. Looking at P&L: "Finance Costs": 256,000,000 EUR Less: "Finance Income": 47,000,000 EUR Net finance costs: 209,000,000 EUR This equals the cash interest paid. But is this accrual or cash? The cash flow shows 209M interest paid, which matches the net finance cost. This suggests no significant capitalization or timing differences. However, for FFO, we need **cash interest**, not accrual. The cash flow statement gives us: 209,000,000 EUR interest paid. But wait - does this include lease interest? Under IFRS 16, the total lease payment is 120M (financing activities). This likely includes both principal and interest. The interest portion would be part of the 120M, not the 209M. Actually, let me check: Finance costs in P&L are 256M. This includes: - Interest on debt - Lease interest - Other finance costs Cash flow shows: - Interest paid (operating): 209M - Lease payments (financing): 120M The 120M lease payments include interest and principal. We don't have the split. For S&P FFO calculation with IFRS 16, they typically: - Start with EBITDA - Subtract cash interest paid on debt (excluding lease interest) - Subtract cash taxes - Then make lease adjustment: subtract total lease payments (not just interest) Actually, let me re-read the baseline: "FFO = Adjusted_EBITDA - cash_interest - cash_taxes" For IFRS 16 companies, S&P's typical adjustment is to treat leases as operating for FFO purposes. So: - Add back lease depreciation and lease interest (already in EBITDA) - Subtract lease payments (cash outflow) But wait, EBITDA already has lease depreciation added back. If we subtract cash interest that includes lease interest, we'd be double counting. Let me think more carefully about the S&P approach for IFRS 16: Standard S&P approach post-IFRS 16: 1. Calculate "Adjusted EBITDA" as reported EBITDA (which already includes add-back of lease depreciation) 2. For FFO: Adjusted EBITDA - cash interest (on debt only, excluding lease interest) - cash taxes - lease payments + lease interest (or equivalently: Adjusted EBITDA - cash interest on debt - cash taxes - lease principal payments) Actually, the simplest approach is: FFO = Adjusted EBITDA - (total interest paid on debt) - cash taxes - (lease payments - lease interest) ... this gets messy. Alternative S&P approach: Treat leases as debt-like for the debt adjustment, but for FFO, use: FFO = Funds from operations = Net income + depreciation + deferred taxes + other non-cash items - working capital changes... Actually, let me use the direct cash flow approach. From the cash flow statement: - Cash Flows From Used In Operating Activities: 1,648,000,000 EUR This is CFO. S&P's FFO is typically close to CFO but with adjustments. Standard S&P FFO formula from cash flows: FFO = CFO + cash interest paid + cash taxes paid - working capital changes... Actually no, CFO already includes interest and taxes paid. Let me use the baseline formula more carefully: FFO = Adjusted_EBITDA - cash_interest - cash_taxes Where: - cash_interest = interest paid on debt (excluding lease interest if separately identifiable) - cash_taxes = income taxes paid From cash flow: - Interest Paid: 209,000,000 - Income Taxes Paid: 215,000,000 But if we use these, we get: FFO = 2,068,000,000 - 209,000,000 - 215,000,000 = 1,644,000,000 This is very close to CFO of 1,648,000,000. The difference is 4M, which could be due to working capital and other items. Actually, let me verify: CFO includes: - Operating profit adjustments - Working capital changes: 135,000,000 - Other operating cash flows: -283,000,000 - Interest paid: -209,000,000 - Interest received: +40,000,000 - Dividends received: +89,000,000 - Taxes paid: -215,000,000 - Other: +12,000,000 Starting from profit before tax: 869,000,000 + adjustments: 927,000,000 + working capital: 135,000,000 + other: -283,000,000 = subtotal before interest/taxes/dividends: 1,648,000,000? Wait, the 1,648,000,000 is the total CFO. Let me trace: Profit before tax: 869M + depreciation/amortization: 848M (from "Ajustes Por Amortizacion...") + other adjustments: 79M = 1,796M + working capital: 135M = 1,931M + other operating: -283M = 1,648M? No wait, that's before interest and taxes. Actually the cash flow shows: "Cash Flows From Used In Operating Activities" = 1,648M This includes all operating cash flows. The components listed after are details. From the detailed components: - Interest Paid: -209M - Interest Received: +40M - Dividends Received: +89M - Taxes Paid: -215M - Other: +12M These sum to: -209 + 40 + 89 - 215 + 12 = -283M, which matches "Otros Flujos De Efectivo De Actividades De Explotacion" of -283M. So the structure is: Operating profit adjustments: 927M (from 869M profit before tax to 1,796M) + Working capital: 135M + Other operating cash flows (interest, taxes, dividends, other): -283M = 1,648M Wait, that doesn't add up: 1,796 + 135 - 283 = 1,648. Yes it does. For S&P FFO, a common approach is: FFO = Net income + depreciation + deferred taxes + other non-cash items - working capital changes (if unfavorable) + adjustments Or more directly: FFO ≈ CFO + cash interest paid + cash taxes paid - working capital source + dividends received... Actually, standard S&P FFO from CFO: FFO = CFO + cash interest paid + cash taxes paid - dividends received from investments ± other adjustments Because CFO includes interest and tax outflows, but FFO is pre-interest, pre-tax (but after maintenance capex? No, FFO is before capex). Wait, I need to be more careful. S&P defines FFO as "Funds From Operations" which is typically: - Net income before extraordinary items + depreciation, depletion, amortization + deferred taxes + other non-cash items Or from EBITDA: FFO = EBITDA - cash interest - cash taxes ± working capital adjustments Actually, let me check if the baseline is correct. The baseline says: FFO = Adjusted_EBITDA - cash_interest - cash_taxes This assumes no working capital changes, which is a simplification. But S&P FFO typically does include working capital effects if they're recurring, or excludes them if they're one-time. For a more accurate FFO, I should consider if working capital changes are recurring. The 135M working capital change seems reasonable. Let me use the baseline as specified: FFO = Adjusted_EBITDA - cash_interest - cash_taxes But I need to determine what "cash_interest" means for IFRS 16. Looking at this practically: The 209M interest paid likely includes all interest (debt + possibly lease interest). However, under IFRS 16, lease interest might be classified differently. Actually, looking at the balance sheet and cash flows: - Lease liabilities: 511M total (439 noncurrent + 72 current) - Lease payments in financing activities: 120M The 120M lease payments include principal and interest. The interest portion would be roughly: 511M * average interest rate. If average rate is 5%, that's about 25M. So principal is ~95M. For S&P, the typical IFRS 16 adjustment for FFO is: - Start with EBITDA (which includes lease depreciation add-back) - Subtract cash interest on debt (excluding lease interest) - Subtract cash taxes - Subtract lease payments (total, not just interest) Or equivalently: treat leases as operating - add back lease depreciation and lease interest to EBITDA, then subtract lease payments. Since EBITDA = EBIT + depreciation (including lease depreciation), and EBIT includes lease depreciation as an expense... Actually, let me recalculate from scratch with a cleaner approach. **Clean EBITDA reconstruction (pre-IFRS 16 style):** Operating profit (EBIT): 1,334,000,000 + Depreciation of PPE and intangibles: need to estimate "Dotacion Amortizacion Y Variacion De Provisiones": 762,000,000 This includes: depreciation, amortization, and provision changes. Looking at PPE: 9,485M (2023) vs 8,066M (2022) = increase of 1,419M Add: purchases of PPE etc: 2,195M Less: disposals: 47M Less: depreciation? Rough depreciation on PPE: If average PPE is ~8,775M and life is 20 years, depreciation ~439M. But this is very rough. Actually, the 762M line item is the total non-cash charge. It includes: - Depreciation of PPE - Amortization of intangibles - Impairment/reversal - Provision changes From the cash flow: "Ajustes Por Amortizacion Variacion De Provisiones Y Deterioros" = 848,000,000 This is the cash flow add-back, which should be pure non-cash. The 762M in P&L might be net of some items. Let me use the cash flow add-back: 848,000,000 as depreciation/amortization/impairment. So: EBITDA = 1,334,000,000 + 848,000,000 = 2,182,000,000? But wait, operating profit of 1,334 already includes the 159M equity method operating result and excludes the -194M total equity method result? No, operating profit is before equity method. Let me check: "Profit Loss From Operating Activities" = 1,334M Then: "Resultado De Puesta En Equivalencia Operativa" = 159M (this is equity method operating) Then: "Share Of Profit Loss Of Associates..." = -194M (total equity method, including non-operating) Actually, looking at the sequence: - Profit Loss From Operating Activities: 1,334M - Finance Income: 47M - Finance Costs: -256M - Exchange differences: 8M - Financial instruments: -70M - Share Of Profit Loss Of Associates: -194M = Profit Before Tax: 869M Wait, 1,334 + 47 - 256 + 8 - 70 - 194 = 869? Let me check: 1,334 + 47 = 1,381; 1,381 - 256 = 1,125; 1,125 + 8 = 1,133; 1,133 - 70 = 1,063; 1,063 - 194 = 869. Yes! So the 159M "Resultado De Puesta En Equivalencia Operativa" is NOT in operating profit. It's a separate line that feeds into... actually it's not in the main P&L sequence shown. Let me re-read. Actually, I think "Resultado De Puesta En Equivalencia Operativa" might be included in operating profit, while "Share Of Profit Loss..." is the total in the financial section. Looking more carefully at Spanish reporting: The operating profit may include the operating portion of equity method results. The 159M is likely included in the 1,334M. Actually, re-checking: if 1,334M includes 159M equity method operating result, then the underlying operating profit from consolidated operations is 1,175M. For S&P, they sometimes prefer to exclude equity method results and use dividends instead. But for now, let me proceed with reported figures. **Revised EBITDA:** Operating profit: 1,334,000,000 + Depreciation/amortization (from cash flow add-back): 848,000,000 = 2,182,000,000 But wait, the 848M includes provision changes and impairments. Let me check if there were impairments: "Impairment Loss Reversal" = -15M (reversal). So impairments were negative (reversal). The 762M "Dotacion..." in P&L vs 848M in cash flow add-back. The difference might be due to provision changes (increase in provisions is expense in P&L but add-back in cash flow? No, increase in provisions is non-cash expense, added back). Actually, provision changes: "Noncurrent Provisions" went from 301M to 279M (decrease of 22M). "Current Provisions" went from 317M to 299M (decrease of 18M). Total decrease 40M. This would be a gain (release of provisions), reducing P&L expense but increasing cash flow (or being added back). This is getting complex. Let me use the simpler approach: EBITDA = Operating Profit + Depreciation/Amortization as per cash flow add-back. Actually, the cleanest EBITDA is: **2,096,000,000 EUR** (using 762M D&A from P&L) or **2,182,000,000** (using 848M from cash flow). The 762M is "Dotacion Amortizacion Y Variacion De Provisiones" - this includes provision changes. The pure depreciation might be less. For conservatism and following typical S&P practice, let me use EBITDA with the cash flow add-back of 848M, but then I need to adjust for provisions. Actually, S&P typically uses "Adjusted EBITDA" which adds back depreciation and amortization, but not provision changes unless they're non-recurring. Let me use: **EBITDA = 2,096,000,000 EUR** (with 762M add-back, which is the standard P&L D&A). Then Adjusted_EBITDA = 2,096,000,000 - 28,000,000 (nonrecurring gains) = 2,068,000,000 EUR. Or if I use 848M: 1,334 + 848 = 2,182; less 28M = 2,154,000,000. Let me check which is more appropriate. The 848M includes "deterioros" (impairments). With -15M reversal, the impairment component is -15M. So 848 - (-15) = 863M would be depreciation + provisions? Actually, the cash flow line is "Ajustes Por Amortizacion Variacion De Provisiones Y Deterioros" = 848M. This is: depreciation + amortization + provision changes + impairment losses. If impairment reversal is -15M (negative loss = gain), then impairment losses = -15M. Provision changes: if provisions decreased by 40M, that's a release (gain) of 40M, which would be -40M in this line (negative add-back). Hmm, this doesn't make sense. Let me think again. In cash flow from operations, we add back non-cash expenses. If provisions decreased by 40M, that's a use of cash (or source?). Actually, decrease in provisions could be: - Release to P&L (non-cash gain, so subtracted in cash flow, or negative add-back) - Cash payment against provisions (cash outflow, already in operating profit) Actually, looking at the cash flow: "Increase Decrease In Working Capital" is 135M. Provisions might be in working capital or separate. I think for simplicity, let me use the P&L-based EBITDA of 2,096M as it's cleaner. **Final Adjusted_EBITDA: 2,068,000,000 EUR** ## Step 4: Estimate FFO FFO = Adjusted_EBITDA - cash_interest - cash_taxes For IFRS 16, I need to think about what cash_interest means. Option A: Use total interest paid of 209M, but then I need to adjust for lease payments. Option B: Use interest on debt only, excluding lease interest. From the financing cash flow: "Payments Of Lease Liabilities Classified As Financing Activities" = 120M. This includes principal + interest. If I assume lease interest is roughly 5% of average lease liabilities (~505M) = 25M, then: - Debt interest paid = 209M - 25M = 184M? Or 209M is all debt interest and lease interest is in the 120M? Actually, under IFRS 16, lease interest can be classified in operating or financing activities. Looking at the cash flow, the 209M "Interest Paid" is in operating activities, and 120M "Payments Of Lease Liabilities" is in financing. This suggests lease payments (including interest) are in financing, and the 209M is likely just debt interest. But wait - finance costs in P&L are 256M. If cash interest paid is 209M, there's 47M difference. This could be accruals, capitalized interest, or lease interest. Let me assume the 209M is the cash interest on debt and other items, and lease interest is part of the 120M lease payments. For S&P FFO with IFRS 16, the standard approach is: FFO = Adjusted_EBITDA - cash_interest_paid_on_debt - cash_taxes - lease_payments + lease_interest_received? Actually, I think the simplest correct approach for IFRS 16 is: 1. Calculate "EBITDA as if operating leases" = Reported EBITDA + lease depreciation (which is already in reported EBITDA, so no change) + lease interest (which is NOT in EBITDA, it's below EBIT) Wait, under IFRS 16: - Operating profit (EBIT) includes depreciation of right-of-use assets - Interest expense includes lease interest - EBITDA = EBIT + depreciation (including lease depreciation) + amortization So EBITDA already includes the add-back of lease depreciation, but lease interest is below EBIT and NOT added back. For a pre-IFRS 16 comparable EBITDA, we'd need to add back lease interest as well, because under operating lease accounting, lease expense was entirely above EBIT. Actually no - under operating lease accounting (pre-IFRS 16), lease expense was an operating expense, so EBIT was lower by the full lease expense. Under IFRS 16, EBIT includes lease depreciation but not lease interest. So EBIT is higher under IFRS 16 than under operating lease treatment (because depreciation is typically less than total lease payment in early years, but let's not go there). For S&P comparability, they typically want to capitalize leases for debt purposes, but for EBITDA/FFO, they may use reported figures or make adjustments. Given the complexity, let me use the baseline formula as stated, with cash_interest = 209M (total interest paid as per cash flow, which likely includes all interest paid in operating activities). But wait - the baseline says "cash_interest" not "interest paid in operating activities". If lease interest is in financing activities (part of 120M), then cash_interest in the formula might need to include it. Let me try a different approach. S&P's standard post-IFRS 16 FFO calculation: FFO = Net income from continuing operations + Depreciation, depletion, amortization + Deferred income taxes + Other non-cash items - Gain/Loss on asset sales +/- Other adjustments From our data: Net income from continuing operations: 615,000,000 + Depreciation/amortization: 848,000,000 (from cash flow) + Deferred taxes: need to calculate Deferred tax assets: 872M (2023) vs 920M (2022) = decrease of 48M Deferred tax liabilities: 890M (2023) vs 813M (2022) = increase of 77M Net deferred tax liability increase: 77 - (-48) = 125M? Actually, decrease in DTA is expense, increase in DTL is expense. So deferred tax expense = 48 + 77 = 125M? But this is balance sheet, not comprehensive. Income tax expense in P&L: 254M. Cash taxes paid: 215M. So deferred tax component = 254 - 215 = 39M. Other non-cash items: provision changes, impairment reversals, etc. Actually, let me use the direct approach from the baseline. **Using baseline: FFO = Adjusted_EBITDA - cash_interest - cash_taxes** With: - Adjusted_EBITDA = 2,068,000,000 - cash_interest = 209,000,000 (interest paid, operating activities) - cash_taxes = 215,000,000 (taxes paid, operating activities) FFO = 2,068,000,000 - 209,000,000 - 215,000,000 = **1,644,000,000 EUR** This is very close to CFO of 1,648,000,000. The 4M difference is likely due to dividends received (89M) and other items being treated differently. Actually, for S&P FFO, dividends received from investments are typically EXCLUDED or treated separately. The baseline formula excludes them, which is correct for FFO. But wait - CFO of 1,648M includes dividends received of 89M. If we subtract those, we get 1,559M. Then add back interest paid (209M) and taxes paid (215M): 1,559 + 209 + 215 = 1,983M. This is not FFO. Let me think again. CFO = Net income + adjustments - working capital changes - interest paid - taxes paid + interest received + dividends received + other. Actually, standard cash flow presentation: CFO = Net income + Non-cash adjustments (depreciation, etc.) +/- Working capital changes - Interest paid - Taxes paid + Interest received + Dividends received + Other operating cash flows For FFO, we want: FFO = Net income + Non-cash adjustments (depreciation, deferred taxes, etc.) +/- Other non-cash items Or from EBITDA: FFO = EBITDA - cash interest - cash taxes This assumes no working capital changes, or that working capital is normalized. Given the baseline formula explicitly says "Adjusted_EBITDA - cash_interest - cash_taxes", I'll use this. But I need to verify: does Adjusted_EBITDA include dividends received? No, EBITDA is from operations. Does it include interest received? No. So: FFO = 2,068,000,000 - 209,000,000 - 215,000,000 = 1,644,000,000 EUR However, I need to check if lease payments should be subtracted. For IFRS 16, S&P typically subtracts lease payments from FFO (or equivalently, treats them like debt service). Actually, looking at S&P's standard methodology for IFRS 16: They typically calculate "FFO" as: FFO = Adjusted EBITDA - cash interest - cash taxes - lease payments + lease interest Or they adjust debt to include leases and use a different FFO measure. Let me check if there's an "adjustment_leases" in the FFO formula. The baseline says: FFO = Adjusted_EBITDA - cash_interest - cash_taxes No lease adjustment in FFO. Leases are adjusted in EBITDA (if needed) and in Debt. Given the baseline doesn't mention lease adjustment for FFO, I'll proceed with 1,644,000,000. But wait - I need to reconsider the lease treatment. Under IFRS 16, the 209M interest paid might include lease interest. Let me assume it doesn't (since lease payments are in financing activities). Then FFO of 1,644M is before lease principal payments. For S&P's "FFO to debt" ratio, they want FFO available to service debt. If leases are treated as debt-like, then lease payments should be subtracted from FFO. Actually, the standard S&P approach post-IFRS 16 is: - For Debt: include lease liabilities - For FFO: no adjustment needed if using standard formula, OR subtract lease payments and add back lease interest Let me use the most common S&P approach: FFO includes the benefit of lease capitalization (i.e., no lease payment subtraction), but debt includes lease liabilities. This makes the ratio more conservative (higher debt, same FFO). Actually no - that would overstate FFO. The correct approach is to subtract lease payments from FFO if leases are in debt. Let me recalculate with lease adjustment: Lease payments: 120,000,000 (from financing activities) Assuming this is principal + interest, and we need to subtract total lease payments for a true "operating" FFO. But the baseline formula doesn't include this. I'll stick to the baseline. **FFO = 1,644,000,000 EUR** Wait, I want to double-check. Let me also consider if we should use the alternative EBITDA of 2,182M: FFO = 2,182 - 28 - 209 - 215 = 1,730M. But this uses the cash flow add-back. Given the ambiguity, let me use 1,644,000,000 as the conservative figure. Actually, let me reconsider one more time. The cash flow statement shows: "Cash Flows From Used In Operating Activities" = 1,648,000,000 This includes: - Interest paid: -209 - Interest received: +40 - Dividends received: +89 - Taxes paid: -215 - Other: +12 For S&P FFO, a common calculation is: FFO = CFO + Interest Paid + Taxes Paid - Dividends Received (from investments) - Interest Received (from investments) ± other items = 1,648 + 209 + 215 - 89 - 40 - 12? Actually, let me think about what FFO represents: Funds From Operations, available to service debt and fund capex. It should be after working capital changes (if normalized), after cash taxes, but before interest and dividends. From CFO: 1,648M Add back: Interest paid (209M) - this is a financing cost, not operating Less: Dividends received (89M) - this is investing, not operating Less: Interest received (40M) - this is financial, not operating FFO = 1,648 + 209 - 89 - 40 = 1,728? No, that doesn't make sense. Actually, standard S&P FFO from CFO: FFO = CFO + Cash Interest Paid + Cash Taxes Paid - Dividends Received from Unconsolidated Affiliates Because CFO is after interest, taxes, and includes dividends from affiliates. FFO should be before interest and taxes, but after dividends from affiliates are removed (since they're not from operations). So: FFO = 1,648 + 209 + 215 - 89 = 1,983M? That seems high. Wait, I need to check if CFO is before or after taxes. Looking at the cash flow, taxes paid are included in CFO. So: CFO = EBIT + Depreciation - Working Capital - Interest Paid - Taxes Paid + Interest Received + Dividends Received + Other So to get to FFO (which is roughly EBIT + Depreciation - Cash Taxes, or EBITDA - Cash Interest - Cash Taxes): FFO = CFO + Interest Paid - Interest Received - Dividends Received - Other Operating Items + Working Capital Changes? This is getting messy with the specific line items. Let me use the baseline formula with Adjusted_EBITDA = 2,068M: FFO = 2,068 - 209 - 215 = 1,644M This is close to CFO (1,648M), with the difference explained by: - Working capital source of 135M is not in FFO (baseline assumes no WC change) - Other items: -283M includes dividends received (89), interest received (40), interest paid (-209), taxes paid (-215), other (12) Actually: -209 + 40 + 89 - 215 + 12 = -283. Yes. So CFO = Adjusted_EBITDA + Working Capital - Other (where Other = 283) = 2,068 + 135 - 283 = 1,920? No, that's not 1,648. Hmm, let me recalculate. The "Adjustments For Reconcile Profit Loss" is 927M. This gets from Profit Before Tax (869M) to... what? 869 + 927 = 1,796. Then + working capital 135 = 1,931. Then + other -283 = 1,648. So: 1,796 + 135 - 283 = 1,648. Yes. Now, 1,796 is roughly EBIT + Depreciation + other non-cash (excluding working capital and other items). EBIT = 1,334. 1,334 + 762 = 2,096. But we have 1,796. Difference is 300M. Wait, 869 (PBT) + 927 = 1,796. PBT includes finance costs net (256-47=209), exchange (8), financial instruments (-70), equity method (-194). Operating profit is 1,334. PBT is 869. Difference is -465 (due to financial items). So 1,796 = 869 + 927. This is "cash flow before working capital and other items". To get to FFO: We want something like Operating Profit + Depreciation - Cash Taxes + Other Non-Cash. = 1,334 + 762 - 215 + other non-cash items (deferred taxes, provision changes, etc.) The 927M add-back includes more than just depreciation. It includes: - Depreciation/amortization/impairment: 848M - Other adjustments: 79M Total: 927M. But wait, 848 + 79 = 927. Yes. So 1,796 = 869 + 848 + 79 = 1,796. For FFO from this: = Operating Profit + 848 (D&A) + 79 (other) - Cash Taxes? = 1,334 + 848 + 79 - 215 = 2,046? Or from PBT: 869 + 927 - 215 (taxes paid, not tax expense) = 1,581? This is confusing because tax expense is 254, taxes paid is 215. Let me try: FFO = Net Income + Depreciation + Deferred Taxes + Other Non-Cash = 615 + 848 + (254-215) + other = 615 + 848 + 39 + ... = 1,502 + other items The "other adjustments" of 79M likely includes items like provision changes, gains/losses, etc. Actually, let me just use the baseline formula as specified. The problem says to use: FFO = Adjusted_EBITDA - cash_interest - cash_taxes With Adjusted_EBITDA = 2,068M, cash_interest = 209M, cash_taxes = 215M: **FFO = 1,644,000,000 EUR** I'll use this figure, noting that it's very close to reported CFO and is consistent with the baseline approach. ## Step 4: Estimate Adjusted_Debt Baseline: Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash **Reported debt:** From balance sheet: - "Participaciones Preferentes Obligaciones YOtros Valores Negociables No Corrientes" (Noncurrent bonds/securities): 3,101,000,000 (2023) - "Noncurrent Portion Of Noncurrent Loans Received": 2,624,000,000 (2023) - "Participaciones Preferentes Obligaciones YOtros Valores Negociables Corrientes" (Current bonds/securities): 1,139,000,000 (2023) - "Current Loans Received And Current Portion Of Noncurrent Loans Received": 553,000,000 (2023) Total reported debt = 3,101 + 2,624 + 1,139 + 553 = 7,417,000,000 EUR Wait, I need to check the dates. The balance sheet items are at 2023-01-01 and 2022-01-01. For FY2022, I should use 2023-01-01 (end of year) or average? Typically for ratios, S&P uses year-end or average. For FFO/debt, they typically use year-end debt or average. Let me use year-end 2022 (which is 2023-01-01 in the data, since fiscal year ends Dec 31, 2022, so 2023-01-01 is the balance at end of FY2022). Actually, looking at the labels: "2023-01-01" means January 1, 2023, which is the day after Dec 31, 2022. So this is the closing balance for FY2022. Total debt at 2023-01-01: 7,417,000,000 EUR **Leases:** Already capitalized under IFRS 16. The lease liabilities are: - Noncurrent: 439,000,000 - Current: 72,000,000 Total: 511,000,000 EUR But wait - these are already included in the debt figures? No, they're separate line items. For S&P, we typically add these to debt if not already included. Since they're separate from "loans received" and "bonds", we should add them. Actually, looking at the debt items: "Noncurrent Portion Of Noncurrent Loans Received" and "Current Loans Received..." - these are bank loans. The "Participaciones Preferentes..." are bonds/securities. Leases are separate. So: Reported debt + leases = 7,417 + 511 = 7,928,000,000? But under IFRS 16, lease liabilities are already on balance sheet as debt-like. The question is whether S&P wants to include them in "Adjusted_Debt" additionally. Actually, the baseline says "+ leases". This suggests we add operating lease liabilities if not already capitalized, or we ensure they're included. Since IFRS 16 already capitalizes them, and they're in the balance sheet as liabilities, they might already be in "reported_debt" if the user considers all liabilities. But the line items show leases separately from loans and bonds. So total interest-bearing debt including leases = 7,417 + 511 = 7,928M. However, for S&P's "Adjusted Debt", they typically include ALL debt-like items, including leases, even under IFRS 16. So I'll add leases explicitly: + 511M. Actually, re-reading the baseline: "reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items" This suggests "reported_debt" is just the explicit debt (loans, bonds), and we add leases separately. So: Reported debt = 7,417M + Leases = 511M **Pension deficit:** No explicit pension liability visible. The "Other Noncurrent Liabilities" of 1,134M might include some, but no specific pension data. I'll assume 0. **Guarantees:** No specific data. Assume 0. **Hybrid debt portion:** "Participaciones Preferentes" (preferred shares/participations) might be hybrid. The noncurrent portion is 3,101M and current is 1,139M. These are "Preferred shares and other negotiable securities". For S&P, preferred shares can be hybrid (part equity, part debt). The baseline mentions "hybrid_debt_portion". If these are treated as 100% debt in reported debt, then no additional hybrid portion. But if they're equity-like, we might need to subtract. Actually, looking at the equity section: "Issued Capital" is only 55M. The "Participaciones Preferentes" are in liabilities, not equity. So they're treated as debt for accounting. However, S&P might treat preferred shares as hybrid and assign an equity portion. Without specific guidance, I'll include them in debt as reported. **Other debt-like items:** - "Other Noncurrent Liabilities": 1,134M - "Other Current Liabilities": 1,798M These might include debt-like items. But they're likely trade payables, accruals, etc. Looking at "Trade And Other Current Payables": 3,889M. This is clearly operating. "Other Current Liabilities" of 1,798M - could include some debt-like items, but without detail, hard to say. For S&P, they typically don't include trade payables in adjusted debt, but might include other debt-like items if >1 year or interest-bearing. I'll assume no additional debt-like items beyond explicit debt and leases. **Eligible cash:** "Cash And Cash Equivalents": 2,360,000,000 EUR S&P typically subtracts "available cash" or "surplus cash". Standard approach: subtract all cash unless restricted. But for "eligible_cash", S&P might consider only excess cash or cash not needed for operations. Standard approach for corporate issuers: subtract most cash and liquid investments. Looking at current financial assets: 315M. These might be short-term investments. "Shortterm Investments Classified As Cash Equivalents": 462M. This is part of cash equivalents. Total cash and equivalents: 2,360M (which includes 462M short-term investments). For S&P, they typically subtract all cash and cash equivalents from debt to get "net debt" or use gross debt for certain ratios. The baseline says "- eligible_cash". For FFO/Debt ratio, S&P typically uses GROSS debt, not net debt, in the denominator. Let me check... Actually, the ratio is "FFO to debt", not "FFO to net debt". S&P typically uses gross debt for this ratio. So eligible_cash = 0 for this calculation. Wait, but the baseline explicitly includes "- eligible_cash". So I should subtract some cash. S&P's typical approach for "Adjusted Debt" is to use gross debt for the FFO/Debt ratio, but they might subtract "readily available cash" if it's truly excess. For conservatism and following the baseline, let me subtract a portion of cash. But how much? Standard S&P approach: If cash is > 5% of revenue or clearly excess, subtract. Otherwise, keep. Revenue is 11,195M. Cash is 2,360M = 21% of revenue. This seems high, suggesting some might be needed for operations. For infrastructure/utility companies, S&P typically assumes some cash is needed for working capital and operations. They might subtract 75% or use a formula. Without specific guidance, I'll use: **eligible_cash = 0** for gross debt approach, or **eligible_cash = 2,360M** if we want net debt. Actually, re-reading S&P methodology: For "FFO to debt", they typically use GROSS debt. The "adjusted debt" includes all debt-like items but doesn't subtract cash. However, the baseline formula explicitly says "- eligible_cash". So let me use a conservative approach: subtract all cash that appears truly available. Given the company has significant operations and likely needs some cash, but 2,360M seems high, let me use **eligible_cash = 1,500,000,000** (roughly 2 months of revenue, or about 65% of cash). Actually, this is too arbitrary. Let me use **eligible_cash = 0** for gross debt, or check if S&P typically uses gross or net. Looking at S&P's corporate methodology: "FFO to debt" typically uses gross debt. "Debt" includes short-term and long-term interest-bearing debt, plus leases, plus other debt-like items. I'll use: **Adjusted_Debt = 7,417 + 511 = 7,928,000,000 EUR** (with eligible_cash = 0) Or if we want to subtract some cash: 7,928 - 2,360 = 5,568M. Let me check which is more standard. For "FFO to debt", S&P Global Ratings typically reports both gross and net, but the key metric is usually **gross debt**. However, the baseline says "- eligible_cash", so I need to include this. Let me assume **eligible_cash = 2,360,000,000** (all cash is eligible, or at least the cash and cash equivalents are readily available). Actually, for many European utilities/infrastructure companies, S&P does subtract cash to get "adjusted debt" for certain ratios. Let me use **eligible_cash = 2,360,000,000**. But wait - this gives very low debt. Let me reconsider. Looking at the cash flow: The company has significant capex needs (2,195M purchase of PPE + 244M investments in group companies = 2,439M outflows, vs operating cash flow of 1,648M). They need cash for operations and growth. S&P's standard approach for "eligible cash" is to subtract cash that is truly surplus, not needed for operations. A common rule: cash up to 5% of revenue is needed, rest is excess. Or cash equal to 2% of revenue is operating need. Revenue = 11,195M. 5% = 560M. So excess cash = 2,360 - 560 = 1,800M. Or more conservatively, they might need 1,000M for working capital and operations. Let me use a middle ground: **eligible_cash = 1,500,000,000 EUR** This is roughly the cash needed for near-term capex and operations. Actually, I realize I'm overthinking this. Let me look at what "Cash And Cash Equivalents" includes: Cash 1,898M + Short-term investments 462M = 2,360M. For S&P, "eligible cash" typically includes cash and liquid investments that can be used to repay debt. If the company has significant near-term debt maturities, they need cash. Current debt maturities: 1,139 + 553 = 1,692M. Plus current leases 72M. Total current debt = 1,765M. So they need at least some cash for refinancing. But they also generate 1,648M CFO annually. Let me use **eligible_cash = 1,000,000,000 EUR** as a conservative estimate of truly excess cash. Adjusted_Debt = 7,417 + 511 - 1,000 = **6,928,000,000 EUR** Or if we use 0 eligible cash: 7,928M If we use all 2,360M: 5,568M This range is quite wide. Let me check S&P's typical practice for similar companies. For infrastructure companies with high capex needs, S&P typically uses **gross debt** for FFO/Debt, or subtracts only clearly excess cash. Given the baseline explicitly includes "- eligible_cash", and the company's cash position seems reasonable for its operations, I'll use **eligible_cash = 0** for a conservative (higher debt) approach, or **eligible_cash = 2,360M** for net debt. Actually, looking at this from a different angle: The problem asks for "S&P-adjusted FFO-to-debt ratio". S&P's published ratios for companies typically use gross debt, not net debt. For example, they report "FFO to debt" with debt being gross adjusted debt. Let me use **Adjusted_Debt = 7,928,000,000 EUR** (gross, with eligible_cash = 0). But to follow the baseline formula exactly, I need to include "- eligible_cash". Let me define eligible_cash as 0 since we're using gross debt for the ratio. Wait, the formula says "(reported_debt + leases + ... ) - eligible_cash". If eligible_cash = 0, then it's just the sum. Let me set **eligible_cash = 0** and note that this gives gross adjusted debt. **Adjusted_Debt = 7,417,000,000 + 511,000,000 = 7,928,000,000 EUR** ## Step 5: Calculate FFO / Adjusted_Debt FFO = 1,644,000,000 Adjusted_Debt = 7,928,000,000 Ratio = 1,644 / 7,928 = 0.2074 Let me verify this calculation: 1,644 ÷ 7,928 = 0.207366... Rounded to four decimal places: **0.2074** However, I want to check sensitivity to my assumptions: 1. If Adjusted_EBITDA = 2,182M (using 848M D&A): FFO = 2,182 - 28 - 209 - 215 = 1,730M. Ratio = 1,730/7,928 = 0.2182 2. If eligible_cash = 2,360M (all cash): Adjusted_Debt = 7,928 - 2,360 = 5,568M. Ratio = 1,644/5,568 = 0.2953 3. If we add other debt-like items (say 500M of other liabilities): Adjusted_Debt = 8,428M. Ratio = 1,644/8,428 = 0.1951 Given the wide range, let me reconsider my key assumptions. **Reconsidering EBITDA:** Looking more carefully at the P&L structure, I want to verify my EBITDA calculation. Revenue: 11,195 + Other Income: 1,016 - Changes in Inventories: -72 - Raw Materials: -3,483 - Employee Benefits: -2,077 - Other Expense: -4,814 - D&A: -762 - Impairment reversal: +15 (negative expense) + Other Gains: +13 + Equity method operating: +159 = Operating Profit: 1,334? Let me check: 11,195 + 1,016 = 12,211; 12,211 - 72 = 12,139; 12,139 - 3,483 = 8,656; 8,656 - 2,077 = 6,579; 6,579 - 4,814 = 1,765; 1,765 - 762 = 1,003; 1,003 + 15 = 1,018; 1,018 + 13 = 1,031; 1,031 + 159 = 1,190? That doesn't equal 1,334. So my line item assignment is wrong. Actually, "Dotacion Amortizacion Y Variacion De Provisiones" is likely already included in "Other Expense By Nature" or other lines. It's not a separate line in the P&L. Looking at the P&L sequence: Revenue + Other Income + Changes in Inventories - Raw Materials - Employee Benefits - Other Expense = EBIT? Or = EBITDA? Then: - Dotacion Amortizacion... + Impairment reversal + Other Gains + Equity method operating = Operating Profit So: EBIT before these items = 1,334 + 762 - 15 - 13 - 159 = 1,909? Or: Starting from 11,195 + 1,016 - 72 - 3,483 - 2,077 - 4,814 = 1,765. Then subtract 762 = 1,003. Add 15 = 1,018. Add 13 = 1,031. Add 159 = 1,190. Still not 1,334. Hmm, let me try: 1,765 - 762 + 15 + 13 + 159 + ... need 1,334. So 1,765 - 762 = 1,003. Need +331 to get to 1,334. 15 + 13 + 159 = 187. Not enough. Maybe "Other Expense By Nature" of 4,814 already excludes some items. Or my revenue calculation is wrong. Actually, looking at the data format: "Other Expense By Nature" might be the total of many expenses, and "Dotacion Amortizacion..." is a breakdown component. Let me try a different approach: Use the cash flow to verify. Cash flow from operations starts with profit before tax: 869. Add back: adjustments 927. = 1,796. Add working capital: 135. = 1,931. Add other: -283. = 1,648. The 927 adjustments include 848 for D&A and 79 other. So "cash earnings" = 869 + 927 = 1,796. This is PBT + non-cash items. Operating profit = 1,334. PBT = 869. Difference is 465 (financial and equity costs). If we add back D&A to operating profit: 1,334 + 762 = 2,096. This is EBITDA from operations. But cash earnings of 1,796 is lower. Why? Because PBT includes financial costs (net 209), exchange (8), financial instruments (-70), equity method (-194). 869 = 1,334 - 209 + 8 - 70 - 194 = 869. Check: 1,334 - 209 = 1,125; +8 = 1,133; -70 = 1,063; -194 = 869. Yes. So operating profit is 1,334. This is EBIT. EBITDA = EBIT + D&A = 1,334 + 762 = 2,096. The 762M "Dotacion..." is the D&A expense in P&L. The 848M in cash flow includes more (impairment, provision changes). So my original EBITDA = 2,096M is correct. Now, for Adjusted_EBITDA, I subtracted 28M nonrecurring gains. But let me verify these are truly nonrecurring. "Other Gains Losses": 13M - this is small, could be recurring or nonrecurring. "Impairment Loss Reversal": -15M - this is a reversal, so it's a gain. Impairment reversals are typically nonrecurring. Actually, looking at S&P's definition: nonrecurring items are one-time gains/losses. Small items might be recurring. Let me check if 13M "Other Gains Losses" is nonrecurring. Without more detail, I'll assume it's nonrecurring (as "other" often is). But actually, for conservatism, maybe I should NOT adjust for these small items, as they might be normal business. If no nonrecurring adjustment: Adjusted_EBITDA = 2,096M. FFO = 2,096 - 209 - 215 = 1,672M. Ratio = 1,672 / 7,928 = 0.2109. Or if I use the 848M cash flow add-back for a broader measure: Adjusted_EBITDA = 1,334 + 848 = 2,182. FFO = 2,182 - 209 - 215 = 1,758. Ratio = 1,758/7,928 = 0.2217. Given the range of reasonable estimates is 0.195 to 0.222, let me settle on a central estimate. **Final calculation:** Adjusted_EBITDA = 2,068,000,000 (with nonrecurring adjustment of 28M) FFO = 2,068 - 209 - 215 = 1,644,000,000 Adjusted_Debt: - Reported debt = 3,101 + 2,624 + 1,139 + 553 = 7,417 - Leases = 439 + 72 = 511 - Total gross = 7,928 - Eligible cash: I'll use 0 for gross debt approach, or include a modest amount. Actually, re-reading the problem: It asks for "S&P-adjusted FFO-to-debt ratio". In S&P's terminology, this is typically FFO / Adjusted Debt, where Adjusted Debt is gross (including leases, etc.) minus some cash if clearly excess. For a company with 2,360M cash and 1,765M current debt, the cash seems needed for operations and refinancing. I'll use **eligible_cash = 0** for a standard gross debt measure. Adjusted_Debt = 7,928,000,000 Ratio = 1,644 / 7,928 = 0.207366... ≈ **0.2074** Let me also check if I should include other items in debt: - "Other Noncurrent Liabilities" 1,134M: likely includes deferred income, provisions, etc. Not typically debt-like unless interest-bearing. - "Noncurrent Provisions" 279M: non-debt. - "Deferred Tax Liabilities" 890M: non-debt. - "Current Provisions" 299M: non-debt. - "Other Current Liabilities" 1,798M: likely includes VAT, payroll, etc. Not debt-like. So 7,928M seems reasonable for adjusted gross debt. One more check: Should I use average debt rather than year-end? S&P typically uses year-end or latest available for ratios. Year-end 2022 (2023-01-01) is appropriate. Beginning debt (2022-01-01): - Noncurrent bonds: 2,364 - Noncurrent loans: 2,073 - Current bonds: 1,666 - Current loans: 280 - Total loans/bonds: 6,383 - Leases: 430 + 68 = 498 - Total: 6,881 Average debt = (6,881 + 7,928) / 2 = 7,404.5 If using average debt: Ratio = 1,644 / 7,404.5 = 0.2220 S&P sometimes uses average debt for return metrics, but year-end for leverage ratios. For FFO/Debt, they typically use year-end debt. I'll stick with year-end: **0.2074** But let me also consider: should FFO be calculated with average or latest? FFO is a flow measure for the year, debt is a stock measure at year-end. This is standard. Final verification of my FFO calculation: - Adjusted_EBITDA: 2,068M - Less: Cash interest 209M - Less: Cash taxes 215M - FFO: 1,644M This FFO represents funds available before working capital changes, capex, and dividends. It's a reasonable measure of cash generation available for debt service. One final check: Does this include dividends from JVs? No, and it shouldn't for FFO. Does it include interest received? No, and EBITDA doesn't either. Actually, wait - should interest received be in FFO? S&P sometimes includes interest received in FFO if it's from operating activities. But the baseline formula doesn't include it. If we add interest received (40M) to FFO: 1,644 + 40 = 1,684. Ratio = 1,684/7,928 = 0.2124. But standard FFO excludes interest received as it's financial, not operating. I'll stay with 1,644M. ## Final Answer 0.2074