I need to estimate the FFO (Funds From Operations) / Net debt ratio for 2022. First, let me identify the key components: **FFO Calculation:** FFO is typically calculated as: - Net income + Depreciation/Amortization + Impairments + Deferred taxes - Gains on sales + Other non-cash items Or more commonly for utilities: Operating Cash Flow - Changes in Working Capital (or sometimes just using cash from operations before working capital changes) Let me use a standard approach: FFO = Profit Loss + Depreciation Amortisation And Impairment + Provisions - Other non-cash gains + Finance Costs (net) - Tax... Actually, let me use a more practical approach. FFO is often approximated as: - Cash Flows From Used In Operations (before working capital changes) OR - Net income + D&A + other non-cash items Looking at the cash flow statement data: - "Cash Flows From Used In Operations" 2022: 4,200,324,000 EUR - This is typically before working capital changes Let me also check: "Cash Flows From Used In Operating Activities" 2022: 3,777,785,000 EUR FFO is usually closer to operating cash flow before working capital changes. The "Cash Flows From Used In Operations" at 4,200,324,000 EUR seems to be the pre-working capital operating cash flow. Alternatively, I can calculate FFO as: - Profit Loss: 1,169,749,000 EUR + Depreciation Amortisation And Impairment: 1,979,007,000 EUR + Provisions Expenses: 14,539,000 EUR + Finance Costs (net of finance income, or just add back): 1,753,220,000 - 843,000,000 = 910,220,000 - Income Tax: 398,490,000 - CESE: 51,534,000 Wait, let me look at the adjustments in the cash flow: "Adjustments For Depreciation And Amortisation Expense And Impairment Loss": 1,979,007,000 "Adjustments For Provisions": 14,539,000 "Adjustments For Joint Ventures And Associates": -208,684,000 "Adjustments For Finance Income Cost": 910,220,000 "Other Adjustments To Reconcile Profit Loss": -1,384,104,000 The "Cash Flows From Used In Operations" of 4,200,324,000 is essentially: Profit Loss (1,169,749,000) + adjustments = 4,200,324,000 Let me verify: 1,169,749,000 + 1,979,007,000 + 14,539,000 - 208,684,000 + 910,220,000 - 4,377,000 + 405,817,000 + 766,260,000 - 142,137,000 + 502,859,000 - 1,384,104,000 - 258,849,000 = ? Actually, let me just use "Cash Flows From Used In Operations" as FFO, which is 4,200,324,000 EUR. This is a common approximation for FFO in credit analysis. **Net Debt Calculation:** Net Debt = Total Borrowings (Long-term + Current) - Cash and Cash Equivalents Long-term Borrowings 2022: 15,782,604,000 EUR Current Borrowings And Current Portion Of Noncurrent Borrowings 2022: 4,239,869,000 EUR Total Borrowings: 15,782,604,000 + 4,239,869,000 = 20,022,473,000 EUR Cash And Cash Equivalents 2022: 4,900,205,000 EUR Net Debt = 20,022,473,000 - 4,900,205,000 = 15,122,268,000 EUR Wait, I need to check if there are other current financial liabilities that should be included. Let me check "Other Current Financial Liabilities" = 3,600,893,000 EUR. Some analysts include these if they're debt-like. Also "Other Noncurrent Financial Liabilities" = 5,159,496,000 EUR. These might include debt-like items. For a cleaner net debt, let me stick to borrowings minus cash: Net Debt = 20,022,473,000 - 4,900,205,000 = 15,122,268,000 EUR Or if we want to be more conservative and include other financial liabilities: Total Financial Debt = 20,022,473,000 + 5,159,496,000 + 3,600,893,000 = 28,782,862,000 EUR Net Debt = 28,782,862,000 - 4,900,205,000 = 23,882,657,000 EUR Let me check standard practice. For credit ratios, "debt" usually includes borrowings and debt-like items. Let me look more carefully. Actually, looking at typical EDP reporting, their net debt usually includes: - Long-term borrowings - Current borrowings - Other financial liabilities (debt-like) - Less: Cash and cash equivalents - Less: Other current financial assets (if liquid) Let me use a more standard approach for utilities: Gross Debt = Longterm Borrowings + Current Borrowings = 15,782,604,000 + 4,239,869,000 = 20,022,473,000 Net Debt = 20,022,473,000 - 4,900,205,000 = 15,122,268,000 EUR Or if we include other financial liabilities that are debt-like. Let me check "Other Noncurrent Financial Liabilities" of 5,159,496,000 and "Other Current Financial Liabilities" of 3,600,893,000. Actually, for FFO/Net Debt ratio as commonly reported by rating agencies for EDP, they typically use: - FFO = Funds from operations (operating cash flow before working capital changes or net income + D&A + deferred taxes) - Net Debt = Total financial debt - cash Let me use FFO = 4,200,324,000 EUR (Cash Flows From Used In Operations) For Net Debt, let me use total borrowings minus cash: Net Debt = 20,022,473,000 - 4,900,205,000 = 15,122,268,000 EUR FFO / Net Debt = 4,200,324,000 / 15,122,268,000 = 0.2778 or 27.8% Alternatively, if we use a broader debt definition including other financial liabilities: Gross debt = 20,022,473,000 + 5,159,496,000 + 3,600,893,000 = 28,782,862,000 Net debt = 28,782,862,000 - 4,900,205,000 = 23,882,657,000 FFO/Net Debt = 4,200,324,000 / 23,882,657,000 = 0.1759 or 17.6% Let me think about which is more appropriate. The "Other Noncurrent Financial Liabilities" of 5.16bn and "Other Current Financial Liabilities" of 3.6bn likely include derivatives, institutional partnerships, and other items. Actually, looking at the line "Institutional Partnerships In North America" = 2,211,216,000 EUR under non-current liabilities. These are typically non-debt items (equity partnerships). Let me re-examine. For a cleaner analysis, I'll use: - FFO = Cash Flows From Used In Operations = 4,200,324,000 EUR - Net Debt = (Longterm Borrowings + Current Borrowings) - Cash = 20,022,473,000 - 4,900,205,000 = 15,122,268,000 EUR But wait - I should also consider if "Other Current Financial Liabilities" includes short-term debt or commercial paper. And "Other Noncurrent Financial Liabilities" might include pension deficits or other non-debt items. Let me try another approach using EBITDA-like FFO: Profit Loss Before Financial Income And Financial Expenses Income Tax Expense And CESE = 2,529,993,000 + Depreciation Amortisation And Impairment = 1,979,007,000 + Provisions = 14,539,000 = 4,523,539,000 (which matches "Profit Loss Before Provisions..." line) Then FFO = this + interest paid - taxes paid + other adjustments... Actually, looking more carefully at standard FFO definitions from rating agencies: FFO = Net income from continuing operations + depreciation + amortization + deferred income taxes + other non-cash items Or: FFO = Funds from operations = operating cash flows before changes in working capital The "Cash Flows From Used In Operations" at 4,200,324,000 EUR is the best proxy for FFO. For Net Debt, I'll use a comprehensive approach but exclude equity-like items: - Longterm Borrowings: 15,782,604,000 - Current Borrowings: 4,239,869,000 - Less Cash: 4,900,205,000 Net Debt = 15,122,268,000 Actually, I want to check if there are other debt items. Looking at the balance sheet, I see "Collateral Deposits Associated To Financial Debt" which are typically restricted cash or deposits related to debt. Let me also consider: should I include "Other Noncurrent Financial Liabilities" and "Other Current Financial Liabilities"? For a conservative credit analysis, yes. But these could include derivatives (which have zero net value when netting receivables/payables), payables, or other operating liabilities. Given the complexity, let me use the most standard definition: Net Debt = Long-term borrowings + Current borrowings - Cash and cash equivalents = 15,782,604,000 + 4,239,869,000 - 4,900,205,000 = 20,022,473,000 - 4,900,205,000 = 15,122,268,000 EUR FFO / Net Debt = 4,200,324,000 / 15,122,268,000 = 0.2778 Or expressed as a percentage: 27.78% But ratios are often expressed as x.x% or as a multiple (Net Debt/FFO). The question asks for FFO/Net Debt ratio, which is typically expressed as a percentage or decimal. Let me double-check by also calculating using operating cash flow: Cash Flows From Used In Operating Activities = 3,777,785,000 EUR This is after working capital changes. FFO should be before working capital changes, so 4,200,324,000 is correct. Actually, let me verify my FFO figure by working through the adjustments: Profit Loss: 1,169,749,000 + Adjustments For Depreciation And Amortisation: 1,979,007,000 + Adjustments For Provisions: 14,539,000 + Adjustments For Joint Ventures And Associates: -208,684,000 (this is equity pickup, subtract) + Adjustments For Finance Income Cost: 910,220,000 + Gains Losses On Disposal: -4,377,000 + Adjustments For Decrease Increase In Trade And Other Receivables: 405,817,000 + Adjustments For Increase Decrease In Trade And Other Payables: 766,260,000 + Changes In Working Capital To Personnel: -142,137,000 + Changes In Working Capital For Regulatory Assets: 502,859,000 + Other Adjustments: -1,384,104,000 + Income Tax And CESE: -258,849,000 Wait, this doesn't cleanly sum to 4,200,324,000. Let me check which items are included in "Cash Flows From Used In Operations". Actually, looking at the structure, "Cash Flows From Used In Operations" likely includes: - Profit Loss - + All adjustments except working capital changes and tax Let me try: 1,169,749,000 + 1,979,007,000 + 14,539,000 - 208,684,000 + 910,220,000 - 4,377,000 + (-1,384,104,000) = ? = 1,169,749,000 + 1,979,007,000 = 3,148,756,000 + 14,539,000 = 3,163,295,000 - 208,684,000 = 2,954,611,000 + 910,220,000 = 3,864,831,000 - 4,377,000 = 3,860,454,000 - 1,384,104,000 = 2,476,350,000 That's not 4,200,324,000. So my assumption is wrong. Let me re-read: "Cash Flows From Used In Operations" 2022: 4,200,324,000 EUR "Other Inflows Outflows Of Cash Classified As Operating Activities" 2022: -422,539,000 EUR "Cash Flows From Used In Operating Activities" 2022: 3,777,785,000 EUR So 4,200,324,000 + (-422,539,000) = 3,777,785,000 ✓ The "Cash Flows From Used In Operations" is the pre-working-capital, pre-other-items operating cash flow. This is indeed the FFO proxy. Now, how is 4,200,324,000 calculated? Let me check if it includes working capital items or not. Looking at the adjustments listed: - Adjustments For Decrease Increase In Trade And Other Receivables: 405,817,000 - Adjustments For Increase Decrease In Trade And Other Payables: 766,260,000 - Changes In Working Capital To Personnel: -142,137,000 - Changes In Working Capital For Regulatory Assets: 502,859,000 These are working capital changes. If "Cash Flows From Used In Operations" excludes these, then it's FFO. Actually, the standard presentation is: Cash flow from operations (FFO-like) = Net income + non-cash adjustments Then +/- working capital = Operating cash flow before other items Then other items = Net operating cash flow Let me try another combination. Maybe "Cash Flows From Used In Operations" includes: Profit Loss + D&A + Provisions + JVs + Finance costs + Other adjustments + Tax = 1,169,749,000 + 1,979,007,000 + 14,539,000 - 208,684,000 + 910,220,000 - 4,377,000 - 1,384,104,000 - 258,849,000 + ? Hmm, let me just accept that 4,200,324,000 is the reported "Cash Flows From Used In Operations" and use it as FFO. For Net Debt, I want to be more careful. Let me look at what EDP typically reports. Actually, I notice "Noncurrent Liabilities" = 27,556,917,000 and "Current Liabilities" = 17,424,886,000. But for net debt, we need financial debt only. Let me identify: - Longterm Borrowings: 15,782,604,000 - Current Borrowings: 4,239,869,000 - Other Noncurrent Financial Liabilities: 5,159,496,000 - need to check if debt - Other Current Financial Liabilities: 3,600,893,000 - need to check if debt The "Other Noncurrent Financial Liabilities" of 5,159,496,000 could include: - Derivative liabilities - Pension deficits - Other non-debt financial liabilities Similarly for current. For a standard Net Debt calculation, I'll use: Financial Debt = Long-term borrowings + Current borrowings + Current portion of long-term debt (already in current borrowings) Net Debt = 15,782,604,000 + 4,239,869,000 - 4,900,205,000 = 15,122,268,000 But I want to check if there are other debt-like items. Looking at "Institutional Partnerships In North America" = 2,211,216,000 - these are typically non-controlling interests in project finance structures, often treated as non-debt equity. Let me also check "Trade Payables And Other Liabilities From Commercial Activities" - these are operating payables, not debt. I think the cleanest Net Debt is: Gross Debt = Longterm Borrowings + Current Borrowings = 20,022,473,000 Less: Cash and Cash Equivalents = 4,900,205,000 Net Debt = 15,122,268,000 FFO / Net Debt = 4,200,324,000 / 15,122,268,000 = 0.2778 or 27.8% However, I should check if rating agencies might use a different figure. Sometimes they add back dividends received or subtract dividends paid. But for FFO, it's typically pre-dividend. Let me also consider: should I use "Cash Flows From Used In Operating Activities" (3,777,785,000) instead? This is after working capital changes. FFO is typically before working capital changes, so 4,200,324,000 is more appropriate. Actually, I want to double-check by looking at EBITDA and seeing if I can derive FFO another way. EBITDA proxy = Profit Loss Before Financial Income And Financial Expenses Income Tax Expense And CESE + Depreciation Amortisation And Impairment = 2,529,993,000 + 1,979,007,000 = 4,509,000,000 Wait, that's not right. "Profit Loss Before Financial Income And Financial Expenses Income Tax Expense And Extraordinary Contribution To The Energy Sector CESE" is already after provisions and D&A? No, let me check. "Profit Loss Before Provisions Amortisation And Impairment Financial Income And Financial Expenses Income Tax Expense And Extraordinary Contribution To The Energy Sector CESE" = 4,523,539,000 - "Provisions Expenses" = 14,539,000 - "Depreciation Amortisation And Impairment" = 1,979,007,000 = "Profit Loss Before Financial Income And Financial Expenses..." = 2,529,993,000 So 4,523,539,000 - 14,539,000 - 1,979,007,000 = 2,529,993,000 ✓ This 4,523,539,000 is essentially EBITDA + share of JVs - other items... actually it's more like EBIT before JVs + provisions. Actually, 4,523,539,000 = Net of Revenue and Cost of Energy + Other Income - Services - Employee Benefits - Other Expense + JVs = 6,121,051,000 + 927,450,000 - 1,103,668,000 - 770,800,000 - 829,724,000 - 60,199,000 + 239,429,000 = ? = 6,121,051,000 + 927,450,000 = 7,048,501,000 - 1,103,668,000 = 5,944,833,000 - 770,800,000 = 5,174,033,000 - 829,724,000 = 4,344,309,000 - 60,199,000 = 4,284,110,000 + 239,429,000 = 4,523,539,000 ✓ So FFO can also be thought of as 4,523,539,000 + D&A (1,979,007,000) - some items... but this gets messy. Let me stick with: FFO = 4,200,324,000 EUR For Net Debt, let me also consider if I should include "Other Current Financial Assets" as cash-like. These are 3,371,795,000 EUR. If these are liquid investments, they could reduce net debt. Conservative Net Debt = 20,022,473,000 - 4,900,205,000 - 3,371,795,000 = 11,750,473,000 FFO/Net Debt = 4,200,324,000 / 11,750,473,000 = 0.357 or 35.7% But standard practice is to only include "Cash and Cash Equivalents" as cash, not other financial assets. Let me go with my original calculation but also check if there's a more standard EDP approach. Actually, looking at this again, I realize I want to verify the 2022 year-end vs average debt. FFO/Net Debt is typically calculated using year-end net debt or average net debt. For annual ratios, year-end is common. Let me finalize: FFO = 4,200,324,000 EUR Net Debt (year-end 2022) = Longterm Borrowings (15,782,604,000) + Current Borrowings (4,239,869,000) - Cash (4,900,205,000) = 15,122,268,000 EUR FFO / Net Debt = 4,200,324,000 / 15,122,268,000 = 0.2778 As a percentage: 27.78% As a multiple (Net Debt/FFO): 3.60x The question asks for "FFO / Net debt ratio" which is typically expressed as a decimal or percentage. I'll provide it as a decimal. Wait, I want to double-check my borrowings figures. Let me re-read: "Longterm Borrowings" 2023-01-01: 15782604000 EUR (this is 2022 year-end) "Current Borrowings And Current Portion Of Noncurrent Borrowings" 2023-01-01: 4239869000 EUR Yes, these are the 2022 year-end figures (since 2023-01-01 is the balance at end of 2022). And Cash: "Cash And Cash Equivalents" 2023-01-01: 4900205000 EUR So Net Debt = 15,782,604,000 + 4,239,869,000 - 4,900,205,000 = 15,122,268,000 EUR FFO = "Cash Flows From Used In Operations" 2022-01-01 - 2023-01-01: 4200324000 EUR Ratio = 4,200,324,000 / 15,122,268,000 = 0.2778 Let me also check if I should use 2021 year-end or average for any reason. No, the question asks for 2022 ratio, so 2022 year-end balance sheet and 2022 income/cash flow figures are correct. One more check: should FFO include or exclude interest paid? In the cash flow, "Cash Flows From Used In Operations" is before interest and tax typically. Let me verify by looking at the financing section: "Interest And Similar Costs Of Financial Debt Including Hedge Derivatives" = 716,454,000 in financing activities. So interest is not in operating cash flow. Actually, looking more carefully at the cash flow presentation, the "Cash Flows From Used In Operations" of 4,200,324,000 likely includes interest received (classified as operating or investing?) and excludes interest paid (in financing). Wait, I see "Interest Received Classified As Investing Activities" = 101,841,000. So interest received is in investing, not operating. And "Interest And Similar Costs Of Financial Debt Including Hedge Derivatives" = 716,454,000 in financing. So "Cash Flows From Used In Operations" excludes both interest received and interest paid. This is consistent with IFRS where companies can classify interest differently. For FFO, rating agencies typically add back interest paid (gross) and sometimes interest received. But the standard "Funds From Operations" is usually pre-interest, pre-tax operating cash flow. Actually, let me reconsider. Standard FFO from rating agencies (S&P, Moody's) is: Net income + D&A + deferred taxes + other non-cash items - working capital changes (sometimes) + interest expense Or more precisely: FFO = Cash flow from operations before changes in working capital + after-tax interest expense Hmm, this is getting complicated. Let me use a simpler approach. For utility companies, a common FFO definition is: FFO = Net income + Depreciation + Amortization + Deferred taxes - Equity earnings + Dividends received from equity investments Or: FFO = EBITDA - Cash interest - Cash taxes +/- other items Let me try: EBITDA = 4,523,539,000 (pre-D&A, pre-provisions, pre-interest, pre-tax profit) + wait that's not right. Actually, "Profit Loss Before Provisions Amortisation And Impairment Financial Income And Financial Expenses Income Tax Expense And Extraordinary Contribution To The Energy Sector CESE" = 4,523,539,000 This is: Revenue - Cost of Energy - Operating Expenses + JVs = pre-D&A, pre-provision, pre-interest, pre-tax profit. This is essentially EBITDA + JVs - other items, or more accurately it's the operating profit before non-cash charges. Then FFO = this - cash taxes + other adjustments... Actually, I think the cleanest is to use the reported "Cash Flows From Used In Operations" = 4,200,324,000 as FFO proxy, and accept that this is how the company/most analysts would calculate it. Let me verify my calculation one more time: FFO / Net Debt = 4,200,324,000 / 15,122,268,000 = 0.2778 I'll round to 0.278 or express more precisely. Actually, let me also consider if I should include the 2022 opening cash position or average. No, for balance sheet ratios, year-end is standard. Final calculation: 4,200,324,000 ÷ 15,122,268,000 = 0.277756... So approximately 0.278 or 27.8% I'll provide this as 0.278 (or more precisely 0.2778, but let me calculate more carefully). 4,200,324,000 / 15,122,268,000: = 4200324 / 15122268 = 0.277756... Let me verify: 15,122,268,000 × 0.278 = 4,203,990,504, close to 4,200,324,000. Actually, I'll use more precision: 0.2778 Or should I express as percentage? 27.78% The question says "FFO / Net debt ratio" - this is typically expressed as a decimal (e.g., 0.28) or sometimes as a percentage. I'll use decimal form as it's more standard for ratio presentation. Let me also do a quick sanity check. EDP is a utility with reasonable credit metrics. FFO/Net Debt of ~28% or Net Debt/FFO of ~3.6x is consistent with investment grade utility credit metrics (BBB range). Actually, I want to check one more thing. Should I use average net debt instead of year-end? Average Net Debt = (Opening Net Debt + Closing Net Debt) / 2 Opening 2022 (end 2021): Longterm Borrowings 2022-01-01: 15,299,588,000 Current Borrowings 2022-01-01: 1,518,348,000 Cash 2022-01-01: 3,222,409,000 Net Debt opening = 15,299,588,000 + 1,518,348,000 - 3,222,409,000 = 13,595,527,000 Closing 2022 = 15,122,268,000 (calculated above) Average Net Debt = (13,595,527,000 + 15,122,268,000) / 2 = 14,358,897,500 FFO / Average Net Debt = 4,200,324,000 / 14,358,897,500 = 0.2925 or 29.25% However, year-end net debt is more commonly used for this ratio in annual reporting unless specified otherwise. I'll stick with year-end. Actually, I realize I should double-check my opening cash figure. "Cash And Cash Equivalents" 2022-01-01: 3222409000 EUR. Yes, that's correct. And "Cash And Cash Equivalents" 2021-01-01: 2954302000 EUR. This is 2020 year-end. So my opening 2022 cash of 3,222,409,000 is correct. Let me finalize with year-end net debt: FFO / Net Debt = 4,200,324,000 / 15,122,268,000 = 0.2778 I'll round to 0.278 for final answer, or provide more precise 0.278. Actually let me just compute exactly: 4200324000 / 15122268000 = 0.277756... So 0.278 when rounded to three decimal places, or 0.28 to two. Given the precision of inputs, I'll provide 0.278. Wait, I want to reconsider one more time if I should include other financial liabilities in debt. Let me look at what "Other Noncurrent Financial Liabilities" and "Other Current Financial Liabilities" contain. For EDP, "Other Noncurrent Financial Liabilities" of 5,159,496,000 likely includes: - Derivative liabilities (non-hedge) - Lease liabilities (if not in borrowings) - Other financial payables And "Other Current Financial Liabilities" of 3,600,893,000 includes: - Derivative liabilities (current) - Current portion of lease liabilities - Other short-term financial payables For a comprehensive net debt figure, some analysts include all financial liabilities. But standard "Net Debt" is borrowings minus cash. If I include other financial liabilities: Gross Debt = 20,022,473,000 + 5,159,496,000 + 3,600,893,000 = 28,782,862,000 Less: Cash = 4,900,205,000 Net Debt = 23,882,657,000 FFO/Net Debt = 4,200,324,000 / 23,882,657,000 = 0.1759 or 17.6% This is significantly different. Which is right? For credit ratios, rating agencies typically use "Total Adjusted Debt" which includes more than just borrowings. But "Net Debt" in common parlance is borrowings minus cash. I think for this question, given it's based on annual report line items, the standard "borrowings minus cash" definition is most appropriate. The "Other Financial Liabilities" may include non-debt items like derivatives (which net to zero with assets), making interpretation difficult. I'll use: FFO / Net Debt = 0.278 But let me also check if there's an even simpler FFO I should use. Some define FFO as simply: Net Income + D&A = 1,169,749,000 + 1,979,007,000 = 3,148,756,000 Then FFO/Net Debt = 3,148,756,000 / 15,122,268,000 = 0.208 or 20.8% But this is too simplistic and misses many items. The cash flow based FFO of 4,200,324,000 is more comprehensive and standard. Actually, I want to verify one more thing. Is "Cash Flows From Used In Operations" the same as "Funds From Operations"? In many European utility annual reports, "Cash Flow From Operations" or "Operating Cash Flow Before Working Capital Changes" is indeed the FFO proxy used by rating agencies. Let me also check: 4,200,324,000 / 15,122,268,000 = ? 4200324 / 15122268 = 0.277756 I'll provide 0.278. Hmm, but I want to make sure about the year. The data shows: "Cash Flows From Used In Operations" 2022-01-01 - 2023-01-01: 4200324000 EUR This is the 2022 fiscal year. And balance sheet items at 2023-01-01 are year-end 2022. Correct. Final answer: 0.278 (or more precisely, 0.2778) Actually, I'll compute with full precision and see if I should round differently. 4200324000 ÷ 15122268000 = 0.2777560509... To three significant figures: 0.278 To two significant figures: 0.28 I'll use 0.278. 0.278