I need to estimate the Net Debt / EBITDA ratio for 2022 using S&P methodology. Let me work through this step by step. ## Step 1: Understand S&P Methodology for Net Debt S&P methodology typically defines Net Debt as: - **Total Debt** (short-term + long-term borrowings, including lease liabilities, but excluding operating liabilities like payables/provisions) - **Minus Cash and Cash Equivalents** - **Minus Liquid Financial Assets** (if applicable) For S&P, debt includes: - Financial liabilities (borrowings, bonds, loans) - Lease liabilities (both current and non-current) - Sometimes other financial debt-like items ## Step 2: Identify Debt Components from Balance Sheet From the 2022 data (2023-01-01 balances, which represent end of 2022): **Non-current financial liabilities:** - Noncurrent Financial Liabilities Excluding Concession Liabilities: 19,692,100,000 EUR - Noncurrent Lease Liabilities: 1,656,200,000 EUR - Noncurrent Concession Liabilities: 1,680,500,000 EUR - Noncurrent Derivative Financial Liabilities: 720,200,000 EUR **Current financial liabilities:** - Current Financial Liabilities Excluding Concession Liabilities: 6,521,400,000 EUR - Current Lease Liabilities: 496,500,000 EUR - Current Concession Liabilities: 243,200,000 EUR - Current Derivative Financial Liabilities: 883,400,000 EUR - Bank Overdrafts And Other Cash Position Items: 213,600,000 EUR **Cash and equivalents:** - Cash And Cash Equivalents: 9,012,200,000 EUR ## Step 3: Calculate Total Debt (S&P Methodology) S&P typically includes: - Financial liabilities (excluding operating items) - Lease liabilities - Exclude concession liabilities (these are operating in nature for infrastructure companies) **Total Debt:** - Noncurrent Financial Liabilities Excluding Concession Liabilities: 19,692,100,000 - Current Financial Liabilities Excluding Concession Liabilities: 6,521,400,000 - Noncurrent Lease Liabilities: 1,656,200,000 - Current Lease Liabilities: 496,500,000 - Bank Overdrafts: 213,600,000 Total Debt = 19,692,100,000 + 6,521,400,000 + 1,656,200,000 + 496,500,000 + 213,600,000 = **28,579,800,000 EUR** Note: Derivative liabilities are typically excluded from debt in S&P methodology (they're mark-to-market, not principal debt). Concession liabilities are operating in nature. **Cash and Equivalents:** 9,012,200,000 EUR **Net Debt = 28,579,800,000 - 9,012,200,000 = 19,567,600,000 EUR** However, let me also check if we should include other items. Looking at current assets, "Other Current Financial Assets" of 2,213,500,000 EUR and "Actifs Financiers Operationnels Courants" of 182,800,000 EUR might be liquid. But S&P typically only subtracts cash and near-cash. Let me also consider if we need to include more. The "Noncurrent Investments Other Than Investments Accounted For Using Equity Method" dropped from 3,770,300,000 to 112,500,000, suggesting a major disposal. The "Nonconsolidated Other Securities" at 112,500,000 might be liquid. For conservative S&P approach, I'll use standard definition: - Net Debt = Gross Debt - Cash and Cash Equivalents Gross Debt = Financial liabilities + Lease liabilities + Bank overdrafts (excluding derivatives and concession liabilities which are operating) Actually, let me reconsider: S&P Global Ratings methodology for utilities/infrastructure typically includes: - All borrowings (short and long term) - Lease liabilities - Exclude derivatives, pension liabilities, payables, provisions - Minus cash and cash equivalents So my calculation stands: - Gross Debt = 19,692.1 + 6,521.4 + 1,656.2 + 496.5 + 213.6 = 28,579.8 million EUR - Net Debt = 28,579.8 - 9,012.2 = **19,567.6 million EUR** ## Step 4: Calculate EBITDA For S&P methodology, EBITDA is typically: - Operating Income (or EBIT) + Depreciation & Amortization From the income statement for 2022 (2022-01-01 to 2023-01-01): **Operating Income before equity method:** 2,206,300,000 EUR **Share of net income of equity accounted entities:** 127,000,000 EUR **Operating Income after equity method (Resultat Operationnel):** 2,333,300,000 EUR For EBITDA, S&P typically uses: - EBIT (operating income) + D&A From cash flow statement: **Operating Depreciation Amortization Provisions And Impairment Losses:** 3,178,600,000 EUR However, "provisions and impairment losses" should be excluded for clean EBITDA. We need just D&A. Looking at the PPE and intangible assets growth, and the nature of the business, let me estimate. The line item includes impairments and provision changes. For S&P, they often use "EBITDA before non-recurring items" or clean EBITDA. Actually, let me use a different approach. S&P calculates EBITDA as: - Revenue - Cash Operating Costs (approximation) - Or: Operating Income + D&A + other non-cash items From the data, we can calculate: - Revenue: 42,885,300,000 - Cost of Sales: 35,739,800,000 - Selling Expense: 954,200,000 - G&A: 3,215,800,000 - Other Operating Income/Expense: -769,200,000 (expense) Operating Income before equity = 42,885,300 - 35,739,800 - 954,200 - 3,215,800 - 769,200 = 2,206,300,000 ✓ For EBITDA, add back D&A. The D&A component from "Operating Depreciation Amortization Provisions And Impairment Losses" of 3,178,600,000 needs to be split. In practice, for S&P, they often use reported EBITDA or calculate as EBIT + D&A. The impairment and provision components are typically excluded if non-recurring, but included if recurring. For a utility/infrastructure company like Veolia, most D&A is recurring. Let me estimate D&A is approximately 2,800,000,000 (excluding one-time impairments of ~378M, which seems reasonable given the asset base). Actually, looking at the balance sheet changes and industry norms, let me use a more practical approach. S&P would typically use: EBITDA = Operating Income + D&A (recurring) + share of equity income (sometimes) Or more commonly for European companies: EBITDA = EBIT + Depreciation + Amortization Let me use the cash flow approach. From cash flows from operations before working capital changes: 4,804,300,000 EUR. This equals: - Net Income + D&A + other non-cash items - interest - taxes (roughly) Actually, Cash Flows From Used In Operations Before Changes In Working Capital = 4,804,300,000 This includes: - Profit Loss: 997,600,000 - D&A and impairments: 3,178,600,000 - Other adjustments: various From the reconciliation items in cash flow: - Operating Depreciation Amortization Provisions And Impairment Losses: 3,178,600,000 - Financial Amortization And Impairment Losses: 14,800,000 - Gains Losses On Disposal Of Operating Assets: -299,000,000 (negative = gain to subtract) - Plus Ou Moins Values De Cessions Dactifs Financiers: -370,000,000 - Share Of Net Income Loss Of Joint Ventures: 56,500,000 (add back) - Adjustments For Undistributed Profits Of Associates: 70,500,000 - Adjustments For Dividend Income: 4,100,000 - Net Finance Costs Adjustments: 632,700,000 - Adjustments For Income Tax Expense: 419,800,000 - Other Adjustments: 282,300,000 Sum of adjustments: 3,178.6 + 14.8 - 299.0 - 370.0 + 56.5 + 70.5 + 4.1 + 632.7 + 419.8 + 282.3 = 3,990,300,000 Profit + Adjustments = 997.6 + 3,990.3 = 4,987.9 million, but reported is 4,804.3. There's a discrepancy of ~183.6 million, likely due to discontinued operations or other items. For EBITDA, standard approach is: EBITDA = Operating Income (before equity) + D&A + share of equity income (if using proportionate consolidation approach) Or: EBITDA = EBIT + D&A Using Operating Income before equity method: 2,206,300,000 Add: D&A (estimated clean) ~ 2,800,000,000 Add: Share of equity income: 127,000,000 This gives ~5,133,300,000, which seems high. Alternative: S&P often uses "Adjusted EBITDA" which for 2022 with Suez integration would be around 5.5-6.0 billion based on reported figures. Let me try another approach. From the cash flow, if we take: - Cash Flows From Used In Operations Before Changes In Working Capital: 4,804,300,000 - Add: Interest Paid: 637,700,000 - Add: Income Taxes Paid: 557,400,000 - Less: Dividend Income and other financial items This gives approximate EBITDA of 4,804.3 + 637.7 + 557.4 = 5,999,400,000, but this includes working capital-like items and other adjustments. Actually, a cleaner approach: S&P EBITDA for rating purposes = Operating Income + D&A + share of JVs/associates (equity accounted) = 2,206,300 + 3,178,600 + 127,000 = 5,511,900,000 EUR But this includes impairments in D&A. If we assume ~10% is impairments (317,860,000), then clean D&A = 2,860,740,000, giving EBITDA = 2,206,300 + 2,860,740 + 127,000 = 5,194,040,000. However, for 2022 with Suez acquisition, there are significant one-time integration costs. S&P would typically adjust for these. Let me look at this differently. Veolia's reported EBITDA for 2022 was approximately €5.9 billion including Suez contribution. But for S&P methodology, they might use lower figures. Given the data constraints, let me use: - **EBITDA = Operating Income before equity + D&A (full from cash flow) + share of equity income** = 2,206.3 + 3,178.6 + 127.0 = **5,511.9 million EUR** Or more conservatively, using resultat operationnel after equity: = 2,333.3 + 3,178.6 = 5,511.9 million EUR (same since share of equity is already in resultat) Wait, let me recheck: Resultat Operationnel Apres Quote Part = 2,333.3, which already includes 127.0 of equity income. So: EBITDA = 2,333.3 + 3,178.6 = 5,511.9 million EUR But this double counts if I add equity income again. Correct approach: - EBIT = 2,333.3 (already includes equity income) - EBITDA = EBIT + D&A = 2,333.3 + 3,178.6 = 5,511.9 million EUR However, S&P typically excludes impairments from EBITDA. If we estimate D&A excluding impairments and provisions: The line is "Operating Depreciation Amortization Provisions And Impairment Losses" - this includes: - Depreciation of PPE - Amortization of intangibles - Change in provisions (operating) - Impairment losses For a clean EBITDA, we want only D&A, not provisions/impairments. From balance sheet changes and industry norms, let me estimate: - PPE increased from 8,701.9 to 16,569.0 (net of depreciation and additions/disposals) - Intangibles increased significantly due to Suez Given the complexity, and that S&P would use their own adjustments, let me use a practical estimate. For 2022, Veolia reported EBITDA around €5.9 billion on a pro forma basis. Using our calculation of 5,511.9 million EUR as base, and adding back estimated one-time integration costs of ~400 million, we get ~5.9 billion. For conservative S&P estimate, I'll use **EBITDA = 5,900,000,000 EUR** (approximately, based on reported figures and industry practice). Actually, let me be more rigorous. Looking at the cash flow reconciliation: - Profit Loss: 997.6 - Operating D&A and impairments: 3,178.6 - Financial amortization: 14.8 - Gains on disposals: -299.0 - 370.0 = -669.0 - Equity income adjustments: 56.5 + 70.5 + 4.1 = 131.1 - Finance costs: 632.7 - Income tax: 419.8 - Other: 282.3 Sum adjustments: 3,178.6 + 14.8 - 669.0 + 131.1 + 632.7 + 419.8 + 282.3 = 3,990.3 Plus profit 997.6 = 4,987.9, but reported CF before WC is 4,804.3. Difference of 183.6 is likely from discontinued operations (-78.6 profit loss, but +43.8 operating CF, net -34.8) and other items. For EBITDA, using standard formula: EBITDA = Revenue - Cash Operating Costs (excluding D&A) = 42,885.3 - 35,739.8 - 954.2 - 3,215.8 - (-769.2) + 3,178.6 (D&A add back) = 42,885.3 - 39,140.6 + 769.2 + 3,178.6 Wait, let me recalculate: Operating costs = 35,739.8 + 954.2 + 3,215.8 + 769.2 = 40,679.0 Operating income = 42,885.3 - 40,679.0 = 2,206.3 ✓ EBITDA = Operating Income + D&A = 2,206.3 + 3,178.6 = 5,384.9 million EUR But this uses full "Operating Depreciation Amortization Provisions And Impairment Losses" which includes non-cash provisions. For S&P, they typically use this as reported by companies, or adjust. Given Veolia's 2022 context with Suez integration, let me use a more nuanced approach. S&P Global Ratings typically calculates: **S&P Adjusted EBITDA** = Reported EBITDA + adjustments for non-recurring items, pensions, etc. For practical purposes with available data, I'll use: - **EBITDA ≈ 5,500 million EUR** (rounded from 5,384.9 + some adjustments) Actually, let me check if there's a better way. The "Operating Income Before Share Of Net Income Loss Of Equity Accounted Entities" is 2,206.3 million. Adding full D&A of 3,178.6 gives 5,384.9. Adding share of equity income 127 gives 5,511.9 if we want proportionate-like EBITDA. For Net Debt/EBITDA, S&P uses "Debt" including leases, and "EBITDA" including proportionate JVs or equity income depending on methodology. Let me settle on: - **Net Debt = 19,567.6 million EUR** (or slightly different based on exact definition) - **EBITDA = 5,511.9 million EUR** (using EBIT + full D&A line) Net Debt / EBITDA = 19,567.6 / 5,511.9 = **3.55x** However, let me reconsider if S&P includes more in debt. If we include derivatives and concession liabilities: Gross Debt with concessions and derivatives: 28,579.8 + 720.2 + 883.4 + 1,680.5 + 243.2 = 32,107.1 million Net Debt = 32,107.1 - 9,012.2 = 23,094.9 million Ratio = 23,094.9 / 5,511.9 = 4.19x But S&P typically excludes concession liabilities (operating) and derivatives (non-debt). Let me also check if we should include "Other Current Financial Assets" as cash-like. Probably not for strict definition. Another consideration: S&P sometimes uses "Funds From Operations" (FFO) based approach, but the question asks for Net Debt/EBITDA. Given Veolia's 2022 actual reported Net Debt/EBITDA was around 3.0x-3.2x on a pro forma basis with S&P adjustments, my calculation of 3.55x seems reasonable without S&P's specific adjustments (which would add back some items to EBITDA and possibly adjust debt). Let me refine: If we use "cleaner" EBITDA excluding impairments and non-recurring items, say 5,800 million, then: 19,567.6 / 5,800 = 3.37x Or with slightly different debt definition, around 3.0-3.5x. Given the data and typical S&P methodology for European utilities, I'll use: **Net Debt:** 19,567.6 million EUR **EBITDA:** 5,511.9 million EUR (reported basis) or ~5,900 million (S&P adjusted) Using reported basis: 19,567.6 / 5,511.9 = 3.55 But let me recalculate debt more carefully. Looking at 2023-01-01 (end 2022): Current Financial Liabilities Excluding Concession Liabilities: 6,521,400,000 Noncurrent Financial Liabilities Excluding Concession Liabilities: 19,692,100,000 Current Lease Liabilities: 496,500,000 Noncurrent Lease Liabilities: 1,656,200,000 Bank Overdrafts: 213,600,000 Total = 28,579,800,000 Less Cash: 9,012,200,000 Net Debt = 19,567,600,000 For EBITDA, using most standard S&P approach: EBITDA = EBIT + D&A = 2,333,300,000 + 3,178,600,000 = 5,511,900,000 But wait - S&P typically uses "Adjusted EBITDA" which adds back certain items. Also, for 2022 with Suez, there were significant acquisition-related costs that S&P would add back. If we estimate S&P Adjusted EBITDA at approximately 6,000 million (adding back ~488 million of one-time/integration costs), then: 19,567.6 / 6,000 = 3.26x Given the uncertainty, and that Veolia's actual S&P-reported leverage for 2022 was around 3.0-3.2x, I'll use a calculation in that range. Actually, let me recheck my debt calculation. Should I include "Other Current Financial Assets" as negative debt (i.e., more cash-like)? Looking at Current Assets: - Other Current Financial Assets: 2,213,500,000 - Actifs Financiers Operationnels Courants: 182,800,000 These might be liquid investments. If we subtract these from Net Debt: 19,567.6 - 2,213.5 - 182.8 = 17,171.3 million 17,171.3 / 5,511.9 = 3.12x This is closer to reported figures. However, S&P typically only subtracts "Cash and Cash Equivalents" and sometimes "Liquid Investments" if clearly short-term and liquid. Given "Other Current Financial Assets" of 2,213.5 million, this could include trade receivables financing or other items not purely liquid. For conservative S&P approach, I'll stick with standard Net Debt definition. Let me try one more approach using "Net Debt" as commonly reported by companies: Gross Financial Debt = All borrowings + leases + bank overdrafts = 6,521.4 + 19,692.1 + 496.5 + 1,656.2 + 213.6 = 28,579.8 Less: Cash and cash equivalents = 9,012.2 Less: Other current financial assets (liquid) = ? Net Debt = 19,567.6 million (minimum) EBITDA = 5,511.9 million Ratio = 3.55 However, I realize I should check if we need to use average debt or year-end debt. S&P typically uses year-end debt for simplicity, or average for seasonal businesses. Given all considerations, and that my calculation might be slightly conservative on EBITDA (including full impairments), I'll estimate the S&P Net Debt/EBITDA ratio for 2022 as approximately **3.2x to 3.6x**. For a precise single number, using standard methodology with available data: Net Debt = 19,567.6 million EBITDA (S&P-adjusted estimate) = 6,000 million Ratio = 3.26 Or with reported EBITDA: Ratio = 3.55 Given the question asks for S&P methodology specifically, and S&P would make certain adjustments (add back non-recurring integration costs, perhaps include proportionate EBITDA from JVs), I'll use an estimate of **3.2x** as a reasonable S&P-adjusted figure, or **3.5x** on a stricter reported basis. Actually, rethinking: For 2022, Veolia completed the Suez acquisition in early 2022. The full year 2022 includes Suez for most of the year. S&P would use "S&P Global Ratings Adjusted" figures which typically: - Add back restructuring costs, integration costs - Use proportionate consolidation for JVs - Adjust for operating leases (already in IFRS 16) - Adjust for pensions, etc. Without exact S&P adjustments, using reported figures with standard S&P debt definition gives us around 3.5x. With typical S&P EBITDA adjustments (adding back ~300-500M of non-recurring items), we'd get to ~3.0-3.2x. I'll provide **3.2** as a reasonable estimate, or more precisely calculate with available data. Let me finalize with: - Net Debt: 19,568 million EUR (using strict definition: financial liabilities + leases - cash) - EBITDA: 5,900 million EUR (estimated S&P adjusted from 5,512 reported) Actually, let me use a more data-driven EBITDA. If we look at "Cash Flows From Used In Operations Before Changes In Working Capital" of 4,804.3 million, and add back interest and taxes: - Interest paid: 637.7 - Taxes paid: 557.4 - Less: Interest received (not directly stated, but "Interest On Operating Assets" = 78.5, "Interest On Lease" is expense not income) Rough EBITDA proxy = 4,804.3 + 637.7 + 557.4 - 78.5 (interest income) = 5,920.9 million This is close to my 5,900 estimate. Using this: 19,567.6 / 5,920.9 = 3.30 Or with slightly different adjustments, around 3.2-3.4x. Given all this analysis, I'll estimate the S&P Net Debt/EBITDA ratio for 2022 as **3.2x** (or more precisely, around 3.3x based on calculations). Let me use 3.3 as my best estimate with strict calculation, or round to 3.2 for typical S&P adjustments. Final check: If I use EBITDA = 5,920.9 (from CFO + interest + taxes) and Net Debt = 19,567.6: Ratio = 3.30 If I subtract more liquid assets (Other Current Financial Assets of 2,213.5): Net Debt = 17,354.1 Ratio = 2.93 This seems too low compared to market reports. So likely S&P does not subtract those assets. I'll go with **3.3x** as my best estimate using available data and standard S&P methodology. 3.3