I need to estimate the FFO (Funds From Operations) / Net Debt ratio for 2022. First, let me identify the relevant data and calculate FFO and Net Debt. **FFO Calculation:** FFO is typically calculated as: - Net Income + Depreciation & Amortization + Deferred Taxes + Other non-cash items From the data for 2022 (period 2022-01-01 to 2023-01-01): - Profit Loss (Net Income): 111,771,000 EUR - Depreciation And Amortisation Expense: 249,276,000 EUR For a simplified FFO, I'll use: Net Income + Depreciation & Amortization FFO = 111,771,000 + 249,276,000 = 361,047,000 EUR Some analysts also add back items like impairment losses. Let me check: - Impairment Loss Reversal: 1,437,000 EUR (this is a gain, so we'd subtract it) - Changes In Other Provisions: -2,230,000 EUR A more comprehensive FFO might include: - Profit Loss: 111,771,000 - Depreciation And Amortisation: 249,276,000 - Income Tax Expense: 54,263,000 (add back since FFO is pre-tax in some definitions) - Finance Costs net of Finance Income: 45,668,000 Actually, let me use the standard approach. FFO is often calculated as: Operating Profit + Depreciation - Taxes (or simply Net Income + D&A for a quick estimate) Or more precisely, from cash flow perspective: FFO = Cash Flows From Used In Operating Activities - Working Capital Changes From operating cash flow: 613,466,000 EUR But let me use the more standard definition for credit analysis: FFO = Net Income + D&A + Deferred Taxes + Other non-cash items Looking at the balance sheet changes for deferred taxes: - Deferred Tax Assets 2022: 96,673,000 - Deferred Tax Assets 2023: 69,803,000 Change = decrease of 26,870,000 (this is a positive cash flow/add back) - Deferred Tax Liabilities 2022: 107,569,000 - Deferred Tax Liabilities 2023: 115,064,000 Change = increase of 7,495,000 (this is a negative/add expense) Net deferred tax change = -26,870,000 + 7,495,000 = -19,375,000 (unfavorable, so subtract from FFO) Actually, let me use a cleaner approach. For utility companies, FFO is often: FFO = EBIT + D&A - Cash Taxes Or: Net Income + D&A + Interest Expense(net) + Deferred Taxes Let me use: Net Income + D&A = 111,771,000 + 249,276,000 = 361,047,000 EUR Some might add back the Energy Sector Extraordinary Contribution (28,019,000) as it's a special item, but I'll keep it simple. **Net Debt Calculation:** Net Debt = Total Borrowings - Cash and Cash Equivalents Borrowings: - Longterm Borrowings 2022: 2,390,852,000 EUR - Current Borrowings And Current Portion Of Noncurrent Borrowings 2022: 375,221,000 EUR Total Borrowings = 2,390,852,000 + 375,221,000 = 2,766,073,000 EUR Cash and Cash Equivalents 2022: 398,759,000 EUR Net Debt = 2,766,073,000 - 398,759,000 = 2,367,314,000 EUR **FFO / Net Debt Ratio:** = 361,047,000 / 2,367,314,000 = 0.1525 or about 15.3% Let me verify with a slightly different FFO calculation. Some include: FFO = Profit Loss From Operating Activities + D&A - Cash Taxes = 239,721,000 + 249,276,000 - (Income Tax Expense - change in deferred taxes) = 488,997,000 - (54,263,000 - 19,375,000) = 488,997,000 - 34,888,000 = 454,109,000 This seems too high. Let me stick with the simpler Net Income + D&A approach. Actually, let me reconsider. The standard Moody's/S&P definition of FFO: FFO = Net Income + D&A + Deferred Income Taxes + Other non-cash items From the cash flow statement, we can also derive: FFO ≈ CFO + Working capital changes (to normalize) Or for a cleaner credit metric, use: FFO = EBIT + D&A - Cash Taxes = 239,721,000 + 249,276,000 - (54,263,000 - 26,870,000 + 7,495,000) [approximate cash taxes] = 488,997,000 - 34,888,000 = 454,109,000 Hmm, but this includes the extraordinary contribution. Let me try: EBIT before ESEC = 239,721,000 + 28,019,000 = 267,740,000? No, the ESEC is after operating profit. Looking at structure: Profit Loss From Operating Activities: 239,721,000 Finance Income Cost: -45,668,000 Profit And Loss Before Taxes And Esec: 194,053,000 Income Tax Expense: 54,263,000 Energy Sector Extraordinary Contribution: 28,019,000 Profit Loss: 111,771,000 So EBIT = 239,721,000 (this is already before interest and taxes) Wait, "Profit Loss From Operating Activities" is EBIT. For FFO, a common credit metric is: FFO = Net Income + D&A + Interest Expense + Deferred Taxes = 111,771,000 + 249,276,000 + (67,394,000 - 11,911,000 - 9,815,000) + (-19,375,000) = 111,771,000 + 249,276,000 + 45,668,000 - 19,375,000 = 387,340,000 Or simpler, using pre-interest version: FFO = EBIT + D&A - Cash Taxes = 239,721,000 + 249,276,000 - 54,263,000 + 26,870,000 - 7,495,000 [approximate] = 454,109,000 then minus interest... this gets messy. Let me use the most common simple definition for this exercise: FFO = Net Income + Depreciation & Amortization = 111,771,000 + 249,276,000 = 361,047,000 Net Debt = 2,766,073,000 - 398,759,000 = 2,367,314,000 Ratio = 361,047,000 / 2,367,314,000 = 0.1525 Or if we use total debt instead of net debt: 361,047,000 / 2,766,073,000 = 0.1305 The question asks for FFO/Net Debt, so I'll use net debt. Let me also consider if we should include the "Asset Related To The Transitional Gas Price Stabilization Regime" of 1,000,000,000 EUR. This seems like a regulatory asset/liability pair that nets to zero and doesn't affect debt. Actually, looking more carefully at current borrowings - the 2023 figure is much higher (638,944,000 vs 375,221,000), suggesting more short-term debt. But for 2022 year-end, we use 2022-01-01 figures. Wait - I need to re-read the dates. The data shows: - "Current Borrowings..." 2022-01-01: 375,221,000 EUR - "Current Borrowings..." 2023-01-01: 638,944,000 EUR So 2022-01-01 represents the start of 2022, which is the end of 2021. And 2023-01-01 represents the end of 2022. So for "2022" year-end, I should use 2023-01-01 figures! Let me recalculate: **For 2022 year-end (using 2023-01-01 balance sheet figures):** Total Borrowings: - Longterm Borrowings 2023-01-01: 1,695,362,000 EUR - Current Borrowings 2023-01-01: 638,944,000 EUR Total Borrowings = 2,334,306,000 EUR Cash and Cash Equivalents 2023-01-01: 365,292,000 EUR Net Debt = 2,334,306,000 - 365,292,000 = 1,969,014,000 EUR FFO for 2022 (from 2022-01-01 to 2023-01-01, i.e., the 2022 fiscal year): - Net Income: 111,771,000 - D&A: 249,276,000 FFO = 361,047,000 EUR FFO / Net Debt = 361,047,000 / 1,969,014,000 = 0.1834 or 18.3% Let me also check if we should include other items in FFO. Some analysts use: FFO = CFO (or adjusted CFO) From cash flow: Cash Flows From Used In Operating Activities = 613,466,000 But this includes working capital changes. For a normalized FFO, we typically exclude working capital. Let me verify with another approach. The comprehensive income includes items that might be relevant. Actually, for credit rating purposes, FFO is often defined as: FFO = Funds from operations = Net income from continuing operations + depreciation, amortization, deferred taxes, and other non-cash items Let me try: 111,771,000 + 249,276,000 + (96,673,000 - 69,803,000) [deferred tax assets decrease] + (115,064,000 - 107,569,000) [deferred tax liabilities increase] = 111,771,000 + 249,276,000 + 26,870,000 - 7,495,000 = 380,422,000 FFO / Net Debt = 380,422,000 / 1,969,014,000 = 0.1932 or 19.3% Hmm, but the deferred tax assets decreased, which means we used deferred tax benefits, which is a positive cash flow/add back to net income. And deferred tax liabilities increased, which is also favorable. So yes, add back the decrease in DTA and subtract the increase in DTL, or: add (96,673-69,803) and subtract (115,064-107,569) = add 26,870 and subtract 7,495 = net add 19,375. Wait, I think I had it wrong. Let me reconsider: - Decrease in DTA (asset decrease): positive for cash/FFO (using up the asset) - Increase in DTL (liability increase): negative for FFO? No, increase in deferred tax liability means we recognized more expense than paid, so add back. Actually, standard formula: add back increase in deferred tax liability and decrease in deferred tax asset; subtract decrease in deferred tax liability and increase in deferred tax asset. Change in DTA: 69,803 - 96,673 = -26,870 (decrease). For FFO: add back decrease = +26,870 Change in DTL: 115,064 - 107,569 = +7,495 (increase). For FFO: add back increase = +7,495 Total add back = 26,870 + 7,495 = 34,365 FFO = 111,771 + 249,276 + 34,365 = 395,412 FFO/Net Debt = 395,412 / 1,969,014 = 0.2008 or 20.1% But wait - I need to check if these deferred tax changes are already in net income. Yes, the income tax expense includes deferred tax changes. So when we add back D&A and deferred tax changes to net income, we get closer to cash basis. Actually, let me verify: Income Tax Expense Continuing Operations = 54,263,000. This includes both current and deferred portions. The cash taxes paid were 77,970,000. So deferred tax benefit = 54,263 - 77,970 = -23,707,000 (we paid more in cash than expensed, so we used deferred tax assets or created deferred tax liabilities). Hmm, this doesn't match my balance sheet changes. Let me not overcomplicate. Let me use the simplest and most common definition: FFO = Net Income + Depreciation & Amortization = 111,771 + 249,276 = 361,047 Or if we want to be more comprehensive and match typical credit rating agency definitions: FFO = Net Income + D&A + Deferred Income Taxes + Other non-cash items Given the complexity, let me also consider using "retained earnings" approach or check if there's a standard formula for this company. Actually, looking at the cash flow from operations (613,466,000) and adjusting for working capital: - The big working capital item is the "Asset/Liability Related To The Transitional Gas Price Stabilization Regime" of 1,000,000,000 each. These are non-cash regulatory items. - Also, trade receivables decreased from 448,171 to 327,764 = 120,407 positive - Trade payables increased from 644,701 to 885,416 = 240,715 positive If we adjust CFO for these working capital and regulatory items: CFO = 613,466 Less: decrease in receivables (positive cash, but normalize?) = -120,407 Less: increase in payables (positive cash, but normalize?) = -240,715 Add: regulatory asset/liability (net zero, but asset is a use of cash) = ? This gets complicated. Let me stick with the earnings-based FFO. For a utility with regulated activities, a common approach is: FFO = Net Income + D&A + Net Interest Expense (after tax) or similar Let me try the most standard credit metric: FFO = EBIT + D&A - Cash Taxes = 239,721 + 249,276 - 77,970 (cash taxes paid) = 411,027 FFO/Net Debt = 411,027 / 1,969,014 = 0.2087 or 20.9% Or with accrual taxes: = 239,721 + 249,276 - 54,263 = 434,734 Ratio = 434,734 / 1,969,014 = 0.2208 or 22.1% I think for this exercise, given the data available, the most straightforward and commonly used approach is: FFO = Net Income + Depreciation & Amortization = 361,047 Net Debt = Total Debt - Cash = 2,334,306 - 365,292 = 1,969,014 Ratio = 0.1834 or about 18.3% However, I want to check if we should include the finance costs in FFO. Some definitions of FFO (like EBITDA - Capex approach, or EBIT + D&A - taxes) give higher numbers. Let me also consider: FFO = Profit before tax + Interest + D&A - Cash taxes = 194,053 + 45,668 + 249,276 - 77,970 = 411,027 (same as above) Or with accrual taxes: 194,053 + 45,668 + 249,276 - 54,263 = 434,734 I think the ratio using Net Income + D&A is the most conservative and commonly cited for "FFO/Net Debt" in financial analysis. Let me calculate more precisely: 361,047,000 / 1,969,014,000 = 0.183362... Rounded: 0.18 or 18.3% Actually, I want to double-check my debt figures. The 2022-01-01 vs 2023-01-01 dating: - 2022-01-01 means January 1, 2022, which is start of 2022 (end of 2021) - 2023-01-01 means January 1, 2023, which is end of 2022 So yes, for 2022 year-end, use 2023-01-01 figures. And for the income statement, "2022-01-01 - 2023-01-01" means the year 2022. Let me also verify: is there any other debt I should include? Like lease liabilities? The data shows "Payments Of Lease Liabilities" and "Payments Of Lease Interests" but no explicit lease liability balance. In modern accounting, these might be in borrowings. Also, are there other non-current payables that are debt-like? "Trade And Other Non Current Payables" = 450,297,000 at 2023-01-01. These are typically not interest-bearing, so not included in net debt. So my calculation stands: - FFO = 111,771,000 + 249,276,000 = 361,047,000 EUR - Net Debt = (1,695,362,000 + 638,944,000) - 365,292,000 = 1,969,014,000 EUR - Ratio = 361,047,000 / 1,969,014,000 = 0.1834 Let me also try with total debt instead of net debt to see if that makes more sense: 361,047 / 2,334,306 = 0.1547 But the question specifically asks for FFO/Net Debt, so net debt is correct. One more check: should I use average net debt or year-end net debt? Typically for ratios, if it's a flow/ stock ratio, we might use average stock or year-end stock. For credit ratios, year-end is common, but sometimes average is used. I'll use year-end as it's most standard for this type of question unless specified otherwise. Actually, let me also consider if FFO should include the "Share Of Profit Loss Of Associates" or other items. The net income of 111,771 already includes the 11,812 share of profit from associates. For FFO, we typically want to exclude equity income and include dividends received instead. But we don't have that breakdown easily. Dividends received in cash flow = 21,551,000. Equity income = 11,812,000. So we could adjust: subtract 11,812 and add 21,551 = +9,739. But this gets into detailed adjustments. For a quick estimate, I'll stick with simple FFO = NI + D&A. Final answer: 361,047 / 1,969,014 = 0.1834 Or expressed as percentage: 18.3% Let me round to two decimal places: 0.18 0.18