To estimate the S&P-adjusted debt-to-EBITDA ratio for ENI S.P.A. for the fiscal year ended December 31, 2022, we follow the workflow outlined below. ### Step 1: Identify the Relevant Industry ENI S.P.A. is a major integrated energy company involved in oil and gas exploration, production, refining, and marketing. Based on the provided industry methodologies, ENI falls under the **"Oil And Gas Exploration And Production"** sector (specifically as an integrated company). The methodology for this sector guides the calculation of financial ratios, particularly regarding volatility and supplementary ratios, but the core definition of Adjusted Debt and Adjusted EBITDA generally follows the standard corporate methodology unless specific sector adjustments (like off-balance sheet leases or specific pension treatments) are mandated. The provided text for Oil & Gas E&P focuses heavily on business risk (reserves, costs) and uses FOCF/DCF to debt as preferred *supplementary* ratios, but does not explicitly redefine the standard Adjusted Debt/EBITDA calculation differently from the general corporate baseline provided in the prompt instructions. Therefore, we will apply the baseline formulas provided in the prompt, ensuring we capture all debt-like items and cash offsets correctly. ### Step 2: Estimate Adjusted Debt The baseline formula is: `Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash` **1. Reported Debt:** We identify interest-bearing borrowings from the balance sheet items for 2023-01-01 (which represents the end of the 2022 fiscal year). * Short-term Borrowings: 4,446,000,000 EUR * Current Portion of Long-term Borrowings: 3,097,000,000 EUR * Long-term Borrowings: 19,374,000,000 EUR * *Total Reported Debt* = 4,446 + 3,097 + 19,374 = **26,917,000,000 EUR** **2. Leases:** S&P typically treats lease liabilities as debt. * Current Lease Liabilities: 884,000,000 EUR * Noncurrent Lease Liabilities: 4,067,000,000 EUR * *Total Leases* = 884 + 4,067 = **4,951,000,000 EUR** **3. Pension Deficit:** The provided facts do not explicitly list a "Net Pension Liability" or "Pension Deficit" separate from "Noncurrent Provisions For Employee Benefits" (886,000,000 EUR) and "Other Longterm Provisions". In the absence of a specific net pension deficit figure disclosed as underfunded, and given that provisions often include various items, we generally look for a specific pension deficit adjustment. Without explicit data on the funded status (assets vs liabilities) of the pension plan, we cannot calculate a precise deficit to add. However, standard S&P adjustments often add the underfunded portion. Lacking specific pension asset/liability breakdowns in the facts, we will assume the provision is accounted for in operating liabilities or is not a significant net debt-like item requiring addition beyond what's in provisions, or that the "Noncurrent Provisions For Employee Benefits" is the best proxy but usually, only the *unfunded* deficit is added to debt. Without explicit "Pension Assets" and "Pension Liabilities" to net, we will conservatively exclude a specific pension deficit addition, noting that if the provisions are fully funded, the adjustment is zero. If we were to treat the entire "Noncurrent Provisions For Employee Benefits" as debt-like, it would be an overstatement. Standard practice without specific deficit data is to leave it out or use disclosed net deficit. We will proceed with **0 EUR** for pension deficit adjustment due to lack of specific net deficit data in the provided facts. **4. Guarantees, Hybrid Debt, Other Debt-like Items:** * **Hybrid Debt:** The equity section mentions "Perpetual Subordinated Bonds". The facts show "Decrease Through Coupon Payment On Perpetual Subordinated Bonds Equity" and "Increase Decrease Through Net Issue Reimbursement Of Perpetual Subordinated Bonds Equity". This indicates perpetual bonds are classified as **Equity** in the financial statements. S&P typically treats a portion of hybrid securities as debt. A standard haircut is often 50% or 100% depending on the instrument's characteristics. However, the prompt does not provide the *outstanding balance* of these perpetual bonds, only the *changes* (coupon payments and issues/redemptions). We cannot determine the total outstanding principal of the perpetual bonds from the flow data alone. Therefore, we cannot accurately add a hybrid debt portion. We will assume **0 EUR** for this component due to missing stock data. * **Guarantees/Other:** No specific data provided. **5. Eligible Cash:** S&P allows the deduction of cash and cash equivalents, and sometimes short-term investments, from debt. * Cash And Cash Equivalents: 10,155,000,000 EUR * Current Financial Assets At Fair Value Through Profit Or Loss: 8,251,000,000 EUR * Other Current Financial Assets: 1,504,000,000 EUR * *Total Eligible Cash/Equivalents*: Typically, S&P deducts unrestricted cash and short-term investments. Let's sum these liquid assets: 10,155 + 8,251 + 1,504 = **19,910,000,000 EUR**. * *Note*: S&P methodology often restricts the cash deduction to the amount of debt or applies haircuts to non-cash equivalents. "Current Financial Assets At FVPL" and "Other Current Financial Assets" are highly liquid. We will deduct the full amount of Cash + these liquid financial assets as "eligible cash" against the debt, as is common in simplified adjusted debt calculations when specific restrictions aren't noted. **Calculation of Adjusted Debt:** * Gross Debt (Borrowings) = 26,917,000,000 EUR * Plus Leases = 4,951,000,000 EUR * Gross Adjusted Debt = 31,868,000,000 EUR * Less Eligible Cash = 19,910,000,000 EUR * **Adjusted Debt** = 31,868 - 19,910 = **11,958,000,000 EUR** ### Step 3: Estimate Adjusted EBITDA The baseline formula is: `Adjusted_EBITDA = EBITDA + adjustment_leases + nonrecurring_losses - nonrecurring_gains ...` First, we must reconstruct EBITDA from the Income Statement data for the period 2022-01-01 to 2023-01-01. **1. Calculate Reported EBITDA:** We can start from "Profit Loss From Operating Activities" (Operating Profit) and add back Depreciation and Amortization. * Profit Loss From Operating Activities: 17,510,000,000 EUR * Depreciation And Amortisation Expense: 7,205,000,000 EUR * *Reported EBITDA* = 17,510 + 7,205 = **24,715,000,000 EUR** Alternatively, we can check via Revenue and Expenses: * Revenue And Other Income: 133,687,000,000 EUR * Less: Total Purchases Services And Other Costs: 102,529,000,000 EUR * Less: Employee Benefits Expense: 3,015,000,000 EUR * Less: Other Operating Income Expense: -1,736,000,000 EUR (This is a negative expense, i.e., income, or a net loss? The label is "Other Operating Income Expense". A negative value here usually implies a net expense if the sign convention follows expenses as positive. However, looking at the context: Revenue (133k) - Purchases (102k) - Employees (3k) = ~28k. The Operating Profit is 17.5k. The difference is roughly 10.5k. Let's look at the components. * Gross Margin approx: 133,687 - 102,529 = 31,158. * Operating Profit before D&A: 17,510 + 7,205 = 24,715. * Difference: 31,158 - 24,715 = 6,443. * Employee Benefits: 3,015. * Remaining: 6,443 - 3,015 = 3,428. * "Other Operating Income Expense" is -1,736. If this is an expense, it reduces profit. 3,428 - 1,736 = 1,692. This doesn't match perfectly due to other items like impairment, write-offs, etc., which are often included in "Other Operating Income Expense" or listed separately. * Let's stick to the direct reconstruction: **Operating Profit + D&A**. * Operating Profit: 17,510,000,000 EUR. * D&A: 7,205,000,000 EUR. * **EBITDA** = **24,715,000,000 EUR**. **2. Adjustments:** * **Lease Adjustment:** Under IFRS 16, depreciation and interest on leases are already included in Operating Profit (Depreciation) and Finance Costs (Interest). EBITDA adds back Depreciation. The "Depreciation And Amortisation Expense" likely includes depreciation on Right-of-Use assets. S&P often adds back the *interest* portion of lease payments to EBITDA if it was deducted to arrive at Operating Profit? No, interest is below Operating Profit. So Reported EBITDA (Op Profit + D&A) already includes the EBITDA contribution of leases (since lease interest is excluded from Op Profit, and lease depreciation is added back). However, S&P sometimes adjusts EBITDA to add back the "rent" equivalent if comparing to pre-IFRS 16, but standard S&P Global Ratings methodology for IFRS reporters typically uses the reported EBITDA which includes the lease depreciation add-back. The prompt formula says `+ adjustment_leases`. In many contexts, this refers to adding back the interest component of lease liabilities to EBITDA if one starts from Net Income, or simply recognizing that EBITDA is higher than pre-IFRS 16 EBITDA. Given we started from Operating Profit, and D&A is added back, we have the standard IFRS EBITDA. S&P generally does *not* make further upward adjustments to EBITDA for leases under IFRS 16 because the depreciation (non-cash) is added back, and the interest (financing) is not in EBITDA. So, **Adjustment = 0**. * **Non-recurring Items:** * Impairment Loss Reversal... Recognised In Profit Or Loss: 1,140,000,000 EUR. This is a *reversal* (gain), which increased Operating Profit. To normalize, we should **subtract** this gain. * Write Off Of Tangible And Intangible Assets: 599,000,000 EUR. This is a loss/expense. We should **add** this back. * "Other Operating Income Expense": -1,736,000,000 EUR. This line item is large. It likely contains various operational items. Without specific breakdown of non-recurring items within this, we treat it as recurring operating performance unless specified otherwise. However, the Impairment and Write-offs are explicitly listed. * Are Impairment and Write-offs included in "Profit Loss From Operating Activities"? Yes, typically. * So, we adjust the base EBITDA of 24,715. * Subtract Impairment Reversal (Gain): -1,140,000,000 EUR. * Add Write-off (Loss): +599,000,000 EUR. * Net Adjustment = -541,000,000 EUR. * **Joint Venture / Equity Accounted Investments:** * Share Of Profit Loss Of Equity Accounted Investments: 1,841,000,000 EUR. * This income is included in "Profit Loss Before Tax" but typically *above* Operating Profit? Let's check. * Operating Profit: 17,510. * Finance Income/Cost Net: -925. * Investment Income Expense: 5,464. * Profit Before Tax: 22,049. * 17,510 - 925 + 5,464 = 22,049. Matches. * So, the Share of Profit from Equity Investments (1,841) is part of "Investment Income Expense" (5,464), which is *below* Operating Profit. * Therefore, it is **not** included in our starting EBITDA (derived from Operating Profit). * S&P methodology often adds the proportional EBITDA of equity affiliates if they are material. However, we only have the "Share of Profit" (net income line), not the EBITDA of the affiliates. We cannot reconstruct the affiliate EBITDA without their tax, interest, and D&A data. * Alternatively, some simplified adjustments just add the "Share of Profit" back if it's considered a core operating part, but strictly speaking, EBITDA is an operating metric. If we cannot get the EBITDA, we might leave it out or assume the "Share of Profit" is a proxy for cash flow contribution. However, standard S&P Adjusted EBITDA usually *excludes* equity income unless specifically grossed up. Given the lack of data to gross up, we will **exclude** it from Adjusted EBITDA (i.e., adjustment is 0), or consider if it should be added. * Wait, the prompt formula says `± joint_venture_proportional_EBITDA`. We don't have the EBITDA. We have the net share of profit. Adding the net profit would overstate EBITDA (as it's after tax and interest of the JV). We will assume **0** adjustment for JV EBITDA due to data limitations, or that it is not part of the core operating EBITDA definition for this calculation. * **Other Normalization:** * There are no other explicit non-recurring gains/losses identified in the facts provided (e.g., gains on disposal are often in "Other Operating Income Expense" or separate). "Gains Losses On Disposal Of Noncurrent Assets" is listed in Cash Flow adjustments as -524,000,000 EUR (a gain). This gain is likely included in Operating Profit or Investment Income. If it's in Operating Profit, we should subtract it. The Cash Flow statement lists "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" as -524. This implies a gain of 524 was deducted from Net Income to get Cash Flow. Where is it in the P&L? It's likely in "Other Operating Income Expense" or "Investment Income". Given the magnitude, let's assume it's in Operating Profit. If so, we subtract the gain. * Let's refine the Non-Recurring Adjustments: 1. Impairment Reversal (Gain): 1,140. Subtract. 2. Write-off (Loss): 599. Add. 3. Gain on Disposal: 524. Subtract. * Net Adjustment = -1,140 + 599 - 524 = **-1,065,000,000 EUR**. **Calculation of Adjusted EBITDA:** * Reported EBITDA: 24,715,000,000 EUR * Adjustments: -1,065,000,000 EUR * **Adjusted EBITDA** = 24,715 - 1,065 = **23,650,000,000 EUR** ### Step 4: Calculate the Ratio * Adjusted Debt: 11,958,000,000 EUR * Adjusted EBITDA: 23,650,000,000 EUR Ratio = 11,958 / 23,650 Calculation: 11,958 / 23,650 ≈ 0.5056 Rounding to two decimal places: **0.51** 0.51