I need to estimate the FFO (Funds From Operations) / Net Debt ratio for 2022. First, let me understand what FFO and Net Debt mean: - FFO = Funds From Operations, typically calculated as: Net Income + Depreciation/Amortization + Deferred Taxes + Other non-cash items, or more commonly for utilities: Operating Cash Flow - Working Capital Changes + Interest Expense, or simply Cash Flow from Operations adjusted. A common approximation is: Net Profit + Depreciation + Deferred Taxes - Gains on asset sales + Other non-cash items. For a simpler approach often used: FFO ≈ Operating Cash Flow + Interest Expense (since FFO is before financing costs). Actually, let me use a more standard definition for FFO in the context of credit analysis: FFO = Net Income + Depreciation and Amortization + Deferred Income Taxes + Other non-cash items - Gains on asset sales Or more practically: FFO = Cash Flow from Operating Activities + Interest Paid - Interest Received (roughly, to get back to pre-financing position) Let me look at the data: From the cash flow statement: - Cash Flows From Used In Operating Activities 2022: 11,924,000,000 DKK This already includes interest received and paid, and tax paid. For FFO, a common approach is: FFO = Operating Cash Flow + Interest Paid (classified as operating) - Interest Received (classified as operating) + Income Taxes Paid + Changes in working capital (to normalize) Actually, let me use a simpler and more standard approach for FFO: FFO = Net Income + Depreciation/Amortization + Deferred Taxes + Other non-cash adjustments From the data: - Profit Loss (Net Income): 14,996,000,000 DKK - Depreciation Amortisation And Impairment Loss: 12,283,000,000 DKK But wait - Operating cash flow already starts from operating profit. Let me think more carefully. Actually, a standard FFO calculation for credit rating purposes: FFO = Funds from operations = Cash flow from operating activities before working capital changes Or: FFO = EBIT + Depreciation - Cash taxes Let me try another approach. FFO is often approximated as: FFO = Operating Cash Flow + Interest Expense - Interest Income (to get to pre-financing) From cash flow: - Operating activities: 11,924,000,000 - Interest Received (operating): 7,985,000,000 - Interest Paid (operating): 8,548,000,000 - Income Taxes Paid: 1,263,000,000 So pre-interest, pre-tax operating cash flow would be: 11,924 + 8,548 - 7,985 + 1,263 = 13,750,000,000? No that's not right. Actually, let me think about this more carefully. The operating cash flow of 11,924 already includes: - Starts with profit before tax or operating profit - Adjusts for non-cash items - Includes working capital changes - Includes interest received and paid - Includes taxes paid For FFO, we typically want to add back interest paid (net of interest received) to get to a pre-financing measure, and sometimes adjust for working capital volatility. Standard FFO formula used by rating agencies: FFO = Net Income + Depreciation + Deferred Taxes + Other non-cash items Or: FFO = CFO + Interest Paid (net of Interest Received) - Extraordinary items Let me use: FFO = CFO + Interest Paid - Interest Received (if interest received is operating) Actually, looking at this more carefully for a utility/energy company, FFO is typically: FFO = Operating profit before working capital changes + Depreciation - Cash taxes Or simply use: FFO = Net Income + Depreciation + Deferred Tax + Other non-cash - Gain on sale From P&L: - Profit Loss: 14,996,000,000 - Depreciation Amortisation: 12,283,000,000 - Income Tax Expense: 2,613,000,000 But we need to be careful. Let me use cash flow approach. From cash flow statement, the reconciliation items to get from profit to operating cash flow: - Adjustments For Losses Gains On Disposal Of Noncurrent Assets: -10,885,000,000 (subtract gain) - Change In Derivatives Other Adjustments: -8,687,000,000 - Adjustments For Provisions: -1,935,000,000 - Other Adjustments To Reconcile Profit Loss: -278,000,000 - Adjustments For Decrease Increase In Inventories: 1,419,000,000 - Adjustments For Decrease Increase In Contract Assets/Liabilities: -1,303,000,000 - Adjustments For Decrease Increase In Trade Account Receivable: -2,875,000,000 - Adjustments For Decrease Increase In Other Operating Receivables: 2,742,000,000 - Adjustments For Increase Decrease In Trade Account Payable: 3,886,000,000 - Adjustments For Increase Decrease In Tax Equity Partner Liabilities: -353,000,000 - Adjustments For Increase Decrease In Other Operating Payables: -38,000,000 - Interest Received: 7,985,000,000 - Interest Paid: -8,548,000,000 (negative, so outflow) - Income Taxes Paid: -1,263,000,000 Wait, I need to understand the sign convention. The cash flow from operating is 11,924,000,000. Let me try: FFO = Operating Cash Flow + Interest Paid (as positive outflow to add back) - Interest Received Actually, standard approach: FFO is cash flow before financing decisions, so: FFO = CFO + Interest Paid (gross) - Interest Received (if operating) But this gets confusing. Let me use a cleaner approach. For credit analysis, FFO is often calculated as: FFO = EBITDA - Cash Taxes Or: FFO = EBIT + Depreciation - Cash Taxes From P&L: - Profit Loss From Operating Activities (EBIT): 19,774,000,000 - Depreciation Amortisation: 12,283,000,000 - EBITDA = 19,774 + 12,283 = 32,057,000,000 (matches the reported EBITDA line!) - Cash taxes = Income Tax Expense + change in deferred taxes? Or actual taxes paid = 1,263,000,000 Actually, let me verify: "Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense" = 32,057,000,000. Yes! So EBITDA = 32,057,000,000 For FFO, we can use: FFO = EBITDA - Cash Taxes = 32,057 - 1,263 = 30,794,000,000? But this doesn't account for working capital and other cash items. More precisely: FFO = CFO + Interest Paid - Interest Received (to normalize for financing) From the cash flow: CFO = 11,924,000,000 Interest Paid (operating) = 8,548,000,000 Interest Received (operating) = 7,985,000,000 Net interest in CFO = 7,985 - 8,548 = -563,000,000 So pre-interest CFO = 11,924 + 563 = 12,487,000,000? No wait, if interest received is positive and interest paid is negative in the calculation... Actually, looking at standard cash flow presentation: CFO = Operating profit + adjustments + Interest Received - Interest Paid - Taxes Paid So: CFO before interest and tax = CFO + Interest Paid - Interest Received + Taxes Paid = 11,924 + 8,548 - 7,985 + 1,263 = 13,750,000,000 Hmm, but this should equal EBIT + Depreciation - Working capital changes = 19,774 + 12,283 - changes... = 32,057 - working capital changes and other items. Let me verify: 32,057 (EBITDA) - 10,885 (gains on disposal) - 8,687 (derivatives) - 1,935 (provisions) - 278 (other) + 1,419 (inventories) - 1,303 (contracts) - 2,875 (receivables) + 2,742 (other receivables) + 3,886 (payables) - 353 (tax equity) - 38 (other payables) = ? = 32,057 - 10,885 - 8,687 - 1,935 - 278 + 1,419 - 1,303 - 2,875 + 2,742 + 3,886 - 353 - 38 = 32,057 - 22,785 + 6,481 = 15,753 Then - Interest Paid? No, we're before interest. Then - taxes... This is getting messy with signs. Let me just use a practical approach. For FFO / Net Debt, rating agencies typically use: FFO = Net Income + Depreciation + Deferred Taxes + Other non-cash items Or more commonly for project/infrastructure companies: FFO = CFO + Interest Paid (gross) - Interest Received Let me use: FFO = CFO + Interest Paid - Interest Received = 11,924 + 8,548 - 7,985 = 12,487,000,000 Wait, that's too low. Or is it? Actually, for utilities with heavy derivative trading, FFO should exclude derivative mark-to-market impacts. Let me think again. Standard FFO for credit analysis (Moody's/S&P style): FFO = Net Income + Depreciation + Deferred Income Taxes + Other non-cash charges - Gains on asset sales + Minority interest From data: - Net Income: 14,996,000,000 - Depreciation: 12,283,000,000 - Deferred Tax: Need to calculate from balance sheet or use tax expense vs cash tax Deferred tax change = Deferred Tax Assets 2023 - Deferred Tax Assets 2022 + Deferred Tax Liabilities 2023 - Deferred Tax Liabilities 2022? No, the change in deferred tax position. Deferred Tax Assets: 13,719 - 13,281 = 438 increase (use) Deferred Tax Liabilities: 7,414 - 5,616 = 1,798 increase (source) Net deferred tax change = 1,798 - 438 = 1,360 increase in liability = benefit to cash? Actually, increase in deferred tax liability is a non-cash charge that should be added back. Income Tax Expense: 2,613,000,000 Cash Taxes Paid: 1,263,000,000 So deferred/non-cash tax portion = 2,613 - 1,263 = 1,350,000,000 Other non-cash: Gains on disposal = -10,885,000,000 (need to subtract) Provisions, etc. Actually, let me try: FFO = EBIT + Depreciation - Cash Taxes = 19,774 + 12,283 - 1,263 = 30,794,000,000? No wait, EBIT already includes interest and other items. EBIT = 19,774 Depreciation is already added back to get EBIT from EBITDA... wait no: EBITDA = 32,057 Depreciation = 12,283 EBIT = 19,774 So EBIT + Depreciation = EBITDA = 32,057. Yes. FFO = EBITDA - Cash Taxes = 32,057 - 1,263 = 30,794? But this ignores working capital and other cash items. Actually, the proper FFO is closer to operating cash flow before working capital changes and before interest. Let me use a different approach. FFO for project finance/infrastructure: FFO = Cash Flow from Operating Activities before changes in working capital + Interest Paid - Interest Received Or simply: FFO ≈ Net Income + Depreciation + Deferred Taxes = 14,996 + 12,283 + (2,613 - 1,263) = 14,996 + 12,283 + 1,350 = 28,629,000,000 But we need to subtract gains on disposal: -10,885? Or is that already in net income? Yes, gains on disposal are in net income, so we subtract them for FFO. Wait, looking at the adjustments: "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" = -10,885,000,000. This is subtracting a gain (negative adjustment means removing a gain). So the gain was included in profit and this removes it. So starting from Net Income: 14,996 Add back depreciation: 12,283 Add back deferred tax: ~1,350 Subtract gain on disposal: -10,885 (already in net income, so we need to remove it) FFO = 14,996 + 12,283 + 1,350 - 10,885 = 17,744,000,000? Hmm, but this seems low. Let me check with another approach. Actually, for rating agencies, FFO is often defined as: FFO = Funds from operations = Net income from continuing operations + depreciation + deferred taxes + other non-cash items For Ørsted, a renewable energy company with significant asset sales and derivative impacts, FFO should be normalized. Let me use the most practical approach: FFO = Operating Cash Flow + Interest Paid - Interest Received = 11,924 + 8,548 - 7,985 = 12,487,000,000 But this includes working capital changes and other volatile items. For a normalized FFO, we might want to exclude working capital. Actually, looking at this again, for Net Debt / FFO or FFO / Net Debt ratios, the standard is: FFO = CFO + Interest Paid (gross) - Interest Received But this seems low. Let me check if there's a better way. Actually, I think I made an error. Let me re-read the cash flow items. "Interest Received Classified As Operating Activities" 2022: 7,985,000,000 "Interest Paid Classified As Operating Activities" 2022: 8,548,000,000 In cash flow statements, these are typically shown as: - Interest received: positive inflow - Interest paid: negative outflow (or positive with note) The way it's written: "Interest Paid Classified As Operating Activities" with value 8,548,000,000 - this is likely the absolute amount paid, and in the cash flow calculation it's subtracted. So CFO = ... + 7,985 - 8,548 - 1,263 + other items = 11,924 To get FFO (pre-financing, pre-tax operating cash flow): FFO = CFO + Interest Paid - Interest Received + Income Taxes Paid = 11,924 + 8,548 - 7,985 + 1,263 = 13,750,000,000 Or if we want pre-tax but after working capital: FFO = CFO + Interest Paid - Interest Received = 11,924 + 8,548 - 7,985 = 12,487,000,000 Hmm, but this still seems low compared to EBITDA of 32,057. Let me verify by working through the cash flow reconciliation: Start with Profit Loss From Operating Activities: 19,774 Add: Depreciation (already in operating profit? No, operating profit is after depreciation) Wait! "Profit Loss From Operating Activities" = EBIT = 19,774. This is after depreciation! So to get to EBITDA: 19,774 + 12,283 = 32,057. Correct. Now from EBIT to CFO: - Remove gains on disposal: -10,885 (these are in EBIT but not operating cash) - Derivative adjustments: -8,687 - Provisions: -1,935 - Other adjustments: -278 - Working capital changes: various - Interest and taxes: various Actually, the gains on disposal of 10,885 - are these in EBIT? Looking at the P&L: "Gains Losses On Disposals Of Investments" = 331,000,000 But the adjustment is 10,885,000,000. This suggests there are gains on disposal of non-current assets (PPE) included in operating profit or other income. "Other Income" = 14,119,000,000. This likely includes gains on asset sales. So EBIT includes gains on asset sales of ~10,885. To get to a normalized operating cash flow, we subtract these. Let me try: Normalized Operating Cash Flow before working capital and interest = EBITDA - Cash Taxes - Normalized working capital Or: FFO = EBITDA - Cash Taxes = 32,057 - 1,263 = 30,794 But this ignores working capital and the gains on disposal. Actually, I think the most standard definition for FFO in credit analysis is: FFO = Net Income + Depreciation + Deferred Taxes + Other non-cash items - Gains on asset sales = 14,996 + 12,283 + 1,350 - 10,885 = 17,744 But wait, we also need to add back interest expense (net) or not? FFO is typically after interest. Actually, different rating agencies define FFO differently: - Moody's: FFO = Net Income + Depreciation + Deferred Taxes + Other non-cash items - S&P: FFO = Funds from operations, similar but may include working capital adjustments For FFO/Net Debt, we want FFO available to service debt, so after interest is appropriate (as interest is already paid). Let me use: FFO = Net Income + Depreciation + Deferred Taxes + Other non-cash - Gains on sales = 14,996 + 12,283 + (2,613 - 1,263) - 10,885 = 14,996 + 12,283 + 1,350 - 10,885 = 17,744,000,000 Hmm, but let me cross-check with CFO approach. CFO = 11,924 CFO includes: interest received 7,985, interest paid -8,548, taxes paid -1,263 So before interest and tax: 11,924 + 8,548 - 7,985 + 1,263 = 13,750 This 13,750 includes working capital changes. To get FFO, we might want to add back working capital changes or not, depending on definition. Actually, for FFO/Net Debt, the standard ratio uses FFO as defined by rating agencies, which is typically close to CFO + Interest Paid - Interest Received, or about 12,487. But this seems too low. Let me reconsider. Actually, I think I need to check if "Interest Paid Classified As Operating Activities" is already subtracted in the CFO figure. Yes it is. Let me try another approach: FFO = EBITDA - Cash Interest - Cash Taxes = 32,057 - (8,548 - 7,985) - 1,263? No, that's not right. Or: FFO = EBIT + Depreciation - Cash Interest - Cash Taxes? No, FFO is before interest. OK let me look at this fresh. The standard FFO definition for leverage ratios: FFO = Funds From Operations = Cash generated from operations before working capital changes, available to service debt. For a clean calculation: FFO = Operating Profit (EBIT) + Depreciation - Cash Taxes = 19,774 + 12,283 - 1,263 = 30,794? No, EBIT already has depreciation added back to get EBITDA. Wait: EBIT = 19,774. This is Earnings Before Interest and Taxes. Depreciation of 12,283 was already subtracted to get EBIT. So: EBITDA = EBIT + Depreciation = 19,774 + 12,283 = 32,057. FFO = EBITDA - Cash Taxes = 32,057 - 1,263 = 30,794 But this is before working capital changes and other items. The actual cash generated might differ. Actually, I realize now that "FFO" in credit analysis for utilities/infrastructure typically means: FFO = Net Income + Depreciation + Deferred Taxes + Other non-cash items And for the ratio FFO/Net Debt or Net Debt/FFO, we use this measure. Let me calculate more carefully: - Net Income: 14,996 - Add Depreciation: 12,283 - Add Deferred Tax (expense - cash paid): 2,613 - 1,263 = 1,350 - Subtract Gain on asset sales (non-operating/non-recurring): The P&L shows gains on disposals of investments = 331. But the cash flow adjustment is 10,885 for "Losses Gains On Disposal Of Noncurrent Assets". This suggests 10,885 gain was included in profit. Wait, let me check: "Gains Losses On Disposals Of Investments" = 331. And "Other Income" = 14,119. The 10,885 adjustment likely relates to gains on sale of PPE or subsidiaries included in operating profit or other income. Actually, looking more carefully: "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" = -10,885. This is negative, meaning it's removing a gain. So there was a gain of 10,885 included in the profit figure that is being adjusted out. But wait - is this in EBIT? EBIT is 19,774. If the gain is included in EBIT, then to get to a sustainable FFO, we should exclude it. FFO = Net Income + Depreciation + Deferred Taxes - Gains on asset sales (to normalize) = 14,996 + 12,283 + 1,350 - 10,885 = 17,744 But we also need to consider if interest is added back. For FFO available to service debt, we typically want after interest. But for "FFO" as a cash flow measure, it's often before interest. Let me check: if Net Income is 14,996, this is after interest and tax. Pre-interest, pre-tax = 14,996 + 2,613 + (8,548 - 7,985)? No, finance costs are 18,050 and finance income is 15,514. Profit Before Tax = 17,609 Tax = 2,613 Net Income = 14,996 Finance Costs = 18,050 Finance Income = 15,514 Net Finance = -2,536 So pre-finance, pre-tax = 17,609 + 2,536? No, PBT is already after finance. EBIT = 19,774 (given) Finance net = 17,609 - 19,774? No wait, let me check. Actually: "Profit Loss Before Tax" = 17,609 "Profit Loss From Operating Activities" = 19,774 So finance items = 17,609 - 19,774 = -2,165? Or 19,774 - 17,609 = 2,165 positive finance impact? Wait: Operating profit 19,774, then finance items, then PBT 17,609. So finance is negative: 17,609 - 19,774 = -2,165. But Finance Income is 15,514 and Finance Costs is 18,050, so net finance = -2,536. And there are other items: "Gains Losses On Disposals Of Investments" = 331, "Share Of Profit Loss Of Associates And Joint Ventures Accounted For Using Equity Method Non Core Business" = 40. So: 19,774 + 331 + 40 - 2,536 = 17,609? = 19,774 + 371 - 2,536 = 17,609. Yes! 19,774 + 371 = 20,145; 20,145 - 2,536 = 17,609. Correct. Now back to FFO. Let me use the most common definition for European utilities: FFO = EBITDA - Cash Taxes ± Change in Working Capital - Maintenance Capex? No, that's different. For FFO/Net Debt ratio, I should use: FFO = Cash Flow from Operating Activities + Interest Paid - Interest Received This gives FFO before financing costs but after working capital and operations. = 11,924 + 8,548 - 7,985 = 12,487 But this seems low. Let me also consider if we should add back taxes paid: = 11,924 + 8,548 - 7,985 + 1,263 = 13,750 Or use EBITDA - Cash Taxes approach: = 32,057 - 1,263 = 30,794 There's a huge difference. Which is right? Actually, I think for this type of company with heavy derivative trading and asset sales, the "clean" FFO should exclude working capital and derivative impacts, and focus on core operations. Let me try: Core FFO = EBIT + Depreciation - Cash Taxes = 19,774 + 12,283 - 1,263 = 30,794? No wait, EBIT is already after depreciation. So: = EBITDA - Cash Taxes = 32,057 - 1,263 = 30,794 But this includes gains on asset sales. Core FFO = 30,794 - 10,885 (gain) = 19,909? Hmm. Let me look at actual rating agency methodologies for renewable energy/utilities. Moody's FFO = Net Income + Depreciation + Deferred Taxes + Other non-cash items - Gains on asset sales + Minority interest = 14,996 + 12,283 + 1,350 - 10,885 + 0 (minority is negative, so maybe subtract?) = 17,744 S&P FFO is similar but may treat working capital differently. Actually, I realize I should check if the 10,885 gain is already in net income or in operating profit. It's in the reconciliation of operating profit to cash flow, so it's in the starting point. Starting point for cash flow reconciliation is likely "Profit Loss From Operating Activities" = 19,774 or possibly Net Income. Looking at the adjustments, they total to get from profit to CFO of 11,924. The starting point would be Net Income or Operating Profit. If starting from Net Income 14,996: + Depreciation 12,283 + Other adjustments (gains, derivatives, provisions, working capital, interest, taxes) = CFO 11,924 Let me verify: 14,996 + 12,283 = 27,279. Then adjustments: -10,885 - 8,687 - 1,935 - 278 + 1,419 - 1,303 - 2,875 + 2,742 + 3,886 - 353 - 38 + 7,985 - 8,548 - 1,263 = ? = 27,279 - 22,785 + 6,481 - 563 - 1,263 = 27,279 - 22,785 = 4,494; + 6,481 = 10,975; - 563 = 10,412; - 1,263 = 9,149. Not 11,924. So starting point is not Net Income. Let me try starting from Operating Profit 19,774: 19,774 + 12,283 = 32,057 (EBITDA) Then -10,885 - 8,687 - 1,935 - 278 + 1,419 - 1,303 - 2,875 + 2,742 + 3,886 - 353 - 38 + 7,985 - 8,548 - 1,263 = 32,057 - 22,785 + 6,481 - 563 - 1,263 = 32,057 - 18,130 = 13,927. Not 11,924. Hmm, still not right. Let me recheck the sum of adjustments. Actually, depreciation is already included in the adjustments? Let me re-read. "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" = -10,885 "Change In Derivatives Other Adjustments" = -8,687 "Adjustments For Provisions" = -1,935 "Other Adjustments To Reconcile Profit Loss" = -278 These are non-cash or non-operating adjustments. Then working capital: "Adjustments For Decrease Increase In Inventories" = 1,419 (positive = source of cash) "Adjustments For Decrease Increase In Contract Assets..." = -1,303 "Adjustments For Decrease Increase In Trade Account Receivable" = -2,875 "Adjustments For Decrease Increase In Other Operating Receivables" = 2,742 "Adjustments For Increase Decrease In Trade Account Payable" = 3,886 "Adjustments For Increase Decrease In Tax Equity Partner Liabilities" = -353 "Adjustments For Increase Decrease In Other Operating Payables" = -38 Then interest and tax: "Interest Received" = 7,985 "Interest Paid" = -8,548? Or is it positive 8,548 and subtracted? If Interest Paid is shown as positive 8,548 and is a cash outflow, then in the cash flow it's -8,548. Similarly, Income Taxes Paid 1,263 is outflow = -1,263. Let me try: Start with Operating Profit 19,774. Add back depreciation: +12,283 = 32,057 Then: -10,885 - 8,687 - 1,935 - 278 + 1,419 - 1,303 - 2,875 + 2,742 + 3,886 - 353 - 38 + 7,985 - 8,548 - 1,263 Let me calculate step by step: 32,057 - 10,885 = 21,172 - 8,687 = 12,485 - 1,935 = 10,550 - 278 = 10,272 + 1,419 = 11,691 - 1,303 = 10,388 - 2,875 = 7,513 + 2,742 = 10,255 + 3,886 = 14,141 - 353 = 13,788 - 38 = 13,750 + 7,985 = 21,735 - 8,548 = 13,187 - 1,263 = 11,924. ✓ Great! So starting point is Operating Profit (EBIT) = 19,774, and we add back depreciation to get EBITDA = 32,057, then make other adjustments. Now for FFO. The standard definition I want is: FFO = Operating Cash Flow before working capital changes and before interest and tax, or equivalently: FFO = EBITDA - Cash Taxes (normalized) Or more practically for this company: FFO = CFO + Interest Paid - Interest Received + Working Capital Changes (to normalize) = 11,924 + 8,548 - 7,985 + (-1,419 + 1,303 + 2,875 - 2,742 - 3,886 + 353 + 38) = 11,924 + 563 + (-3,478) = 12,487 - 3,478? No wait. Working capital changes total: 1,419 - 1,303 - 2,875 + 2,742 + 3,886 - 353 - 38 = 3,478 (positive, meaning source of cash) So to normalize CFO (remove working capital impact): Normalized CFO before working capital = 11,924 - 3,478 = 8,446? No wait, if working capital was a source (positive), then removing it means subtracting. Actually: CFO = EBIT + Depreciation + Other non-cash adjustments + Working Capital + Interest + Taxes = 19,774 + 12,283 - 22,785 + 3,478 + 7,985 - 8,548 - 1,263 = 32,057 - 22,785 + 3,478 - 563 - 1,263 = 32,057 - 22,785 = 9,272; + 3,478 = 12,750; - 563 = 12,187; - 1,263 = 10,924? Hmm, not matching. Let me recheck: 32,057 - 22,785 = 9,272. Then + 3,478 (WC) = 12,750. Then + 7,985 (int rec) = 20,735. Then - 8,548 (int paid) = 12,187. Then - 1,263 (tax) = 10,924. But CFO is 11,924. Difference of 1,000. Let me recheck working capital: 1,419 - 1,303 - 2,875 + 2,742 + 3,886 - 353 - 38 = 1,419 - 1,303 = 116 116 - 2,875 = -2,759 -2,759 + 2,742 = -17 -17 + 3,886 = 3,869 3,869 - 353 = 3,516 3,516 - 38 = 3,478. Yes. Total adjustments without interest and tax: -22,785 + 3,478 = -19,307 Then: 32,057 - 19,307 = 12,750 Then interest and tax: + 7,985 - 8,548 - 1,263 = -1,826 12,750 - 1,826 = 10,924. But CFO is 11,924. Off by 1,000. Let me recheck non-cash adjustments: -10,885 - 8,687 - 1,935 - 278 = -21,785? Not -22,785. -10,885 - 8,687 = -19,572 -19,572 - 1,935 = -21,507 -21,507 - 278 = -21,785. Yes! So: 32,057 - 21,785 + 3,478 - 563 - 1,263 = 32,057 - 21,785 = 10,272; + 3,478 = 13,750; - 563 = 13,187; - 1,263 = 11,924. ✓ Great. So the math checks. Now for FFO. I want a normalized measure. Let me define: FFO = EBITDA - Cash Taxes ± Normalized Working Capital Or for simplicity, use the common credit metric: FFO = Net Income + Depreciation + Deferred Taxes + Other non-cash items But with proper treatment of gains/losses and interest. Actually, let me use the most standard FFO for leverage ratios: FFO = Cash Flow from Operating Activities + Interest Paid (net of Interest Received) - Working Capital Changes (to normalize) = 11,924 + (8,548 - 7,985) - 3,478 = 11,924 + 563 - 3,478 = 9,009 Hmm, that's even lower. This doesn't seem right for a company with 32B EBITDA. Wait, I think I'm confusing myself. Let me look up standard FFO calculation. For Moody's: FFO = Net Income + Depreciation + Deferred Income Taxes + Other non-cash items For S&P: FFO = Funds from operations, similar definition The key is that FFO is NOT cash flow. It's an accounting-based measure of cash generation. FFO = 14,996 (Net Income) + 12,283 (Depreciation) + 1,350 (Deferred Tax) + other non-cash - gains on sales Other non-cash from cash flow statement (excluding depreciation and working capital): - Gains on disposal: -10,885 (remove this gain) - Derivative adjustments: -8,687 (this is non-cash, but should we add back? It's already in net income as unrealized) - Provisions: -1,935 - Other: -278 Actually, for FFO, we typically add back non-cash expenses and subtract non-cash gains. From Net Income: + Depreciation: 12,283 (add back non-cash expense) + Deferred Tax: 1,350 (add back non-cash expense) - Gains on disposal: -10,885? Wait, the adjustment is negative, meaning gain was subtracted from profit to get cash flow. So gain was in profit. For FFO, we want to remove non-recurring gains. So: 14,996 + 12,283 + 1,350 - 10,885 = 17,744 But what about the derivative adjustments of 8,687? These are likely fair value changes on derivatives. For a normalized FFO, should we adjust? For a utility with heavy hedging, Moody's typically includes realized gains/losses in FFO but excludes unrealized. The 8,687 "Change In Derivatives Other Adjustments" is likely unrealized mark-to-market. If we exclude this: 17,744 - 8,687 = 9,057? Or add back if it was a loss? The adjustment is -8,687, meaning it was subtracted from profit to get cash flow. This suggests the derivative change was a non-cash gain (positive in profit, removed for cash flow). So we should subtract it for FFO normalization: 17,744 - 8,687 = 9,057. But this seems very low. Let me reconsider. Actually, for Ørsted specifically, they have significant commodity derivative trading. The "Change In Derivatives Other Adjustments" might be working capital related (margin calls) rather than unrealized P&L. Looking at the financing section: "Collateral Posted In Relation To Trading Of Derivatives" = 48,885 and "Collateral Released" = 52,143. These are financing activities. And in operating cash flow, "Change In Derivatives Other Adjustments" = -8,687. This could be unrealized gains/losses or working capital changes. Given the complexity, let me use a simpler approach. For FFO/Net Debt, I'll use: FFO = Operating Cash Flow + Interest Paid - Interest Received = 11,924 + 8,548 - 7,985 = 12,487 This is conservative and standard for some methodologies. Or: FFO = EBITDA - Cash Taxes = 32,057 - 1,263 = 30,794 I think for this exercise, given the data available, I'll use: FFO = CFO + Interest Paid - Interest Received = 12,487 But actually, I want to check what "Net Debt" means. Net Debt = Total Debt - Cash and Cash Equivalents Debt items: - Longterm Borrowings: 60,451 - Shortterm Borrowings: 2,830 - Current Lease Liabilities: 569 - Noncurrent Lease Liabilities: 7,697 Total Debt = 60,451 + 2,830 + 569 + 7,697 = 71,547 Or sometimes only borrowings are considered debt: - Longterm Borrowings: 60,451 - Shortterm Borrowings: 2,830 Total Borrowings = 63,281 Cash and Cash Equivalents: 16,175 (end of 2022, i.e., 2023-01-01) Wait, the dates: "Cash And Cash Equivalents" 2023-01-01: 16,175,000,000 and 2022-01-01: 8,624,000,000. For 2022 year-end (which is 2023-01-01 in the data): Cash = 16,175 Also "Cash" 2023-01-01: 16,178,000,000 and 2022-01-01: 8,624,000,000. Slight difference, likely due to cash equivalents. Net Debt with borrowings only: 63,281 - 16,175 = 47,106 Net Debt with all debt (including leases): 71,547 - 16,175 = 55,372 Or if we include hybrid capital? Hybrid capital is often treated as equity or debt depending on terms. "Hybrid Capital" = 19,793. This is typically treated as equity for some purposes but debt-like for others. For Net Debt, standard is: Net Debt = Short-term borrowings + Long-term borrowings + Current portion of long-term debt - Cash and cash equivalents = 2,830 + 60,451 - 16,175 = 47,106 Or with leases: 2,830 + 60,451 + 569 + 7,697 - 16,175 = 55,372 Let me check if there are other debt-like items: - Current Derivative Financial Liabilities: 33,438 (these are mark-to-market, not debt) - Noncurrent Derivative Financial Liabilities: 24,121 (same) I'll use Net Debt = Total Borrowings - Cash = 63,281 - 16,175 = 47,106 Or with all interest-bearing debt including leases = 71,547 - 16,175 = 55,372 Now for FFO, let me reconsider. I think the most appropriate measure given the data is: FFO = EBITDA - Cash Taxes ± normalized working capital Or simply use the direct FFO definition: FFO = Net Income + Depreciation + Deferred Taxes = 14,996 + 12,283 + 1,350 = 28,629 But this includes gains on asset sales and derivative impacts. Normalized FFO = 28,629 - 10,885 (gain on disposal) = 17,744? Or further normalized for derivatives? Actually, looking at this from a practical credit perspective, Ørsted is a major renewable energy developer. Their business model involves developing and selling assets (farm-downs). The gains on disposal are actually part of their core business model! So maybe we shouldn't normalize out the gains on disposal. In that case: FFO = 28,629 (or 28,629 + interest if we want pre-interest) But wait, Net Income is after interest. For FFO to service debt, we want after interest. Actually, I realize I should look at this differently. The standard FFO/Net Debt for project/infrastructure companies: FFO = Cash available to service debt after operating costs but before debt service = EBITDA - Cash Taxes = 32,057 - 1,263 = 30,794 Or if we want to be more precise and use actual cash flow: FFO = CFO + Interest Paid - Interest Received (to get pre-financing) = 11,924 + 8,548 - 7,985 = 12,487 The difference is huge (30,794 vs 12,487) due to working capital, derivatives, and other items. For a normalized ratio, we typically want sustainable FFO. The 30,794 is closer to "normalized" before working capital, while 12,487 includes all cash impacts. Actually, let me recalculate: CFO + Interest Paid - Interest Received assumes Interest Paid is added back and Interest Received is subtracted. But in CFO, Interest Received is added and Interest Paid is subtracted. So: CFO = X + Interest Received - Interest Paid - Taxes So X (pre-interest, pre-tax) = CFO - Interest Received + Interest Paid + Taxes Then FFO = X - Taxes = CFO - Interest Received + Interest Paid = 11,924 - 7,985 + 8,548 = 12,487 Yes. But this X includes working capital changes. For "Funds From Operations", we typically want before working capital changes. So: FFO before WC = CFO - WC changes - Interest Received + Interest Paid = 11,924 - 3,478 - 7,985 + 8,548 = 9,009 Hmm, that's even lower. This suggests the company's working capital absorbed 3.5B cash, and derivatives/other items absorbed significant cash too. Actually, I think for this specific company, given the complexity, the most standard approach would be: FFO = Net Income + Depreciation + Deferred Taxes = 14,996 + 12,283 + 1,350 = 28,629 Or with interest added back (for pre-interest FFO): = 28,629 + (Finance Costs - Finance Income) = 28,629 + (18,050 - 15,514) = 28,629 + 2,536 = 31,165 Wait, but Net Income is after tax, and Finance Costs/Income are before tax. Let me be careful. PBT = 17,609 Tax = 2,613 Net Income = 14,996 Pre-finance PBT = 17,609 + 2,536 (net finance cost) = 20,145? No, PBT includes finance. EBIT = 19,774. Actually: EBIT 19,774, then + 371 (gains on investments and associates) = 20,145. Then - 2,536 finance = 17,609 PBT. So pre-finance, pre-tax operating profit = 20,145. Tax on this would be different. For simplicity, let me use FFO = CFO + Interest Paid - Interest Received = 12,487. This is after tax and after working capital. Or FFO = EBITDA - Cash Taxes = 32,057 - 1,263 = 30,794. This is before working capital and interest. I think for the ratio FFO/Net Debt, I'll use the more common credit metric which is closer to EBITDA-based: FFO ≈ EBITDA - Cash Taxes = 30,794 But let me also consider: FFO = Net Income + Depreciation + Deferred Taxes + Interest Expense (net) = 14,996 + 12,283 + 1,350 + 2,536 = 31,165 This is close to 30,794. The difference is due to gains/losses and other items. Actually, 31,165 vs 30,794 - close enough. The 2,536 is net finance cost. But wait, Net Income is after tax, and I'm adding back pre-tax interest. That's inconsistent. Let me do it properly: Pre-tax FFO = EBIT + Depreciation - Cash Taxes + Other non-cash? No, EBIT already includes everything operating. FFO (pre-interest, after tax) = EBIT + Depreciation - Cash Taxes? No, EBIT is before interest, so: = EBIT - Cash Taxes + add back non-cash items in EBIT Actually, EBIT = 19,774 includes non-cash items like depreciation (already subtracted) and gains (already included). So: EBIT + Depreciation = EBITDA = 32,057 Then - Cash Taxes = 32,057 - 1,263 = 30,794 But this is pre-interest, after tax. To compare with Net Debt, we typically want pre-interest so we can calculate debt service coverage. Actually, for FFO/Net Debt, the ratio is often calculated as: FFO = Net Income + Depreciation + Deferred Taxes + Other non-cash items (after interest) Then FFO/Net Debt shows how many times the net debt could be covered by internal funds. Using after-interest FFO: FFO = 14,996 + 12,283 + 1,350 = 28,629 Net Debt = 47,106 (borrowings only) or 55,372 (with leases) FFO/Net Debt = 28,629 / 47,106 = 0.608 or 60.8% Or = 28,629 / 55,372 = 0.517 or 51.7% If we use pre-interest FFO: FFO = 31,165 / 47,106 = 0.662 or 66.2% Hmm, these seem reasonable for a capital-intensive utility. But wait, I want to double-check Net Debt. Should we include hybrid capital? Hybrid Capital = 19,793. This is treated as equity in the balance sheet but has debt-like features (fixed coupons). For credit analysis, it's often included in "Total Debt" or "Adjusted Debt". If included: Total Debt = 63,281 + 19,793 = 83,074 (borrowings + hybrid) Or with leases = 71,547 + 19,793 = 91,340 Net Debt with hybrid = 83,074 - 16,175 = 66,899 Or = 91,340 - 16,175 = 75,165 This would give lower ratios. For standard Net Debt, I'll exclude hybrid (treated as equity) and exclude leases (sometimes excluded in "Net Debt" though included in "Net Debt and Lease Liabilities"). Net Debt = Long-term borrowings + Short-term borrowings - Cash = 60,451 + 2,830 - 16,175 = 47,106 Now for FFO, let me finalize. I'll use the most standard definition: FFO = Net Income + Depreciation + Deferred Income Taxes = 14,996 + 12,283 + (2,613 - 1,263) = 14,996 + 12,283 + 1,350 = 28,629 But should I add back interest? For "FFO" in the context of FFO/Net Debt, it's typically after interest. But sometimes it's before. Looking at S&P's definition: "Funds from operations (FFO) are cash earnings from operations." This is typically after interest. Moody's: "FFO = Net Income + Depreciation + Deferred Taxes + Other non-cash items" So I'll use FFO = 28,629. But wait, I need to check if there are other non-cash items to add back. The "Other Adjustments To Reconcile Profit Loss" = -278. This is small. Provisions change = -1,935 - this is a non-cash expense? Actually, provision changes can be non-cash (reversal of provision) or cash (utilization). For simplicity, I'll stick with FFO = 28,629. FFO/Net Debt = 28,629 / 47,106 = 0.6077 or about 0.61 But let me also consider if we should use a different FFO. Looking at the cash flow, the company's actual cash generation is lower due to working capital and derivative impacts. For a "sustainable" FFO, maybe we should normalize. Actually, I realize that for this type of company, the most relevant FFO might be closer to operating cash flow before working capital: OCF before WC = CFO - WC changes = 11,924 - 3,478 = 8,446? No wait, if WC was source (positive), then: CFO includes +3,478 from WC. So without WC: 11,924 - 3,478 = 8,446. Then + Interest Paid - Interest Received = 8,446 + 8,548 - 7,985 = 9,009. This is much lower. But this includes derivative impacts and other items. Hmm, I think 28,629 is too high and 9,009 is too low. Let me try a middle ground. FFO = EBITDA - Cash Taxes = 32,057 - 1,263 = 30,794 Then subtract after-tax interest to get to after-interest FFO: 30,794 - 2,536*(1 - tax rate)? Tax rate = 2,613 / 17,609 = 14.8% After-tax interest = 2,536 * (1 - 0.148) = 2,161 FFO after interest = 30,794 - 2,161 = 28,633. Matches my 28,629! Good. So FFO = 28,629 is consistent with EBITDA - Cash Taxes - After-tax Interest. Now, should I adjust for gains on disposal? The 10,885 gain is part of EBITDA (included in EBIT). For normalized FFO, we might want to exclude it: Normalized EBITDA = 32,057 - 10,885 = 21,172 Normalized FFO = 21,172 - 1,263 - 2,161 = 17,748 This is closer to my earlier 17,744. For a renewable energy developer like Ørsted, farm-downs (selling stakes in projects) are part of core business. So the gains are somewhat recurring. However, they're lumpy and not truly "operating". I think for this exercise, I'll use the unadjusted FFO = 28,629 as it's the most standard and directly calculable from the data. FFO/Net Debt = 28,629 / 47,106 = 0.6077 Let me also calculate with leases included in debt: Net Debt = 55,372 FFO/Net Debt = 28,629 / 55,372 = 0.517 And with hybrid capital: Net Debt = 66,899 or 75,165 FFO/Net Debt = 28,629 / 66,899 = 0.428 or 28,629 / 75,165 = 0.381 I think the most standard "Net Debt" for this ratio excludes leases and hybrid, so: FFO/Net Debt = 0.608 or about 61% But let me reconsider if I should use a different FFO. Looking at actual credit ratios for utilities, they often use: FFO = Cash Flow from Operating Activities + Interest Paid - Interest Received = 12,487 This gives FFO/Net Debt = 12,487 / 47,106 = 0.265 or 26.5% This is much more conservative and reflects actual cash available. Actually, I think I've been confusing two different measures: 1. FFO (Funds From Operations) - an accounting-based measure 2. Cash Flow Available for Debt Service (CFADS) - a cash-based measure For "FFO/Net Debt", it's typically the accounting-based FFO = Net Income + Depreciation + Deferred Taxes. Let me verify with a simple calculation: EBITDA = 32,057. If FFO/Net Debt = 0.6, then FFO ≈ 19,000-29,000. My 28,629 fits. I'll go with FFO = 28,629 and Net Debt = 47,106. FFO / Net Debt = 28,629 / 47,106 = 0.6077 Rounding: 0.61 or 61% Actually, let me recheck if I should include current portion of long-term debt or if it's already in short-term borrowings. The data shows "Shortterm Borrowings" = 2,830 and "Longterm Borrowings" = 60,451. These seem to be separate categories, so total borrowings = 63,281. Also, should I include "Current Tax Liabilities" or other items? No, those are not debt. One more check: Cash = 16,175 or 16,178? The data has "Cash And Cash Equivalents" = 16,175 and "Cash" = 16,178. I'll use 16,175 as "Cash And Cash Equivalents" is the standard line item. Net Debt = 60,451 + 2,830 - 16,175 = 47,106 FFO = 14,996 + 12,283 + 1,350 = 28,629 Ratio = 28,629 / 47,106 = 0.6077 Let me express this as a percentage or decimal? The ratio FFO/Net Debt is typically expressed as a percentage or as a multiple. If as multiple: 0.61x. If as percentage: 61%. Actually, looking at common usage: "FFO/Net Debt ratio" is often expressed as a percentage (e.g., "FFO/Net Debt of 60%") or sometimes as years (inverse of debt/FFO). I'll provide as a decimal: 0.61 or 0.608. But wait, I want to double-check my FFO calculation. Should I include the hybrid capital coupon or other items? "Coupon Payments On Hybrid Capital" = 529. This is like interest but paid to hybrid holders. If hybrid is treated as equity, this is a distribution, not interest. So no adjustment needed for FFO. Also, "Profit Loss Attributable To Hybrid Capital Owners" = 577. This is part of Net Income attribution, already included in the 14,996 Net Income. Actually, Net Income = 14,996 = 14,549 (owners) + 577 (hybrid) - 130 (NCI). Or 14,996 total. For FFO, we typically use total Net Income, not just attributable to owners. So FFO = 14,996 + 12,283 + 1,350 = 28,629. Correct. One final check: Should I use "Profit Loss From Operating Activities" (EBIT) instead of Net Income as starting point? If FFO = EBIT + Depreciation - Cash Taxes? No, EBIT already has depreciation subtracted, so EBIT + Depreciation = EBITDA. FFO = EBITDA - Cash Taxes - After-tax Interest? = 32,057 - 1,263 - 2,161 = 28,633. Close to 28,629 (difference due to rounding and other items). Yes, consistent. I'll go with FFO/Net Debt = 0.608 or approximately 0.61. Actually, let me see if I can get a more precise number. The exact calculation: FFO = 14,996,000,000 + 12,283,000,000 + 1,350,000,000 = 28,629,000,000 Net Debt = 60,451,000,000 + 2,830,000,000 - 16,175,000,000 = 47,106,000,000 Ratio = 28,629 / 47,106 = 0.607735... So 0.608 or 60.8%. I'll provide 0.61 as a rounded figure, or should I be more precise? Let me use 0.608. Actually, I want to reconsider one more time if leases should be included. In modern credit analysis (post-IFRS 16), lease liabilities are often included in Net Debt. If so: Net Debt = 60,451 + 2,830 + 7,697 + 569 - 16,175 = 55,372 FFO/Net Debt = 28,629 / 55,372 = 0.517 or 51.7% This is a significant difference. Which is more standard? For "Net Debt", the common definition includes: - Short-term borrowings - Long-term borrowings - Current portion of long-term debt - Less: Cash and cash equivalents Lease liabilities are sometimes included in "Net Debt and Lease Liabilities" or "Adjusted Net Debt". Given the traditional definition, I'll exclude leases but note that including them would give ~52%. Final answer: FFO/Net Debt = 0.61 or 61%. Let me format as requested: just the number, no units, between XML tags. Actually, I want to do one more sanity check. Ørsted is a major offshore wind developer with significant capital needs. Their Net Debt increased significantly in 2022: 2021: Long-term 31,502 + Short-term 19,493 - Cash 8,624 = 42,371 2022: Long-term 60,451 + Short-term 2,830 - Cash 16,175 = 47,106 Net Debt increased by about 5B. Their EBITDA was 32B, FFO ~29B. The ratio of 0.61 seems reasonable for a growing utility with heavy capex (33B in 2022). Actually, looking at this again, their FFO of 29B and Net Debt of 47B gives them a ratio of ~0.6, meaning their net debt is about 1.6x FFO. This is reasonable for a utility. I'll finalize with 0.61. 0.61