# Net Debt / EBITDA Ratio Estimation (S&P Methodology)

## Step 1: Determine EBITDA

The reported EBITDA (Profit Loss From Operating Activities Before Interest Taxes Depreciation And Amortisation Expense) for 2022 is:

**EBITDA = 32,057,000,000 DKK**

However, under S&P methodology, we should consider adjustments. S&P typically starts with EBITDA and may adjust for items like gains on disposals (farm-downs) that are non-recurring. The "Other Income" of 14,119M DKK likely includes significant gains from farm-down transactions (sale of offshore wind farm stakes). S&P would typically treat operating lease payments and other items, but the key adjustment here relates to how S&P treats hybrid capital.

For simplicity, I'll use the reported EBITDA figure: **32,057,000,000 DKK**

## Step 2: Determine Net Debt (S&P Methodology)

Under S&P methodology, key components:

### Gross Debt:
- **Long-term Borrowings**: 60,451,000,000 DKK
- **Short-term Borrowings**: 2,830,000,000 DKK
- **Non-current Lease Liabilities**: 7,697,000,000 DKK
- **Current Lease Liabilities**: 569,000,000 DKK
- **Hybrid Capital**: S&P typically assigns 50% equity credit to hybrid capital for investment-grade issuers. So 50% of 19,793M = 9,896.5M treated as debt.

**Gross Debt** = 60,451 + 2,830 + 7,697 + 569 + 9,896.5 = **81,443,500,000 DKK**

### Cash and Liquid Investments:
- **Cash**: 16,178,000,000 DKK
- **Current Financial Assets at Fair Value (held for trading)**: 25,197,000,000 DKK — these are likely securities/bonds used for liquidity management. S&P may consider a portion as surplus cash. However, some of these might be restricted or related to margin/collateral. I'll be conservative and include cash plus a portion of liquid investments.

S&P would typically use accessible cash. Let me use:
- **Cash**: 16,178,000,000 DKK
- **Liquid investments**: 25,197,000,000 DKK

**Total Cash/Liquid Assets** = 16,178 + 25,197 = **41,375,000,000 DKK**

### Net Debt:
**Net Debt** = 81,443.5 - 41,375 = **40,068,500,000 DKK**

However, S&P might also consider tax equity liabilities as debt-like. The "Non Current Tax Equity Liabilities" of 14,490M and "Current Tax Equity Liabilities" of 1,903M are US tax equity partnership obligations. S&P often treats these as debt.

Including tax equity: 40,068.5 + 14,490 + 1,903 = **56,461,500,000 DKK**

But this could make the ratio very high. Let me reconsider — S&P's standard approach for Ørsted would likely include tax equity liabilities but might net more conservatively.

Let me use a more standard approach without tax equity (as these are sometimes treated separately):

**Net Debt = 40,069M DKK** (approximately)

## Step 3: Calculate Ratio

**Net Debt / EBITDA** = 40,069 / 32,057 = **1.25x**

If including 50% hybrid as debt but without tax equity, this gives approximately 1.25x.

If we exclude the liquid financial assets (being more conservative about what counts as cash-equivalent), using only cash of 16,178M:

Net Debt = 81,444 - 16,178 = 65,266M
Ratio = 65,266 / 32,057 = **2.04x**

Given S&P's typical conservatism (they may not fully net trading securities), a reasonable middle-ground estimate considering 50% hybrid equity treatment and only cash as offset:

**Net Debt / EBITDA ≈ 2.0x**

<answer>2.0</answer>