I'll work through this step-by-step for FERROVIAL SA. ## Step 1: Identify Relevant Industry FERROVIAL SA is a Spanish infrastructure company. Based on the data, it operates in **Transportation Infrastructure** (airports, roads, etc.). The company has "Investments In Infrastructure Projects" as a major asset category, and generates revenue from infrastructure concessions. This fits the **Transportation Infrastructure** methodology. However, looking more carefully at the data, FERROVIAL has significant infrastructure project investments and also appears to have construction/operating activities. The company is primarily an **infrastructure concessionaire and operator**, which falls under **Transportation Infrastructure**. Given the complexity and the need to apply baseline formulas with industry modifications, I'll proceed with the Transportation Infrastructure methodology where relevant, but note that FERROVIAL also has characteristics that might blend with general corporate. ## Step 2: Estimate 2021 Adjusted_EBITDA First, let me reconstruct EBITDA for 2021 from the income statement data. From the data for 2021 (period 2021-01-01 to 2022-01-01): - Revenue: 6,910,000,000 EUR - Operating Expense: 6,301,000,000 EUR - Profit From Operations Before Impairment And Disposals Of Non Current Assets: 340,000,000 EUR - Amortisation Expense: 270,000,000 EUR EBITDA = Profit From Operations Before Impairment + Amortisation Expense EBITDA = 340,000,000 + 270,000,000 = 610,000,000 EUR Wait - let me recalculate. "Profit From Operations Before Impairment And Disposals Of Non Current Assets" is 340,000,000 EUR for 2021. This is EBIT before impairment. So: EBITDA = 340,000,000 + 270,000,000 = 610,000,000 EUR But let me verify using another approach: - Gross Profit: 610,000,000 EUR - Employee Benefits Expense: 1,293,000,000 EUR - Miscellaneous Other Operating Expense: 3,923,000,000 EUR Wait, let me re-read. The "Profit From Operations Before Impairment And Disposals Of Non Current Assets" is already after employee benefits and other operating expenses. From the data: - "Profit From Operations Before Impairment And Disposals Of Non Current Assets" 2021: 340,000,000 EUR This is operating profit before impairment. To get EBITDA, we add back depreciation and amortization. Actually, let me check: "Amortisation Expense" is 270,000,000 EUR. But we also need depreciation. Looking at "Ajustes Al Resultado Por Gastos Por Depreciacion YAmortizacion" (Adjustments for Depreciation and Amortization Expenses): 270,000,000 EUR for 2021. This seems to be total D&A. So EBITDA = Operating Profit before impairment + D&A = 340,000,000 + 270,000,000 = 610,000,000 EUR But wait - is "Profit From Operations Before Impairment" already after D&A? Yes, typically it is. So EBITDA = 340,000,000 + 270,000,000 = 610,000,000 EUR. However, let me cross-check with "Gross Profit" which is 610,000,000 EUR. Then we have operating expenses. Let me trace through: Revenue: 6,910,000,000 Raw Materials: 1,085,000,000 Employee Benefits: 1,293,000,000 Miscellaneous Other Operating Expense: 3,923,000,000 (before fair value) or 3,923,000,000 (total) Wait, "Miscellaneous Other Operating Expense" "Before Fair Value Adjustments Member" is 3,922,000,000 and total is 3,923,000,000. Total Operating Expense = 6,301,000,000 Revenue and Operating Income = 6,911,000,000 Hmm, "Revenue And Operating Income" is 6,911,000,000 which equals Revenue (6,910,000,000) + Other Income (1,000,000). So Operating Profit = Revenue + Other Income - Operating Expense = 6,911,000,000 - 6,301,000,000 = 610,000,000... but that's Gross Profit. Wait, let me re-read: "Gross Profit" is 610,000,000 EUR for 2021. Then "Profit From Operations Before Impairment" is 340,000,000 EUR. The difference is 270,000,000 EUR, which equals the amortization/depreciation expense. So: EBIT before impairment = 340,000,000. This means there are other operating expenses between gross profit and operating profit of 610,000,000 - 340,000,000 = 270,000,000, which equals D&A. Actually, that makes sense: Gross Profit 610,000,000 - D&A 270,000,000 = 340,000,000 operating profit before impairment. But wait, there should be other operating expenses too. Let me re-check: "Operating Expense" total is 6,301,000,000. This includes raw materials (1,085,000,000), employee benefits (1,293,000,000), and miscellaneous other operating expense (3,923,000,000). Sum: 1,085 + 1,293 + 3,923 = 6,301. Yes. Revenue and Operating Income: 6,911,000,000 Operating Expense: 6,301,000,000 Gross Profit: 610,000,000 Then from Gross Profit to Operating Profit: we subtract D&A (270,000,000) to get 340,000,000. But are there other items? "Profit From Operations Before Impairment And Disposals" is 340,000,000, which equals 610,000,000 - 270,000,000. So D&A seems to be the only item between gross profit and operating profit. So EBITDA = 610,000,000 EUR (which equals Gross Profit, or alternatively 340,000,000 + 270,000,000) For Transportation Infrastructure, we need to consider: - Adjustment for leases: Add back operating lease expense if capitalized (already have right-of-use assets, so IFRS 16 is applied) - Nonrecurring items: The "Impairment And Gains Or Losses On Disposal Of Non Current Assets" for 2021 is 1,139,000,000 EUR (including fair value adjustments). Before fair value adjustments: 38,000,000 EUR. Looking at 2021: "Impairment And Gains Or Losses On Disposal Of Non Current Assets" "Before Fair Value Adjustments Member" is 38,000,000 EUR, and total is 1,139,000,000 EUR. The fair value adjustment component is 1,101,000,000 EUR. This large fair value adjustment is likely nonrecurring. Let me check what this represents - it seems like a major gain. For S&P purposes, we need to normalize. The "Before Fair Value Adjustments" figure of 38,000,000 is likely more normalized. But actually, for EBITDA, we start from operating profit before impairment, so impairment is below this line. Wait - "Profit From Operations Before Impairment And Disposals" is 340,000,000. Then "Impairment And Gains Or Losses On Disposal" is 1,139,000,000. This gives "Profit Loss From Operating Activities" of 1,479,000,000. So the 1,139,000,000 is a net gain (positive number in expense means... wait, let me check signs). "Impairment And Gains Or Losses On Disposal Of Non Current Assets" 2021: 1,139,000,000 EUR. If this is a gain, it's positive. But in the income statement, it's shown as positive 1,139,000,000, which means it's a gain (reducing expenses or adding to income). Actually, looking at the structure: Profit From Operations Before Impairment (340,000,000) + Impairment/Gains (1,139,000,000) = Profit Loss From Operating Activities (1,479,000,000). So yes, 1,139,000,000 is a gain. This includes 1,101,000,000 from "Fair Value Adjustments Member" - this is likely a large one-time gain. For Adjusted EBITDA, we want to add back nonrecurring losses and subtract nonrecurring gains. So we should subtract this 1,139,000,000 gain, or at least the 1,101,000,000 fair value adjustment portion. But wait - S&P typically adjusts EBITDA to be before nonrecurring items. Since EBITDA is before impairment and gains/losses on disposal, we don't need to adjust for these items as they're below the EBITDA line. EBITDA is already before these items. So 2021 EBITDA = 610,000,000 EUR. For Transportation Infrastructure, are there specific adjustments? - Leases: Already capitalized under IFRS 16 (right-of-use assets present) - Joint ventures: FERROVIAL has significant investments in associates (1,838,000,000 EUR). We should consider proportional EBITDA from associates. For joint ventures, S&P typically adds proportional EBITDA. However, FERROVIAL uses equity accounting for associates. The "Share Of Profit Loss Of Associates" is -178,000,000 EUR for 2021. This is already in EBIT. For EBITDA, if we want to include proportional EBITDA from associates, we'd need to add back the equity-accounted profit and add proportional D&A. But we don't have separate D&A for associates. Given complexity and data limitations, let me use a more practical approach. For infrastructure companies with significant associates, S&P may look through to proportional consolidation. However, let me first check if there's a simpler path. The "Investments In Associates" is 1,838,000,000 EUR. The share of profit is -178,000,000 EUR. This is already below operating profit. Actually, for EBITDA calculation, if we want proportional EBITDA from associates: - Share of profit of associates: -178,000,000 (this is after their tax and D&A) - To get to proportional EBITDA, we'd need to add back their tax, interest, and D&A Without detailed associate financials, this is difficult. Let me proceed with reported EBITDA and note this limitation, or use a practical adjustment. Actually, looking at S&P methodology for Transportation Infrastructure, they focus on FFO to debt. For FFO, they typically start from net income and add back D&A, deferred taxes, etc. Let me recalculate more carefully following S&P's typical approach for infrastructure: For 2021: - Net income (Profit Loss Attributable To Owners Of Parent): 1,198,000,000 EUR - But this includes discontinued operations: 361,000,000 EUR - Continuing operations: 975,000,000 EUR total, or 838,000,000 EUR attributable to owners? Let me check. "Profit Loss From Continuing Operations" 2021: 975,000,000 EUR "Profit Loss From Discontinued Operations" 2021: 361,000,000 EUR "Profit Loss" 2021: 1,336,000,000 EUR "Profit Loss Attributable To Owners Of Parent" 2021: 1,198,000,000 EUR "Profit Loss Attributable To Noncontrolling Interests" 2021: 138,000,000 EUR For FFO, S&P typically uses: FFO = Net income from continuing operations + D&A + deferred taxes + other non-cash items - working capital changes +/− other items Or alternatively: FFO = Adjusted EBITDA - cash interest - cash taxes Let me try to reconstruct using the cash flow statement approach. From cash flow data 2021: - Cash Flows From Used In Operating Activities: 810,000,000 EUR - Adjustments For Reconcile Profit Loss: 256,000,000 EUR (this is adjustments to reconcile profit to operating cash flow) - Interest Paid Classified As Financing Activities: 295,000,000 EUR - Income Taxes Paid Refund Classified As Operating Activities: 155,000,000 EUR For FFO (Funds From Operations), S&P definition: FFO = Cash flow from operating activities before working capital changes - cash interest paid - cash taxes paid + interest received (if classified as operating) Or more commonly for infrastructure: FFO = Net income + D&A + deferred taxes + other non-cash charges - extraordinary gains + equity in earnings of affiliates - dividends from affiliates Let me use: FFO = Operating Cash Flow - Working Capital Changes + Cash Interest + Cash Taxes - Other Non-FFO Items Actually, the standard S&P FFO formula is: FFO = Cash flow from operating activities before changes in working capital and provision - cash interest - cash taxes Wait, let me check the cash flow data more carefully. "Cash Flows From Used In Operating Activities" 2021: 810,000,000 EUR This includes working capital changes and other items. "Increase Decrease In Working Capital" 2021: 249,000,000 EUR (positive means decrease in working capital, adding to cash flow) So cash flow before working capital changes = 810,000,000 - 249,000,000 = 561,000,000 EUR? No wait, if working capital decrease added 249,000,000, then cash flow before working capital would be 810,000,000 - 249,000,000 = 561,000,000. Actually, standard formula: CFO = Net income + adjustments + working capital changes. If working capital decrease is positive 249,000,000, then: CFO before working capital = 810,000,000 - 249,000,000 = 561,000,000 EUR But this also includes other items. Let me look at "Adjustments For Reconcile Profit Loss" 2021: 256,000,000 EUR. This includes D&A, impairments, etc. Actually, the adjustments to reconcile profit to operating cash flow: - Adjustments For Reconcile Profit Loss: 256,000,000 - Adjustments For Non Controlling Interests: 138,000,000 - Adjustment For Net Profit Loss From Discontinued Operations: -361,000,000 - Adjustments For Income Tax Expense: -9,000,000 (negative means tax expense was negative, i.e., credit) - Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method: 178,000,000 - Adjustments For Finance Income Cost: 335,000,000 - Adjustments For Gain Loss On Disposals Property Plant And Equipment: -1,139,000,000 - Ajustes Al Resultado Por Gastos Por Depreciacion YAmortizacion: 270,000,000 Sum of adjustments: 256 + 138 - 361 - 9 + 178 + 335 - 1139 + 270 = let's check: 256+138=394, 394-361=33, 33-9=24, 24+178=202, 202+335=537, 537-1139=-602, -602+270=-332. That doesn't equal 256,000,000. Wait, I think "Adjustments For Reconcile Profit Loss" is the total, and the others are components. Let me re-read. Actually, looking at the data structure, "Adjustments For Reconcile Profit Loss" 2021: 256,000,000 EUR is the total reconciliation adjustment. The other items are components that sum to this total. Let me verify: The components listed seem to be detailed breakdowns. But 256,000,000 is the total. For 2021, starting from Profit Loss: 1,336,000,000 Add adjustments: 256,000,000 Add working capital changes: 249,000,000 Add dividends received: 272,000,000 Add income taxes paid: wait, taxes paid is 155,000,000 (outflow) Actually, standard structure: Profit before tax: 966,000,000 Adjustments: 256,000,000 Working capital: 249,000,000 Dividends received: 272,000,000 Taxes paid: -155,000,000 Other items? Let me try: 966,000,000 + 256,000,000 + 249,000,000 + 272,000,000 - 155,000,000 = 1,588,000,000. That's not 810,000,000. Hmm, I need to be more careful. Let me look at the exact cash flow items. Looking at the data again, the cash flow statement items for 2021: - Adjustments For Reconcile Profit Loss: 256,000,000 - Adjustments For Non Controlling Interests: 138,000,000 - Adjustment For Net Profit Loss From Discontinued Operations: -361,000,000 - Adjustments For Income Tax Expense: -9,000,000 (this is likely adding back tax expense, but tax was a credit) - Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method: 178,000,000 - Adjustments For Finance Income Cost: 335,000,000 - Adjustments For Gain Loss On Disposals Property Plant And Equipment: -1,139,000,000 - Ajustes Al Resultado Por Gastos Por Depreciacion YAmortizacion: 270,000,000 - Gross Profit Loss From Discontinued Operations: 332,000,000 - Gross Profit Loss Including Discontinued Operations: 942,000,000 - Income Taxes Paid Refund Classified As Operating Activities: 155,000,000 (this is likely outflow, so negative) - Increase Decrease In Working Capital: 249,000,000 - Dividends Received Classified As Operating Activities: 272,000,000 - Cash Flows From Used In Operating Activities: 810,000,000 I think "Adjustments For Reconcile Profit Loss" is the total of all adjustments to profit. Let me check if the components sum to 256,000,000. Actually, looking more carefully, the items listed seem to be separate line items in the cash flow statement, not all components of "Adjustments For Reconcile Profit Loss." Some are part of operating activities. Let me try a different approach. For FFO, I'll use: FFO = EBITDA - Cash Interest - Cash Taxes For 2021: EBITDA = 610,000,000 EUR (as calculated) Cash interest: From "Interest Paid Classified As Financing Activities": 295,000,000 EUR. But we need cash interest paid, which may also include infrastructure project financing. "Financial Result On Financing Of Infrastructure Projects" 2021: -220,000,000 EUR (expense) "Financial Result On Financing Excluding Infrastructure Projects" 2021: -27,000,000 EUR (expense) Total financing cost: -247,000,000 EUR But cash interest paid is 295,000,000 EUR (from financing activities). There may also be interest paid in operating activities or infrastructure projects. Actually, "Interest Paid Classified As Financing Activities" 2021: 295,000,000 EUR. This seems to be total cash interest. Cash taxes: "Income Taxes Paid Refund Classified As Operating Activities" 2021: 155,000,000 EUR. This is outflow. But wait - "Adjustments For Income Tax Expense" 2021: -9,000,000 EUR. This suggests income tax expense was negative (a credit). The actual tax paid was 155,000,000 EUR. For FFO = EBITDA - Cash Interest - Cash Taxes: FFO = 610,000,000 - 295,000,000 - 155,000,000 = 160,000,000 EUR This seems low. Let me reconsider. Actually, for infrastructure companies, S&P often calculates FFO as: FFO = Cash flow from operating activities before working capital changes - cash interest - cash taxes + dividends received from investments Or more precisely, from the cash flow statement: CFO before working capital changes = 810,000,000 - 249,000,000 = 561,000,000? No, working capital decrease added to cash flow, so CFO before WC = 810,000,000 - 249,000,000 = 561,000,000. But this 561,000,000 includes dividends received (272,000,000) and excludes taxes paid (155,000,000 is already deducted to get to 810,000,000). Actually, let me trace through more carefully: Starting point: Profit before tax = 966,000,000 + Adjustments (D&A, etc.) = 256,000,000 +/- Working capital = 249,000,000 + Dividends received = 272,000,000 - Taxes paid = -155,000,000 = CFO = 810,000,000? Let's check: 966 + 256 + 249 + 272 - 155 = 1,588. Not 810. Hmm, the adjustments must work differently. Let me reconsider - maybe "Adjustments For Reconcile Profit Loss" already includes some items. Actually, I think I need to look at this differently. The cash flow statement starts from "Profit Loss" not "Profit before tax." Profit Loss 2021: 1,336,000,000 + Adjustments For Reconcile Profit Loss: 256,000,000 = 1,592,000,000 Then working capital, dividends, taxes, etc. But 1,336 + 256 = 1,592, and then with working capital +249, dividends +272, taxes -155 = 1,592 + 249 + 272 - 155 = 1,958. Still not 810. I think I'm misunderstanding the structure. Let me assume "Cash Flows From Used In Operating Activities" 810,000,000 is the final operating cash flow, and work backwards or use a different approach. For S&P FFO, a simpler approach: FFO = Net income + D&A + deferred taxes + equity in earnings of affiliates - dividends from affiliates + other non-cash items Or: FFO = EBIT + D&A - Cash Interest - Cash Taxes Let me try: EBIT for 2021. "Profit Loss From Operating Activities" is 1,479,000,000. But this includes the 1,139,000,000 gain on disposal. Normalized EBIT = 340,000,000 (before impairment) - 38,000,000 (impairment before fair value) = 302,000,000? Or is operating activities after impairment? "Profit Loss From Operating Activities" 2021: 1,479,000,000 = 340,000,000 + 1,139,000,000. For normalized EBIT, we want 340,000,000 (before the nonrecurring 1,139,000,000 gain). Normalized EBITDA = 340,000,000 + 270,000,000 = 610,000,000 EUR. Now for FFO using S&P typical formula: FFO = EBITDA - Cash Interest - Cash Taxes + Dividends from investments (if equity accounted) Cash interest: We need to identify total cash interest paid. From "Interest Paid Classified As Financing Activities": 295,000,000. But there may also be interest on infrastructure projects. "Financial Result On Financing Of Infrastructure Projects" 2021: -220,000,000 "Financial Result On Financing Excluding Infrastructure Projects" 2021: -27,000,000 "Result On Derivatives And Other Financial Results Infrastructure Projects" 2021: -87,000,000 "Result On Derivatives And Other Financial Results Excluding Infrastructure Projects" 2021: -1,000,000 Total finance cost: -335,000,000 (matches "Adjustments For Finance Income Cost") Cash interest paid: 295,000,000. But this may not include all financing costs. For S&P purposes, cash interest is actual interest paid. The 295,000,000 is classified as financing activities. There might be more interest in operating activities or elsewhere. Actually, looking at "Financial Result On Financing Of Infrastructure Projects" of -220,000,000 - this is likely accrued interest on project debt. The cash payment may differ. Given data limitations, let me use: Cash interest ≈ 295,000,000 EUR (from financing activities) + any capitalized interest or project interest paid from operating cash flows. For practical purposes, let me estimate total cash interest as roughly 295,000,000 to 335,000,000. I'll use 295,000,000 as minimum. Cash taxes: 155,000,000 EUR (paid, outflow). But wait - for FFO, S&P uses "cash taxes" which is taxes actually paid, not tax expense. Tax expense was negative (credit) in 2021: -9,000,000 total, or continuing operations -9,000,000. Actually "Income Tax Expense Continuing Operations" 2021: -9,000,000 (credit) "Income Tax Expense" total 2021: -9,000,000? Let me check: "Income Tax Expense Continuing Operations" "Before Fair Value Adjustments Member" 2021: 13,000,000, and "Fair Value Adjustments Member": -21,000,000, total -9,000,000 (credit). So tax expense was a credit of 9,000,000, but tax paid was 155,000,000. This suggests refunds or timing differences. For FFO = EBITDA - Cash Interest - Cash Taxes: Using Cash Interest = 295,000,000, Cash Taxes = 155,000,000: FFO = 610,000,000 - 295,000,000 - 155,000,000 = 160,000,000 EUR This seems very low for FFO. Let me reconsider if EBITDA is correct. Actually, I think I need to include proportional EBITDA from associates, or use a different approach. For infrastructure companies with significant investments in associates (1,838,000,000 EUR), S&P may look through to proportional consolidation or add dividends received. "Dividends Received Classified As Operating Activities" 2021: 272,000,000 EUR. These are dividends from investments. For FFO, S&P sometimes adds back dividends received from equity-accounted investments (as they're part of operating cash flow but not in EBITDA). Adjusted FFO approach: FFO = EBITDA - Cash Interest - Cash Taxes + Dividends from equity investments = 610,000,000 - 295,000,000 - 155,000,000 + 272,000,000 = 432,000,000 EUR Or using cash flow approach: CFO before working capital changes ≈ CFO + working capital decrease - dividends received + taxes paid? This gets confusing. Let me try yet another approach. S&P FFO from cash flows: FFO = Cash flow from operating activities before working capital changes - cash interest - cash taxes + dividends received from equity investments... no that's double counting. Standard S&P FFO: FFO = Funds from operations = Net income + depreciation and amortization + deferred income taxes + other non-cash items - extraordinary items - gain/loss on asset sales + equity in earnings of unconsolidated affiliates - dividends received from unconsolidated affiliates For 2021: Net income (continuing operations): 975,000,000 + D&A: 270,000,000 + Deferred taxes: need to calculate. "Deferred Tax Assets" increased from ? to 570,000,000. "Deferred Tax Liabilities" 2022-01-01: 687,000,000. We need 2021-01-01 values. Actually, we have "Deferred Tax Assets" 2022-01-01: 570,000,000 and 2023-01-01: 784,000,000. So 2021 year-end is 570,000,000, 2020 year-end is unknown. "Deferred Tax Liabilities" 2022-01-01: 687,000,000 and 2023-01-01: 924,000,000. Change in deferred tax assets 2021 to 2022: 570,000,000 - ? Change in deferred tax liabilities 2021 to 2022: 687,000,000 - ? Without 2021-01-01 (i.e., 2020 year-end) data, I can't calculate deferred tax change. Let me use a simpler approach and accept some approximation. For 2021, using the income statement and cash flow data: - Profit before tax: 966,000,000 (includes 1,101,000,000 fair value gain) - Normalized profit before tax (excluding fair value gain): 966,000,000 - 1,101,000,000 = -135,000,000? That doesn't make sense because fair value adjustment is part of operating activities. Wait, let me re-read. "Profit Loss Before Tax" "Before Fair Value Adjustments Member" 2021: -47,000,000. "Fair Value Adjustments Member": 1,014,000,000. Total: 967,000,000 ≈ 966,000,000. So normalized PBT (before fair value adjustments) is -47,000,000 EUR! This is a loss. Then normalized net income from continuing operations: -60,000,000 (before FV adjustments) + 1,035,000,000 (FV adjustments) = 975,000,000. So the company had a normalized operating loss but a large fair value gain. For credit analysis, S&P would look at normalized earnings. The fair value gain of 1,014,000,000 in PBT is likely nonrecurring. Normalized EBITDA (before fair value adjustments): - "Profit From Operations Before Impairment And Disposals" "Before Fair Value Adjustments Member" 2021: 341,000,000? Wait, let me check. "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Before Fair Value Adjustments Member" 2021: 341,000,000? No, it's 341,000,000 for 2022. For 2021: 379,000,000? Let me check. Looking back: "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Before Fair Value Adjustments Member" 2022-01-01 - 2023-01-01: 428,000,000 2021-01-01 - 2022-01-01: 341,000,000? No wait, let me re-read. Actually: "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: 341,000,000? Let me check the exact text. From the data: "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Before Fair Value Adjustments Member" 2022-01-01 - 2023-01-01: 428000000 EUR "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Fair Value Adjustments Member" 2022-01-01 - 2023-01-01: 1000000 EUR "Profit From Operations Before Impairment And Disposals Of Non Current Assets" 2022-01-01 - 2023-01-01: 429000000 EUR "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: 341000000 EUR? Let me search... Actually I see: "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: 341000000 EUR? No, looking more carefully: "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: 341000000 EUR Wait no, let me re-read the exact line: "Profit Loss From Operating Activities" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: 379000000 EUR Hmm, I need to find "Profit From Operations Before Impairment" for 2021. Let me search again... From the data string, I find: "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: 341000000 EUR? Actually looking at the pattern, I think it's: 2021: 341,000,000 (before FV) and 340,000,000 (total, with -1,000,000 FV) Wait no, for 2022: 428,000,000 (before FV) + 1,000,000 (FV) = 429,000,000 total. For 2021: 341,000,000 (before FV) + (-1,000,000) (FV) = 340,000,000 total? Let me check: "Profit From Operations Before Impairment And Disposals Of Non Current Assets" 2021-01-01 - 2022-01-01: 340000000 EUR. And "Fair Value Adjustments Member" 2021: -1000000 EUR. So before FV would be 341,000,000? But I don't see that exact number. Actually I see: "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: 341000000 EUR? Let me check if this exists... Looking at the raw data more carefully, I don't see an explicit "Before Fair Value Adjustments Member" for 2021 for this line. Let me search for "341000000". Actually, I think the data shows: "Profit From Operations Before Impairment And Disposals Of Non Current Assets" 2021-01-01 - 2022-01-01: 340000000 EUR (total) And the components might not be separately shown for 2021, or they might be: "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: 341000000 EUR? Hmm, I don't see this in my scan. Let me assume the total is 340,000,000 and the before FV adjustment is what we need. Actually, re-reading: "Profit Loss From Operating Activities" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: 379000000 EUR. This is after impairment. And "Impairment And Gains Or Losses On Disposal Of Non Current Assets" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: 38000000 EUR. So "Profit From Operations Before Impairment" + "Impairment/Gains" = "Profit Loss From Operating Activities" 341,000,000? + 38,000,000 = 379,000,000. So before impairment would be 341,000,000. But this 341,000,000 is "Before Fair Value Adjustments Member". And total "Profit Loss From Operating Activities" is 1,479,000,000 = 379,000,000 + 1,100,000,000 (FV adjustment). So normalized operating profit (before FV, before impairment): 341,000,000? No wait, 341,000,000 would be before impairment but after... hmm. Let me clarify: - "Profit From Operations Before Impairment And Disposals" before FV: 341,000,000? (this is what I need to verify) - Plus impairment/gains before FV: 38,000,000 - Equals "Profit Loss From Operating Activities" before FV: 379,000,000 Then add FV adjustment of 1,100,000,000 to get total operating activities of 1,479,000,000. So normalized EBITDA = 341,000,000 + 270,000,000 (D&A) = 611,000,000 ≈ 610,000,000 EUR. This matches my earlier calculation. Good. But wait - I need to verify if 341,000,000 is correct. Let me check if "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Before Fair Value Adjustments Member" 2021 is explicitly stated. From the data, searching for "341000000": I find "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: 341000000 EUR? Actually, I don't see this exact string. Let me look at what's available: I have: "Profit From Operations Before Impairment And Disposals Of Non Current Assets" 2021-01-01 - 2022-01-01: 340000000 EUR (total) And "Profit Loss From Operating Activities" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: 379000000 EUR And "Impairment And Gains Or Losses On Disposal Of Non Current Assets" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: 38000000 EUR So: 379,000,000 - 38,000,000 = 341,000,000. This is the before impairment, before FV figure. But is this 341,000,000 the same as "Profit From Operations Before Impairment And Disposals"? The total is 340,000,000, and with -1,000,000 FV adjustment, before FV would be 341,000,000. Yes! So normalized operating profit before impairment = 341,000,000 EUR for 2021. Normalized EBITDA 2021 = 341,000,000 + 270,000,000 = 611,000,000 EUR. Now for 2022: "Profit From Operations Before Impairment And Disposals Of Non Current Assets" "Before Fair Value Adjustments Member" 2022-01-01 - 2023-01-01: 428,000,000 EUR "Amortisation Expense" 2022: 299,000,000 EUR Normalized EBITDA 2022 = 428,000,000 + 299,000,000 = 727,000,000 EUR. Great, now I have: - 2021 Normalized EBITDA: 611,000,000 EUR - 2022 Normalized EBITDA: 727,000,000 EUR Now for Adjusted EBITDA, I need to consider: - Leases: Already capitalized (IFRS 16) - Nonrecurring items: Already normalized by using before FV adjustments - Pension adjustments: Not material (employee benefits provision is 3,000,000 noncurrent, 2,000,000 current - very small) - Joint venture proportional EBITDA: Need to estimate For joint ventures: "Investments In Associates" 2022: 1,838,000,000 EUR; 2023: 1,892,000,000 EUR. "Share Of Profit Loss Of Associates" 2021: -178,000,000 EUR; 2022: 165,000,000 EUR. To get proportional EBITDA, I'd need to add back tax, interest, and D&A for associates. Without this data, I'll use a practical approach: add dividends received as a proxy for cash flow contribution, or add back the equity-accounted loss/profit and estimate D&A. For 2021: Share of loss = 178,000,000. If I add this back to EBITDA (since it's below operating profit), and assume associate D&A is roughly proportional to investment, say 5-10% of investment = 90-180,000,000. Rough proportional EBITDA from associates: -178,000,000 + 90,000,000 (est. D&A) + tax and interest addbacks ≈ not easily estimable. Given the complexity, let me use reported EBITDA and note that FFO will include dividends received from associates. Actually, for S&P Adjusted EBITDA, they typically want to include proportional EBITDA from equity-accounted investments when they're significant. But without detailed data, I'll use reported EBITDA with a note. Let me proceed with: - Adjusted EBITDA 2021 = 611,000,000 EUR (reported, normalized for nonrecurring FV adjustments) - Adjusted EBITDA 2022 = 727,000,000 EUR For joint ventures, I'll add a rough estimate. If associates represent roughly 7-8% of total assets (1,838/24,882 = 7.4%), and assuming similar margin and D&A rates: Proportional EBITDA ≈ 611,000,000 × 0.074 / (1 - 0.074) ≈ not right. Better: if associate profitability is similar, and they have 1,838,000,000 investment with -178,000,000 loss (very poor year), vs 2022 with +165,000,000 profit. Actually, 2021 was a bad year for associates (loss), 2022 was good (profit). The -178,000,000 loss is after D&A and tax. If I gross up by say 50% for D&A and tax, proportional EBITDA might be around -350,000,000 or so, which would make Adjusted EBITDA lower. But this is getting too speculative. Let me use reported EBITDA and be consistent, or use a simpler adjustment. For practical purposes, I'll use: Adjusted EBITDA = Reported normalized EBITDA + proportional EBITDA from associates (estimated as dividends received + equity earnings + estimated D&A) For 2021: Dividends received 272,000,000 + equity loss (-178,000,000) = 94,000,000 cash-like contribution. Plus estimated D&A of associates. If associate fixed assets are roughly half of investment, and 5% depreciation = 46,000,000. So proportional EBITDA ≈ 94,000,000 + 46,000,000 = 140,000,000? No, that's not right either. Let me try: proportional EBITDA = equity earnings / (1 - tax rate) + interest + D&A. With -178,000,000 loss, this is negative. I'll skip this adjustment due to data limitations and use reported EBITDA, noting that for a more precise S&P-style calculation, associate look-through would be needed. ## Step 3: Estimate 2021 FFO FFO = Adjusted EBITDA - Cash Interest - Cash Taxes For 2021: - Adjusted EBITDA: 611,000,000 EUR - Cash Interest: Need to estimate. "Interest Paid Classified As Financing Activities": 295,000,000 EUR. But there may be more interest in operating activities or project companies. - Cash Taxes: 155,000,000 EUR (paid) However, looking at "Financial Result On Financing Of Infrastructure Projects" 2021: -220,000,000 EUR. This is likely interest expense on project debt. Is this paid from operating cash flow or financing? For infrastructure projects, interest during construction may be capitalized, and operating project interest may be paid from project cash flows. The 295,000,000 EUR "Interest Paid Classified As Financing Activities" likely includes holding company interest. Total financing cost 2021: 335,000,000 EUR (from "Adjustments For Finance Income Cost"). This includes infrastructure project financing (220,000,000) and other financing (27,000,000) and derivatives/other (87,000,000 + 1,000,000). Cash interest paid 295,000,000 may not include all of this. Let me use 295,000,000 as minimum cash interest. FFO 2021 = 611,000,000 - 295,000,000 - 155,000,000 = 161,000,000 EUR This seems very low. Let me check if I should add back dividends from investments or use a different approach. Actually, S&P FFO for infrastructure companies often includes: FFO = Cash flow from operating activities before working capital changes - cash interest - cash taxes + dividends from equity investments... Or from the cash flow statement, a more direct approach: "Cash Flows From Used In Operating Activities" 2021: 810,000,000 EUR Less: Working capital contribution: 249,000,000 EUR (this is a source, so remove it) Less: Dividends received: 272,000,000 EUR (remove as non-operating) Plus: Taxes paid: 155,000,000 EUR (add back as it was deducted) Plus: Interest paid in operating activities: ? This gets messy. Let me try: CFO before working capital and non-operating items = 810,000,000 - 249,000,000 - 272,000,000 + ? = ? Actually, standard approach: CFO = Net income + adjustments + WC changes + other items. From "Adjustments For Reconcile Profit Loss" 2021: 256,000,000. This includes D&A, impairments, etc. CFO before WC changes = Net income + adjustments = 1,336,000,000 + 256,000,000 = 1,592,000,000? No, that's too high. Wait, "Adjustments For Reconcile Profit Loss" is 256,000,000, but this is the total adjustment to profit. Let me see if this reconciles. Profit Loss: 1,336,000,000 + Adjustments: 256,000,000 + Working capital: 249,000,000 + Dividends received: 272,000,000 - Taxes paid: -155,000,000 = 1,336 + 256 + 249 + 272 - 155 = 1,958,000,000. Not 810,000,000. I think the issue is that "Adjustments For Reconcile Profit Loss" might already be net of some items, or the structure is different. Let me try another way. Looking at cash flow from operations: - Start with PBT: 966,000,000 - Add back D&A: 270,000,000 - Add back impairment/gain: -1,139,000,000 (gain, so subtract) - Add back finance cost: 335,000,000 - Add back other non-cash: ? - Working capital: 249,000,000 - Dividends received: 272,000,000 - Taxes paid: -155,000,000 Subtotal: 966 + 270 - 1139 + 335 + 249 + 272 - 155 = 808,000,000 ≈ 810,000,000. Close enough! So the reconciliation works from PBT, not net income. Good. For FFO, S&P typically uses: FFO = PBT + interest expense + D&A - cash interest - cash taxes - extraordinary items +/- other items Or: FFO = EBIT + D&A - cash interest - cash taxes EBIT (normalized, before FV) = PBT before FV + interest expense = -47,000,000 + 335,000,000? No wait, PBT before FV is -47,000,000, which includes interest expense. Actually, "Profit Loss Before Tax" "Before Fair Value Adjustments Member" 2021: -47,000,000 EUR. This is after interest expense of 335,000,000 (finance cost). So EBIT before FV = -47,000,000 + 335,000,000 = 288,000,000? But earlier I had 341,000,000 for operating profit before impairment. Let me check: Operating profit before impairment 341,000,000 - impairment/gains 38,000,000 = operating activities 379,000,000. Then + financial result? No, financial result is below operating activities. "Profit Loss From Operating Activities" before FV: 379,000,000 "Finance Income Cost" before FV: -252,000,000? Let me check. "Finance Income Cost" "Before Fair Value Adjustments Member" 2021-01-01 - 2022-01-01: -252,000,000 EUR "Share Of Profit Loss Of Associates" before FV: -174,000,000 EUR = PBT before FV: 379,000,000 - 252,000,000 - 174,000,000 = -47,000,000. Yes! So EBIT = Operating activities before FV + finance income cost before FV? No, EBIT is before interest and tax. So EBIT = Operating activities before FV = 379,000,000? Or before impairment = 341,000,000? Actually, EBIT typically includes share of profit of associates (equity method). So: EBIT = Operating profit + share of profit of associates = 379,000,000 + (-174,000,000) = 205,000,000? Or is associates already in operating profit? Looking at the structure: "Profit Loss From Operating Activities" is 379,000,000 (before FV). Then "Finance Income Cost" is -252,000,000. Then "Share Of Profit Loss Of Associates" is -174,000,000. Then PBT is -47,000,000. So operating activities does NOT include associates or finance cost. EBIT would include share of associates but exclude finance cost. EBIT = 379,000,000 + (-174,000,000) = 205,000,000? But this seems odd as it's lower than operating profit. Actually, for many companies, "operating profit" includes associates (equity method). Let me check if 379,000,000 includes associates. The line "Share Of Profit Loss Of Associates" comes after "Profit Loss From Operating Activities" and before "Profit Loss Before Tax". So operating activities does NOT include associates. Therefore EBIT = Operating activities + share of associates = 379,000,000 + (-174,000,000) = 205,000,000. But wait, is "Profit From Operations Before Impairment" the same as operating activities? No, "Profit Loss From Operating Activities" is after impairment. "Profit From Operations Before Impairment" before FV: 341,000,000 "Impairment And Gains" before FV: 38,000,000 "Profit Loss From Operating Activities" before FV: 379,000,000 So EBIT before impairment = 341,000,000 + (-174,000,000) = 167,000,000? This seems very low. Hmm, but earlier I calculated EBITDA = 341,000,000 + 270,000,000 = 611,000,000. This is before impairment and before associates. For S&P purposes, EBITDA typically includes proportional or equity-accounted EBITDA from associates when significant. Or they may calculate it differently. Given the complexity, let me use a practical FFO calculation from the cash flow statement: FFO = Cash flow from operating activities before working capital changes - cash interest - cash taxes + dividends received from investments From earlier, CFO before WC changes = 810,000,000 - 249,000,000 = 561,000,000 EUR? No wait, working capital decrease of 249,000,000 added to cash flow. So if we remove it, CFO before WC = 810,000,000 - 249,000,000 = 561,000,000. But this 561,000,000 includes dividends received of 272,000,000 and excludes taxes paid of 155,000,000 (which was already deducted to get to 810,000,000). Actually, let me recalculate from PBT: PBT: 966,000,000 + D&A: 270,000,000 - Gain on disposal: -1,139,000,000 + Other non-cash: ? + Working capital: 249,000,000 + Dividends received: 272,000,000 - Taxes paid: -155,000,000 = CFO: 810,000,000 Check: 966 + 270 - 1139 + 249 + 272 - 155 = 463,000,000. Not 810,000,000. Hmm, I'm missing something. Let me add finance cost: + Finance cost: 335,000,000 966 + 270 - 1139 + 335 + 249 + 272 - 155 = 798,000,000 ≈ 810,000,000. Close! So CFO = PBT + D&A - gain + finance cost + WC + dividends - taxes = 810,000,000. For FFO, we want: FFO = EBIT + D&A - cash interest - cash taxes Or: FFO = PBT + interest expense + D&A - cash interest - cash taxes PBT: 966,000,000 + Interest expense (finance cost): 335,000,000 = EBIT: 1,301,000,000? No, that's too high. PBT already includes associates. Actually: EBIT = PBT + interest expense = 966,000,000 + 335,000,000 = 1,301,000,000? But this doesn't match my earlier calculation. I think the issue is that "Finance Income Cost" of -335,000,000 includes more than just interest. It includes derivatives and other financial results. "Financial Result On Financing Of Infrastructure Projects": -220,000,000 "Result On Derivatives And Other Financial Results Infrastructure Projects": -87,000,000 "Financial Result On Financing Excluding Infrastructure Projects": -27,000,000 "Result On Derivatives And Other Financial Results Excluding Infrastructure Projects": -1,000,000 Total: -335,000,000. Yes. For cash interest, we want the actual interest paid, not the total finance cost including derivatives. "Interest Paid Classified As Financing Activities": 295,000,000 EUR. This is likely the cash interest. So FFO = EBIT + D&A - cash interest - cash taxes. But what is EBIT? From operating activities: 379,000,000 (before FV, after impairment) + associates (-174,000,000) = 205,000,000? Or before impairment: 341,000,000 + (-174,000,000) = 167,000,000? This is getting too convoluted. Let me use a simpler, more standard S&P approach: FFO = Net income + D&A + deferred taxes + other non-cash items - extraordinary gains + equity in earnings of affiliates - dividends from affiliates For 2021: Net income (continuing operations): 975,000,000? Or total 1,336,000,000? S&P typically uses total net income attributable to parent and noncontrolling interests, or just parent. Actually, for credit analysis, S&P uses total net income (not just parent). Net income 2021: 1,336,000,000 + D&A: 270,000,000 + Deferred taxes: ? (unknown, but "Deferred Tax Assets" increased from unknown to 570,000,000; "Deferred Tax Liabilities" at 2022-01-01 is 687,000,000) Without change data, I'll estimate. Actually, from PBT 966,000,000 and tax expense -9,000,000, the effective tax rate is negative. Tax paid was 155,000,000. So deferred tax benefit was -164,000,000? Not sure. Let me skip deferred taxes and use: FFO ≈ Net income + D&A - extraordinary gains + equity in losses of affiliates = 1,336,000,000 + 270,000,000 - 1,139,000,000 (gain on disposal) + (-174,000,000) (equity loss, already in net income) Wait, the 1,139,000,000 gain is already in net income. So FFO before adjustments = 1,336,000,000 + 270,000,000 = 1,606,000,000? Then subtract the gain as nonrecurring: -1,139,000,000? But the gain is already in the 1,336,000,000. Normalized net income = 1,336,000,000 - 1,101,000,000 (FV adjustment) = 235,000,000? Or using before FV: -47,000,000 PBT - tax credit 9,000,000 = -56,000,000? That can't be right for net income. Let me check: "Profit Loss Before Tax" before FV: -47,000,000. Tax expense: -9,000,000 (credit). So net income before FV: -47,000,000 - (-9,000,000) = -38,000,000? Plus associates and discontinued? Actually, the -47,000,000 is before associates. "Share Of Profit Loss Of Associates" before FV: -174,000,000. So PBT before FV and before associates = -47,000,000 + 174,000,000? No, PBT includes associates. From the structure: Profit Loss From Operating Activities before FV: 379,000,000 + Finance Income Cost before FV: -252,000,000 + Share Of Profit Loss Of Associates before FV: -174,000,000 = PBT before FV: -47,000,000 Yes! So PBT before FV = -47,000,000. Then tax credit of 9,000,000 gives net income before FV of -38,000,000? But then add FV adjustments... PBT total: 966,000,000 = -47,000,000 + 1,014,000,000 (FV adjustments) Tax total: -9,000,000 = 13,000,000 (before FV) + (-21,000,000) (FV) Net income total: 975,000,000 (continuing) = -38,000,000? + 1,014,000,000 + 21,000,000? = 997,000,000? Not matching. I think the FV adjustment in tax is different. Let me not try to reconcile this exactly. For practical purposes, let me use a much simpler approach that S&P might use for a quick assessment: **FFO from cash flow statement approach:** FFO = Cash flow from operating activities before working capital changes - cash interest - cash taxes + dividends received from equity investments From cash flow data 2021: - CFO: 810,000,000 - Working capital decrease: 249,000,000 (source, so remove to get before WC) - Dividends received: 272,000,000 (remove as it's equity investment return) - Taxes paid: 155,000,000 (was deducted, so add back to get pre-tax CFO) CFO before WC, before dividends, before taxes = 810,000,000 - 249,000,000 - 272,000,000 + 155,000,000 = 444,000,000? Then FFO = this - cash interest + ? Actually, standard S&P: FFO = CFO before WC changes - cash interest - cash taxes + dividends from equity investments... no, dividends are already in CFO. Let me try: FFO = Net income + D&A + deferred taxes + equity in losses - dividends from equity investments + other non-cash For 2021: Net income: 1,336,000,000 + D&A: 270,000,000 - Gain on disposal: -1,139,000,000 (nonrecurring, remove) + Equity in losses of affiliates: 174,000,000 (already in net income as negative, so add back to remove) - Dividends from affiliates: -272,000,000 (these were received, not in net income, so...) Actually, dividends received are not in net income (equity method). So: FFO = Net income - gain on disposal + D&A + deferred taxes + other = 1,336,000,000 - 1,139,000,000 + 270,000,000 + ... = 467,000,000 + adjustments This is getting closer to my earlier 432,000,000-467,000,000 range. Let me settle on a practical FFO calculation: **FFO 2021 = 432,000,000 EUR** This equals: EBITDA (611,000,000) - Cash Interest (295,000,000) - Cash Taxes (155,000,000) + Dividends received (272,000,000)? No, that was 432,000,000 but double counts. Actually: 611 - 295 - 155 + 272 = 433. But this adds dividends to EBITDA-based FFO, which is not standard. Let me use: FFO = EBITDA - Cash Interest - Cash Taxes = 611 - 295 - 155 = 161,000,000. This is too low. Or: FFO = CFO before WC - Cash Interest = (810 - 249) - 295 = 266,000,000? Then - cash taxes? But taxes already paid. Hmm. Let me look at this differently. S&P's FFO for infrastructure companies: From S&P methodology: "Our preferred supplementary ratios in the sector are FOCF to debt and DCF to debt." And "We view DCF to debt as most relevant for companies that pay out a portion of excess cash flow to shareholders." For core ratios: "FFO to debt is the preferred measure." FFO is typically: Net income + depreciation + amortization + deferred taxes + other non-cash items - extraordinary items +/- changes in working capital... no, FFO is before working capital. Standard FFO = Cash flow from operations before changes in working capital and provision. For 2021, if I can estimate CFO before WC: CFO = 810,000,000 WC change = -249,000,000 (decrease, so added to cash flow) CFO before WC = 810,000,000 - 249,000,000 = 561,000,000? No, if WC decrease added 249,000,000, then without it, CFO would be 810,000,000 - 249,000,000 = 561,000,000. But this 561,000,000 includes dividends received (272,000,000). Should we exclude these? For pure FFO, we might want operating cash flow before WC and before dividends from investments. CFO before WC, before dividends = 561,000,000 - 272,000,000 = 289,000,000? Then add back taxes paid = 289,000,000 + 155,000,000 = 444,000,000? This 444,000,000 is roughly: Net income (1,336,000,000) + adjustments (256,000,000) - gain (1,139,000,000)? = 453,000,000. Close to 444,000,000. So normalized CFO before WC and before dividends ≈ 444,000,000. Then FFO = 444,000,000 - cash interest? No, interest is already in net income. Actually, FFO should be after interest expense (accrual) but we need to reconcile to cash. Let me try: FFO = EBIT + D&A - Cash Interest - Cash Taxes EBIT (normalized, before FV, after associates) = ? From PBT before FV (-47,000,000) + Finance cost (252,000,000) = 205,000,000? But this includes associates. Actually: EBIT = Operating profit before FV (379,000,000) + Associates (-174,000,000) + Finance cost? No, EBIT is before interest and tax, so it includes associates but excludes finance cost. EBIT = PBT + Finance cost = -47,000,000 + 252,000,000 = 205,000,000? But this is before FV. Total EBIT = 966,000,000 + 335,000,000 = 1,301,000,000? No, that's wrong because PBT includes associates and other items. Let me just use: EBIT = Operating activities + Associates = 379,000,000 + (-174,000,000) = 205,000,000 (before FV). Then EBITDA = EBIT + D&A = 205,000,000 + 270,000,000 = 475,000,000? But earlier I had 611,000,000. The difference is that 611,000,000 was based on "Profit From Operations Before Impairment" (341,000,000) + D&A, not including associates. But 205,000,000 EBIT includes impairment/gains (38,000,000) and associates. So normalized EBITDA including associates = 341,000,000 + 270,000,000 + (-174,000,000) associates? No, EBITDA should include proportional EBITDA from associates, not just equity earnings. If associates have EBITDA of say 500,000,000 and FERROVIAL owns 30%, proportional EBITDA = 150,000,000. But equity earnings are -174,000,000, which is after their D&A, interest, tax. This is too complex without associate financials. Let me use a simplified approach and accept some approximation. **Final 2021 estimates:** - Adjusted EBITDA: 611,000,000 EUR (reported, normalized for FV adjustments, before associates) - FFO: I'll use 432,000,000 EUR as a practical estimate based on CFO-like approach, or use 161,000,000 if strict EBITDA - cash interest - cash taxes Given the need for consistency with S&P methodology, let me use: **FFO 2021 = 432,000,000 EUR** (approximate, using EBITDA - cash interest - cash taxes + dividends from investments, recognizing this is a simplified approach) Actually, I realize I need to be more careful. Let me re-read S&P's typical FFO definition for infrastructure: For transportation infrastructure, S&P uses FFO / debt as core ratio. FFO typically includes: - Cash flow from operations after working capital changes - Before capex - After cash interest and cash taxes Actually no - FFO is BEFORE working capital changes typically. Let me use the most standard definition: **FFO = Net income + D&A + deferred taxes + other non-cash items - extraordinary gains/losses - equity in earnings of affiliates + dividends received from affiliates** For 2021: Net income: 1,336,000,000 + D&A: 270,000,000 - Gain on disposal: -1,139,000,000 (remove this nonrecurring gain) + Equity in losses: +178,000,000 (add back the loss, as we want cash dividends not equity earnings) - Dividends received: -272,000,000? No, we want to include dividends, not exclude. Wait, standard formula adds back equity in earnings (to remove accrual) and subtracts dividends received (to remove cash already included)? No, that's wrong. Correct formula: FFO = Net income + D&A + deferred taxes - equity in earnings of affiliates + dividends received from affiliates + other items Because equity earnings are non-cash (accrual), we remove them and replace with actual cash dividends received. For 2021: Net income: 1,336,000,000 + D&A: 270,000,000 - Equity in earnings of affiliates: -(-174,000,000) = +174,000,000? No, equity in losses is -174,000,000, so subtracting this means -(-174,000,000) = +174,000,000? Actually: Net income includes equity in losses of -174,000,000. To remove this non-cash item, we add back 174,000,000. Then we subtract dividends received of 272,000,000 to remove cash inflow that's not from operations? No, dividends from investments are part of FFO for infrastructure companies. I'm confusing myself. Let me use a cleaner approach. **Simplified FFO for 2021:** Start from normalized net income (before FV adjustments, continuing operations): - PBT before FV: -47,000,000 - Tax: let's say 0 (approximate, given tax credit) - Net income before FV: -47,000,000 - Add back FV adjustment (as nonrecurring): not needed for normalized Actually, normalized net income from continuing operations before FV: -60,000,000 (from "Profit Loss From Continuing Operations" before FV) Add D&A: 270,000,000 Add equity in losses (to get to cash): 174,000,000? No, we want to exclude equity accounting. Normalized FFO = -60,000,000 + 270,000,000 + 0 (deferred taxes unknown) + other = 210,000,000 plus adjustments. This is getting too messy with the FV adjustments and associates. Let me use a completely different approach: **use reported numbers and be consistent year-over-year, focusing on trend rather than absolute levels.** ## Revised Practical Approach Given data complexity, I'll use: - **Adjusted EBITDA** = Reported operating profit before impairment + D&A, normalized for obvious nonrecurring items (FV adjustments) - **FFO** = Cash flow from operating activities before working capital changes - cash interest - cash taxes, with practical estimates - **Adjusted Debt** = Total debt + leases - cash (with certain adjustments) For year-over-year trend, consistency matters more than absolute precision. ### 2021 Calculations **Adjusted EBITDA 2021:** = "Profit From Operations Before Impairment And Disposals" before FV + D&A = 341,000,000 + 270,000,000 = **611,000,000 EUR** (Note: Using before FV adjustment of 341,000,000 rather than total 340,000,000; difference is 1,000,000, negligible) **FFO 2021:** Using CFO approach: CFO = 810,000,000 Less: Working capital decrease (249,000,000) → remove this source Less: Dividends received (272,000,000) → remove as investment income Add: Taxes paid (155,000,000) → add back to get pre-tax operating = 810,000,000 - 249,000,000 - 272,000,000 + 155,000,000 = 444,000,000 Then subtract cash interest: 444,000,000 - 295,000,000 = 149,000,000? Or using simpler EBITDA-based: FFO = EBITDA - Cash Interest - Cash Taxes + Dividends from investments (as these are part of infrastructure FFO) = 611,000,000 - 295,000,000 - 155,000,000 + 272,000,000 = **433,000,000 EUR** I'll use **FFO 2021 = 433,000,000 EUR** (approximate) Actually, let me reconsider. For infrastructure with significant equity investments, S&P may include dividends in FFO. Let me use 433,000,000. But wait - this seems high relative to EBITDA. Let me check: 611 - 295 - 155 + 272 = 433. The +272 is dividends, which are cash inflow not in EBITDA. So this is like "FFO including investment dividends." For pure operating FFO: 611 - 295 - 155 = 161,000,000. Given S&P's flexibility for infrastructure, I'll use **FFO 2021 = 433,000,000 EUR** including dividends, or note that operating FFO is lower. Hmm, but looking at S&P methodology for Transportation Infrastructure: "Core ratio: FFO to debt is the preferred measure." They don't specify including dividends. Let me use a middle ground: **FFO 2021 = 300,000,000 EUR** as a conservative estimate. Actually, I need to be more rigorous. Let me calculate from the cash flow statement using standard S&P adjustments. From cash flow statement 2021: - Net income: 1,336,000,000 - Adjustments to reconcile: 256,000,000 (includes D&A, impairments, etc.) - Working capital: 249,000,000 - Dividends received: 272,000,000 - Taxes paid: -155,000,000 - CFO: 810,000,000 CFO before working capital = 810,000,000 - 249,000,000 = 561,000,000 This 561,000,000 includes: - Net income: 1,336,000,000 - Adjustments: 256,000,000 - Dividends: 272,000,000 - Taxes: -155,000,000 - Other: ? Check: 1,336 + 256 + 272 - 155 = 1,709,000,000. Not 561,000,000. I think "CFO before working capital" in S&P terms means: CFO + |working capital change if source| or - |if use|. Since WC decrease was a source of 249,000,000, CFO before WC = 810,000,000 - 249,000,000 = 561,000,000. But this 561,000,000 is composed of: Net income 1,336,000,000 + Adjustments 256,000,000 - WC change 249,000,000 (removed) + Dividends 272,000,000 - Taxes 155,000,000 = 1,336 + 256 - 249 + 272 - 155 = 1,460,000,000? No. I'm clearly misunderstanding the cash flow structure. Let me accept that and use a simpler income-statement based FFO. **Final 2021 FFO estimate: 433,000,000 EUR** (EBITDA - cash interest - cash taxes + dividends from equity investments) I'll proceed with this and note it includes dividends. ### 2022 Calculations **Adjusted EBITDA 2022:** = "Profit From Operations Before Impairment And Disposals" before FV + D&A = 428,000,000 + 299,000,000 = **727,000,000 EUR** **FFO 2022:** = EBITDA - Cash Interest - Cash Taxes + Dividends from investments = 727,000,000 - 329,000,000 - 82,000,000 + 284,000,000? Wait, cash taxes 2022: "Income Taxes Paid Refund Classified As Operating Activities" 2022: 82,000,000 EUR. Cash interest 2022: "Interest Paid Classified As Financing Activities" 2022: 329,000,000 EUR. Dividends received 2022: 284,000,000 EUR. FFO 2022 = 727,000,000 - 329,000,000 - 82,000,000 + 284,000,000 = **600,000,000 EUR** Or without dividends: 727 - 329 - 82 = 316,000,000. ## Step 4: Estimate 2021 Adjusted_Debt Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash For 2021 (year-end 2022-01-01): - Current Borrowings And Current Portion Of Noncurrent Borrowings: 1,096,000,000 EUR - Noncurrent Portion Of Other Noncurrent Borrowings: 9,513,000,000 EUR - Total reported debt: 1,096,000,000 + 9,513,000,000 = 10,609,000,000 EUR Wait, let me check components: - "Current Debt Securities And Bank Borrowings Of Infrastructure Projects": 47,000,000 - "Current Debt Securities And Bank Borrowings Excluding Infrastructure Projects": 1,049,000,000 - "Noncurrent Debt Securities And Bank Borrowings Of Infrastructure Projects": 7,362,000,000 - "Noncurrent Debt Securities And Bank Borrowings Excluding Infrastructure Projects": 2,151,000,000 Total debt: 47 + 1,049 + 7,362 + 2,151 = 10,609,000,000 EUR. Matches. Leases: - Current Lease Liabilities: 58,000,000 - Noncurrent Lease Liabilities: 115,000,000 Total leases: 173,000,000 EUR Pension deficit: "Noncurrent Provisions For Employee Benefits" 2022-01-01: 3,000,000 EUR. Very small. Other debt-like items: - "Other Noncurrent Financial Liabilities": 72,000,000 EUR - "Current Derivative Financial Liabilities": 110,000,000 EUR - "Noncurrent Derivative Financial Liabilities": 295,000,000 EUR These derivatives may or may not be debt-like depending on position. Hybrid debt: "Perpetual Subordinated Bonds" - these are equity-like but may have debt portion. From equity section, there are perpetual subordinated bonds of -7,000,000 in 2021 (negative means reduction). The amount outstanding is small or zero. Eligible cash: - "Cash And Cash Equivalents": 5,536,000,000 EUR - But includes infrastructure project cash: 207,000,000 - And restricted cash: 47,000,000 + 160,000,000 = 207,000,000? "Cash And Cash Equivalents Infrastructure Projects": 207,000,000 "Current Restricted Cash And Cash Equivalents Infrastructure Projects": 47,000,000 "Other Cash And Cash Equivalents Infrastructure Projects": 160,000,000 Total infrastructure/restricted cash: 207,000,000 + 47,000,000 + 160,000,000 = 414,000,000? But "Cash And Cash Equivalents Infrastructure Projects" of 207,000,000 might include the restricted and other. Looking: "Cash And Cash Equivalents Infrastructure Projects" 2022-01-01: 207,000,000 "Current Restricted Cash And Cash Equivalents Infrastructure Projects": 47,000,000 "Other Cash And Cash Equivalents Infrastructure Projects": 160,000,000 207 = 47 + 160? Yes! So infrastructure cash is 207,000,000 total, comprising 47,000,000 restricted and 160,000,000 other. "Cash And Cash Equivalents Excluding Infrastructure Projects": 5,329,000,000 Total cash: 5,329,000,000 + 207,000,000 = 5,536,000,000. Matches. For eligible cash, S&P typically excludes: - Restricted cash (47,000,000) - Cash in non-recourse project entities (160,000,000 or all 207,000,000 infrastructure cash) Eligible cash ≈ Cash excluding infrastructure and restricted = 5,329,000,000 - some adjustment for operational needs. Actually, S&P typically deducts all cash not available to service debt at the corporate level. For FERROVIAL, much cash is at project companies. Conservative approach: Eligible cash = "Cash And Cash Equivalents Excluding Infrastructure Projects" = 5,329,000,000 EUR. Or less if some is trapped. But this is very high relative to debt. Let me check if this makes sense. Actually, looking at the balance sheet: Current Assets 9,030,000,000 includes Cash 5,536,000,000. This is a very cash-rich company. For Adjusted Debt, S&P typically subtracts "surplus cash" not all cash. But for simplicity, let's use: Eligible cash = Cash And Cash Equivalents Excluding Infrastructure Projects = 5,329,000,000 But this would make Adjusted Debt very low or negative. Let me check: Debt is 10,609,000,000, cash is 5,536,000,000, so net debt is about 5,073,000,000. For S&P, they may not subtract all cash, or may use a haircut. Let me use a more standard approach: Subtract cash excluding infrastructure projects and restricted cash, but cap at some level. Actually, for credit analysis, S&P typically uses "available cash" which may be less than total cash. But without specific guidance, I'll use: Eligible cash = Cash And Cash Equivalents Excluding Infrastructure Projects - minimum operating cash (say 5% of revenue = 346,000,000) ≈ 5,329,000,000 - 346,000,000 = 4,983,000,000. Or simply use 5,329,000,000. But wait - this seems too high. Let me re-read the data. "Cash And Cash Equivalents Excluding Infrastructure Projects" 2022-01-01: 5,329,000,000 EUR. This is a huge amount. Actually, I wonder if this includes investments or other items. Let me check total current assets: 9,030,000,000. Cash is 5,536,000,000 (61% of current assets). This seems high but possible for an infrastructure company with recent divestitures. For Adjusted Debt, I'll use: - Reported debt: 10,609,000,000 + Leases: 173,000,000 + Pension deficit: 3,000,000 + Other debt-like: let's include derivative liabilities 295,000,000 + 110,000,000 = 405,000,000? Or exclude as these may be hedging. - Eligible cash: 5,329,000,000 (excluding infrastructure and restricted) Adjusted Debt 2021 = 10,609,000,000 + 173,000,000 + 3,000,000 - 5,329,000,000 = **5,456,000,000 EUR** If we include derivative liabilities: +405,000,000 = 5,861,000,000. Let me use **Adjusted Debt 2021 = 5,456,000,000 EUR** (excluding derivatives as hedging-related) ### 2022 Adjusted_Debt For 2022 (year-end 2023-01-01): - Current Borrowings: 877,000,000 - Noncurrent Borrowings: 10,776,000,000 - Total reported debt: 11,653,000,000 EUR Check by components: - Current project debt: 74,000,000 - Current non-project debt: 803,000,000 - Noncurrent project debt: 7,893,000,000 - Noncurrent non-project debt: 2,883,000,000 Total: 74 + 803 + 7,893 + 2,883 = 11,653,000,000. Yes. Leases: - Current: 64,000,000 - Noncurrent: 120,000,000 Total: 184,000,000 Pension: 2,000,000 Other debt-like: - Other Noncurrent Financial Liabilities: 838,000,000 (increased significantly) - Derivatives: 66,000,000 + 47,000,000 = 113,000,000 Eligible cash: - Cash excluding infrastructure: 4,962,000,000 - Infrastructure cash: 168,000,000 (comprising 38,000,000 restricted + 130,000,000 other) Adjusted Debt 2022 = 11,653,000,000 + 184,000,000 + 2,000,000 + 838,000,000 - 4,962,000,000 = **7,715,000,000 EUR** Or without "Other Noncurrent Financial Liabilities" (which may not be debt): 11,653 + 184 + 2 - 4,962 = 6,877,000,000. The 838,000,000 increase in "Other Noncurrent Financial Liabilities" is significant. Let me check what this represents. It went from 72,000,000 to 838,000,000. This might be acquisition-related payables, put options, or other debt-like items. For conservatism, I'll include it as debt-like. **Adjusted Debt 2022 = 7,715,000,000 EUR** ## Steps 5-6: 2021 Ratios Adjusted_Debt / Adjusted_EBITDA 2021 = 5,456,000,000 / 611,000,000 = **8.93x** FFO / Adjusted_Debt 2021 = 433,000,000 / 5,456,000,000 = **0.079** or **7.9%** Wait, this FFO/Debt is very low. Let me reconsider FFO. If I use FFO without dividends: 161,000,000 / 5,456,000,000 = **0.029** or **2.9%**, even worse. Given the company's strong cash position, maybe my debt calculation is off, or FFO should be higher. Let me recheck EBITDA. Is 611,000,000 reasonable for a company with 6.9B revenue? That's 8.8% EBITDA margin, which seems low for infrastructure. Actually, FERROVIAL is a concessionaire with investments in infrastructure, not a pure operator. The revenue may be from construction/services, while investments are equity-accounted. Let me check if there's other EBITDA. "Revenue" is 6,910,000,000. But the company also has "Share Of Profit Loss Of Associates" of -174,000,000, which is below EBITDA. For proportional consolidation, if associates have revenue of say 3,000,000,000 and 30% ownership, proportional revenue is 900,000,000, and proportional EBITDA might be 300,000,000. But this is speculative. Let me accept my calculations and proceed, noting the trend. Actually, let me recalculate FFO using a different approach. From S&P's cash flow based FFO: FFO = Cash flow from operating activities before working capital changes - cash interest - cash taxes CFO before WC changes 2021: Need to estimate. From cash flow: CFO 810,000,000. WC decrease added 249,000,000. So CFO before WC = 810,000,000 - 249,000,000 = 561,000,000? No, if WC decrease was a source (positive), then removing it gives lower CFO. Actually, in cash flow statements: CFO = Net income + adjustments + WC changes + other items If WC change was -249,000,000 (use of cash), then CFO without WC = 810,000,000 - (-249,000,000)? No, the sign convention matters. From earlier reconciliation: PBT 966 + D&A 270 - gain 1,139 + finance cost 335 + WC 249 + dividends 272 - taxes 155 = 808 ≈ 810. So WC change of 249,000,000 was ADDED (source of cash). If we remove it: 810 - 249 = 561. But wait, this 561 includes dividends received of 272. For operating FFO, we might exclude dividends. CFO before WC and before dividends = 561 - 272 = 289,000,000? Then add back taxes paid = 289 + 155 = 444,000,000. This 444,000,000 is roughly: PBT 966 + D&A 270 - gain 1,139 + finance cost 335 - taxes 155? = 277. Not matching. Let me try: Net income 1,336 + D&A 270 - gain 1,139 + other adjustments? = 467. Then + dividends 272 = 739. Then - WC 249 = 490. Then - taxes 155? No, taxes already in net income. I'm going in circles. Let me just use my FFO estimate of 433,000,000 and proceed, or use a simpler approach. Actually, let me recalculate FFO as: FFO = EBITDA - Cash Interest - Cash Taxes + Dividends received (for infrastructure) = 611 - 295 - 155 + 272 = 433 Or if we consider dividends as part of operating cash (which S&P might for infrastructure): FFO = 433,000,000 But this gives low coverage. Let me check if cash interest should be lower. "Financial Result On Financing Of Infrastructure Projects" 2021: -220,000,000. This is expense. But cash paid may differ. "Interest Paid Classified As Financing Activities" 2021: 295,000,000. This includes all interest paid. Maybe some of this interest is capitalized or at project level and not deducted for FFO. For FFO, S&P deducts "cash interest" which is interest actually paid. The 295,000,000 seems correct. Given the complexity, let me use **FFO 2021 = 433,000,000** with the understanding that this includes dividends from investments, which may be appropriate for this infrastructure company. ## Steps 7-9: 2022 Calculations **Adjusted EBITDA 2022 = 727,000,000 EUR** (as calculated) **FFO 2022:** = 727,000,000 - 329,000,000 - 82,000,000 + 284,000,000 = **600,000,000 EUR** Or without dividends: 727 - 329 - 82 = 316,000,000. I'll use **600,000,000 EUR** for consistency with 2021 approach. **Adjusted Debt 2022 = 7,715,000,000 EUR** (as calculated) ## Steps 10-11: 2022 Ratios Adjusted_Debt / Adjusted_EBITDA 2022 = 7,715,000,000 / 727,000,000 = **10.61x** FFO / Adjusted_Debt 2022 = 600,000,000 / 7,715,000,000 = **0.078** or **7.8%** ## Step 12: Credit Trend Analysis Signal 1: Leverage (Adjusted_Debt / Adjusted_EBITDA) - 2021: 8.93x - 2022: 10.61x - Change: 10.61 - 8.93 = **+1.68x** Threshold: ≥ +0.2x is Deteriorating. **Signal 1: DETERIORATING** (well above threshold) Signal 2: Cash-flow coverage (FFO / Adjusted_Debt) - 2021: 0.079 (7.9%) - 2022: 0.078 (7.8%) - Change: 0.078 - 0.079 = **-0.001** (-0.1 percentage points) Threshold: ≤ -0.03 is Deteriorating; between -0.03 and +0.03 is Stable. **Signal 2: STABLE** (change of -0.001 is within -0.03 to +0.03) ### Combining Signals: - Signal 1: Deteriorating - Signal 2: Stable Per instructions: "If one is Stable and the other is Improving or Deteriorating, return the non-Stable category." Therefore: **DETERIORATING** However, let me double-check my calculations as the leverage change seems very large (+1.68x). Rechecking Adjusted Debt: 2021: 10,609 debt + 173 leases + 3 pension - 5,329 cash = 5,456 2022: 11,653 debt + 184 leases + 2 pension + 838 other liabilities - 4,962 cash = 7,715 The increase is mainly from: - Debt increase: 11,653 - 10,609 = 1,044 - Other liabilities increase: 838 - 72 = 766 - Cash decrease: 5,329 - 4,962 = 367 (less cash to net against debt) - Total increase: 1,044 + 766 + 367 = 2,177 Adjusted Debt increased by 2,177,000,000, or about 40%. This is significant. EBITDA increased from 611 to 727, or 19%. So leverage ratio increased from 8.93x to 10.61x due to debt growing faster than EBITDA. Is this realistic? Let me check if I missed something in 2021 debt. Actually, I realize I may have double-counted or missed items. Let me recheck 2021 "Other Noncurrent Financial Liabilities": 72,000,000. I didn't include this in 2021 Adjusted Debt. If I include it: Adjusted Debt 2021 = 10,609 + 173 + 3 + 72 - 5,329 = 5,528,000,000 Ratio = 5,528 / 611 = 9.05x For 2022, if "Other Noncurrent Financial Liabilities" of 838 is included: Adjusted Debt 2022 = 11,653 + 184 + 2 + 838 - 4,962 = 7,715,000,000 Ratio = 7,715 / 727 = 10.61x Change: 10.61 - 9.05 = 1.56x. Still strongly deteriorating. What if "Other Noncurrent Financial Liabilities" is not debt-like? Excluding from both: 2021: 10,609 + 173 + 3 - 5,329 = 5,456; ratio = 8.93x 2022: 11,653 + 184 + 2 - 4,962 = 6,877; ratio = 9.46x Change: 9.46 - 8.93 = 0.53x. Still Deteriorating (>0.2x). What about FFO? Let me recheck. If I use FFO without dividends: 2021: 611 - 295 - 155 = 161; 161/5,456 = 0.029 2022: 727 - 329 - 82 = 316; 316/7,715 = 0.041 Change: 0.041 - 0.029 = +0.012. This is Stable (between -0.03 and +0.03, actually closer to Stable/Improving boundary). But with dividends: 2021: 433/5,456 = 0.079 2022: 600/7,715 = 0.078 Change: -0.001. Stable. The FFO trend depends heavily on treatment of dividends. Given the conservative bias instruction ("lean toward the more negative signal"), and Signal 1 is clearly Deteriorating with a large magnitude (+1.56x to +1.68x, far exceeding the 0.2x threshold), while Signal 2 is at best Stable and slightly negative, the overall conclusion should be **Deteriorating**. The materiality of the leverage increase (1.56x-1.68x vs 0.2x threshold, or 7.8x-8.4x the threshold) far exceeds any minor FFO improvement. The company's debt increased significantly while EBITDA growth was insufficient to offset it. Deteriorating