## Reasoning ### Step 1: Calculate Net Debt (S&P Methodology) S&P's Net Debt typically includes: - Short-term borrowings + Long-term borrowings - Cash and cash equivalents - S&P also typically includes operating lease liabilities and other adjustments, but with the data available, I'll work with what's provided. **As of end of 2022 (i.e., 2023-01-01 balance sheet date):** - Long-term Borrowings: 28,083M EUR - Current Borrowings and Current Portion of Noncurrent Borrowings: 12,508M EUR - Total Gross Debt: 28,083 + 12,508 = 40,591M EUR - Cash and Cash Equivalents: 15,570M EUR **Net Debt = 40,591 - 15,570 = 25,021M EUR** Note: S&P methodology would also typically add 50% of deeply subordinated perpetual notes (hybrid securities) to debt. The deeply subordinated perpetual notes balance is 3,393M EUR. S&P typically gives 50% equity / 50% debt credit for hybrids, so we'd add 50% × 3,393 = ~1,697M EUR to debt. However, the perpetual notes might already be excluded from the borrowings line since they appear in equity. Let me include them: **Adjusted Net Debt = 25,021 + 1,697 = 26,718M EUR** Actually, let me reconsider. S&P's approach to hybrids can vary, but a common treatment is to add 50% of hybrid capital to debt. Since the hybrids are already in equity (not in borrowings), I should add the debt portion. Let me proceed with both scenarios but use the simpler approach first (without hybrid adjustment) and then with it. ### Step 2: Calculate EBITDA (S&P Methodology) S&P EBITDA = Operating Income + Depreciation & Amortization From the income statement for 2022 (period 2022-01-01 to 2023-01-01): **Current Operating Income Including Operating MtM:** 4,309M EUR This is the operating income before non-recurring items. S&P typically uses a recurring/adjusted operating income. **Depreciation, Amortization and Provisions:** 5,187M EUR However, "provisions" in this line may include non-cash provisions beyond just D&A. Let me think about what S&P would consider. S&P's EBITDA typically starts from: - Revenue - Operating costs + D&A (added back) Let me reconstruct: **Current Operating Income Including Operating MtM = 4,309M EUR** This already includes the MtM adjustments on operating derivatives. **EBITDA = Current Operating Income Including Operating MtM + Depreciation Amortization and Provisions** = 4,309 + 5,187 = 9,496M EUR S&P would also typically add back the share of equity method income, but that's already shown separately. S&P may also include dividends received from equity method entities rather than the equity income. Actually, S&P's approach: - EBITDA = Revenue - Cash operating expenses (excluding D&A) - Or equivalently: EBIT + D&A From the cash flow statement, we can also cross-check: - Cash Flows from Operations before Working Capital Changes: 12,415M EUR - This already adds back D&A, provisions, impairments, and other non-cash items, plus adds back financial costs and taxes. Let me use the simpler approach: **S&P EBITDA ≈ Current Operating Income + D&A** Current Operating Income Including Operating MtM: 4,309M + Depreciation, Amortization and Provisions: 5,187M = **9,496M EUR** S&P might also add the share of equity-accounted entities' profit or use dividends received instead. Let me include the equity method income: **EBITDA including equity method = 5,367 + 5,187 = 10,554M EUR** But S&P typically replaces equity method income with dividends received. From the cash flow: - Dividends Received (investing): 18M EUR - Adjustments for Dividend Income: -713M (this appears to be a negative adjustment in cash flow, meaning 713M was added back, suggesting dividends received of 713M) So S&P EBITDA = 4,309 + 5,187 - 1,059 (equity income) + 713 (dividends received) = 9,150M EUR Hmm, but the S&P methodology can be complex. Let me use a more standard approach: **S&P EBITDA = Current Operating Income + D&A = 4,309 + 5,187 = 9,496M** ### Step 3: Net Debt / EBITDA **Without hybrid adjustment:** Net Debt / EBITDA = 25,021 / 9,496 = 2.63x **With hybrid adjustment (50% of perpetual notes as debt):** Net Debt / EBITDA = 26,718 / 9,496 = 2.81x Given S&P methodology typically includes hybrid treatment, but the most commonly cited ratio would be around 2.6-2.8x. Let me go with the version including the S&P hybrid adjustment: **Net Debt / EBITDA ≈ 26,718 / 9,496 ≈ 2.81** Actually, let me reconsider. The S&P methodology for EBITDA would also adjust for the hybrid coupon. S&P would add back the hybrid coupon to EBITDA (since it's treated as interest). The operations on deeply subordinated perpetual notes show -77M in retained earnings (coupon) and -374M (redemptions). The coupon portion (~77M) might be added to interest expense and added back to EBITDA. This is getting complex. Let me settle on a reasonable estimate: **Net Debt = 25,021M** (simple, without hybrid) **EBITDA = 9,496M** **Ratio = 2.63x** Or with hybrids: ~2.81x I'll go with approximately **2.6** as a reasonable estimate, or let me be more precise: 25,021 / 9,496 = 2.635 Rounding: ~2.6 2.6