## Reasoning ### S&P Net Debt Calculation S&P's Net Debt typically includes: 1. Short-term debt (borrowings) 2. Long-term debt (borrowings) 3. Lease liabilities (under S&P methodology, operating leases are often capitalized, but since IFRS 16 is already applied, lease liabilities are on balance sheet) 4. Minus: Cash and cash equivalents 5. S&P also typically includes hybrid instruments with debt-like characteristics Let me identify the components from the balance sheet as of 2023-01-01 (end of 2022): **Gross Debt Components:** 1. **Non-current bank debt and bonds ("Deudas Con Entidades De Credito YObligaciones UOtros Valores Negociables")**: 36,129M EUR 2. **Current bank debt and bonds ("Deudas Con Entidades De Credito YObligaciones UOtros Valores Negociables Corrientes")**: 10,458M EUR 3. **Non-current lease liabilities**: 2,287M EUR 4. **Current lease liabilities**: 151M EUR 5. **Hybrid instruments (non-current) ("Instrumentos De Capital Con Caracteristicas De Pasivo Financiero No Corriente")**: 576M EUR 6. **Hybrid instruments (current) ("Instrumentos De Capital Con Caracteristicas De Pasivo Financiero Corriente")**: 87M EUR S&P typically treats hybrid instruments with intermediate equity content as 50% debt / 50% equity. However, looking at the "Instrumentos de capital con características de pasivo financiero" - these are classified as financial liabilities on the balance sheet, so they would be 100% debt for S&P purposes (or at least partially). But S&P's treatment of hybrids varies. Let me include them at 50% for now, but actually these are already classified as liabilities, suggesting they have more debt-like features. Actually, looking more carefully at S&P methodology, they also consider perpetual subordinated bonds. The equity statement shows "Emision De Obligaciones Perpetuas Subordinadas" and "Devengo De Intereses De Obligaciones Perpetuas Subordinadas" flowing through equity (specifically through non-controlling interests and retained earnings). This suggests Iberdrola has perpetual subordinated bonds that are classified as equity under IFRS but S&P would typically give them intermediate equity content (50% debt, 50% equity). From the equity statement, the non-controlling interests include perpetual subordinated bonds. In 2021-2022, there was an issuance of 2,740M EUR of perpetual subordinated bonds classified under non-controlling interests. The interest accrual on these was 169M EUR in 2022 (charged to retained earnings). Let me try to estimate the total perpetual subordinated bonds outstanding. The NCI balance is 16,995M EUR. But not all of this is hybrid - much of it represents actual minority interests in subsidiaries. For simplicity and to follow S&P methodology more closely, let me focus on what's clearly identifiable: **Gross Financial Debt:** - Non-current bank debt & bonds: 36,129M - Current bank debt & bonds: 10,458M - Non-current lease liabilities: 2,287M - Current lease liabilities: 151M - Non-current hybrid instruments (liability): 576M - Current hybrid instruments (liability): 87M Total gross debt = 36,129 + 10,458 + 2,287 + 151 + 576 + 87 = 49,688M EUR **Cash and equivalents:** 4,608M EUR **Net Debt** = 49,688 - 4,608 = 45,080M EUR S&P might also add 50% of equity-classified hybrids. The perpetual subordinated bonds accruing 169M interest suggests a principal around 2,740M+ (from the 2021-2022 issuance alone). But let me keep it simpler and focus on balance sheet items. Actually, S&P also sometimes subtracts "surplus cash" only and may not subtract all cash. But typically they subtract readily available cash. ### EBITDA Calculation (S&P adjusted) S&P EBITDA typically starts from reported EBITDA and makes adjustments. The company reports: **"Beneficio Bruto De Explotacion Ebitda"** = 13,228M EUR for 2022 S&P's EBITDA would typically: - Include operating lease payments added back (but under IFRS 16, depreciation of ROU assets and interest on lease liabilities replace lease expense, so EBITDA already excludes lease costs effectively) - S&P might add back lease depreciation to get to their EBITDA figure, but they also add lease liabilities to debt Under S&P methodology with IFRS 16 leases already capitalized, the reported EBITDA of 13,228M should be close to S&P's adjusted EBITDA. However, S&P might exclude some non-recurring items. The "Other Gains Losses" of 911M might include non-recurring items. Without more detail, I'll use the reported EBITDA. ### Net Debt / EBITDA Net Debt / EBITDA = 45,080 / 13,228 ≈ 3.41 Let me reconsider. S&P often includes "other financial liabilities" as part of debt too. Looking at: - "Other Noncurrent Financial Liabilities": 1,534M - these could include things like collateral, deposits, etc. - "Other Current Financial Liabilities": 5,058M These might include items that S&P considers debt-like. However, without more detail, and to avoid double-counting derivative positions, I'll be conservative. Actually, S&P's standard approach typically focuses on: - Interest-bearing debt (short-term + long-term borrowings) - Lease liabilities - 50% of hybrid equity instruments Let me recalculate more carefully: **Core debt:** - NC borrowings: 36,129M - C borrowings: 10,458M - NC lease liabilities: 2,287M - C lease liabilities: 151M - Hybrid instruments (on BS as liabilities): 576 + 87 = 663M Total = 49,688M Less cash: 4,608M Net Debt = 45,080M Net Debt / EBITDA = 45,080 / 13,228 = **3.41** 3.4