## Reasoning ### Step 1: Calculate Net Debt (S&P Methodology) S&P's Net Debt typically includes: - Short-term borrowings - Current portion of long-term borrowings - Long-term borrowings - Lease liabilities (both current and non-current) - S&P typically includes these - Minus: Cash and cash equivalents - Minus: Short-term investments/current financial assets at fair value **Note:** The balance sheet dates labeled "2023-01-01" represent the end of fiscal year 2022 (December 31, 2022), and "2022-01-01" represents end of fiscal year 2021. For the 2022 fiscal year (balance sheet as of 2023-01-01): **Gross Debt:** - Short-term borrowings: 4,446M - Current portion of long-term borrowings: 3,097M - Current lease liabilities: 884M - Long-term borrowings: 19,374M - Non-current lease liabilities: 4,067M - Total Gross Debt = 4,446 + 3,097 + 884 + 19,374 + 4,067 = 31,868M **Cash and liquid investments:** - Cash and cash equivalents: 10,155M - Current financial assets at fair value through profit or loss: 8,251M - Total = 18,406M **Net Debt = 31,868 - 18,406 = 13,462M** However, S&P sometimes treats operating leases differently. Under S&P's methodology, they often add operating lease obligations to debt. Since IFRS 16 already capitalizes leases on the balance sheet, the lease liabilities are already included above. S&P also sometimes includes perpetual subordinated bonds as debt (or partially as debt). Looking at the equity section, there appear to be perpetual subordinated bonds classified in equity (under "Other Reserves"). The coupon payment was 138M in 2022. However, S&P typically assigns intermediate or minimal equity content to hybrids, often treating 50% as debt. But for simplicity, and since we don't have the exact hybrid amount readily separated, let me check. From the equity changes, we can see: - In FY2021 (2021-01-01 to 2022-01-01): "Increase Decrease Through Net Issue Reimbursement Of Perpetual Subordinated Bonds Equity" = 2,000M - In FY2020 (2020-01-01 to 2021-01-01): same = 3,000M So approximately 5,000M in hybrid bonds are classified as equity. S&P typically treats 50% of hybrid bonds as debt. That would add ~2,500M to debt. But let me keep it simpler and use the standard approach without adjusting for hybrids first, then consider. Actually, for a standard S&P Net Debt/EBITDA calculation, let me focus on the core components: **Net Debt (without hybrid adjustment) = 13,462M** **With 50% hybrid adjustment:** ~13,462 + 2,500 = ~15,962M ### Step 2: Calculate EBITDA EBITDA = Profit from Operating Activities + Depreciation & Amortization + Impairment losses + Write-offs From the income statement for FY2022 (2022-01-01 to 2023-01-01): - Profit from operating activities: 17,510M - Depreciation and amortization: 7,205M - Impairment losses: 1,140M - Write-offs: 599M Wait - EBITDA typically = Operating Profit + D&A. Impairments and write-offs are sometimes added back too. S&P's EBITDA = Operating income + D&A (and sometimes impairments) But looking at the structure, the operating profit of 17,510M is AFTER depreciation (7,205M), impairments (1,140M), and write-offs (599M). **EBITDA = 17,510 + 7,205 = 24,715M** (basic EBITDA) If we add back impairments and write-offs: **EBITDA = 17,510 + 7,205 + 1,140 + 599 = 26,454M** S&P typically adds back D&A but may or may not add back impairments. Their standard EBITDA definition usually includes adding back D&A and sometimes impairments. Let me use the broader definition including impairments as S&P typically does. Actually, S&P's EBITDA = Revenue - Operating expenses + D&A. Impairments are non-cash and typically added back. So: **EBITDA = 17,510 + 7,205 + 1,140 + 599 = 26,454M** S&P also typically adds lease-related depreciation/interest back or adjusts for leases. Under IFRS 16, lease costs are split between depreciation (in D&A) and interest (in finance costs). Since we've already added back D&A (which includes lease depreciation), and the lease interest is below operating profit, for S&P methodology we might need to add lease payments back or adjust. Actually, S&P's approach under IFRS 16: They typically add back lease depreciation (already in D&A) and lease interest to get to their EBITDA measure, then they've already included lease liabilities in debt. Let me keep it straightforward: ### Simple Calculation: **Net Debt = 13,462M** (without hybrid adjustment) **EBITDA = 26,454M** (with impairments added back) **Net Debt / EBITDA = 13,462 / 26,454 ≈ 0.51x** If using basic EBITDA (just D&A): **Net Debt / EBITDA = 13,462 / 24,715 ≈ 0.54x** With hybrid adjustment (50% of ~5,000M as debt): **Net Debt / EBITDA = 15,962 / 26,454 ≈ 0.60x** Let me reconsider. S&P's standard approach: For S&P, EBITDA typically = Operating profit + D&A. They may separately adjust for impairments but the core EBITDA is operating profit + D&A. Also, S&P includes operating lease adjustments. Under IFRS 16, the operating profit already excludes lease expense (it's been replaced by depreciation + interest). S&P's adjusted EBITDA would add the lease interest component back to be consistent with including lease debt. Lease interest isn't separately disclosed, but lease liabilities and ROU assets are. The finance costs include lease interest. Let me just go with the standard calculation: **Net Debt / EBITDA:** Net Debt (including leases, excluding hybrids) = 13,462M EBITDA (operating profit + D&A) = 17,510 + 7,205 = 24,715M Ratio = 13,462 / 24,715 = 0.545 Rounding to about 0.5x. Let me reconsider whether S&P would exclude current financial assets from the cash offset. S&P typically only deducts "readily available cash" and "short-term investments that are liquid." The current financial assets at fair value (8,251M) could be liquid investments. S&P might be more conservative. If we only deduct cash: Net Debt = 31,868 - 10,155 = 21,713M Ratio = 21,713 / 24,715 = 0.88x If we deduct cash + current financial assets at FVTPL: Net Debt = 31,868 - 18,406 = 13,462M Ratio = 13,462 / 24,715 = 0.54x S&P generally considers surplus cash and liquid investments. For a company like Eni, the current financial assets at FVTPL are likely liquid (money market funds, short-term securities). S&P would likely include these as cash equivalents for net debt purposes. My best estimate: **~0.5x** 0.5