To estimate the FFO (Funds From Operations) / Net Debt ratio for Italgas S.p.A. for the year 2022, we need to calculate both the numerator (FFO) and the denominator (Net Debt) using the provided financial data. **1. Calculate Funds From Operations (FFO)** FFO is typically calculated as Net Income + Depreciation & Amortization + Other non-cash items. In the context of utility companies and the provided data, a common proxy for operating cash flow generation before working capital changes and financing costs is EBITDA or a variation of FFO. However, standard FFO for regulated utilities often starts with Net Income and adds back D&A. Let's look at the available metrics. A robust definition of FFO for credit analysis often aligns with: $FFO = \text{Net Income} + \text{Depreciation and Amortization} + \text{Deferred Taxes} + \text{Other Non-Cash Items}$ From the data: * **Net Income (Profit Loss) 2022:** 436,126,000 EUR * **Depreciation, Amortisation and Impairment (D&A):** The line item "Depreciation Amortisation And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" for 2022-01-01 - 2023-01-01 is 479,186,000 EUR. * **Deferred Taxes:** The change in Deferred Tax Liabilities is $91,633,000 - 50,791,000 = 40,842,000$ EUR. The change in Deferred Tax Assets is 0. This is a non-cash add-back if we start from Net Income, but often FFO definitions vary. Let's stick to a standard simplified FFO: Net Income + D&A. * $FFO_{simple} = 436,126,000 + 479,186,000 = 915,312,000$ EUR. Alternatively, some definitions use EBITDA - Taxes Paid - Interest Paid, or start from Operating Profit. Let's look at "Cash Flows From Used In Operations" which is 548,169,000 EUR. This is after working capital changes. FFO is usually before working capital changes. Let's try calculating EBITDA first: $EBITDA = \text{Profit Loss From Operating Activities} + \text{D\&A}$ $\text{Profit Loss From Operating Activities} = 641,338,000$ EUR $D\&A = 479,186,000$ EUR $EBITDA = 641,338,000 + 479,186,000 = 1,120,524,000$ EUR A common FFO definition for utilities (like S&P or Moody's) is: $FFO = \text{Net Income} + \text{D\&A} + \text{Deferred Taxes} + \text{Equity in Earnings of Affiliates (subtracted if added in NI)} ...$ Let's use the standard: $FFO = \text{Net Income} + \text{D\&A}$. $FFO = 436,126,000 + 479,186,000 = 915,312,000$ EUR. Let's check if there are other significant non-cash items. "Adjustments For Sharebased Payments": 7,958,000 EUR. "Adjustments For Impairment Loss...": 895,000 EUR. "Effect Of Valuation Using The Equity Method": 662,000 EUR (This is likely included in Net Income, so we might need to subtract it if it's non-cash income, or add it back if it's a loss. The line item "Share Of Profit Loss Of Associates..." is income of 3,432,000. The adjustment in cash flow is -662,000? No, the adjustment line is "Adjustments For Effect Of Valuation Using The Equity Method" with value -662,000. This suggests the equity income recognized was higher than cash received, or vice versa. Usually, equity income is non-cash and subtracted from Net Income in Cash Flow from Operations. If it's included in Net Income, we subtract it to get cash flow. For FFO, we often add it back or leave it depending on the definition. Let's stick to the core $NI + D\&A$. Let's refine FFO. A very common metric for leverage is **FFO / Net Debt**. FFO = Net Income + Depreciation & Amortization. $FFO = 436,126,000 + 479,186,000 = 915,312,000$ EUR. **2. Calculate Net Debt** Net Debt = Total Financial Debt - Cash and Cash Equivalents. We need to identify Total Financial Debt at the end of 2022 (2023-01-01). Financial Liabilities include: * Current Financial Liabilities: * "Short Term Financial Liabilities Excluding Other Current Financial Liabilities" (2023-01-01): 142,437,000 EUR * "Other Current Financial Liabilities" (2023-01-01): 290,000 EUR * Total Current Financial Debt = $142,437,000 + 290,000 = 142,727,000$ EUR. * Non-Current Financial Liabilities: * "Long Term Financial Liabilities Excluding Other Non Current Financial Liabilities" (2023-01-01): 6,402,913,000 EUR * "Other Noncurrent Financial Liabilities" (2023-01-01): 34,000 EUR * Total Non-Current Financial Debt = $6,402,913,000 + 34,000 = 6,402,947,000$ EUR. * Total Financial Debt = $142,727,000 + 6,402,947,000 = 6,545,674,000$ EUR. * Cash and Cash Equivalents (2023-01-01): 451,946,000 EUR. * Net Debt = Total Financial Debt - Cash $Net Debt = 6,545,674,000 - 451,946,000 = 6,093,728,000$ EUR. **3. Calculate the Ratio** $Ratio = FFO / Net Debt$ $Ratio = 915,312,000 / 6,093,728,000$ Calculation: $915,312,000 / 6,093,728,000 \approx 0.1502$ Let's double-check if "FFO" might imply a different calculation. Sometimes FFO includes minority interests or is pre-tax. If we use EBITDA / Net Debt: $EBITDA = 1,120,524,000$ $Ratio = 1,120,524,000 / 6,093,728,000 \approx 0.1839$ However, FFO is distinct from EBITDA. FFO is closer to cash flow from operations before working capital changes. Let's look at "Cash Flows From Used In Operations" (CFO) = 548,169,000. CFO is after working capital changes. Working Capital Change = -336,750,000 (This is a decrease in working capital, which is a source of cash, wait. The line item is "Increase Decrease In Working Capital" with value -336,750,000. In cash flow statements, a negative number for "Increase in WC" usually means a decrease in WC assets or increase in liabilities, which is a cash INFLOW. But here it is listed under adjustments. Let's look at the structure. Start with Operating Profit: 641,338,000 + D&A: 479,186,000 +/- Other adjustments... = Cash Flow from Operations before WC changes? The line "Cash Flows From Used In Operations" is 548,169,000. If we add back the working capital change to get FFO (which is essentially CFO before WC changes): If the WC change was a cash inflow of 336M (negative increase), then CFO before WC would be lower? Actually, FFO is often defined as Net Income + D&A. Let's stick with $FFO = 915.3$ million. Is there any other debt? "Liabilities Included In Disposal Groups..." is 0. So Net Debt is ~6.09 billion. Ratio = 0.15. Let's consider if "Net Debt" should include lease liabilities. "Cash Outflow For Leases" is present. Under IFRS 16, lease liabilities are financial debt. Are lease liabilities included in the "Financial Liabilities" lines above? Usually, "Short Term Financial Liabilities" and "Long Term Financial Liabilities" include lease liabilities if they are classified as such. The line "Other Noncurrent Nonfinancial Liabilities" is 545,192,000. The line "Other Current Nonfinancial Liabilities" is 30,072,000. Lease liabilities are often split between current and non-current financial liabilities. Given the explicit "Financial Liabilities" lines, it is highly probable they include the lease debt recognized under IFRS 16. Total Assets = 11,030,557,000. Total Liabilities = 8,639,987,000. Equity = 2,390,570,000. Let's re-verify the Financial Debt components. Current: Short Term Financial Liabilities... : 142,437,000 Other Current Financial Liabilities: 290,000 Total Current Fin Debt: 142,727,000 Non-Current: Long Term Financial Liabilities... : 6,402,913,000 Other Noncurrent Financial Liabilities: 34,000 Total Non-Current Fin Debt: 6,402,947,000 Total Gross Debt = 6,545,674,000. Cash = 451,946,000. Net Debt = 6,093,728,000. FFO = Net Income (436,126,000) + D&A (479,186,000) = 915,312,000. Ratio = 915,312,000 / 6,093,728,000 = 0.150205... Rounding to two decimal places, it is 0.15. Let's check if there is a more standard "FFO" definition for Italgas. Sometimes FFO is defined as EBITDA - Cash Taxes - Cash Interest. Cash Taxes Paid: 152,372,000. Cash Interest Paid (Finance Costs Paid): 53,720,000. EBITDA: 1,120,524,000. $FFO_{alt} = 1,120,524,000 - 152,372,000 - 53,720,000 = 914,432,000$. This is extremely close to the Net Income + D&A figure (915,312,000). The difference is due to deferred taxes and other non-cash items. Using 914,432,000: $Ratio = 914,432,000 / 6,093,728,000 = 0.15006...$ Both methods yield approximately 0.15. 0.15