I need to calculate the Net Debt / EBITDA ratio for 2022 using S&P methodology. First, let me identify the components needed: - Net Debt = Total Debt - Cash and Cash Equivalents - EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization **Step 1: Calculate Total Debt (S&P methodology typically includes all interest-bearing liabilities)** From the balance sheet, I need to identify debt items: - "Participaciones Preferentes Obligaciones YOtros Valores Negociables No Corrientes1" (Non-current marketable securities/bonds): 2,364,000,000 EUR at 2022-01-01 - "Noncurrent Portion Of Noncurrent Loans Received": 2,073,000,000 EUR at 2022-01-01 - "Noncurrent Lease Liabilities": 430,000,000 EUR at 2022-01-01 - "Participaciones Preferentes Obligaciones YOtros Valores Negociables Corrientes" (Current marketable securities/bonds): 1,666,000,000 EUR at 2022-01-01 - "Current Loans Received And Current Portion Of Noncurrent Loans Received": 280,000,000 EUR at 2022-01-01 - "Current Lease Liabilities": 68,000,000 EUR at 2022-01-01 Total Debt at 2022-01-01: = 2,364,000,000 + 2,073,000,000 + 430,000,000 + 1,666,000,000 + 280,000,000 + 68,000,000 = 6,881,000,000 EUR **Step 2: Calculate Net Debt** Cash and Cash Equivalents at 2022-01-01: 2,318,000,000 EUR Net Debt = Total Debt - Cash and Cash Equivalents = 6,881,000,000 - 2,318,000,000 = 4,563,000,000 EUR **Step 3: Calculate EBITDA** For S&P methodology, EBITDA typically starts from Operating Profit and adds back depreciation and amortization. From the income statement for period 2021-01-01 to 2022-01-01: - "Profit Loss From Operating Activities": 829,000,000 EUR - "Dotacion Amortizacion YVariacion De Provisiones" (Depreciation, amortization and provision changes): 714,000,000 EUR However, I need to be careful. The S&P methodology typically defines EBITDA as: Operating Profit + Depreciation & Amortization But let me verify if "Dotacion Amortizacion YVariacion De Provisiones" includes only D&A or also provisions. Looking at the cash flow statement: - "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" (Adjustments for amortization, provision changes and impairments): 715,000,000 EUR This suggests the 714,000,000 includes provisions and impairments, not just pure D&A. For S&P methodology, we typically use: EBITDA = Operating Profit + Depreciation + Amortization Looking more carefully at the P&L structure: - "Profit Loss From Operating Activities" = 829,000,000 EUR This already includes depreciation and amortization. To get EBITDA, I need to add back D&A. From the cash flow adjustments: "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" = 715,000,000 EUR But this includes provisions and impairments. Let me look at "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = -67,000,000 EUR (negative means reversal, so impairment was negative in this period, meaning a reversal). Actually, let me reconsider. The standard S&P approach is: EBITDA = Operating Profit + Depreciation & Amortization (as reported in financials, or estimated) From the notes, if we look at the reconciliation from profit to operating cash flow: - "Adjustments For Reconcile Profit Loss": 717,000,000 EUR - This includes "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros": 715,000,000 EUR - And "Other Adjustments To Reconcile Profit Loss": 2,000,000 EUR For S&P Global methodology, EBITDA is typically calculated as: EBITDA = EBIT + Depreciation + Amortization Where EBIT = "Profit Loss From Operating Activities" in many European statements, but we need to check if this is before or after D&A. Actually, looking more carefully: "Profit Loss From Operating Activities" is typically operating profit before financial items, which in Spanish format (PGC) is after D&A. So EBITDA = Operating Profit + D&A But I need to separate D&A from provisions. The item "Dotacion Amortizacion YVariacion De Provisiones" in the P&L = 714,000,000 EUR includes amortization/depreciation AND provision changes. For S&P methodology, a common approach when detailed breakdown isn't available is to use: EBITDA = Revenue - Operating Expenses (excluding D&A) = Operating Profit + D&A Given the data, let me use the most standard S&P approach: - Start with "Profit Loss From Operating Activities" = 829,000,000 EUR - Add back depreciation and amortization If we look at the cash flow, the adjustment for amortization, provisions and impairments is 715,000,000 EUR. But this includes working capital and other items. Actually, let me re-read: "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" = 715,000,000 EUR. This is "Adjustments for amortization, provision changes and impairments." For S&P, we want to add back only D&A, not provision changes. However, without a detailed breakdown, S&P methodology often uses the reported D&A or estimates. Let me try another approach. S&P Global Ratings typically calculates EBITDA as: EBITDA = Recurring Operating Profit + D&A + Other non-cash items Or more practically, from the cash flow statement, we can derive: EBITDA ≈ Cash Flow from Operations + Cash Interest Paid + Cash Taxes Paid - Working Capital Changes From 2021-01-01 to 2022-01-01: - "Cash Flows From Used In Operating Activities": 574,000,000 EUR - "Interest Paid Classified As Operating Activities": 206,000,000 EUR - "Income Taxes Paid Refund Classified As Operating Activities": 82,000,000 EUR - "Increase Decrease In Working Capital": -340,000,000 EUR (negative means increase in working capital, cash outflow) So: Cash from Ops = 574,000,000 Add: Interest Paid = 206,000,000 Add: Taxes Paid = 82,000,000 Add: Working Capital Increase = 340,000,000 (since it was a use of cash) This gives: 574,000,000 + 206,000,000 + 82,000,000 + 340,000,000 = 1,202,000,000 EUR But this should equal EBIT + D&A - Working Capital change + ... hmm, let me be more careful. Actually, the standard relationship is: Cash from Operations = Net Income + D&A + Other non-cash items - Working Capital Increase So: EBITDA - Interest - Taxes - Working Capital Increase = Cash from Operations Therefore: EBITDA = Cash from Operations + Interest + Taxes + Working Capital Increase = 574,000,000 + 206,000,000 + 82,000,000 + 340,000,000 = 1,202,000,000 EUR Wait, but I need to check if "Increase Decrease In Working Capital" of -340,000,000 means working capital increased (cash outflow) or decreased. Looking at the sign convention: "Increase Decrease In Working Capital" = -340,000,000. In cash flow statements, negative typically means cash outflow. An increase in working capital (more receivables, more inventory, less payables) is a cash outflow. So if working capital increased, that's a use of cash of 340,000,000. Then: Cash from Ops = EBIT(1-t) + D&A - Working Capital Increase - Other... Actually, let me use the simpler formula: EBITDA = Operating Profit + D&A From the P&L: "Profit Loss From Operating Activities" = 829,000,000 EUR This is EBIT (or close to it). To get EBITDA, add D&A. From cash flow adjustments: "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" = 715,000,000 EUR But this includes provisions. Let me see if I can isolate D&A. Looking at "Dotacion Amortizacion YVariacion De Provisiones" in P&L = 714,000,000 EUR And "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = -67,000,000 EUR If impairment reversal is 67,000,000, then impairment expense was negative (reversal). The 714,000,000 includes: amortization/depreciation + provision charges + impairment charges. Since impairment was a reversal of 67,000,000, the pure impairment charge was negative. Actually, "Impairment Loss Reversal..." = -67,000,000 means there was a reversal (negative expense = gain). So: 714,000,000 = D&A + Provision charges - 67,000,000 (approximately, if impairment is part of this) Hmm, this is getting complicated. Let me use a cleaner S&P approach. S&P Global Ratings typically uses: - EBITDA = Operating profit before depreciation and amortization For European companies, "Profit Loss From Operating Activities" is often after D&A. So: EBITDA = Profit Loss From Operating Activities + Depreciation + Amortization If we assume the cash flow adjustment "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" ≈ D&A (with some provision noise), then: EBITDA ≈ 829,000,000 + 715,000,000 = 1,544,000,000 EUR But this includes provision changes. For a cleaner estimate, S&P might use just the operating profit and add back only pure D&A. Actually, let me look at this differently. The item "Other Expense By Nature" = 3,621,000,000 EUR likely includes D&A embedded in it, or D&A is reported separately. Looking at typical Spanish reporting: "Dotacion Amortizacion YVariacion De Provisiones" is usually a separate line in the expense breakdown by nature, representing depreciation, amortization, and provision changes. For S&P methodology, a common practical approach is: EBITDA = Revenue - Cash Operating Costs = Revenue - (Raw Materials + Employee Benefits + Other Expenses - D&A) But without clean separation, let me use: EBITDA = Operating Profit + D&A And estimate D&A from the cash flow statement's depreciation/amortization component. Actually, looking more carefully at the cash flow: "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" = 715,000,000 EUR for 2021-2022. This is adjustments for: amortization, provision changes, and impairments. If we look at "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = -67,000,000 EUR, this is already in the P&L. And "Other Gains Losses" = -7,000,000 EUR. Let me try to back out D&A. The relationship between P&L and cash flow adjustments: P&L "Dotacion Amortizacion YVariacion De Provisiones" = 714,000,000 EUR Cash flow "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" = 715,000,000 EUR These are very close, suggesting they're largely the same item. The 715M includes amortization, provision changes, and impairments. For S&P, when detailed breakdown isn't available, they often use the reported operating profit and add back the full D&A adjustment, or they use a "reported EBITDA" if disclosed. Given the data constraints, let me use the most standard interpretation: EBITDA = "Profit Loss From Operating Activities" + "Dotacion Amortizacion YVariacion De Provisiones" - provision changes + impairments But I don't have the breakdown. So let me use a practical S&P approach: S&P typically calculates Adjusted EBITDA as: - Recurring operating profit - Plus D&A - Plus other non-cash items that are truly non-cash Given the lack of detail, I'll use: EBITDA ≈ Operating Profit + D&A ≈ 829,000,000 + (some portion of 714,000,000) If I assume most of 714M is D&A (common for infrastructure/utility companies like Acciona), then: EBITDA ≈ 829,000,000 + 714,000,000 = 1,543,000,000 EUR But this is likely overstated due to provision changes. Let me try yet another approach using the cash flow to verify: Cash from Ops = 574,000,000 + Interest Paid = 206,000,000 + Taxes Paid = 82,000,000 + Working capital increase = 340,000,000 (since -340M means cash outflow from WC growth) = 1,202,000,000 EUR This 1,202M should approximate EBITDA if there are no other major non-cash adjustments. But wait, Cash from Ops also includes: - Dividends received = 49,000,000 - Interest received = 23,000,000 - Other items Let me recalculate more carefully using the "indirect" method: Starting from "Profit Loss" = 404,000,000 EUR (this is net income, not operating profit) Cash from Ops = Net Income + Adjustments 574,000,000 = 404,000,000 + 717,000,000 + (-340,000,000) + (-162,000,000) + other items? Let me check: 404,000,000 + 717,000,000 - 340,000,000 - 378,000,000 - 162,000,000 + 23,000,000 + 49,000,000 - 206,000,000 - 82,000,000 + ... Actually, let me use the explicit formula: Cash from Ops = Net Income + D&A + Provisions + Impairments - Working Capital Increase + Other adjustments From the data: - "Adjustments For Reconcile Profit Loss" = 717,000,000 EUR total - "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" = 715,000,000 EUR - "Other Adjustments To Reconcile Profit Loss" = 2,000,000 EUR - "Increase Decrease In Working Capital" = -340,000,000 EUR - "Otros Flujos De Efectivo De Actividades De Explotacion" = -378,000,000 EUR (other operating cash flows) And then the specific items: - Interest Paid = 206,000,000 EUR - Interest Received = 23,000,000 EUR - Dividends Received = 49,000,000 EUR - Income Taxes Paid = 82,000,000 EUR - Other Inflows Outflows = -162,000,000 EUR Hmm, the signs are getting confusing. Let me just use the direct approach. For S&P Net Debt/EBITDA, a common practical calculation when data is limited: **Net Debt**: Use book values of debt minus cash **EBITDA**: Use Operating Profit + D&A, or estimate from cash flows Let me use the most straightforward S&P approach with available data: EBITDA = "Profit Loss From Operating Activities" + Depreciation & Amortization If we assume "Dotacion Amortizacion YVariacion De Provisiones" ≈ D&A + small provision changes, and for a capital-intensive company like Acciona, most of this is D&A: D&A ≈ 715,000,000 EUR (from cash flow, or 714M from P&L) EBITDA = 829,000,000 + 715,000,000 = 1,544,000,000 EUR But let me cross-check with the cash flow-based approach: Cash from Ops before working capital and interest/taxes = 574,000,000 + 340,000,000 + 206,000,000 + 82,000,000 - 23,000,000 - 49,000,000 + 162,000,000 + 378,000,000 - 2,000,000 ... This is getting messy with signs. Let me try a cleaner approach. Actually, for S&P methodology, let me look at what they typically do: 1. Start with "reported EBITDA" or calculate it 2. Make adjustments for non-recurring items, provisions, etc. Given Acciona is an infrastructure/renewable energy company with heavy fixed assets, D&A is substantial. Let me use a conservative approach: - If "Dotacion Amortizacion YVariacion De Provisiones" = 714,000,000 includes significant provision changes, then pure D&A might be lower - But for S&P, they often accept the reported figures with minimal adjustment when detailed data isn't available I'll use: EBITDA = 829,000,000 + 714,000,000 = 1,543,000,000 EUR Or more precisely, let me check if I can derive cleaner D&A from gross PPE changes. PPE 2022: 8,066,000,000 PPE 2023: 9,485,000,000 Increase: 1,419,000,000 Purchase of PPE (from cash flow): 948,000,000 EUR for 2021-2022 Wait, that's for 2021-2022 period. For 2022-2023 it's 2,195,000,000. Hmm, the period labels are confusing. "2022-01-01 - 2023-01-01" means the year 2022. So for year 2022 (2022-01-01 to 2023-01-01): - PPE increased from 8,066M to 9,485M = 1,419M - Purchases of PPE, intangibles, etc. = 2,195M - Proceeds from disposals = 47M This doesn't directly give me D&A due to acquisitions, disposals, reclassifications, etc. Let me just use the standard formula and accept some noise: **Net Debt / EBITDA for 2022 (period 2022-01-01 to 2023-01-01):** First, I need 2022 year-end data, which is 2023-01-01 balance sheet. Wait, the question asks for "2022" ratio. The data uses 2023-01-01 as end of 2022. Let me re-read: "at the end of 2022" - so the 2023-01-01 data points are for end of 2022. For the income statement, "2022-01-01 - 2023-01-01" is the 2022 fiscal year. So for Net Debt at end of 2022 (which is 2023-01-01): Total Debt: - "Participaciones Preferentes Obligaciones YOtros Valores Negociables No Corrientes1": 3,101,000,000 - "Noncurrent Portion Of Noncurrent Loans Received": 2,624,000,000 - "Noncurrent Lease Liabilities": 439,000,000 - "Participaciones Preferentes Obligaciones YOtros Valores Negociables Corrientes": 1,139,000,000 - "Current Loans Received And Current Portion Of Noncurrent Loans Received": 553,000,000 - "Current Lease Liabilities": 72,000,000 Total Debt = 3,101 + 2,624 + 439 + 1,139 + 553 + 72 = 7,928,000,000 EUR Cash and Cash Equivalents at 2023-01-01: 2,360,000,000 EUR Net Debt = 7,928,000,000 - 2,360,000,000 = 5,568,000,000 EUR For EBITDA (2022 fiscal year, 2022-01-01 to 2023-01-01): - "Profit Loss From Operating Activities": 1,334,000,000 EUR - "Dotacion Amortizacion YVariacion De Provisiones": 762,000,000 EUR EBITDA = 1,334,000,000 + 762,000,000 = 2,096,000,000 EUR But wait, I need to check if this is correct S&P methodology. Let me verify with cash flow: Cash from Ops 2022: 1,648,000,000 + Interest Paid: 209,000,000 + Taxes Paid: 215,000,000 + Working Capital change: -135,000,000 (negative means cash outflow, so WC increased) If WC increased by 135M (cash outflow), then: EBITDA ≈ Cash from Ops + Interest + Taxes + WC increase = 1,648,000,000 + 209,000,000 + 215,000,000 + 135,000,000 = 2,207,000,000 EUR This is close to my 2,096M, with difference due to dividends received (89M), interest received (40M), and other items. Actually, the proper formula is: EBITDA = EBIT + D&A And EBIT ≈ Operating Profit (before financial items) "Profit Loss From Operating Activities" = 1,334,000,000 - this should be before interest and taxes, so it's EBIT or close. Then EBITDA = 1,334,000,000 + D&A If D&A is approximately 762,000,000 (from "Dotacion Amortizacion YVariacion De Provisiones", though this includes provisions), then: EBITDA = 2,096,000,000 EUR But using cash flow verification: 2,207,000,000 EUR The difference is about 111M, which could be explained by: - Dividends received: 89,000,000 (usually excluded from EBITDA in S&P methodology) - Interest received: 40,000,000 (excluded, as EBITDA is before interest) - Other items So 2,207,000,000 - 89,000,000 - 40,000,000 = 2,078,000,000, close to 2,096M. For S&P methodology, I'll use the more standard accounting approach: EBITDA = Operating Profit + D&A = 1,334,000,000 + 762,000,000 = 2,096,000,000 EUR But I need to adjust for the "provision" component in 762M. Looking at "Impairment Loss Reversal..." = -15,000,000 EUR for 2022, this suggests impairments were minimal (reversal). If provisions are small, then 762M is mostly D&A. Net Debt / EBITDA = 5,568,000,000 / 2,096,000,000 = 2.656 Let me also check using average or beginning debt. S&P typically uses period-end debt for leverage ratios, or sometimes average. Actually, for Net Debt/EBITDA, S&P Global Ratings typically uses: - Net debt at period end - EBITDA for the last 12 months (LTM) So: 5,568 / 2,096 = 2.66x But wait - I need to double check my debt calculation. S&P methodology for "Total Debt" includes: From S&P Global Ratings methodology: - Short-term debt (bank loans, bonds, commercial paper) - Long-term debt - Finance lease obligations - Preferred shares (if hybrid, treated as equity or debt depending on features) - Pension deficits (sometimes) - Less: Cash and cash equivalents Looking at Acciona's structure: - "Participaciones Preferentes Obligaciones YOtros Valores Negociables" - these are preferred shares, bonds, and other marketable securities. The "Participaciones Preferentes" (preferred shares) might be treated as equity or debt depending on features. For S&P, preferred shares are typically treated as debt if they have debt-like features (fixed dividend, no voting rights, etc.). Given the label includes "Obligaciones" (bonds) and "Valores Negociables" (marketable securities), and it's classified as liabilities, these are likely debt instruments or hybrid equity treated as debt. Actually, looking at the balance sheet structure, these are listed under liabilities (non-current and current), so they're debt-like. Let me verify my debt items are correctly classified as liabilities: - "Participaciones Preferentes Obligaciones YOtros Valores Negociables No Corrientes1" - Non-current - "Noncurrent Portion Of Noncurrent Loans Received" - Non-current loans - "Noncurrent Lease Liabilities" - Non-current leases - "Participaciones Preferentes Obligaciones YOtros Valores Negociables Corrientes" - Current - "Current Loans Received And Current Portion Of Noncurrent Loans Received" - Current loans - "Current Lease Liabilities" - Current leases These are all clearly liability items. Total Debt = 3,101 + 2,624 + 439 + 1,139 + 553 + 72 = 7,928 million EUR Net Debt = 7,928 - 2,360 = 5,568 million EUR EBITDA = 2,096 million EUR Net Debt / EBITDA = 5,568 / 2,096 = 2.6565... Let me round to 2.66 or present more precisely. Actually, let me reconsider if I should use beginning or end of year EBITDA components. The question asks for "2022" ratio. For 2022: - Use 2022 year-end net debt (2023-01-01 balance sheet) - Use 2022 full year EBITDA (2022-01-01 to 2023-01-01 income statement) This is the standard approach. But wait - I should double-check if "Profit Loss From Operating Activities" is truly EBIT. Looking at the P&L structure: - Revenue - Other Income - Changes in inventories - Raw materials - Employee benefits - Other expenses - Dotacion Amortizacion... (D&A, provisions) - Impairment - Other gains/losses - Resultado De Puesta En Equivalencia Operativa (equity method results from operations) - = Profit Loss From Operating Activities Then: - Finance Income - Finance Costs - Exchange differences - Fair value changes - Share of profit/loss of associates (equity method, financial) - = Profit Loss Before Tax So "Profit Loss From Operating Activities" is indeed operating profit before financing costs and taxes, equivalent to EBIT. Therefore: EBITDA = EBIT + D&A = 1,334,000,000 + 762,000,000 = 2,096,000,000 EUR Net Debt = 5,568,000,000 EUR Ratio = 5,568 / 2,096 = 2.6565... Let me verify with more precise calculation: 5,568 / 2,096 = 2.65648855... Or should I use 2.66? Actually, let me also consider if S&P would make any adjustments. One common S&P adjustment is to treat operating leases as debt (already done here with lease liabilities), and to use "funds from operations" or adjusted EBITDA. Another consideration: S&P sometimes excludes certain cash items or includes certain adjustments. But with the given data, the most straightforward S&P calculation is: Net Debt / EBITDA = 5,568 / 2,096 = 2.66x Let me also check if I should use average debt or year-end debt. For point-in-time leverage ratios, S&P typically uses period-end debt. However, for "2022" ratio, some practitioners use average debt or beginning-of-year debt. But S&P Global Ratings typically uses "latest" or period-end for their published ratios. Let me also verify my debt calculation by checking if there are any other debt-like items I missed: Looking at "Other Noncurrent Liabilities" = 1,134,000,000 EUR - these could include some debt, but typically "other" excludes financial debt. Looking at "Other Current Liabilities" = 1,798,000,000 EUR - same, likely not financial debt. The debt items I identified seem complete for financial debt. One more check: Does "Trade And Other Current Payables" = 3,889,000,000 include any bank debt? Typically no, these are trade payables. So my debt calculation seems correct. Final calculation: Net Debt = 7,928 - 2,360 = 5,568 million EUR EBITDA = 1,334 + 762 = 2,096 million EUR Net Debt / EBITDA = 5,568 / 2,096 = 2.6565... I'll round to 2.66 or provide 2.656. Given the precision of inputs, 2.66 seems appropriate, or perhaps 2.7 if rounding to one decimal. Actually, let me provide more precision: 2.66 Or should I write 2.656? For financial ratios, typically 2 decimal places are used. Let me recalculate to be sure: Total Debt = 3,101,000,000 + 2,624,000,000 + 439,000,000 + 1,139,000,000 + 553,000,000 + 72,000,000 = 3,101 + 2,624 = 5,725 + 439 = 6,164 + 1,139 = 7,303 + 553 = 7,856 + 72 = 7,928 Yes, 7,928,000,000 EUR Cash = 2,360,000,000 EUR Net Debt = 5,568,000,000 EUR EBITDA = 1,334,000,000 + 762,000,000 = 2,096,000,000 EUR Ratio = 5,568 / 2,096 = 2.6564885496... Rounded to two decimal places: 2.66 2.66