I need to calculate the FFO / Net debt ratio for 2022 based on S&P methodology. First, let me understand S&P's FFO (Funds From Operations) methodology: - FFO = Net income + Depreciation and amortization + Deferred income taxes + Other non-cash items For S&P methodology, FFO is typically calculated as: - Profit/Loss + Depreciation & Amortization + Deferred Tax changes + Other non-cash adjustments Let me identify the relevant figures for 2022 (period 2022-01-01 to 2023-01-01): From the data: - Profit Loss 2022-01-01 - 2023-01-01: -879,000,000 EUR - Depreciation And Amortisation Expense 2022-01-01 - 2023-01-01: 1,233,000,000 EUR For S&P FFO, I need to also consider: - Changes in deferred taxes - Other non-cash items - Share of profits from equity method investments (usually added back if not received as dividends) Let me look at the cash flow statement adjustments to better understand FFO: From operating cash flow adjustments: - Adjustments For Depreciation And Amortisation: 1,233,000,000 EUR - Adjustments For Losses Gains On Disposal: 38,000,000 EUR - Adjustments For Undistributed Profits Of Investments: 120,000,000 EUR - Dividends Received: 92,000,000 EUR - Adjustments For Provisions: 104,000,000 EUR - Other Adjustments For Noncash Items: 1,347,000,000 EUR For S&P FFO, the standard approach is: FFO = Net income + D&A + Deferred income taxes + Other non-cash expenses - Gain on sale + Share of earnings of affiliates Let me calculate using a more direct approach based on S&P methodology: S&P FFO typically equals: - Funds from operations = Operating cash flow before working capital changes + Interest paid - Interest received (if classified as investing) + Dividends received from investments Actually, let me use the more standard S&P approach: FFO = Net income + D&A + Deferred taxes + Other non-cash items From the P&L: - Net income (Profit Loss): -879,000,000 EUR - D&A: 1,233,000,000 EUR For deferred taxes, I need to look at the change: - Deferred Tax Assets 2022-01-01: 162,000,000 EUR - Deferred Tax Assets 2023-01-01: 711,000,000 EUR - Deferred Tax Liabilities 2022-01-01: 7,000,000 EUR - Deferred Tax Liabilities 2023-01-01: 12,000,000 EUR Change in net deferred tax position: - 2022: 162 - 7 = 155,000,000 EUR (asset net) - 2023: 711 - 12 = 699,000,000 EUR (asset net) - Change: 699 - 155 = 544,000,000 EUR increase in deferred tax assets This increase in deferred tax assets represents a non-cash benefit to income (reduced tax expense), so I need to add back the increase in deferred tax assets or subtract the decrease. Actually, looking at the income statement: Income Tax Expense is -354,000,000 EUR (negative means tax benefit). For S&P FFO, the formula is closer to: FFO = Profit before tax + Interest expense - Interest income + D&A + Other non-cash items - Tax paid Or more commonly: FFO = Net income + D&A + Deferred tax expense + Other non-cash items Let me use the cash flow approach which is cleaner for S&P: FFO = Cash flow from operations before working capital changes + Interest paid From cash flows: - Cash Flows From Used In Operations Excluding Eeg Working Capital: 596,000,000 EUR - This already includes interest paid and received? Let me check. Looking at financing activities: - Interest Paid Classified As Financing Activities: 202,000,000 EUR And investing activities: - Interest Received Classified As Investing Activities: 45,000,000 EUR For S&P FFO, we typically add back interest paid and subtract interest received (if in operating) or adjust. Standard S&P FFO calculation: FFO = Funds from operations = Net cash from operating activities + Increase in working capital (i.e., subtract the benefit from working capital) + Interest paid - Interest received (if in operating) + Dividends received from investments (if equity method) Actually, let me use the more direct S&P formula: FFO = Net income + D&A + Deferred income tax expense + Other non-cash items From the data, I can reconstruct: - Net income: -879,000,000 - D&A: 1,233,000,000 - Other non-cash items from cash flow: Other Adjustments For Noncash Items = 1,347,000,000 But wait, this "Other Adjustments For Noncash Items" likely includes many things. Let me look more carefully. Actually, S&P Global Ratings methodology for FFO: FFO = Funds from operations = Net income from continuing operations + Depreciation and amortization + Deferred income taxes + Other non-cash items For utilities, S&P also typically adjusts for: - Changes in regulatory assets/liabilities - Pension adjustments Let me try a different approach using the cash flow statement and working backwards: Cash Flows From Used In Operations Excluding Eeg Working Capital: 596,000,000 EUR This is after: - D&A add back: 1,233,000,000 - Gains/losses on disposal: 38,000,000 - Undistributed profits: 120,000,000 - Dividends received: 92,000,000 - Provisions: 104,000,000 - Other non-cash: 1,347,000,000 - Working capital excluding EEG: -736,000,000 (negative means source of cash) - Income taxes paid: 231,000,000 Wait, let me recalculate. The "Cash Flows From Used In Operations Excluding Eeg Working Capital" of 596,000,000 is the net after all these adjustments and before EEG working capital. For S&P FFO, the standard is: FFO = Cash from operations before working capital changes + Interest expense (after tax) or Interest paid - Interest received (if in operating) Actually, let me look at this more carefully. S&P FFO is typically: FFO = EBIT + D&A - Cash taxes paid Or: FFO = Net income + D&A + Deferred taxes + Interest expense (net) + Other non-cash Let me use the most standard S&P approach for corporate issuers: FFO = Net income + Depreciation & Amortization + Deferred income taxes + Other non-cash charges From our data: - Net income: -879,000,000 - D&A: 1,233,000,000 For deferred taxes, I need the deferred tax expense (non-cash portion of tax). The total tax expense is -354,000,000 (benefit). The cash taxes paid are 231,000,000. So the deferred tax benefit is -354,000,000 - (negative cash tax, wait...) Actually, income taxes paid is 231,000,000 (positive means paid, so outflow). Total tax expense: -354,000,000 (negative means benefit, i.e., tax credit) So: Tax expense = Cash taxes paid + Deferred tax benefit -354,000,000 = 231,000,000 + Deferred tax benefit Deferred tax benefit = -354,000,000 - 231,000,000 = -585,000,000 Wait, that doesn't seem right. Let me reconsider. Actually, "Income Taxes Paid Refund Classified As Operating Activities" of 231,000,000 - if positive, this is taxes paid. But in cash flow statements, sometimes this is shown as negative for outflow. Looking at the sign convention: "Income Taxes Paid Refund" - positive 231,000,000 likely means paid (outflow, so shown as positive in "used in" section or the number represents the amount). Let me use a cleaner approach. S&P FFO for infrastructure/utilities: FFO = Operating cash flow before working capital changes + Interest paid Operating cash flow before working capital changes = Net income + D&A + Other non-cash items + Gains/losses adjustments + etc. From the cash flow data, "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596,000,000 EUR This includes: - Net income effects - D&A: 1,233,000,000 - Other adjustments totaling various amounts - And importantly, this is BEFORE interest and taxes in some presentations, or after in others. Actually, looking at standard Dutch cash flow presentation, operating cash flow typically starts with profit before tax and adjusts. Let me try to calculate FFO more directly using S&P's standard formula for corporate entities: FFO = Profit/Loss before tax + Interest expense + D&A - Cash taxes paid Or from net income: FFO = Net income + Interest expense + D&A + Deferred tax expense + Other non-cash From data: - Profit Loss Before Tax: -1,233,000,000 - Finance Costs: 300,000,000 - Finance Income: 43,000,000 - So Interest expense net = 300 - 43 = 257,000,000 (or Finance Income Cost is -257,000,000) - D&A: 1,233,000,000 EBITDA proxy = Profit before tax + Interest expense + D&A = -1,233,000,000 + 300,000,000 + 1,233,000,000 = 300,000,000? No wait. Let me be careful: Profit Loss Before Tax: -1,233,000,000 Finance Income Cost (net): -257,000,000 (negative means net cost) So EBIT = Profit before tax + Finance costs - Finance income = -1,233,000,000 + 300,000,000 - 43,000,000 = -976,000,000 Wait, that's exactly "Profit Loss From Operating Activities": -976,000,000 So EBIT = -976,000,000? No, that's operating profit. For S&P FFO: FFO = Operating profit + D&A - Cash taxes + Interest expense (gross) Or: FFO = Net income + D&A + Interest expense + Deferred taxes + Other non-cash Let me use: FFO = Cash flow from operations before working capital changes + Interest paid From cash flow statement, I need to reconstruct CFO before working capital changes and interest. Actually, let me use the most common S&P formula directly: FFO = Net income + Depreciation and amortization + Deferred income taxes + Other non-cash charges - Gain on sale + Share of earnings in affiliates From data 2022-2023: - Net income: -879,000,000 - D&A: 1,233,000,000 - Deferred tax change: Need to calculate Deferred tax assets increased from 162 to 711 = 549,000,000 Deferred tax liabilities increased from 7 to 12 = 5,000,000 Net deferred tax assets increased by 544,000,000 This increase in deferred tax assets is a non-cash benefit (reduces tax expense), so it's part of FFO. But wait - the tax expense already includes this. Let me think again. Total tax expense: -354,000,000 (benefit) Cash taxes paid: 231,000,000 (outflow) If cash taxes paid is 231M outflow, and total tax benefit is 354M, then: Tax benefit = Cash taxes paid (outflow, positive number) + Deferred tax benefit -354,000,000 = 231,000,000 + Deferred tax benefit? Hmm, signs are confusing. Let me think of it as: Total tax expense = Current tax expense + Deferred tax expense -354 = Current + Deferred Cash taxes paid = 231 (positive means paid, so expense) If cash taxes paid = current tax expense (approx), then: Current tax expense ≈ 231 Deferred tax expense = -354 - 231 = -585 (benefit) So deferred tax benefit of 585M. This is added back to FFO. Other non-cash items: - Share of profit of associates and JVs: 120,000,000 (this is equity method, non-cash, so subtract or add back appropriately) - Other gains/losses: -38,000,000 (loss, already in net income) Actually, for S&P FFO, equity method earnings are typically EXCLUDED from FFO (since they're non-cash), or dividends received are included instead. Let me use a cleaner approach. S&P FFO formula from their published methodology: FFO = Net income + Depreciation & amortization + Deferred income taxes + Other non-cash items - Gain on sale of assets + Interest expense - Interest income (if not from operations) Or more practically for most corporates: FFO = Cash flow from operating activities - Change in working capital (i.e., add back the working capital benefit/use) + Interest paid (if not already in CFO) - Interest received (if in CFO and not operating) Let me reconstruct from the detailed cash flow: Cash Flows From Used In Operations Excluding Eeg Working Capital: 596,000,000 This is after: + D&A: 1,233,000,000 + Losses on disposal: 38,000,000 + Undistributed profits: 120,000,000 + Dividends received: 92,000,000 + Provisions: 104,000,000 + Other non-cash: 1,347,000,000 - Working capital excluding EEG: 736,000,000 (wait, the line says "Increase Decrease In Working Capital Excluding Eeg Working Capital" = 736,000,000, but is this a source or use?) Actually "Increase Decrease In Working Capital Excluding Eeg Working Capital" = 736,000,000 - positive could mean increase (use) or decrease (source). Looking at components: - Trade receivables increase: -1,026,000,000 (use) - Inventories increase: -49,000,000 (use) - Trade payables decrease: -33,000,000 (use, or increase would be source) - Contract liabilities increase: 103,000,000 (source) - Current financial liabilities increase: 269,000,000 (source) Sum: -1026 -49 -33 + 103 + 269 = -736,000,000. So this is a USE of 736M. But the line says 736,000,000 positive. Hmm, the sign convention: "Increase Decrease In Working Capital" = 736,000,000. Given the components are mostly negative (uses), this 736M might be shown as positive meaning "increase" (use). But in "Cash Flows From Used In Operations", a positive 596M with working capital USE of 736M would mean operations before WC generated 1,332M. Let me recalculate: If working capital used 736M, and total CFO excl EEG is 596M, then CFO before WC changes = 596 + 736 = 1,332,000,000. For S&P FFO, we want this before working capital, plus interest paid: FFO = 1,332,000,000 + Interest paid Interest paid in financing activities: 202,000,000 But is interest paid already in the 596M? In Dutch GAAP/IFRS, interest paid can be in operating or financing. Looking at the cash flow: "Cash Flows From Used In Operations Excluding Eeg Working Capital" - this likely includes interest paid and received if classified as operating, or excludes if financing. Interest Paid Classified As Financing Activities: 202,000,000 Interest Received Classified As Investing Activities: 45,000,000 So interest paid is in financing, not operating. For S&P FFO, we add back interest paid (after tax) or interest paid gross. S&P FFO = CFO before working capital + Interest paid = 1,332,000,000 + 202,000,000 = 1,534,000,000 But we need to subtract interest received if it was in operating (it's in investing, so no adjustment needed for FFO). Wait, let me verify the 1,332M calculation another way. From P&L to CFO before WC: Net income: -879,000,000 + D&A: 1,233,000,000 + Other non-cash in "Other Adjustments": 1,347,000,000? That already exceeds 1,332M. Let me look more carefully. Actually, "Other Adjustments For Noncash Items" of 1,347,000,000 likely includes many things. Let me see if I can reconcile. From the adjustments listed: + D&A: 1,233,000,000 + Losses on disposal: 38,000,000 + Undistributed profits of equity method: 120,000,000 + Provisions: 104,000,000 + Other non-cash: 1,347,000,000 Total adjustments to net income: 1,233 + 38 + 120 + 104 + 1,347 = 2,842,000,000 Net income: -879,000,000 + Adjustments: 2,842,000,000 = 1,963,000,000 before working capital and dividends/taxes? But then we have: - Dividends received: 92,000,000 (this is positive cash, so adds) - Working capital use: -736,000,000 - Income taxes paid: -231,000,000 So: 1,963 + 92 - 736 - 231 = 1,088? Not matching 596. Let me try: Maybe "Other Adjustments For Noncash Items" includes the tax and other items. Actually, let me look at this more carefully. The line "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596,000,000. This is composed of: Starting from net income or profit before tax? Standard approach: Start with profit before tax, adjust for non-cash, then subtract taxes paid. Profit before tax: -1,233,000,000 + D&A: 1,233,000,000 + Other gains/losses (loss): 38,000,000? (Other Gains Losses is -38,000,000, so loss of 38M) + Undistributed profits: 120,000,000 (this is share of profit, need to subtract as non-cash) + Provisions: 104,000,000 + Other non-cash: 1,347,000,000 - Dividends received: -92,000,000? (or + if classified as operating inflow) Hmm, "Dividends Received Classified As Operating Activities" = 92,000,000. This is cash inflow. Let me try building from PBT: PBT: -1,233,000,000 Less: Share of profit of associates and JVs: -120,000,000 (to get to operating profit before tax) = -1,353,000,000 operating profit before tax? No, PBT already includes this as +120M (profit). Actually PBT = Operating profit + Share of profit + Finance income - Finance costs -1,233 = -976 + 120 + 43 - 300? = -976 + 120 - 257 = -1,113? Doesn't match. Wait: Profit Loss From Operating Activities: -976,000,000 Share Of Profit: 120,000,000 Finance Income Cost: -257,000,000 (net cost) So: -976 + 120 - 257 = -1,113, not -1,233. Hmm, there's Other Gains Losses of -38,000,000. Where does this fit? Operating profit: -976,000,000 includes Other Gains Losses? Let me check: Revenue: 8,299,000,000 Energy Transmission Charges: 7,517,000,000 (this is likely cost, not revenue) Employee Benefits: 285,000,000 D&A: 1,233,000,000 Miscellaneous Other Operating Expense: 322,000,000 Other Gains Losses: -38,000,000 Operating profit = Revenue - Costs + Gains = 8,299 - 7,517 - 285 - 1,233 - 322 + (-38)? = -1,096? Not -976. Hmm, "Operating Expense" = 9,395,000,000 total. Revenue = 8,299,000,000 Operating profit = 8,299 - 9,395 = -1,096,000,000? But stated as -976,000,000. The difference is 120,000,000, which is exactly the share of profit! So operating activities profit is -976M including the equity method pickup. Actually, looking at standard presentation: Profit Loss From Operating Activities typically = EBIT or operating profit before financing and taxes. Given the complexity, let me use the direct S&P FFO approach from cash flows: S&P FFO = Cash generated from operations before working capital changes From "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596,000,000 This is after working capital excluding EEG? No wait - the name says "Excluding Eeg Working Capital", meaning this is BEFORE EEG working capital but AFTER other working capital. Actually, re-reading: "Cash Flows From Used In Operations Excluding Eeg Working Capital" - this means the cash flow from operations excluding the EEG working capital portion. So this includes non-EEG working capital changes. Then "Increase Decrease In Working Capital Eeg Working Capital" = -1,792,000,000 And "Cash Flows From Used In Operating Activities" = 1,196,000,000 Check: 596 - (-1,792)? = 596 + 1,792 = 2,388? Not 1,196. Or 596 - 1,792 = -1,196, but stated as 1,196,000,000 positive. Sign conventions are tricky. Let me assume: - "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596,000,000 (positive means generated) - "Increase Decrease In Working Capital Eeg Working Capital" = -1,792,000,000 (negative means decrease, i.e., source of cash? Or increase = use?) Actually, for EEG working capital: - Trade receivables EEG: 592,000,000 (positive = decrease? or increase?) - Trade receivables EEG over 3 months: 472,000,000 - Trade payables EEG: 728,000,000 Sum: 592 + 472 + 728 = 1,792,000,000. But line says -1,792,000,000. So these are sources (decreases in receivables, increases in payables). So "Increase Decrease In Working Capital Eeg Working Capital" = -1,792,000,000 means working capital provided 1,792M cash. Then total CFO = 596 + 1,792 = 2,388? But stated as 1,196,000,000. Hmm, 596 - 1,792 = -1,196. But the total is 1,196,000,000 positive. Maybe the 596 is "used in" (negative), so -596 + 1,792 = 1,196. Yes! That works. So "Cash Flows From Used In Operations Excluding Eeg Working Capital" of 596,000,000 actually means -596,000,000 (used), and with EEG working capital source of 1,792,000,000, total is 1,196,000,000. Wait, but 596 is positive in the data. Let me re-check: if it's "used in", positive means used. But then total would be negative. Actually, I think the convention is: - "Cash Flows From Used In" - if positive, it's "from" (source). If negative, it's "used in" (use). So 596,000,000 means generated from operations excl EEG WC. And -1,792,000,000 for EEG WC means... wait it's negative, but we calculated it as source. Let me just accept: Total CFO = 1,196,000,000. For S&P FFO, I need to add back the working capital changes (both EEG and non-EEG) to get to "funds from operations" before working capital. From the detailed adjustments, working capital excluding EEG was a USE of 736,000,000 (calculated from components). And EEG working capital was a source of 1,792,000,000 (from components, or -1,792,000,000 as "increase decrease"). Net working capital change: -736 + 1,792 = 1,056,000,000 source? Or 736 use + 1,792 source = 1,056 source. But total CFO = 1,196,000,000. If working capital provided 1,056M, then operations before WC = 1,196 - 1,056 = 140,000,000? That seems too low. Hmm, let me try: Working capital excluding EEG was 736,000,000 (positive in the line "Increase Decrease..."). If positive means increase (use of cash), then use of 736M. EEG working capital was -1,792,000,000, meaning decrease (source of 1,792M). Net: -736 + 1,792 = 1,056M source. CFO before WC = 1,196 - 1,056 = 140M? That seems wrong given D&A alone is 1,233M. Let me try another approach. Maybe "Increase Decrease In Working Capital Excluding Eeg Working Capital" = 736,000,000 means DECREASE (source) of 736M. Then: CFO before WC = 1,196 + 736 - 1,792 = 140M? Still wrong. Or: CFO excl EEG WC = 596M means this already includes non-EEG WC. So CFO before all WC = 596 + (non-EEG WC effect). If non-EEG WC was use of 736M (from components), then CFO before all WC = 596 + 736 = 1,332M. Then add EEG WC source of 1,792M = 3,124M? No, that would be after EEG WC. Actually: CFO before any WC = CFO excl EEG WC + non-EEG WC change = 596 + 736 = 1,332M. Then with EEG WC source of 1,792M: 1,332 + 1,792 = 3,124M? But total CFO is 1,196M. I'm getting confused with signs. Let me try yet again with explicit signs. From components of non-EEG WC: - Receivables increase: -1,026 (use) - Inventories increase: -49 (use) - Payables decrease: -33 (use) - Contract liabilities increase: +103 (source) - Financial liabilities increase: +269 (source) Sum: -1,026 - 49 - 33 + 103 + 269 = -736 (net use of 736M) From components of EEG WC: - Receivables decrease: +592 (source) - Receivables over 3 months decrease: +472 (source) - Payables increase: +728 (source) Sum: +1,792 (net source of 1,792M) Total WC effect: -736 + 1,792 = +1,056 (net source of 1,056M) Total CFO = 1,196M (source/generated) So CFO before WC = 1,196 - 1,056 = 140M? This can't be right with 1,233M D&A. Unless... the "Cash Flows From Used In Operations Excluding Eeg Working Capital" of 596M is actually negative (used), not generated. If 596M is used (negative -596), and total CFO is +1,196 (generated), then: -596 + EEG_WC = 1,196 EEG_WC = 1,792 (source) Then CFO before all WC = -596 + 736 = 140? Still same problem. Wait - maybe "Cash Flows From Used In Operations Excluding Eeg Working Capital" includes the non-EEG WC already. So if it's -596 (used), and non-EEG WC used 736, then before non-EEG WC = -596 + 736 = +140? No, if WC used cash, then before WC would be better (higher). If operations excl WC = X, and non-EEG WC used 736, then X - 736 = -596, so X = 140. But with D&A of 1,233, this seems impossible unless there are huge losses or other uses. Net income is -879. Add D&A 1,233 = 354. Add other adjustments... there are many other non-cash items. Actually, looking at "Other Adjustments For Noncash Items" = 1,347,000,000. This is huge! If this includes things like regulatory asset/liability changes, it could explain the discrepancy. Let me try: Net income -879 + D&A 1,233 + Other non-cash 1,347 + other items = ? -879 + 1,233 + 1,347 = 1,701. Plus other adjustments (provisions 104, undistributed profits 120, losses 38) = 1,963. Less dividends received in operations 92 = 1,871. Less taxes paid 231 = 1,640. Less working capital use 736 = 904. But stated as 596. Hmm, not matching. Maybe "Other Adjustments" includes some of these items. Let me just accept the reported numbers and calculate S&P FFO as: FFO = Cash Flows From Used In Operations Excluding Eeg Working Capital + Interest paid + non-EEG working capital change + EEG working capital change? No, that's circular. Standard S&P FFO definition for corporates: "Funds from operations (FFO) is calculated as cash flow from operating activities before changes in working capital, plus dividends received from unconsolidated affiliates, minus interest paid (if included in operating activities), plus interest paid (if included in financing activities), minus interest received (if included in operating activities)." Or more simply for most European companies where interest is in financing: FFO = CFO before working capital changes + Interest paid (financing) From our data, if I can identify CFO before WC changes. Actually, let me use a different S&P formula that's more robust: FFO = EBIT + D&A - Cash taxes paid EBIT = Profit Loss From Operating Activities + Share Of Profit Of Associates? No, operating activities already includes this. From data: Profit Loss From Operating Activities: -976,000,000 (this is EBIT essentially) D&A: 1,233,000,000 (already included in operating activities to get to this number!) Wait, operating profit is AFTER D&A. So EBIT = -976,000,000 includes D&A already. Then EBITDA = EBIT + D&A = -976 + 1,233 = 257,000,000? But Finance Income Cost is -257,000,000. And PBT = -1,233,000,000. Check: EBIT + Finance income - Finance costs = PBT -976 + 43 - 300 = -1,233. Yes! ✓ So EBIT = -976,000,000. For S&P FFO: FFO = EBIT + D&A - Cash taxes + Interest paid? No, EBIT is before interest. Actually, standard S&P: FFO = Net income + D&A + Deferred taxes + Other non-cash + Interest expense Or: FFO = EBIT + D&A - Cash taxes paid (this is a common approximation) Let me try: EBIT (-976) + D&A (1,233) - Cash taxes (231) = -976 + 1,233 - 231 = 26,000,000? Way too low. Hmm, EBIT already includes D&A as an expense, so EBIT + D&A = EBITDA = operating profit before D&A. Wait: "Profit Loss From Operating Activities" = -976,000,000. This is after D&A of 1,233,000,000. So if we add back D&A: -976 + 1,233 = 257,000,000. This is roughly EBITDA (but may include other non-cash). Actually, let's verify: Revenue 8,299 - Operating Expense 9,395 = -1,096. But operating profit is -976. Difference is 120, which is share of profit. So operating activities includes share of profit. Operating activities = Revenue - Costs + Share of profit = 8,299 - 9,395 + 120 = -976. Yes. Now EBITDA would be before D&A: -976 + 1,233 = 257,000,000. For S&P FFO, we want: FFO ≈ EBITDA - Cash taxes + Other adjustments Cash taxes paid: 231,000,000 So 257 - 231 = 26,000,000? Still too low. But wait, "Other Adjustments For Noncash Items" is 1,347,000,000. This must include things like regulatory deferrals, pension adjustments, etc. that are part of operating profit but non-cash. Let me try the most comprehensive S&P approach: FFO = Net income + D&A + Deferred tax expense + Other non-cash charges + Interest expense Net income: -879,000,000 D&A: 1,233,000,000 Deferred tax: Need to calculate Other non-cash: Need to identify Interest expense: 300,000,000 (gross, before interest income) From taxes: Total tax benefit: -354,000,000 Cash taxes paid: 231,000,000 (outflow, so expense) Deferred tax benefit = Total tax benefit - Cash tax expense? Actually: Tax expense = Current tax expense + Deferred tax expense -354 = Current + Deferred If cash taxes paid = 231, then current tax expense = 231 (positive expense). Deferred tax expense = -354 - 231 = -585 (benefit, i.e., negative expense). So deferred tax benefit of 585,000,000. Other non-cash: Looking at cash flow adjustments not already included: - Undistributed profits of investments: 120,000,000 (this is equity method earnings not received as dividends) - Provisions: 104,000,000 - Other non-cash items: 1,347,000,000 - Gains/losses on disposal: 38,000,000 (loss, so add back) But some of these may already be in net income. Equity method earnings of 120M is IN net income (share of profit). So we subtract it for FFO (since non-cash). Actually for S&P FFO, we typically: - Add back D&A (already in net income as expense) - Add back deferred tax benefit (already reduced tax expense) - Subtract equity method earnings (already in net income as income, non-cash) - Add back other non-cash expenses So: FFO = -879 + 1,233 + 585 - 120 + 104 + 38 + 1,347 + other items? = -879 + 1,233 = 354 + 585 = 939 - 120 = 819 + 104 = 923 + 38 = 961 + 1,347 = 2,308 Then subtract dividends received (cash, not FFO): -92 = 2,216? And interest? This is getting too high. Let me reconsider what "Other Adjustments For Noncash Items" includes. Actually, looking at the cash flow statement structure, "Other Adjustments For Noncash Items" of 1,347M likely includes the deferred tax and other major items. It might be the net adjustment for all non-cash items not separately listed. Let me try a completely different, more direct approach using S&P's published formula for FFO: For utilities/infrastructure, S&P often uses: FFO = Cash from operations before working capital changes + Interest paid From the cash flow, I need to find "cash from operations before working capital changes." Looking at the adjustments to net income in the operating section: + D&A: 1,233 + Losses on disposal: 38 + Undistributed profits: 120 + Dividends received: 92 + Provisions: 104 + Other non-cash: 1,347 + Working capital adjustments (various) - Taxes paid: 231 The subtotal "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596. If I add back the non-EEG working capital change of 736 (use, so add back to get before WC): 596 + 736 = 1,332,000,000 Then add EEG working capital source of 1,792: 1,332 + 1,792 = 3,124? No, that's after. Actually, "Cash Flows From Used In Operations Excluding Eeg Working Capital" means this is CFO excluding the EEG portion of working capital. So this INCLUDES non-EEG working capital. To get CFO before ALL working capital: = CFO excl EEG WC + non-EEG WC effect = 596 + 736 (if 736 is use, add back) = 1,332,000,000 Then for S&P FFO, add interest paid (in financing): FFO = 1,332 + 202 = 1,534,000,000 Or if we want to be more precise, S&P FFO includes interest paid, so: FFO = 1,534,000,000 Let me verify this makes sense. CFO before WC of 1,332M with net income of -879M: Adjustments = 1,332 - (-879) = 2,211M. Known adjustments: D&A 1,233 + other items. 2,211 - 1,233 = 978M for other items. We have: provisions 104 + undistributed profits 120 + losses 38 + other non-cash 1,347 + dividends received 92 = 1,701M. Less taxes paid 231 = 1,470M. Hmm, 1,470 vs 978. Doesn't match perfectly, but "Other Adjustments For Noncash Items" might include offsetting items. Actually, I realize "Other Adjustments For Noncash Items" of 1,347M might be net of various things. Let me just accept the reported subtotal. For S&P FFO, another common formula is: FFO = Net income + D&A + Deferred taxes + Other non-cash - Equity earnings + Interest expense Let me try with deferred tax: Net income: -879 D&A: 1,233 Deferred tax benefit: 585 (calculated as -354 total tax - 231 cash paid, but wait...) Actually, let me recalculate deferred tax. Total tax expense: -354,000,000 (benefit, so negative) Cash taxes paid: 231,000,000 (positive means paid, so outflow, expense) Tax accounting: Tax expense = Current tax expense + Deferred tax expense If cash taxes paid = current tax expense ≈ 231 Then: -354 = 231 + Deferred Deferred = -585 (benefit) So add back deferred tax benefit of 585. Equity earnings (non-cash): 120 (share of profit) Interest expense: 300 (gross, or 257 net) FFO = -879 + 1,233 + 585 - 120 + 300 = 1,119,000,000? Plus other non-cash items from cash flow: provisions 104, losses 38, other 1,347? But these might be included in net income already or be other adjustments. Actually, "Other Adjustments For Noncash Items" of 1,347M is huge. What could this be? For a utility like TenneT, this likely includes: - Regulatory asset/liability changes - Accrued interest - Other accruals If I include this: FFO = -879 + 1,233 + 585 - 120 + 104 + 38 + 1,347 + 300 = 2,708,000,000? Too high. But then I need to subtract dividends received (cash, not FFO): 92 And maybe other items. Let me try: FFO = 2,708 - 92 (dividends) - 300 (interest, if we want net) + 257 (net finance cost, already in PBT)... I'm going in circles. Let me use the most standard, widely accepted S&P formula and be done with it: **S&P FFO = Net income + D&A + Deferred income taxes + Other non-cash items** Where "Other non-cash items" includes provisions, equity method earnings adjustments, gains/losses, etc. From cash flow statement, the total adjustments to get to CFO before WC are effectively: D&A 1,233 + Losses 38 + Undistributed profits 120 + Provisions 104 + Other non-cash 1,347 = 2,842,000,000 Plus net income: -879 + 2,842 = 1,963,000,000 Less dividends received in operating activities: 92 = 1,871,000,000? Or plus? Less taxes paid: 231 = 1,640,000,000 Less working capital use: 736 = 904,000,000? But reported as 596. The 308M difference might be taxes or other items. Let me not worry about perfect reconciliation. For practical purposes, S&P FFO for this company: FFO ≈ Cash flow from operations before working capital changes + Interest paid = 1,332,000,000 + 202,000,000 = 1,534,000,000 EUR Or using the EBITDA-based approach with actual cash taxes: FFO = EBITDA - Cash taxes + Other non-cash adjustments EBITDA = EBIT + D&A = -976 + 1,233 = 257,000,000? This can't be right for a utility with 8.3B revenue. Wait! I think I misread "Profit Loss From Operating Activities". Let me re-check. "Profit Loss From Operating Activities" 2022-01-01 - 2023-01-01: -976000000 EUR But revenue is 8,299M and operating expenses are 9,395M. The difference is -1,096M. Then share of profit is 120M. So -1,096 + 120 = -976M. Yes. But EBITDA should be much higher. Let me recalculate: Revenue: 8,299M Less: Energy Transmission Charges: 7,517M? Is this revenue or expense? "Energy Transmission Charges" - this sounds like an expense, but it's listed separately from revenue. In some utility presentations, "Energy Transmission Charges" might be pass-through costs. Actually, looking at this: Revenue 8,299 and Energy Transmission Charges 7,517. If Energy Transmission Charges are costs passed through to customers, then: Net revenue = 8,299 - 7,517 = 782M? That seems low. Or: Revenue includes transmission charges, and "Energy Transmission Charges" is the main revenue line? Let me re-read. "Revenue" 2022-01-01 - 2023-01-01: 8299000000 EUR "Energy Transmission Charges" 2022-01-01 - 2023-01-01: 7517000000 EUR Perhaps "Energy Transmission Charges" is a component of revenue or a separate expense item. Given the name and the fact that operating expenses total 9,395M, let me see: Employee Benefits: 285 D&A: 1,233 Miscellaneous Other Operating Expense: 322 Energy Transmission Charges: 7,517? Other Gains Losses: -38 Total if Energy Transmission is expense: 285 + 1,233 + 322 + 7,517 - 38 = 9,319? Close to 9,395 but not exact. Actually "Operating Expense" = 9,395M total. The components listed don't sum to this, so Energy Transmission Charges might be part of revenue or a separate presentation item. Regardless, the accounting is what it is. Operating profit is -976M including D&A. For S&P FFO purposes, let me use the most reliable calculation: **FFO = Cash flows from operating activities before changes in working capital + Interest paid** From data: Cash Flows From Used In Operating Activities: 1,196,000,000 Increase Decrease In Working Capital Eeg Working Capital: -1,792,000,000 (source, so working capital benefit) Increase Decrease In Working Capital Excluding Eeg Working Capital: 736,000,000? If total working capital benefit = 1,792 - 736 = 1,056M (assuming 736 is use), then: CFO before WC = 1,196 - 1,056 = 140M? No, if WC was source, then before WC would be lower. If total working capital source = 1,056M, and CFO = 1,196M, then CFO before WC = 1,196 - 1,056 = 140M. This is implausible. Alternative: Total working capital use = 736M (non-EEG) - 1,792M (EEG source) = -1,056M net source. Then CFO before WC = 1,196 - (-1,056) = 2,252M? Or 1,196 + 1,056 = 2,252M. Then FFO = 2,252 + 202 (interest paid) = 2,454M? Let me check: If CFO before WC = 2,252M, and net income is -879M, adjustments = 3,131M. D&A is 1,233M, so other adjustments = 1,898M. We have other adjustments totaling 1,347 + 104 + 120 + 38 = 1,609M, plus taxes 231M = 1,840M. Close to 1,898M. Reasonable. So FFO ≈ 2,252 + 202 = 2,454,000,000? Or is interest already in the 2,252M? In the cash flow, interest paid is in financing activities, not operating. So it's not in CFO. For S&P FFO, we add it back. Actually wait - S&P FFO is meant to be before interest, so we should add interest expense (or interest paid) to CFO before WC. But CFO before WC starts from net income, which is after interest expense. So yes, add interest paid. FFO = 2,252,000,000 + 202,000,000 = 2,454,000,000 EUR But let me cross-check with another approach: FFO = EBIT + D&A - Cash taxes + Other non-cash items EBIT = -976,000,000 D&A = 1,233,000,000 Cash taxes = 231,000,000 Other non-cash = ? EBIT + D&A = 257,000,000 (this is EBITDA, or rather operating profit before D&A) Wait, EBIT is already after D&A. So EBIT + D&A = EBITDA. But EBITDA of 257M seems low. Let me verify: Revenue 8,299 - Operating expenses (excl D&A) = ? Operating expenses 9,395 include D&A of 1,233. So operating expenses excl D&A = 8,162. Revenue 8,299 - 8,162 = 137. Plus share of profit 120 = 257. Yes, matches. So EBITDA = 257M. Then FFO = 257 - 231 (cash taxes) + other non-cash + interest paid. Other non-cash from cash flow (excluding D&A): undistributed profits 120, provisions 104, other 1,347, losses 38 = 1,609M. FFO = 257 - 231 + 1,609 + 202 = 1,837,000,000? Hmm, this differs from 2,454M. The difference is about 617M. The issue is whether "Other Adjustments For Noncash Items" of 1,347M is already included in operating expenses or not. If it's a separate non-cash adjustment, it should be added. Actually, I think the 1,347M "Other Adjustments For Noncash Items" is the key. This likely includes major items like regulatory deferrals. For a TSO like TenneT, there are significant regulatory account adjustments. Let me try to use the cash flow reconciliation more carefully. The cash flow from operations excluding EEG working capital is 596M. This includes: - Net income effects - All non-cash adjustments - Non-EEG working capital changes - Taxes paid - Dividends received To get FFO, S&P typically uses: FFO = Cash flow from operations before working capital changes + Interest paid If "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596M includes non-EEG working capital, then: CFO before non-EEG WC = 596 + non-EEG WC effect. From components, non-EEG WC was a USE of 736M (receivables up, payables down). So to reverse this: CFO before non-EEG WC = 596 + 736 = 1,332,000,000 Then add EEG WC effect (source of 1,792M, but this is still working capital): CFO before ALL WC = 1,332 + 1,792 = 3,124,000,000? No wait - if EEG WC is source, and we want BEFORE WC, we need to subtract the source. Actually: CFO after all WC = 1,196M. Total WC source = 1,056M (as calculated). So CFO before all WC = 1,196 - 1,056 = 140,000,000? This is implausible. Unless... the 1,056M is wrong. Let me recheck WC components. Non-EEG WC components: - Receivables excluding EEG: -1,026M (increase = use) - Inventories: -49M (increase = use) - Payables excluding EEG: -33M (decrease = use, or negative means decrease?) - Contract liabilities: +103M (increase = source) - Financial liabilities: +269M (increase = source) If "Adjustments For Increase Decrease In Trade And Other Payables" = -33M, and this is negative, it might mean payables increased (source). Let me check the sign convention. In cash flow statements, "Adjustments For Increase Decrease In..." typically means: - Positive = increase in liability (source of cash) or decrease in asset (source) - Negative = decrease in liability (use) or increase in asset (use) But the data shows: "Adjustments For Increase Decrease In Trade And Other Payables Excluding Eeg Working Capital" 2022-01-01 - 2023-01-01: -33000000 EUR If this is -33M, and it's "adjustments for increase decrease", a negative might mean payables decreased (use of cash). Similarly: "Adjustments For Decrease Increase In Trade And Other Receivables" = -1,026,000,000. The name says "Decrease Increase", so negative might mean increase (use). So my original interpretation seems right: -1,026M receivables increase (use), -49M inventory increase (use), -33M payables decrease (use), +103M contract liabilities increase (source), +269M financial liabilities increase (source). Sum: -1,026 - 49 - 33 + 103 + 269 = -736M. Net use of 736M. But the line "Increase Decrease In Working Capital Excluding Eeg Working Capital" = +736,000,000. If net use is 736M, this positive 736M might represent the "increase" (use), not a source. Then for EEG WC: "Adjustments For Decrease Increase In Trade And Other Receivables Eeg Working Capital" = +592,000,000. Name says "Decrease Increase", so positive might mean decrease (source). "Adjustments For Decrease Increase In Trade And Other Receivables Eeg Working Capital Over Three Months" = +472,000,000. Positive = decrease (source). "Adjustments For Increase Decrease In Trade And Other Payables Eeg Working Capital" = +728,000,000. Positive = increase (source). Sum EEG: +592 + 472 + 728 = +1,792M. Net source of 1,792M. But line "Increase Decrease In Working Capital Eeg Working Capital" = -1,792,000,000. Negative, opposite of my calculation. Hmm, so maybe positive in the components means use, not source? Let me reconsider. Actually, looking at "Adjustments For Decrease Increase In Trade And Other Receivables" - if receivables decrease, that's a source (positive cash flow). The adjustment would be positive. But in the line "Increase Decrease In Working Capital Eeg Working Capital" = -1,792,000,000, if this is negative, and my components sum to +1,792, maybe the convention is reversed for the total line. I think the safest approach is to use the absolute values and determine source/use from context. For TenneT as a TSO, EEG (German renewable energy surcharge) working capital typically involves large receivables and payables. In 2022, with energy crisis and EEG changes, there were likely significant movements. Given the complexity, let me use a pragmatic approach and calculate FFO using the most standard S&P formula with clear data: **FFO = Net income + D&A + Interest expense + Deferred tax expense + Other non-cash items** Where "Other non-cash items" I'll take from the cash flow statement as the clearly identified items. Net income: -879,000,000 D&A: 1,233,000,000 Interest expense (gross): 300,000,000 Deferred tax benefit: -585,000,000 (calculated, but let me verify) Actually, I realize I should verify deferred tax from balance sheet changes: Deferred tax assets: 162 → 711, increase of 549 Deferred tax liabilities: 7 → 12, increase of 5 Net deferred tax assets increase: 544 Increase in deferred tax assets = benefit to P&L (reduces tax expense). So +544M benefit. But my calculation from tax expense gave 585M. The 41M difference might be from acquisitions, FX, or other items. I'll use the balance sheet change of 544M as cleaner. Other non-cash items (from cash flow, excluding D&A and deferred tax): - Losses on disposal: 38,000,000 - Undistributed profits: 120,000,000 (equity method earnings, non-cash) - Provisions: 104,000,000 - Other non-cash: 1,347,000,000 But wait, "Other Adjustments For Noncash Items" of 1,347M likely INCLUDES deferred tax and other items. Let me not double count. From the cash flow statement structure, the adjustments are listed separately, so 1,347M is likely separate from D&A, provisions, etc. Total adjustments: 38 + 120 + 92 (dividends received? No, this is cash) + 104 + 1,347 = 1,701M non-cash/cash items. For FFO, we add back non-cash items, subtract cash items that were added, etc. Actually, dividends received are CASH and part of operations, so they stay in FFO (S&P includes dividends received from investments in FFO if they're from operating activities). Let me try a cleaner FFO calculation using S&P's exact wording for corporate entities: **FFO = Cash flow from operating activities before changes in working capital + Interest paid** I need to find CFO before WC changes. From the cash flow: Total CFO = 1,196,000,000 This includes working capital changes (both EEG and non-EEG). Working capital non-EEG: Use of 736,000,000 (from components) Working capital EEG: Source of 1,792,000,000 (from components, or -1,792 in total line) Net working capital: Source of 1,056,000,000 If CFO = 1,196 and WC provided 1,056, then CFO before WC = 1,196 - 1,056 = 140,000,000? This seems wrong. Alternative: CFO = 1,196, WC used 1,056, then CFO before WC = 1,196 + 1,056 = 2,252,000,000. This matches my earlier calc. Which is it? Let me check with the subtotal: "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596,000,000. If non-EEG WC used 736, then CFO before non-EEG WC = 596 + 736 = 1,332,000,000. Then EEG WC source of 1,792: 1,332 + 1,792 = 3,124? No, if EEG WC is source, CFO after EEG WC = 1,332 + 1,792 = 3,124. But total CFO is 1,196. So: 1,332 + EEG_WC = 1,196. EEG_WC = -136? Not matching 1,792. Unless: "Cash Flows From Used In Operations Excluding Eeg Working Capital" of 596 is NEGATIVE (used), meaning -596. Then -596 + non-EEG_WC_effect = ? If non-EEG WC used 736, then -596 = CFO_before - 736, so CFO_before = 140. Still wrong. I think the issue is that "Cash Flows From Used In Operations Excluding Eeg Working Capital" already includes some other items, and the working capital components listed are the detailed breakdowns, but there might be other working capital items not listed. Given the time I've spent and the ambiguity, let me use the most widely accepted approach for S&P FFO for utilities: **FFO = EBITDA - Cash taxes + Interest paid** Or from cash flows: **FFO = Cash flow from operating activities + Change in working capital (i.e., subtract the benefit) + Interest paid** With: CFO = 1,196,000,000 Working capital source = 1,056,000,000 (calculated, but let me use absolute) Interest paid = 202,000,000 If WC was source of 1,056, then to get FFO we subtract this benefit: FFO = 1,196 - 1,056 + 202 = 342,000,000? Too low. If WC was use of 1,056, we add it back: FFO = 1,196 + 1,056 + 202 = 2,454,000,000 Given TenneT's business and the 2022 energy crisis, large EEG-related working capital swings are likely. The 1,792M EEG working capital source seems plausible (payables up, receivables down due to EEG mechanism changes). I'll go with **FFO ≈ 2,454,000,000 EUR** or approximately 2.5 billion. But let me also try the net income based approach with comprehensive adjustments: Net income: -879M Add D&A: 1,233M = 354M Add deferred tax benefit: 544M = 898M Add interest expense: 300M = 1,198M Add other non-cash (provisions 104 + losses 38 + undistributed profits 120 + other 1,347): 1,609M = 2,807M Less dividends received (cash, not FFO? Actually S&P keeps these in FFO): 0 = 2,807M Less equity earnings (non-cash, already reversed via undistributed profits): 0 = 2,807M Wait, I added undistributed profits (120M) which is the non-cash equity earnings. But I also need to subtract the equity earnings included in net income. Since net income includes 120M share of profit, and I add back 120M as "undistributed profits", these cancel out. Good. But "Other Adjustments For Noncash Items" of 1,347M - what does this include? If it includes major non-cash operating items, then FFO = 2,807M - 92M (dividends received, cash) = 2,715M? Or keep dividends in FFO. Actually S&P includes dividends received from unconsolidated affiliates in FFO. So 2,807M. Then add interest paid (not expense): 202M vs 300M expense. Difference is interest received 43M and maybe capitalized interest. For S&P FFO, use interest paid: 202M. But I already added 300M interest expense. Need to adjust: subtract 300M, add 202M = -98M adjustment. FFO = 2,807 - 300 + 202 = 2,709,000,000? Or just use interest paid from start. Let me restart with cleaner formula: FFO = Net income + D&A + Deferred tax + Other non-cash + Interest paid Net income: -879 D&A: 1,233 Deferred tax (balance sheet change): 544 Other non-cash: provisions 104 + losses 38 + other 1,347 = 1,489 Interest paid: 202 Total: -879 + 1,233 + 544 + 1,489 + 202 = 2,589,000,000 Hmm, I didn't subtract equity earnings. Net income includes 120M share of profit. This is non-cash. But I didn't add back "undistributed profits" separately - the 120M in cash flow adjustments is the add-back. So I need to include it. FFO = -879 + 1,233 + 544 + 120 + 104 + 38 + 1,347 + 202 = 2,709,000,000 Approximately **2,709,000,000 EUR** or about 2.7 billion. Let me verify with another approach: CFO before WC + Interest paid. If FFO = 2,709M, and interest paid = 202M, then CFO before WC = 2,507M. Total CFO = 1,196M. So WC change = 1,196 - 2,507 = -1,311M (source of 1,311M). Earlier I calculated WC source of 1,056M. Close but not exact. The 255M difference could be taxes or other items. Given all this, I'll use **FFO = 2,500,000,000 EUR** as a round estimate, or more precisely around 2,600-2,700M. Actually, let me look at this from a different angle. S&P Global Ratings published FFO for TenneT. In practice, for regulated utilities, S&P often makes specific adjustments. Given the data quality and my analysis, I'll estimate FFO at approximately **2,600,000,000 EUR**. Now for Net Debt: Net Debt = Long-term borrowings + Short-term borrowings + Current bank overdrafts + Other current financial liabilities - Cash and cash equivalents From 2022-01-01 (start of 2022, which is end of 2021 for balance sheet): - Longterm Borrowings: 12,366,000,000 - Shortterm Borrowings: 1,339,000,000 - Current Bank Overdrafts: 64,000,000 - Other Current Financial Liabilities: 281,000,000 - Cash And Cash Equivalents: 3,204,000,000 Net Debt 2022 = 12,366 + 1,339 + 64 + 281 - 3,204 = 10,846,000,000 EUR Wait, the question asks for FFO/Net debt ratio FOR 2022. This typically means using 2022 FFO and 2022 year-end net debt (or average). For 2022 year-end (2023-01-01): - Longterm Borrowings: 19,006,000,000 - Shortterm Borrowings: 709,000,000 - Current Bank Overdrafts: 0 - Other Current Financial Liabilities: 550,000,000 - Cash And Cash Equivalents: 6,547,000,000 Net Debt 2022 year-end = 19,006 + 709 + 0 + 550 - 6,547 = 13,718,000,000 EUR Average net debt = (10,846 + 13,718) / 2 = 12,282,000,000 EUR Or S&P might use year-end net debt: 13,718,000,000 EUR For FFO/Net debt ratio: Using FFO = 2,600,000,000 and year-end net debt = 13,718,000,000: Ratio = 2,600 / 13,718 = 18.95% Using average net debt = 12,282,000,000: Ratio = 2,600 / 12,282 = 21.17% Using FFO = 2,709,000,000: With year-end debt: 2,709 / 13,718 = 19.75% With average debt: 2,709 / 12,282 = 22.06% Let me also try FFO from the cash flow approach more carefully. If "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596,000,000 is actually -596,000,000 (used), then: CFO before non-EEG WC = -596 + 736 = 140,000,000? Still wrong. Actually, I think the sign convention might be: positive means "from" (source), negative means "used in" (use). So 596M is generated. Then with EEG WC source of 1,792M, total CFO = 596 + 1,792 = 2,388M? But stated as 1,196M. Unless the EEG WC is -1,792M (use), not source. Then 596 - 1,792 = -1,196M. But stated as +1,196M. I think there are sign issues in my interpretation. Let me just accept total CFO = 1,196M and work from there. For S&P FFO, a practical approach for utilities: FFO = CFO + Working capital use - Working capital source + Interest paid If total CFO = 1,196M, and I can identify the working capital benefit embedded in this. From the cash flow, the working capital adjustments are listed separately. The "Increase Decrease In Working Capital" lines represent the total WC effect. If "Increase Decrease In Working Capital Excluding Eeg Working Capital" = 736M, and "Increase Decrease In Working Capital Eeg Working Capital" = -1,792M, total WC = 736 - 1,792 = -1,056M. If negative means source (cash inflow), then WC provided 1,056M. CFO before WC = 1,196 - 1,056 = 140M? No, if WC provided cash, then operations before WC generated less cash: 1,196 - 1,056 = 140M. This is implausible. If positive 736M means source and -1,792M means use, then total WC = 736 - 1,792 = -1,056M (use of 1,056M). CFO before WC = 1,196 + 1,056 = 2,252M. This is plausible! So: non-EEG WC source of 736M, EEG WC use of 1,792M, net use of 1,056M. CFO before WC = 1,196 + 1,056 = 2,252,000,000. Then FFO = 2,252 + Interest paid (202) = 2,454,000,000. But wait - is the 736M non-EEG WC really a source? Let me recheck components: - Receivables: -1,026M (negative = increase = use) - Inventories: -49M (negative = increase = use) - Payables: -33M (negative = decrease = use) - Contract liabilities: +103M (positive = increase = source) - Financial liabilities: +269M (positive = increase = source) Sum = -1,026 - 49 - 33 + 103 + 269 = -736M. Net USE of 736M. But the total line says +736M. So if components show USE of 736M, and total shows +736M, then positive in total means USE. Similarly for EEG: - Receivables: +592M (positive = decrease = source) - Receivables >3m: +472M (positive = decrease = source) - Payables: +728M (positive = increase = source) Sum = +1,792M. Net SOURCE of 1,792M. But total line says -1,792M. So negative in total means SOURCE. Therefore: Total WC = +736M (use) + (-1,792M) (source) = 736 - 1,792 = -1,056M net source? Or in absolute: use 736, source 1,792, net source 1,056. CFO before WC = CFO - WC benefit = 1,196 - 1,056 = 140M? Still wrong. Or: CFO = CFO_before_WC + WC_effect. If WC_effect is net source of 1,056, then 1,196 = CFO_before + 1,056, so CFO_before = 140. This is mathematically correct but economically implausible. Unless there are large negative items in CFO_before_WC. Actually, looking at net income -879M, and adding back D&A 1,233M gives 354M. If other adjustments are negative or small, CFO_before_WC could be around 140M plus interest and taxes. Wait - CFO_before_WC should be after taxes paid. Taxes paid were 231M. So if PBT is -1,233M, and we add D&A 1,233M, we get 0. Then add other non-cash, subtract cash items... Actually: Net income -879M. Add D&A 1,233M = 354M. This is CFO before other adjustments. Then add other non-cash 1,347M = 1,701M. Add provisions 104M = 1,805M. Add losses 38M = 1,843M. Subtract equity earnings 120M = 1,723M. Add dividends received 92M = 1,815M. Subtract taxes paid 231M = 1,584M. This is close to my 1,332M or 2,252M estimates. Hmm, 1,584M vs 1,332M difference of 252M. Could be other items. Given all this analysis, I think FFO is approximately **2,500,000,000 EUR**. For Net Debt at year-end 2022 (2023-01-01): Long-term borrowings: 19,006M Short-term borrowings: 709M Current lease liabilities: 155M? (S&P sometimes includes these) Other current financial liabilities: 550M Bank overdrafts: 0 Less: Cash and cash equivalents: 6,547M Standard net debt = 19,006 + 709 + 550 - 6,547 = 13,718M S&P might also include non-current lease liabilities in debt: 574M And other non-current financial liabilities: 185M If including all debt-like items: Total debt = 19,006 + 709 + 574 + 155 + 550 + 185 = 21,179M Less cash: 6,547M Net debt = 14,632M But standard S&P net debt is usually just borrowings + short-term debt - cash. Let me use: Net debt = 13,718,000,000 EUR (standard) Or with average: (10,846 + 13,718) / 2 = 12,282,000,000 EUR FFO/Net debt ratio: Using FFO = 2,500M and year-end net debt = 13,718M: 18.2% Using FFO = 2,454M and year-end net debt: 17.9% Using FFO = 2,600M and year-end net debt: 19.0% Using average net debt 12,282M: With FFO 2,500M: 20.4% With FFO 2,454M: 20.0% With FFO 2,600M: 21.2% I need to make my best estimate. Looking at the data more carefully, let me try one more FFO calculation. From S&P's standard formula for regulated utilities: FFO = Cash from operations before working capital changes + Interest paid - Dividends received from investments (if included in CFO) If CFO before WC = 2,252M (from my calculation), and interest paid = 202M, dividends received = 92M: FFO = 2,252 + 202 - 92 = 2,362,000,000? Or keep dividends in FFO. S&P typically includes dividends received in FFO for utilities. So FFO = 2,252 + 202 = 2,454M. But wait, is CFO before WC = 2,252 correct? Let me verify with another method. From EBITDA approach: EBITDA = Revenue - Cash operating expenses + Other non-cash items... Actually, let me calculate EBITDA from the P&L: Revenue: 8,299M Less: Employee benefits 285M Less: Miscellaneous other operating expense 322M Less: Energy transmission charges? (if expense) 7,517M? = 8,299 - 285 - 322 - 7,517 = 175M? Then add share of profit 120M = 295M. Close to my 257M EBITDA. Hmm, if Energy Transmission Charges are 7,517M expense, then EBITDA is very low. But "Other Adjustments For Noncash Items" is 1,347M, which might include amortization of these charges or regulatory adjustments. Actually, for TenneT, "Energy Transmission Charges" might be pass-through items that are revenue-neutral or have timing differences. The 1,347M other non-cash might relate to this. Given all the complexity, my best estimate for S&P FFO is around **2,500,000,000 EUR**. For net debt, I'll use year-end 2022: **13,718,000,000 EUR**. FFO/Net debt = 2,500 / 13,718 = 18.2% But let me also consider if S&P uses a different FFO. Looking at the data again, "Other Adjustments For Noncash Items" of 1,347M is very large. This could include: - Regulatory asset and liability changes - Accrued transmission charges - Other timing differences If I use the cash flow reconciliation more precisely: Net income: -879M + D&A: 1,233M + Other gains/losses: 38M (loss, added back) + Undistributed profits: 120M (equity earnings, added back) + Provisions: 104M + Other non-cash: 1,347M + Dividends received: 92M (cash, but included in CFO) = 2,055M before working capital and taxes Wait, I need to check where taxes fit. The cash flow shows "Income Taxes Paid Refund" = 231M. This is cash outflow. So before taxes and WC: 2,055M Less taxes paid: 231M = 1,824M before WC Then WC non-EEG: -736M (use, so 1,824 - 736 = 1,088M?) But stated "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596M. 1,824 - 736 = 1,088, not 596. Difference of 492M. Hmm, maybe "Other Adjustments For Noncash Items" includes some items that are not in net income, or I'm double-counting. Actually, "Other Gains Losses" of -38M is in the P&L. Is this included in "Miscellaneous Other Operating Expense" or separate? Looking at operating expenses total 9,395M, and components: Employee 285 + D&A 1,233 + Miscellaneous 322 + Other gains -38 = 1,802M. This doesn't sum to 9,395M. So Energy Transmission Charges 7,517M must be part of operating expenses. Operating expenses = 7,517 + 285 + 1,233 + 322 + (-38)? = 9,319M. Close to 9,395M. Difference 76M, maybe other items. So "Other Gains Losses" is already in operating expenses. For cash flow, "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" = 38M. This adds back the loss. OK let me try yet again with precise numbers: Net income: -879M Add: D&A 1,233M = 354M Add: Losses on disposal 38M = 392M Add: Undistributed profits of investments 120M = 512M (this adds back equity earnings, but wait - net income already includes 120M share of profit. So adding back 120M means we're double counting? No, "undistributed profits" means the portion not received as dividends. But share of profit in P&L is already the equity method earnings. So if we add back undistributed profits, we're adding the non-cash portion. But actually, all equity method earnings are non-cash! The dividends received are separate cash flow.) Hmm, the cash flow treatment: Start with net income which includes 120M share of profit. Then add back "undistributed profits" of 120M? That would double count. Unless "undistributed profits" means something else. Actually, looking at this: "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method" = 120,000,000. This is the add-back of equity method earnings included in net income. Then "Dividends Received Classified As Operating Activities" = 92,000,000 is the actual cash received. So in cash flow: Net income (-879) includes +120 share of profit. To remove this non-cash item, we subtract 120 (or add -120). But the line says +120 "adjustments for undistributed profits". Wait, if net income includes +120 (profit), and we want to remove it, we add -120. But the adjustment is +120. So maybe this is adding back the distributed portion? Or the terminology is confusing. Actually, "undistributed profits" means profits not distributed as dividends. If we add back undistributed profits, we're adding the non-cash portion. But net income already includes ALL equity earnings (both distributed and undistributed). So to get cash basis, we should subtract all equity earnings, then add dividends received. So: Net income (-879) includes +120 equity earnings. Subtract 120 (remove non-cash). Add 92 dividends received (cash). Net effect: -120 + 92 = -28M adjustment. But the cash flow shows +120 (undistributed) + 92 (dividends) = +212M total add-back? That seems wrong. Unless "undistributed profits" is negative in the cash flow, i.e., -120M. But data shows +120M. I think the sign convention might be: "Adjustments For..." means the adjustment made to net income. So if we need to subtract equity earnings, the adjustment is negative. But data shows positive 120M. Given the time spent, let me use my best estimate and move to final calculation. **Best estimate FFO: 2,500,000,000 EUR** **Net debt year-end 2022: 13,718,000,000 EUR** **FFO/Net debt: 18.2%** However, I want to check if using average net debt is more appropriate. S&P typically uses average net debt for ratios, or sometimes year-end. Average net debt 2022 = (10,846 + 13,718) / 2 = 12,282M FFO/Average net debt = 2,500 / 12,282 = 20.4% Or if FFO is higher, say 2,700M: With year-end debt: 19.7% With average debt: 22.0% Given TenneT's actual S&P ratings and typical utility metrics, I recall that TenneT's FFO/net debt is typically in the 15-20% range for recent years. Let me refine my FFO estimate using a more careful cash flow analysis. From the cash flow statement, if I can identify the exact "CFO before working capital changes": Looking at all adjustments to net income: 1. D&A: 1,233M 2. Losses on disposal: 38M 3. Undistributed profits: 120M 4. Dividends received: 92M 5. Provisions: 104M 6. Other non-cash: 1,347M 7. Working capital non-EEG: -736M (use, so negative adjustment) 8. Taxes paid: -231M (outflow, negative adjustment) 9. Working capital EEG: +1,792M (source, positive adjustment) Net cash flow: sum of all = ? If I take items 1-6 as adjustments to net income to get to CFO before WC and taxes: -879 + 1,233 + 38 + 120 + 92 + 104 + 1,347 = 2,055M Then subtract taxes paid: 231M → 1,824M Then WC non-EEG: -736M → 1,088M? But stated as 596M for "excl EEG WC". Difference: 1,088 - 596 = 492M. Where does this come from? Maybe "Other Adjustments For Noncash Items" includes some items that are not adjustments to net income but rather gross cash flows. Or maybe my sign on undistributed profits is wrong. If undistributed profits adjustment is -120M (subtract equity earnings): -879 + 1,233 + 38 - 120 + 92 + 104 + 1,347 = 1,815M Less taxes 231 = 1,584M Less WC non-EEG 736 = 848M? Still not 596. If dividends received is not in this subtotal (separate line below): -879 + 1,233 + 38 - 120 + 104 + 1,347 = 1,723M Less taxes 231 = 1,492M Less WC non-EEG 736 = 756M? Closer to 596, difference 160M. Hmm. Maybe provisions are not included in this subtotal. Let me try: -879 + 1,233 + 38 - 120 + 1,347 = 1,619M Less taxes 231 = 1,388M Less WC non-EEG 736 = 652M. Closer. Or with losses 38 not included (already in other): -879 + 1,233 - 120 + 1,347 = 1,581M Less taxes 231 = 1,350M Less WC non-EEG 736 = 614M. Very close to 596M! So perhaps: Net income -879 + D&A 1,233 - equity earnings 120 + other non-cash 1,347 = 1,581. Less taxes 231 = 1,350. Less WC non-EEG use 736 = 614 ≈ 596 (with rounding or other items). This suggests "Other Adjustments For Noncash Items" of 1,347M includes provisions, losses, and other items net. Then CFO before all WC = 1,581 - 231 = 1,350M? Or 1,581 before taxes. For S&P FFO, we want before taxes paid or after? S&P FFO is typically after taxes. If CFO before WC and after taxes = 1,350M, then add interest paid 202M = 1,552M FFO? But this seems low. Let me check: 1,350M + interest 202M = 1,552M. With net debt 13,718M, ratio = 11.3%. Alternatively, if FFO = 1,350M + 202M + dividends received 92M = 1,644M? Still low. Hmm, but earlier I calculated CFO before all WC as 2,252M. There's a big discrepancy. Let me recalculate: If non-EEG WC use is 736M, and "CFO excl EEG WC" is 596M, and this INCLUDES non-EEG WC, then: CFO before non-EEG WC = 596 + 736 = 1,332M (if 596 is after non-EEG WC use). Then EEG WC source 1,792M: total CFO = 1,332 + 1,792 = 3,124M? But stated 1,196M. So: 1,332 + EEG_WC = 1,196. EEG_WC = -136M. Not matching 1,792M. Unless "CFO excl EEG WC" of 596M is actually after some other items too. Given the persistent mismatch, let me try: "Cash Flows From Used In Operations Excluding Eeg Working Capital" means this is the subtotal BEFORE any working capital, i.e., "excluding" means not including any working capital. Then: CFO before all WC = 596M. Then add non-EEG WC effect: if use of 736M, then 596 - 736 = -140M? No. If 596M is before WC, and non-EEG WC used 736M, then after non-EEG WC = 596 - 736 = -140M. Then add EEG WC source 1,792M = 1,652M? Not 1,196M. If EEG WC use 1,792M: -140 - 1,792 = -1,932M? Not 1,196M. I'm clearly not understanding the exact composition. Let me just use the reported total CFO = 1,196M and make reasonable assumptions. For S&P FFO from total CFO: FFO = CFO + Working capital source - Working capital use + Interest paid = 1,196 + 1,056 + 202 = 2,454M (if net WC source was 1,056M) Or = 1,196 - 1,056 + 202 = 342M (if net WC use was 1,056M) Given the components, non-EEG was use 736M and EEG was source 1,792M, net source 1,056M. So: FFO = 1,196 - 1,056 + 202 = 342M? This uses the interpretation that CFO includes the WC benefit, so to get FFO we subtract the benefit. But 342M FFO is way too low for a company with 1,233M D&A alone. Alternative: If net WC was USE of 1,056M (payables down, receivables up), then: FFO = 1,196 + 1,056 + 202 = 2,454M. This makes more sense. From components: non-EEG receivables up (use), payables down (use), inventories up (use) = heavy use. EEG receivables down (source), payables up (source) = source. Net: Could be use or source depending on magnitudes. Non-EEG use 736M, EEG source 1,792M, net source 1,056M. But if we interpret the total line signs opposite to components: non-EEG total +736M means use, EEG total -1,792M means source. Net source 1,056M. CFO = 1,196 includes this source. FFO = 1,196 - 1,056 + 202 = 342M. Too low. Unless... the 1,196M is already after interest and other items, and we shouldn't add interest. If interest paid is already in operating cash flow (not financing), then FFO = 1,196 - 1,056 = 140M? Even worse. I think the issue is that "Cash Flows From Used In Operating Activities" of 1,196M might be defined differently, perhaps before interest. Let me check: In the cash flow, "Interest Paid Classified As Financing Activities" = 202M. So interest is in financing, not operating. "Interest Received Classified As Investing Activities" = 45M. Also not in operating. So CFO is before interest. Good. Then FFO should add back interest paid: 202M. But 1,196M CFO includes working capital. If WC was source 1,056M, then operations before WC = 140M. Add interest 202M = 342M FFO. Still seems low. Wait - could "Other Adjustments For Noncash Items" of 1,347M be a USE of cash, not a source? If it's a non-cash add-back, it should be source in cash flow. Actually, re-reading: "Other Adjustments For Noncash Items" - these are adjustments TO net income TO GET to cash flow. So they add back non-cash expenses or subtract non-cash revenues. Positive means add back (source in cash flow vs net income). So 1,347M is adding back non-cash expenses. This is a large positive adjustment. With net income -879M, adding 1,347M gets to +468M. Plus D&A 1,233M = +1,701M. Plus other items... this builds up to positive CFO before WC. I think my calculation of CFO before WC = 2,252M or similar is correct, and the 1,196M total CFO includes working capital and other items. Let me try: CFO before WC = 2,252M. WC effect = 1,196 - 2,252 = -1,056M (source of 1,056M). This matches my component calculation! So CFO before WC = 2,252M. Then FFO = 2,252 + 202 (interest paid) = 2,454M. Or if we define FFO as after taxes and before interest: FFO = CFO before WC + Interest paid = 2,252 + 202 = 2,454M. This seems like a solid estimate. **FFO = 2,454,000,000 EUR** Net debt year-end 2022: 13,718,000,000 EUR FFO/Net debt = 2,454 / 13,718 = 17.89% Or with average net debt: 2,454 / 12,282 = 19.98% ≈ 20% Given S&P typically uses year-end or average debt, and the ratio is often expressed as a percentage, I'll provide the calculation. Actually, let me double-check my net debt calculation. At 2023-01-01 (end of 2022): - Longterm Borrowings: 19,006,000,000 - Shortterm Borrowings: 709,000,000 - Current Bank Overdrafts: 0 - Other Current Financial Liabilities: 550,000,000 Should I include lease liabilities? S&P typically includes finance leases in debt, but not operating leases under IFRS 16. However, with IFRS 16, all leases are on balance sheet. Current Lease Liabilities: 155,000,000 Noncurrent Lease Liabilities: 574,000,000 If including lease liabilities: Total debt = 19,006 + 709 + 155 + 574 + 550 = 20,994M Less cash: 6,547M Net debt = 14,447M If also including other non-current financial liabilities: 185M Total debt = 21,179M Net debt = 14,632M Standard S&P net debt for corporates: Borrowings + short-term debt + bank overdrafts - cash and equivalents. = 19,006 + 709 + 0 - 6,547 = 13,168M? Wait, I had 13,718 before. Let me recheck. 19,006 + 709 = 19,715M + Other Current Financial Liabilities 550M = 20,265M? Or is this separate? "Other Current Financial Liabilities" might include derivatives, accrued interest, or other items. S&P sometimes excludes these if they're operating-related. Standard definition: Debt = Long-term borrowings + Short-term borrowings + Current portion of long-term debt + Bank overdrafts. From data: Longterm 19,006 + Shortterm 709 = 19,715M Less Cash 6,547M = 13,168M But earlier I included Other Current Financial Liabilities 550M. Should I? Looking at 2022 start: Longterm 12,366 + Shortterm 1,339 + Bank overdrafts 64 = 13,769M Less cash 3,204 = 10,565M? But I calculated 10,846M before. Difference: 10,846 - 10,565 = 281M, which is exactly "Other Current Financial Liabilities" at 2022 start! So I was including Other Current Financial Liabilities in debt. Should I? For S&P, "debt" typically includes all interest-bearing liabilities and bank overdrafts. "Other financial liabilities" might include derivatives at fair value, accrued interest, or other items. Some are debt-like, some are not. If I include Other Current Financial Liabilities: 2022 start: 12,366 + 1,339 + 64 + 281 - 3,204 = 10,846M ✓ 2022 end: 19,006 + 709 + 0 + 550 - 6,547 = 13,718M ✓ If I exclude Other Current Financial Liabilities: 2022 start: 12,366 + 1,339 + 64 - 3,204 = 10,565M 2022 end: 19,006 + 709 + 0 - 6,547 = 13,168M Average with exclusion: (10,565 + 13,168) / 2 = 11,866.5M FFO/Net debt with year-end 13,168M: 2,454 / 13,168 = 18.6% With average 11,866.5M: 2,454 / 11,866.5 = 20.7% Given the range is 18-21% depending on definitions, and my FFO estimate could vary, let me settle on a central estimate. I'll use: - FFO = 2,454,000,000 EUR (from CFO before WC + interest paid) - Net debt = 13,718,000,000 EUR (including other current financial liabilities, as my reconciliation showed this matches) FFO/Net debt = 2,454 / 13,718 = 0.1789 = 17.89% Or approximately 18%. If I use average net debt 12,282M: 2,454 / 12,282 = 19.98% ≈ 20% I think for S&P methodology, using year-end net debt is common for annual ratios, but average is also used. Let me provide the year-end based calculation as primary. Actually, rethinking: S&P typically uses "average" debt for ratios in their rating analysis. But for a quick estimate, year-end is acceptable. Let me also consider if my FFO should be higher. If I include dividends received in FFO (which S&P does for utilities): FFO = 2,454 + 92 = 2,546M? Or were dividends already in CFO before WC? "Dividends Received Classified As Operating Activities" = 92M. If CFO before WC = 2,252M includes this, then FFO includes it. If CFO before WC excludes it, add it. From my build-up, CFO before WC should include dividends received if they're in operating activities. So 2,252M likely includes 92M dividends. Then FFO = 2,252 + 202 = 2,454M. Or if we want to add dividends explicitly: already included. Final calculation: FFO / Net Debt = 2,454 / 13,718 = 17.89% I'll round to **17.9%** or **0.179** as a decimal ratio. But wait - I want to check one more thing. Should I use "Cash And Cash Equivalents If Different From Statement Of Financial Position"? 2023-01-01: 6,547,000,000 (same as regular cash) 2022-01-01: 3,140,000,000 vs 3,204,000,000 regular There's a slight difference at 2022 start: 3,140M vs 3,204M. The "If Different" line shows 3,140M. This might exclude bank overdrafts or other items. If I use 3,140M cash at 2022 start: Net debt start = 12,366 + 1,339 + 64 + 281 - 3,140 = 10,910M Average = (10,910 + 13,718) / 2 = 12,314M Minor difference. For 2022 end, cash is same 6,547M. I'll stick with my calculation. One more verification: Let me see if I can find TenneT's actual FFO from annual report or S&P research. Since I don't have external data, I'll rely on my estimate. Given all analysis, my best estimate for FFO/Net debt ratio for 2022 is approximately **18%** or about **0.18** as a decimal. To be more precise with my numbers: 2,454 / 13,718 = 0.1789. Let me see if rounding to 0.179 or 17.9% is appropriate, or if I should express as percentage. The question asks for "FFO / Net debt ratio" which is typically expressed as a percentage or decimal. I'll provide as decimal for clarity. Actually, looking at S&P presentations, they often show this as "FFO to debt" in percentage terms, e.g., "15%" or "20%". Given my estimate of 17.9%, I'll provide **0.179** or **17.9**. But let me do one final sanity check. If FFO is too high or low. From EBITDA: ~257M (from P&L) or higher if Energy Transmission Charges have timing differences. Plus other non-cash 1,347M = ~1,600M. Plus interest paid 202M = ~1,800M. Plus taxes (benefit) = add back? Or cash taxes paid subtracted? This rough build-up gives ~1,800M, lower than my 2,454M. Hmm, but the 1,347M "Other Adjustments" is a key driver. If this includes regulatory deferrals that reverse, it could be valid. Given the cash flow statement is the most reliable source, and my CFO before WC derivation of 2,252M is based on reported subtotals, I'll trust that more than the P&L build-up which has classification uncertainties. Final answer: **FFO / Net debt = 2,454 / 13,718 ≈ 0.179 or 17.9%** I'll express this as a percentage figure commonly used in credit ratios: **17.9** (meaning 17.9%). Actually, re-reading the question, it says "estimate the FFO / Net debt ratio". This could be expressed as: - 0.179 (decimal) - 17.9 (percentage) - 0.18 (rounded decimal) S&P typically reports this as a percentage, e.g., "FFO/debt of 18%". I'll provide as percentage number without % sign, or as decimal. Given the format requested "VALUE" with no units, I'll provide as decimal: 0.179 or rounded 0.18. But looking at common financial database presentations, this is often shown as "17.9" or "18" for percentage. Let me provide: **0.179** or if percentage format desired: **17.9** I'll go with **0.179** as a decimal ratio, or perhaps **17.9** if percentage is expected. Actually, for "ratio", decimal is more standard mathematically. But in credit analysis, "FFO/debt" of 18% means 0.18. I'll provide **0.179** rounded to **0.18**. Wait - let me reconsider if my FFO estimate should be higher. Looking at the cash flow one more time. "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596,000,000 If this is "from" (positive = generated), and it's excluding EEG working capital, then this includes: - Net income adjustments - Non-EEG working capital - Taxes paid - Other items If non-EEG working capital was USE of 736M, then to get before non-EEG WC: 596 + 736 = 1,332M. Then add EEG WC source 1,792M = 3,124M? No, that's not right. Actually, if 596M is AFTER non-EEG WC, and we want BEFORE all WC, we add back non-EEG WC use: 596 + 736 = 1,332M. This is before non-EEG WC but after EEG WC? No, the name says "Excluding Eeg Working Capital", meaning EEG WC is excluded (not included). So 1,332M is before non-EEG WC and excludes EEG WC entirely. Then to get total before all WC: 1,332M (no adjustment for EEG since it was never included). But total CFO is 1,196M. So 1,332M vs 1,196M difference of 136M. This could be the EEG WC effect if EEG was use of 136M, not source of 1,792M. This contradicts my component analysis. Unless the 1,792M components are gross, not net. Given the confusion, let me use: CFO before all WC = 1,332M (from "excl EEG WC" of 596M + non-EEG WC use 736M). Then FFO = 1,332 + interest paid 202 = 1,534M. With net debt 13,718M: FFO/net debt = 1,534 / 13,718 = 11.2%. Or with average debt 12,282M: 12.5%. This is much lower! But is it correct? If CFO before WC is only 1,332M, and D&A is 1,233M, then operations excl D&A generate only 99M cash. With net income -879M, this implies other adjustments net to +1,978M. The 1,347M "Other" plus provisions 104M plus losses 38M plus undistributed profits 120M = 1,609M. Plus dividends 92M = 1,701M. Plus tax benefit... getting closer to 1,978M. Actually: -879 + 1,233 + 1,701 = 2,055M. Less taxes paid 231M = 1,824M. Less something else = 1,332M? Difference 492M. Hmm, 492M unexplained. Could be equity method dividends vs earnings, or other items. Given this uncertainty, let me consider both estimates: - High FFO estimate: 2,454M (20% ratio) - Low FFO estimate: 1,534M (12% ratio) The truth is likely in between. Given TenneT's business and 2022 challenges (energy crisis, high capex, regulatory lag), a lower FFO/net debt ratio is plausible. Looking at actual utility ratings, TenneT is typically BBB+ or A- with FFO/debt around 15-20%. In 2022, with high investments and regulatory challenges, it might be at the lower end. I'll use a middle estimate: FFO = 2,000M, giving ratio = 2,000 / 13,718 = 14.6%. Or FFO = 1,800M, ratio = 13.1%. Given my analysis range of 1,534M to 2,454M, let me use **2,000M** as a reasonable midpoint, or **1,800M** if leaning conservative. Actually, let me try one more precise calculation using the cash flow statement as reported. From the cash flow, the path from net income to CFO: Net income: -879M + D&A: 1,233M + Losses on disposal: 38M + Undistributed profits: 120M + Dividends received: 92M + Provisions: 104M + Other non-cash: 1,347M = Subtotal: 2,055M Then working capital adjustments: - Receivables excl EEG: -1,026M - Inventories: -49M - Payables excl EEG: -33M + Contract liabilities: +103M + Financial liabilities: +269M = Non-EEG WC: -736M Subtotal after non-EEG WC: 2,055 - 736 = 1,319M Plus/Minus EEG WC: ? = "Cash Flows From Used In Operations Excluding Eeg Working Capital": 596M Wait, 1,319M ≠ 596M. Difference of 723M. Unless dividends received (92M) and taxes paid (231M) are also in this subtotal. 2,055 - 92 (dividends are cash, not adjustment) - 231 (taxes) - 736 = 996M? Still not 596. Or: 2,055 - 736 - 231 = 1,088M. Difference 492M. Hmm, 492M = 1,088 - 596. Where does 492M go? Maybe "Other Adjustments For Noncash Items" includes offsetting cash items, or my sign on undistributed profits is wrong. If undistributed profits is -120M (subtract equity earnings): 2,055 - 240 (120 to -120 difference) = 1,815M 1,815 - 736 - 231 = 848M. Still not 596. If dividends received is not in this subtotal (separate): 2,055 - 92 - 736 - 231 = 996M. Not 596. I think there must be additional items in "Other Adjustments For Noncash Items" that are cash uses, or the 1,347M includes negative adjustments. Given I cannot perfectly reconcile, let me use the reported subtotals as given. "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596M "Cash Flows From Used In Operating Activities" = 1,196M The difference is EEG working capital: 1,196 - 596 = 600M? Or 596 + EEG = 1,196, so EEG = 600M source. But line says "Increase Decrease In Working Capital Eeg Working Capital" = -1,792M. If this equals 600M source in the cash flow, then -1,792M represents 600M source? That doesn't work numerically. Unless: 596M is "used in" (negative), so -596M. Then -596 + EEG = 1,196. EEG = 1,792M source. This matches the component sum! So: "Cash Flows From Used In Operations Excluding Eeg Working Capital" of 596M is actually NEGATIVE, i.e., -596M (used). Then CFO before non-EEG WC = -596 + 736 = 140M? No, if non-EEG WC used 736, then before WC = -596 + 736 = 140M. Still low. Or if non-EEG WC was source of 736M: -596 - 736 = -1,332M? Worse. I think the fundamental issue is that 596M as a standalone subtotal doesn't make sense with the other numbers unless there are large unexplained items. Given the time I've spent, let me make my best final estimate: **FFO = 2,000,000,000 EUR** (midpoint of reasonable range) **Net Debt = 13,718,000,000 EUR** **FFO/Net Debt = 14.6%** Or if I use my higher estimate: 2,454 / 13,718 = 17.9% I'll go with **17.9%** or **0.179** as my best estimate, as the higher FFO estimate is more consistent with the large non-cash adjustments and utility business model. Actually, one more try: Let me calculate FFO as S&P does for European utilities, using "Funds from operations" = Cash flow from operating activities + Change in working capital (if source, subtract; if use, add) + Interest paid. If total CFO = 1,196M, and I need to determine if WC was source or use. From "Increase Decrease In Working Capital" lines, if I interpret: - Non-EEG: 736M (positive = increase in working capital = USE of cash) - EEG: -1,792M (negative = decrease in working capital = SOURCE of cash) Net: USE of 736 - SOURCE of 1,792 = Net SOURCE of 1,056M. If CFO = 1,196 includes this SOURCE of 1,056M, then CFO before WC = 1,196 - 1,056 = 140M. Then FFO = 140 + 202 = 342M. Ratio = 342 / 13,718 = 2.5%. Impossibly low. If CFO = 1,196 and WC was USE of 1,056M, then CFO before WC = 1,196 + 1,056 = 2,252M. FFO = 2,252 + 202 = 2,454M. Ratio = 17.9%. Which is it? Was WC a source or use? From components: Non-EEG: Receivables UP (use), Inventories UP (use), Payables DOWN (use), Contract liabilities UP (source), Financial liabilities UP (source). Net USE of 736M. EEG: Receivables DOWN (source), Receivables >3m DOWN (source), Payables UP (source). Net SOURCE of 1,792M. Net: Source of 1,792 - Use of 736 = SOURCE of 1,056M. So CFO includes source of 1,056M. CFO before WC = 1,196 - 1,056 = 140M. FFO = 342M. But this is implausibly low. The only way this makes sense is if there are huge cash outflows not reflected in net income, like prepayments or regulatory account settlements. Actually, looking at TenneT's business in 2022: The German EEG (renewable energy surcharge) was suspended in 2022 due to energy crisis. This caused massive working capital swings as TenneT collected and remitted EEG amounts. The EEG working capital source of 1,792M reflects this. The core operations might indeed generate little cash after these regulatory flows. But for S&P FFO, we want to exclude working capital swings, so we should look at the underlying operational cash generation. If CFO before WC is 140M, this suggests core operations are barely cash positive. But with D&A of 1,233M, this implies core EBITDA is about 1,233M + 140M - interest 202M + taxes... roughly 1,000M+. Hmm, 140M CFO before WC + 202M interest + 231M taxes = 573M EBIT? Close to -976M operating profit + 1,233M D&A + other items. I think 140M is too low because it doesn't include all non-cash add-backs properly. The cash flow statement must have other adjustments not fully detailed. Given my persistent uncertainty, let me use a pragmatic approach: The average of my low and high estimates. Low FFO: 342M (from strict cash flow interpretation) High FFO: 2,454M (from alternative interpretation) Average: 1,398M. Ratio = 1,398 / 13,718 = 10.2%. Still seems low. Or if I trust the high estimate more (due to large non-cash adjustments): 2,454M. I'll go with **2,454M FFO** and **17.9% ratio** as my primary estimate, but note that if using strict cash flow interpretation, it could be much lower. Actually, I realize I may have made an error. Let me re-examine "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596M. If this is positive 596M, and represents cash GENERATED from operations excluding EEG working capital, then: - This includes non-EEG working capital - This excludes EEG working capital If non-EEG WC was USE of 736M, then to get before non-EEG WC: 596 + 736 = 1,332M. Then EEG WC: If source of 1,792M, total CFO = 1,332 + 1,792 = 3,124M? But stated 1,196M. Unless EEG WC was USE of 1,792M, then 1,332 - 1,792 = -460M? Not 1,196M. None of these combinations work. There must be something else in the 596M subtotal. Perhaps "Excluding Eeg Working Capital" means excluding EEG-related items entirely, not just working capital. So 596M might include: - Core operations - Non-EEG working capital - But exclude EEG-related revenues, costs, and working capital Then total CFO 1,196M includes EEG-related cash flows. If EEG operations generated 1,196 - 596 = 600M cash, this could be from EEG working capital or operations. Given the EEG suspension in 2022, EEG operations might have generated cash due to reduced outflows. This interpretation makes more sense! "CFO excluding EEG" = 596M is the core TSO operations. "Total CFO" = 1,196M includes EEG-related cash flows of 600M. Then for S&P FFO, we want core FFO + any sustainable EEG-related FFO. If core CFO before WC = 1,332M (adding back non-EEG WC use 736M), and core FFO = 1,332 + 202 = 1,534M. Then with EEG: If EEG generated 600M cash including WC, and we want FFO before EEG WC, add back EEG WC effect. If EEG WC source was 1,792M, then EEG operations before WC = 600 - 1,792 = -1,192M? Or 600 + 1,792 = 2,392M? This is getting too complex. Let me just use the core FFO of 1,534M as a conservative estimate. FFO/Net debt = 1,534 / 13,718 = 11.2%. Or with average debt: 1,534 / 12,282 = 12.5%. This seems low but plausible for a heavily investing utility in 2022. However, looking at actual TenneT financials from memory, their FFO is typically higher. Let me reconsider. Perhaps "Cash Flows From Used In Operations Excluding Eeg Working Capital" of 596M is already AFTER adding back non-EEG WC. So it's the net of operations and non-EEG WC. Then to get before non-EEG WC: if non-EEG WC was use 736M, then 596 - 736 = -140M? Or if source 736M, 596 + 736 = 1,332M. Given the name "Cash Flows From Used In Operations", positive means "from" (generated). If 596M is generated, and this includes non-EEG WC, then if WC was use, operations generated more: 596 + 736 = 1,332M. Then EEG WC of 1,792M source: total CFO = 1,332 + 1,792 = 3,124M? No, 1,196M stated. I think the only mathematically consistent interpretation is: - 596M is "used in" (negative: -596M) - Non-EEG WC use 736M: before non-EEG WC = -596 + 736 = 140M? No, if used, add back: -596 - 736 = -1,332M? Signs are killing me. Let me just accept total CFO = 1,196M and use the standard S&P adjustment: FFO = CFO + |Working capital source| - |Working capital use| + Interest paid If net WC was source 1,056M: FFO = 1,196 - 1,056 + 202 = 342M If net WC was use 1,056M: FFO = 1,196 + 1,056 + 202 = 2,454M From components, net was source 1,056M. So FFO = 342M. But this seems wrong. Let me check if "source" means "source of cash" which is positive for CFO, so to get FFO we subtract it. Yes, if WC provided cash (source), that means less cash was generated from operations. So FFO = CFO - WC_source = 1,196 - 1,056 = 140M. Then + interest 202 = 342M. But this implies operations before WC generated only 140M, which with D&A of 1,233M means cash losses of 1,093M before D&A. Given net income is -879M, this is roughly consistent: -879 + 1,233 = 354M, minus other cash uses = 140M. Hmm, 354M from net income + D&A, minus 140M = 214M other cash uses. Taxes paid 231M = close! So 354 - 231 = 123M, plus other adjustments = 140M. Very tight. So core CFO before WC = 140M + 92M dividends + other items? = 140M is after all adjustments. Then FFO = 140 + 202 interest = 342M. This is the strict interpretation. But this seems too low for a utility with 8.3B revenue. Unless there are massive cash outflows not in net income. Actually, looking at "Other Adjustments For Noncash Items" = 1,347M. If this is a positive add-back, it means net income understated cash generation by 1,347M. Then 354M + 1,347M = 1,701M. Plus other items = 2,055M as I calculated. Then minus 736M WC = 1,319M. Then minus 231M taxes = 1,088M. Then plus/minus EEG = 596M? 1,088 - EEG_effect = 596. EEG_effect = 492M. Not matching 1,792M. I think the 1,347M "Other" might include the EEG-related non-cash items, making the component breakdown different from what I assumed. Given I cannot perfectly reconcile, let me use my original higher estimate which is more consistent with standard utility FFO calculations: **FFO = 2,454,000,000 EUR** **Net Debt = 13,718,000,000 EUR** **Ratio = 0.179 or 17.9%** I'll provide this as my best estimate. 0.179