I need to calculate the Net Debt / EBITDA ratio for 2022 and 2023 to determine the trend. First, let me identify the relevant data: **For 2022 (period 2022-01-01 to 2023-01-01):** - EBITDA: "Comparable Ebitda" = 2,436,000,000 EUR - I need to find Net Debt **For 2021 (period 2021-01-01 to 2022-01-01):** - EBITDA: "Comparable Ebitda" = 2,016,000,000 EUR Now I need to calculate Net Debt for each year. Net Debt = Total Debt - Cash and Cash Equivalents. Let me find the debt components: **For 2023-01-01 (end of 2022):** - Current financial liabilities: "Other Current Financial Liabilities" = 4,127,000,000 EUR - Noncurrent financial liabilities: "Other Noncurrent Financial Liabilities" = 3,658,000,000 EUR - Current derivative financial liabilities: 3,973,000,000 EUR - Noncurrent derivative financial liabilities: 756,000,000 EUR Wait - I need to be careful about what counts as "debt" for leverage purposes. Typically for S&P adjusted leverage, we focus on interest-bearing debt. Let me look more carefully. For S&P purposes, debt usually includes: - Borrowings/financial liabilities - Sometimes lease liabilities - Sometimes pension liabilities From the cash flow statement, I can see: - "Proceeds From Noncurrent Borrowings" and "Repayments Of Non Current Borrowings And Repayments Of Lease Liabilities" Let me try a different approach. Looking at the balance sheet items that represent debt: **2023-01-01 (end of 2022):** - Other Noncurrent Financial Liabilities: 3,658,000,000 - Other Current Financial Liabilities: 4,127,000,000 - Noncurrent Derivative Financial Liabilities: 756,000,000 - Current Derivative Financial Liabilities: 3,973,000,000 - Nuclear Non Current Provisions: 966,000,000 - Other Longterm Provisions: 118,000,000 - Noncurrent Recognised Liabilities Defined Benefit Plan: 13,000,000 - Other Shortterm Provisions: 13,000,000 - Margin Liabilities: 352,000,000 For S&P adjusted leverage, we typically use: - Gross debt = interest-bearing liabilities - Net debt = gross debt - cash and cash equivalents Looking at typical S&P methodology, debt includes: - Financial liabilities (current and noncurrent) - Sometimes derivative liabilities if they represent debt-like obligations - Sometimes pension deficits Let me use a simplified approach with the main financial liabilities: **2023-01-01 (end of 2022):** Financial debt = Other Noncurrent Financial Liabilities + Other Current Financial Liabilities = 3,658,000,000 + 4,127,000,000 = 7,785,000,000 EUR Cash and Cash Equivalents = "Cash And Cash Equivalents" = 3,919,000,000 EUR Net Debt = 7,785,000,000 - 3,919,000,000 = 3,866,000,000 EUR Wait - I should also check if there are other debt items. Let me look more carefully. Actually, for S&P adjusted leverage, they typically include: - All interest-bearing debt - Bank overdrafts - Commercial paper - Bonds - Lease liabilities Looking at the cash flow statement: "Repayments Of Non Current Borrowings And Repayments Of Lease Liabilities" = 5,888,000,000 EUR in 2022. This suggests lease liabilities are included in that line. However, I don't have a clean breakdown. Let me try using total liabilities minus non-debt items, or focus on the financial liabilities. Actually, let me reconsider. The "Other Noncurrent Financial Liabilities" and "Other Current Financial Liabilities" likely include most debt. But I should also consider if margin liabilities and derivative liabilities are debt-like. For a cleaner approach, let me look at what changed significantly. The company had a major restructuring/discontinued operations in 2022 (huge loss from discontinued operations of -11,302,000,000 EUR). Let me recalculate more carefully: **At 2022-01-01 (end of 2021):** - Other Noncurrent Financial Liabilities: 8,701,000,000 - Other Current Financial Liabilities: 8,519,000,000 - Total financial liabilities: 17,220,000,000 - Cash and Cash Equivalents: 7,592,000,000 - Net Debt = 17,220,000,000 - 7,592,000,000 = 9,628,000,000 EUR **At 2023-01-01 (end of 2022):** - Other Noncurrent Financial Liabilities: 3,658,000,000 - Other Current Financial Liabilities: 4,127,000,000 - Total financial liabilities: 7,785,000,000 - Cash and Cash Equivalents: 3,919,000,000 - Net Debt = 7,785,000,000 - 3,919,000,000 = 3,866,000,000 EUR Hmm, this shows net debt decreasing significantly. But wait - I need to check if I'm using the right debt measure. Let me also check if derivative liabilities should be included. For S&P adjusted leverage, they typically include: - Short-term and long-term debt - Lease liabilities - Pension deficits - Sometimes hybrid instruments But they might exclude derivative liabilities that are part of normal operations (like commodity hedges for a utility). Let me check if there are lease liabilities specifically. The line "Repayments Of Non Current Borrowings And Repayments Of Lease Liabilities" suggests leases are in there. Actually, looking more carefully at the balance sheet, I don't see "Lease Liabilities" as a separate line. They might be included in "Other Noncurrent Financial Liabilities" or "Other Current Financial Liabilities." Let me also consider if I should include margin liabilities. "Margin Liabilities" at 2023-01-01 is 352,000,000 and at 2022-01-01 is 985,000,000. These are typically related to trading activities and might or might not be included in net debt depending on the purpose. For S&P's adjusted leverage for a utility/energy company, they would typically include: - Recourse debt - Exclude non-recourse project finance (if any) - Include proportional share of joint venture debt Given the major disposal/discontinued operations in 2022 (the huge loss of -11.3 billion from discontinued operations), the balance sheet changed dramatically. Total assets went from 149.7 billion to 23.6 billion - this is a massive deconsolidation. Let me recalculate with a broader debt definition to be more accurate: **2022-01-01 (end of 2021):** - Other Noncurrent Financial Liabilities: 8,701,000,000 - Other Current Financial Liabilities: 8,519,000,000 - Noncurrent Derivative Financial Liabilities: 16,657,000,000 - Current Derivative Financial Liabilities: 71,947,000,000 - Margin Liabilities: 985,000,000 Wait - those derivative numbers are huge! 16.7 billion noncurrent and 71.9 billion current derivative liabilities. These are likely related to commodity hedging/trading activities. For a utility company, these derivative liabilities might represent: - Forward contracts for electricity/gas/fuel - Hedging instruments S&P's treatment of derivatives varies. For trading/operational derivatives, they might not include them in debt. Or they might include the net position. Actually, looking at the assets side: - Noncurrent Derivative Financial Assets: 17,096,000,000 - Current Derivative Financial Assets: 65,392,000,000 So the net derivative position at 2022-01-01: Assets: 17,096 + 65,392 = 82,488 billion Liabilities: 16,657 + 71,947 = 88,604 billion Net derivative liability: 6,116 billion At 2023-01-01: - Noncurrent Derivative Financial Assets: 343,000,000 - Current Derivative Financial Assets: 1,486,000,000 - Noncurrent Derivative Financial Liabilities: 756,000,000 - Current Derivative Financial Liabilities: 3,973,000,000 Net derivative position: (343 + 1,486) - (756 + 3,973) = 1,829 - 4,729 = -2,900 billion The massive reduction in derivatives is consistent with the disposal/discontinuation of major operations. For S&P adjusted leverage, I need to think about what they include. Typically: - They might use "adjusted debt" which includes debt-like obligations - For utilities with trading operations, treatment of margin and derivatives can be complex Let me try a more standard approach using just the clear debt items and see: Actually, I realize I should look at this differently. The question asks about "S&P's adjusted leverage trend." S&P Global Ratings has specific methodologies. For corporate issuers, S&P typically calculates "adjusted debt" which includes: - Short-term and long-term debt - Lease liabilities (after adjustment) - Pension deficits - Hybrid instruments (partially) - Less: cash and liquid investments They also make adjustments for EBITDA, including: - Adding back certain non-recurring items - Pro forma adjustments for acquisitions/disposals - Distributions from affiliates Given the major disposal in 2022, the 2022 EBITDA and balance sheet reflect the remaining business, while 2021 includes the disposed business. Wait - I need to re-read the periods carefully. The data shows: - "Comparable Ebitda" 2022-01-01 - 2023-01-01: 2,436,000,000 (this is 2022 fiscal year) - "Comparable Ebitda" 2021-01-01 - 2022-01-01: 2,016,000,000 (this is 2021 fiscal year) And balance sheet dates: - 2023-01-01 is end of 2022 - 2022-01-01 is end of 2021 For leverage calculations, S&P typically uses year-end debt with that year's EBITDA (or sometimes average debt). Let me assume point-in-year-end debt with that year's EBITDA. But wait - there's a complication. The "Profit Loss From Discontinued Operations" is -11,302,000,000 in 2022. This suggests major disposals during 2022. The balance sheet at 2023-01-01 reflects the post-disposal structure. For S&P's adjusted leverage, they might adjust the EBITDA to be pro forma or comparable. The "Comparable EBITDA" is already adjusted for comparability. Let me try to calculate with a reasonable debt definition. I'll include financial liabilities and see: **Definition 1: Simple financial liabilities** 2022-01-01 (end 2021): - Debt = 8,701 + 8,519 = 17,220 million - Cash = 7,592 million - Net debt = 9,628 million - EBITDA = 2,016 million - Net Debt / EBITDA = 9,628 / 2,016 = 4.78x 2023-01-01 (end 2022): - Debt = 3,658 + 4,127 = 7,785 million - Cash = 3,919 million - Net debt = 3,866 million - EBITDA = 2,436 million - Net Debt / EBITDA = 3,866 / 2,436 = 1.59x Difference: 1.59 - 4.78 = -3.19x This is a huge improvement, way beyond ±0.3x. But this seems too large to be right for "Stable" vs "Improving." Let me reconsider if I'm using the right measures. Actually, wait. I need to re-read the question more carefully. It says "the gap of the ratio Net Debt / EBITDA calculated for the years 2022 and 2023." Hmm, the years mentioned are "2022 and 2023" but the data only goes to 2023-01-01. This might mean: - 2022 ratio = using 2022 fiscal year data (period 2022-01-01 to 2023-01-01) - 2023 ratio = using 2023 fiscal year data? But we don't have 2023 data... Wait, I think I misread. Let me re-read: "the gap of the ratio Net Debt / EBITDA calculated for the years 2022 and 2023" Actually, looking at the data format: - "Revenue" 2022-01-01 - 2023-01-01: This is fiscal year 2022 - "Revenue" 2021-01-01 - 2022-01-01: This is fiscal year 2021 And balance sheet dates: - 2023-01-01: end of fiscal 2022 - 2022-01-01: end of fiscal 2021 So when the question says "years 2022 and 2023", it might mean: - 2022 = fiscal year 2022 (period ending 2023-01-01) - 2023 = ? But we don't have fiscal year 2023 data... Or perhaps it means using balance sheet dates 2022 and 2023? No, the balance sheet only has 2022-01-01, 2023-01-01, and 2021-01-01. Wait - I think the question might have a typo or be using "2022 and 2023" to mean the two periods available. Or perhaps "2022" and "2023" refer to the year-end dates (2022-01-01 and 2023-01-01). Actually, re-reading more carefully: "the gap of the ratio Net Debt / EBITDA calculated for the years 2022 and 2023 is among ± 0.3x and ± 0.3x year on year." I think this means: compare the ratio for fiscal year 2022 vs fiscal year 2021 (as the two most recent years), and see if the change is within ±0.3x. But the question asks about "trend for 2022" - so we're looking at what happened in 2022 compared to the prior period. Let me recalculate more carefully, and also consider if I need to include more items in debt. Actually, I realize I should check if the question is asking about 2022 vs 2021 (year-on-year change), or if there's some confusion about dates. Let me assume: - "2022 ratio" = Net Debt at end of 2022 / EBITDA for 2022 - "2021 ratio" = Net Debt at end of 2021 / EBITDA for 2021 And we compare these two ratios. But I want to make sure I'm using the right debt figure. Let me look for more clues in the data. Looking at "Cash Flows From Used In Financing Activities Continuing Operations": - 2022: -4,686,000,000 - 2021: 1,603,000,000 This includes: - Proceeds From Noncurrent Borrowings: 2,421 (2022), 2,809 (2021) - Repayments Of Non Current Borrowings And Repayments Of Lease Liabilities: 5,888 (2022), 2,153 (2021) - Cash Flows From Used In Increase Decrease In Current Borrowings: -170 (2022), 1,844 (2021) Net debt repayment in 2022: 5,888 + 170 - 2,421 = 3,637 million (roughly, ignoring leases) This suggests significant debt repayment in 2022. Let me also look at "Increase Decrease In Cash And Cash Equivalents From Continuing Operations Before Effect Of Exchange Rate Changes": - 2022: -1,119,000,000 - 2021: 2,211,000,000 And total cash change: -3,682 million in 2022 vs +5,256 million in 2021. Cash went from 7,592 to 3,919, a decrease of 3,673 million. Now, let me think about S&P's specific adjustments. They often adjust debt for: - Surplus cash (not all cash is available for debt repayment) - Equity credit for hybrids - Pro forma adjustments for M&A And they adjust EBITDA for: - Non-recurring items - Distributions from affiliates - Pro forma run-rate effects Given the "Comparable EBITDA" is already adjusted, and the massive disposal in 2022, S&P would likely make significant pro forma adjustments. However, I need to work with the data I have. Let me try to calculate a more comprehensive debt figure. Actually, I wonder if I should include the "Margin Liabilities" and potentially other items. Let me look at what a typical energy company might have: For Fortum, a major Nordic utility, debt-like items might include: - Financial liabilities (bonds, bank loans) - Lease liabilities - Pension deficits - Nuclear provisions (if debt-like) - Margin liabilities (if related to trading) The "Nuclear Non Current Provisions" are interesting. These are likely provisions for nuclear waste management and decommissioning. S&P might treat these as debt-like if they represent contractual obligations. However, looking at the balance sheet, "Share In State Nuclear Waste Management Fund" is an asset (966 million at 2023-01-01, 3,515 million at 2022-01-01). This suggests the nuclear provisions might be matched by assets in a fund. Let me try a different approach. Let me look at what changed and see if I can infer S&P's likely treatment. The key insight is that 2022 was a year of massive disposal/discontinuation. The "Profit Loss From Discontinued Operations" of -11,302 million and the reduction in total assets from 149.7 billion to 23.6 billion suggests a major business was sold or spun off. This was likely the Uniper disposal or similar major transaction. Fortum had a major involvement with Uniper which was largely disposed of or written down. Given this, S&P's adjusted leverage would need to be calculated on a pro forma basis for the remaining business. The 2021 figures include the disposed business, while 2022 reflects the remaining business. For year-on-year comparability, S&P might: - Calculate 2021 pro forma leverage excluding the disposed business - Or calculate 2022 including the disposed business for part of the year This is complex. However, the question asks us to estimate the trend based on the data provided. Let me try a simpler approach: use the reported numbers and see what trend emerges. Actually, I realize I may have made an error. Let me re-check the EBITDA figures: "Operating Profit Before Depreciations Ebitda" 2022: 1,842,000,000 "Comparable Ebitda" 2022: 2,436,000,000 "Operating Profit Before Depreciations Ebitda" 2021: 4,913,000,000 "Comparable Ebitda" 2021: 2,016,000,000 Wait, the "Operating Profit Before Depreciations Ebitda" dropped from 4,913 to 1,842, but "Comparable EBITDA" went from 2,016 to 2,436. This suggests the 2021 reported EBITDA included significant one-off positive items (likely from the disposed business or gains), while "Comparable EBITDA" adjusts for these. For leverage calculations, S&P typically uses adjusted EBITDA. The "Comparable EBITDA" is likely closer to what S&P would use, or they might further adjust it. But actually, looking more carefully, S&P might use "Funds From Operations (FFO)" or "EBITDA" with their own adjustments. The "Comparable EBITDA" seems like a good starting point. Now, for debt, let me try to be more comprehensive. I'll include: - Other Noncurrent Financial Liabilities - Other Current Financial Liabilities - Margin Liabilities (these are typically debt-like for trading companies) And potentially: - Nuclear provisions (if not fully funded) - Pension deficits Let me check the pension situation: "Noncurrent Recognised Liabilities Defined Benefit Plan": 13 million at 2023-01-01, 1,190 million at 2022-01-01 This is a significant reduction, likely due to the disposal. For nuclear provisions vs fund: 2022-01-01: Nuclear provision 3,891 million vs Share in fund 3,515 million = net 376 million underfunded 2023-01-01: Nuclear provision 966 million vs Share in fund 966 million = fully funded Interesting! The nuclear provision is exactly matched by the fund share at 2023-01-01. This suggests the nuclear obligations were largely disposed of or the fund share was used. Let me try calculating with a more comprehensive debt definition: **2022-01-01 (end 2021):** - Other Noncurrent Financial Liabilities: 8,701 - Other Current Financial Liabilities: 8,519 - Margin Liabilities: 985 - Total financial debt: 18,205 - Less: Cash and equivalents: 7,592 - Net debt: 10,613 - Less: Liquid Funds (if separate): The data has "Liquid Funds" = 7,592 (same as cash?) Actually, "Liquid Funds" and "Cash And Cash Equivalents" are both 7,592 at 2022-01-01 and 3,919 at 2023-01-01. These appear to be the same thing. Wait, let me check: "Liquid Funds" 2022-01-01: 7,592,000,000 and "Cash And Cash Equivalents" 2022-01-01: 7,592,000,000. Yes, same amount. Net debt = 10,613 million Comparable EBITDA = 2,016 million Net Debt / EBITDA = 5.26x **2023-01-01 (end 2022):** - Other Noncurrent Financial Liabilities: 3,658 - Other Current Financial Liabilities: 4,127 - Margin Liabilities: 352 - Total financial debt: 8,137 - Less: Cash: 3,919 - Net debt: 4,218 - Comparable EBITDA = 2,436 - Net Debt / EBITDA = 1.73x Difference: 1.73 - 5.26 = -3.53x This is still a massive improvement. But wait - I should check if I'm double-counting or missing something. Actually, I realize I should look at this from a different angle. The question mentions "S&P's adjusted leverage trend for 2022." This suggests we need to look at what happened during 2022, which might mean comparing the ratio at the start of 2022 vs end of 2022, or comparing 2022 vs 2021. But actually, for trend analysis, S&P typically looks at the trajectory. If leverage was high at the start of 2022 and lower at the end, that's improving. However, I need to be more careful about what debt to include. Let me look for clues about what Fortum or S&P might consider as debt. Looking at the equity section, there's a detail: "Equity" "Retained Earnings And Other Funds Member" 2022-01-01: 12,830,000,000 "Equity" "Retained Earnings And Other Funds Member" 2023-01-01: 9,499,000,000 And "Retained Earnings" separately: 2022-01-01: 10,062,000,000 2023-01-01: 6,467,000,000 The difference between "Retained Earnings And Other Funds" and "Retained Earnings" might be some reserves or other equity components. Now, let me think about this more carefully. The question asks for an estimate. Given the massive disposal and deleveraging, the trend is likely "Improving" if we compare end-2022 to end-2021. But wait - I want to check if maybe I should use a different EBITDA or if there's something I'm missing about S&P's specific adjustments. Actually, I realize I should re-read the question one more time: "estimate S&P's adjusted leverage trend for 2022: Improving, Stable, or Deteriorating." And the definition: "the gap of the ratio Net Debt / EBITDA calculated for the years 2022 and 2023 is among ± 0.3x and ± 0.3x year on year." Hmm, this says "years 2022 and 2023" but the data only has up to 2023-01-01. This is confusing. Wait - I think I may have been misreading the dates. Let me re-check: The periods are: - 2022-01-01 - 2023-01-01: This is fiscal year 2022 (12 months starting Jan 2022) - 2021-01-01 - 2022-01-01: This is fiscal year 2021 Balance sheet dates: - 2023-01-01: End of fiscal 2022 - 2022-01-01: End of fiscal 2021 - 2021-01-01: End of fiscal 2020 So when the question says "years 2022 and 2023", it might be referring to: - 2022 = fiscal year 2022 (period 2022-01-01 to 2023-01-01) - 2023 = fiscal year 2023? But we don't have that data... Or perhaps it's a typo and should say "2021 and 2022"? Or perhaps "2022 and 2023" refers to the balance sheet dates (2022-01-01 and 2023-01-01)? Given the context "trend for 2022", I think the most logical interpretation is: - Compare the ratio at the end of 2022 (using 2022 fiscal year data) vs the end of 2021 (using 2021 fiscal year data) - Or perhaps compare within 2022: start of year vs end of year Actually, re-reading again: "the gap of the ratio Net Debt / EBITDA calculated for the years 2022 and 2023 is among ± 0.3x and ± 0.3x year on year." I think this might mean: the change from 2022 to 2023 (i.e., from fiscal year 2022 to fiscal year 2023). But we don't have fiscal year 2023 data. Alternatively, it could mean the ratio calculated using 2022 year-end balance sheet and 2022 EBITDA, compared to 2023 year-end balance sheet and 2023 EBITDA. But again, no 2023 data. I think the most reasonable interpretation is that there's a slight confusion in dates, and we should compare: - Period 2021 (2021-01-01 to 2022-01-01) with balance at 2022-01-01 - Period 2022 (2022-01-01 to 2023-01-01) with balance at 2023-01-01 And "2022 and 2023" in the question refers to these two year-end dates or periods. Given this interpretation, let me recalculate more carefully, trying to match S&P's methodology as closely as possible. For S&P adjusted debt, they typically include: 1. Short-term debt 2. Long-term debt 3. Lease liabilities 4. Pension deficits (if underfunded) 5. Hybrid instruments (with equity credit) 6. Less: cash and liquid investments For this company, let me identify: - Short-term debt: Other Current Financial Liabilities - Long-term debt: Other Noncurrent Financial Liabilities - Lease liabilities: Likely included in financial liabilities or need to be estimated - Pension: Noncurrent Recognised Liabilities Defined Benefit Plan Actually, looking at the cash flow statement: "Repayments Of Non Current Borrowings And Repayments Of Lease Liabilities" - this suggests lease liabilities are part of noncurrent borrowings or separately identified. Let me try to estimate lease liabilities. In 2022, total repayment was 5,888 million, including lease liabilities. In 2021, it was 2,153 million. The increase might be due to early repayment or disposal-related payments. Actually, I don't have enough detail to separate leases. Let me assume financial liabilities include leases or that leases are not material for the trend analysis. Let me also check if there are any hybrid instruments. I don't see any obvious hybrids in the equity section. For S&P's adjusted EBITDA, they might start with "Comparable EBITDA" and make further adjustments. But let's use Comparable EBITDA as the closest proxy. Now, one important consideration: S&P typically uses "average" debt or "year-end" debt depending on the situation. For trending, they might use year-end debt. Let me also consider if they would include or exclude discontinued operations. The 2022 numbers include discontinued operations for part of the year (until disposal), while 2021 includes them fully. The balance sheet at 2023-01-01 excludes the disposed business. For S&P's leverage calculation for 2022, they might use: - Debt at year-end 2022 (post-disposal) - EBITDA for 2022 (which includes discontinued ops for part of year, or is adjusted) Actually, looking at the EBITDA figures: - "Operating Profit Before Depreciations Ebitda" 2022: 1,842 (includes all items, including discontinued ops effects) - "Comparable Ebitda" 2022: 2,436 (adjusted for comparability) The comparable EBITDA is higher than reported EBITDA, suggesting adjustments add back some negative items or normalize for one-offs. For 2021: - Operating EBITDA: 4,913 - Comparable EBITDA: 2,016 Here, comparable EBITDA is much lower than operating EBITDA, suggesting 2021 had significant one-off gains that are normalized out. This makes sense if 2021 included large gains from the disposed business or revaluations, while 2022 had losses. For S&P's adjusted leverage, they would likely use comparable or further adjusted EBITDA. The trend from 2,016 to 2,436 is increasing EBITDA for the remaining business, while debt decreased significantly. Let me now calculate with my best estimates: **Fiscal 2021 / End 2021:** Debt: - Other Noncurrent Financial Liabilities: 8,701 - Other Current Financial Liabilities: 8,519 - Total: 17,220 Cash: 7,592 Net Debt: 9,628 Comparable EBITDA: 2,016 Net Debt / EBITDA: 4.78x **Fiscal 2022 / End 2022:** Debt: - Other Noncurrent Financial Liabilities: 3,658 - Other Current Financial Liabilities: 4,127 - Total: 7,785 Cash: 3,919 Net Debt: 3,866 Comparable EBITDA: 2,436 Net Debt / EBITDA: 1.59x Change: 1.59 - 4.78 = -3.19x This is massively improving, well beyond the ±0.3x threshold. But wait, I want to double-check if I should include more in debt. Let me add margin liabilities: **2021:** 17,220 + 985 = 18,205 debt, net debt = 10,613, ratio = 5.26x **2022:** 7,785 + 352 = 8,137 debt, net debt = 4,218, ratio = 1.73x Change: -3.53x, still massively improving. What about pension deficits? **2021:** Pension liability 1,190. Is this net of plan assets? The line says "Noncurrent Recognised Liabilities Defined Benefit Plan" which suggests this is the net liability recognized. Adding this: debt = 19,395, net debt = 11,803, ratio = 5.85x **2022:** Pension liability 13. Adding this: debt = 8,150, net debt = 4,231, ratio = 1.74x Change: still about -4.1x, massively improving. What about nuclear provisions? S&P might treat these as debt-like if they're unfunded contractual obligations. **2021:** Nuclear provision 3,891, fund share 3,515, net unfunded 376. If we add this to debt: total adjustments = 376 + 1,190 + 985 = 2,551 additional. Net debt = 12,179, ratio = 6.04x **2022:** Nuclear provision 966, fund share 966, net unfunded 0. Pension 13. Margin 352. Additional = 365. Net debt = 4,231, ratio = 1.74x Still massively improving. Actually, I want to reconsider whether S&P would include the nuclear net liability. Looking at the balance sheet, "Share In State Nuclear Waste Management Fund" is listed as an asset, and "Nuclear Non Current Provisions" as a liability. If these are legally matched (the fund is specifically to cover the provision), then the net position matters. At 2022-01-01: 3,891 provision - 3,515 fund = 376 net underfunded At 2023-01-01: 966 provision - 966 fund = 0 net So the nuclear obligation was fully funded or disposed of by end 2022. For S&P, if the fund is restricted and can only be used for nuclear obligations, they might net these. If the fund is considered a restricted asset, they might exclude it from available cash. This is getting complex. Let me try a different approach: look at what the market or S&P actually reported for Fortum, or use a simpler standard definition. Actually, I realize I should look at the "Equity And Liabilities" total and work backwards to understand the capital structure. 2022-01-01: Total equity and liabilities = 149,661 - Equity: 13,665 - Liabilities: 135,997 2023-01-01: Total = 23,642 - Equity: 7,737 - Liabilities: 15,905 The massive reduction in liabilities (136 billion to 16 billion) is striking. This reflects the disposal. Now, looking at liabilities breakdown: 2022-01-01 liabilities (135,997 total): - Other Noncurrent Financial: 8,701 - Noncurrent Derivative Financial: 16,657 - Deferred Tax: 827 - Nuclear Non Current Provisions: 3,891 - Other Longterm Provisions: 4,108 - Noncurrent Recognised Liabilities Defined Benefit Plan: 1,190 - Other Noncurrent Liabilities: 397 - Noncurrent total: 35,771 - Other Current Financial: 8,519 - Current Derivative Financial: 71,947 - Other Shortterm Provisions: 2,299 - Margin Liabilities: 985 - Trade And Other Current Payables: 16,477 - Current total: 100,226 2023-01-01 liabilities (15,905 total): - Other Noncurrent Financial: 3,658 - Noncurrent Derivative Financial: 756 - Deferred Tax: 152 - Nuclear Non Current Provisions: 966 - Other Longterm Provisions: 118 - Noncurrent Recognised Liabilities Defined Benefit Plan: 13 - Other Noncurrent Liabilities: 121 - Noncurrent total: 5,784 - Other Current Financial: 4,127 - Current Derivative Financial: 3,973 - Other Shortterm Provisions: 13 - Margin Liabilities: 352 - Trade And Other Current Payables: 1,657 - Current total: 10,122 The derivative liabilities decreased massively (88,604 to 4,729), reflecting the disposal of trading operations. For S&P's debt calculation, they would likely focus on the financial liabilities (excluding derivatives related to normal operations, or netting them). Actually, for an energy utility, commodity derivatives are typically part of normal operations. S&P might exclude operational derivatives from debt and focus on financing debt. Let me try: debt = financial liabilities (excluding derivatives) + margin liabilities + other debt-like items. **2021:** - Other Noncurrent Financial: 8,701 - Other Current Financial: 8,519 - Margin Liabilities: 985 - Total financing debt: 18,205 - Less: Cash: 7,592 - Net debt: 10,613 - EBITDA: 2,016 - Ratio: 5.26x **2022:** - Other Noncurrent Financial: 3,658 - Other Current Financial: 4,127 - Margin Liabilities: 352 - Total financing debt: 8,137 - Less: Cash: 3,919 - Net debt: 4,218 - EBITDA: 2,436 - Ratio: 1.73x Change: -3.53x, massively improving. Even if I use different EBITDA or debt definitions, the direction is clear: debt decreased significantly while EBITDA increased. Wait, I want to check one more thing. Should I use "Operating Profit Before Depreciations Ebitda" or "Comparable Ebitda"? S&P typically adjusts EBITDA to exclude one-offs and normalize. "Comparable EBITDA" is likely closer to S&P's adjusted EBITDA. However, S&P might further adjust for discontinued operations. If I use Operating EBITDA: 2021: 4,913, ratio with net debt 10,613 = 2.16x 2022: 1,842, ratio with net debt 4,218 = 2.29x Change: +0.13x, which would be Stable! But this doesn't make sense because 2021 operating EBITDA included huge one-off gains (likely from the disposed business or revaluations), while 2022 operating EBITDA was depressed by losses. S&P would definitely normalize these. The "Comparable EBITDA" is designed for this purpose. Actually, let me verify: "Items Affecting Comparability" in 2021 was +2,897 million (positive), and in 2022 was -593 million (negative). Operating profit 2021: 4,325 million Comparable operating profit 2021: 1,429 million Difference: 2,896 million ≈ Items Affecting Comparability Operating profit 2022: 1,277 million Comparable operating profit 2022: 1,871 million Difference: -594 million ≈ Items Affecting Comparability So comparable operating profit adds back negative items and removes positive one-offs. For EBITDA: Operating EBITDA 2021: 4,913 Comparable EBITDA 2021: 2,016 Difference: 2,897 (the items affecting comparability, roughly) Operating EBITDA 2022: 1,842 Comparable EBITDA 2022: 2,436 Difference: -594 (adds back negative items) So comparable EBITDA is the normalized figure. S&P would use something like this. Given this, my calculation using Comparable EBITDA shows: 2021: ~5.3x net debt/EBITDA 2022: ~1.7x net debt/EBITDA Change of about -3.6x, which is massively improving. However, I want to double-check one thing. S&P might use "Funds From Operations" or a different metric. But for leverage, Debt/EBITDA is standard. Let me also consider if S&P would include the discontinued operations in EBITDA. The 2022 comparable EBITDA of 2,436 might include discontinued ops for part of the year, or might be pro forma for the remaining business. Looking at the detailed EBITDA build: "Operating Profit Before Depreciations Ebitda" 2022: 1,842 This is for continuing operations? Or total? Actually, the line doesn't specify "continuing" or "discontinued", so it might be total. But there's also "Cash Flows From Used In Operating Activities Discontinued Operations" of -10,870 million in 2022, which is separate. The EBITDA figure might need to be adjusted for discontinued ops. But without clear separation, I'll assume Comparable EBITDA is the right metric to use. Now, one more consideration: S&P might calculate leverage using "average" debt rather than year-end debt, especially if there was a major disposal mid-year. If the disposal happened mid-2022, then: - Start of 2022 debt was high (including disposed business) - End of 2022 debt was low (remaining business) - Average debt might be somewhere in between For 2021, the business was together all year. If S&P uses average debt for 2022, the ratio might be higher than my year-end calculation. However, S&P typically uses year-end debt for point-in-time leverage ratios, or they might pro forma the 2021 ratio to exclude the disposed business for comparability. If they pro forma 2021 to exclude the disposed business: - 2021 debt would be lower (only remaining business) - 2021 EBITDA would be lower (only remaining business) Without detailed pro forma data, it's hard to calculate. But the trend direction is still likely improving due to the deleveraging from the disposal proceeds. Actually, let me think about this differently. The disposal likely generated cash or reduced debt. Even if we look at the remaining business on a standalone basis, the disposal proceeds could have been used to repay debt, improving leverage. Also, the 2022 comparable EBITDA of 2,436 is higher than 2021's 2,016, suggesting improved profitability of the remaining business. Given all this analysis, the leverage trend is clearly improving. The ratio drops from roughly 4-6x to roughly 1.5-2x, depending on exact definitions. Let me do one more check with a slightly different debt definition to make sure: Include all non-current and current financial liabilities, excluding derivatives: 2021: 8,701 + 8,519 = 17,220 debt, 7,592 cash, net 9,628, EBITDA 2,016, ratio 4.78x 2022: 3,658 + 4,127 = 7,785 debt, 3,919 cash, net 3,866, EBITDA 2,436, ratio 1.59x Difference: -3.19x Or include derivatives as debt (if S&P views them as debt-like): 2021: 17,220 + 16,657 + 71,947 = 105,824 debt! This is huge due to derivatives. Net of derivative assets (82,488): net derivative position 23,336 Plus financial liabilities 17,220 = 40,556 gross debt-like Less cash 7,592 = 32,964 net debt EBITDA 2,016, ratio 16.35x 2022: 7,785 + 756 + 3,973 = 12,514 Net of derivative assets (1,829): net derivative position 10,685 Plus financial liabilities 7,785 = 18,470 Less cash 3,919 = 14,551 net debt EBITDA 2,436, ratio 5.97x Difference: -10.38x, still massively improving. But this derivative-inclusive approach seems wrong for an energy utility. Trading derivatives are typically operational, not financing. Let me check if the derivatives are gross or net. In the balance sheet, they're shown gross (assets and liabilities separately). S&P might net them if there's master netting. Actually, looking at the assets side: 2021: Noncurrent derivative assets 17,096 + Current derivative assets 65,392 = 82,488 2021: Noncurrent derivative liabilities 16,657 + Current derivative liabilities 71,947 = 88,604 Net derivative liability: 6,116 2022: Noncurrent derivative assets 343 + Current derivative assets 1,486 = 1,829 2022: Noncurrent derivative liabilities 756 + Current derivative liabilities 3,973 = 4,729 Net derivative liability: 2,900 If S&P includes net derivative liabilities in debt: 2021: 17,220 + 6,116 + 985 = 24,321 gross, less cash 7,592 = 16,729 net, EBITDA 2,016, ratio 8.30x 2022: 7,785 + 2,900 + 352 = 11,037 gross, less cash 3,919 = 7,118 net, EBITDA 2,436, ratio 2.92x Difference: -5.38x, still massively improving. I think any reasonable definition shows significant improvement. The disposal of the major business (likely Uniper or similar) resulted in massive deleveraging. However, I want to make sure about one thing: could S&P view this as deterioration if the disposed business was the profitable part? Looking at comparable operating profit: 2021: 1,429 million 2022: 1,871 million This increased, so the remaining business is more profitable on a comparable basis. But wait, total assets dropped from 149.7 billion to 23.6 billion. That's a 84% reduction! The disposed business was huge. If the disposed business was highly leveraged and less profitable, removing it improves the ratio. If it was low-leveraged and highly profitable, removing it could worsen the ratio. Given that comparable EBITDA increased from 2,016 to 2,436 while assets dropped dramatically, it seems the disposed business was asset-heavy but not EBITDA-heavy (low return). This would mean disposing of it improves leverage and returns. Actually, let me reconsider. The 2021 "Operating Profit Before Depreciations Ebitda" was 4,913 vs "Comparable EBITDA" of 2,016. The difference of 2,897 represents items affecting comparability. These could include: - Gains on sales - Fair value changes - Impairment reversals - One-off items In 2022, operating EBITDA was 1,842 vs comparable EBITDA of 2,436. The difference of -594 means there were negative one-offs in operating EBITDA that are added back for comparable. So 2021 had large positive one-offs inflating operating EBITDA, while 2022 had negative one-offs depressing it. The comparable figures normalize both. The 2021 positive one-offs of 2,897 likely included gains related to the disposed business or market conditions. The 2022 negative one-offs of -594 likely included losses or costs related to the disposal. For S&P's adjusted leverage, they would use normalized EBITDA. The trend from 2,016 to 2,436 is positive (20% increase), while debt decreased significantly. Given all this analysis, I conclude the trend is clearly **Improving**. Let me do a final sanity check with the simplest possible calculation: If I just look at total liabilities to total assets or equity: 2021: Liabilities 136, Equity 13.7, ratio 9.9x 2022: Liabilities 15.9, Equity 7.7, ratio 2.1x Or debt to equity: 2021: 136 / 13.7 = 9.9x 2022: 15.9 / 7.7 = 2.1x Massive deleveraging. Even if I look at just financial debt: 2021: ~17 billion vs equity 13.7 billion 2022: ~8 billion vs equity 7.7 billion The ratios improved significantly. One final check: the question says "S&P's adjusted leverage trend for 2022." This could mean the trend during 2022, i.e., comparing start of 2022 to end of 2022. Start of 2022 (end of 2021): Net debt/EBITDA ≈ 4.8x End of 2022: Net debt/EBITDA ≈ 1.6x Trend: Improving significantly. Or if comparing 2022 to 2023 (forward-looking), we don't have 2023 data. Given the data available, the answer is clearly Improving. Improving