To estimate the Net Debt / EBITDA ratio for ENI S.P.A. for the year 2022 (period ending 2023-01-01) using the S&P methodology, we need to calculate two components: Adjusted Net Debt and EBITDA. **1. Calculate EBITDA** S&P typically defines EBITDA as Earnings Before Interest, Taxes, Depreciation, and Amortization. We can derive this from the provided Income Statement data. * **Profit Loss From Operating Activities (Operating Profit):** 17,510,000,000 EUR * **Add: Depreciation And Amortisation Expense:** 7,205,000,000 EUR * **Add: Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss:** 1,140,000,000 EUR (Note: S&P often adds back impairments as they are non-cash/non-recurring, though treatment can vary. Standard EBITDA usually includes this add-back if starting from Operating Profit which has already deducted it. The line item "Impairment Loss..." is positive, indicating a net reversal or gain, or it represents the expense added back. Looking at the Cash Flow statement adjustments, "Adjustments For Impairment Loss..." is 1,140,000,000. In the P&L, if this is a net reversal, it increased operating profit. If it's an expense, it decreased it. Let's look at the Cash Flow from Operations reconciliation. * Profit Loss From Operating Activities: 17,510 * Adjustments for Depreciation: 7,205 * Adjustments for Impairment: 1,140 * Write Off: 599 * Share of Equity Accounted Investments: 1,841 (This is usually subtracted if included in Operating Profit, as it's non-cash investment income). * Let's stick to the standard definition: EBITDA = Operating Profit + Depreciation + Amortization + Impairment Charges (if deducted). * The line item "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" is 1,140,000,000. In the cash flow, it's an adjustment *to* profit. If it were an expense, it would be added back. If it were a reversal (gain), it would be subtracted. The positive sign in the "Adjustments" section of the Cash Flow statement usually implies it was a non-cash charge that reduced profit, so it's added back. However, the label says "Reversal". Let's check the previous year. 2021: 167. 2020: 3183. * Let's look at "Other Operating Income Expense": -1,736. * Let's calculate EBITDA directly from the top down or bottom up of Operating Profit. * Operating Profit (Profit Loss From Operating Activities): 17,510,000,000 EUR. * This figure usually *includes* depreciation, amortization, and impairment. * Therefore, EBITDA = Operating Profit + Depreciation & Amortization + Impairment Losses (net). * Depreciation and Amortization: 7,205,000,000 EUR. * Impairment: The line item is "Impairment Loss Reversal...". In the Cash Flow statement, it is listed as an adjustment of 1,140,000,000. If this was a net impairment *expense*, it reduces operating profit, so we add it back. If it was a net *reversal* (gain), it increases operating profit, so we subtract it. Given the magnitude and typical energy sector volatility, and the fact that it's grouped with D&A in adjustments, let's assume it's a net charge or we simply add back non-cash items. However, standard EBITDA adds back *expenses*. Let's look at the sign. In 2020, impairment was 3,183 (likely expense). In 2022, 1,140. * Let's assume the standard S&P adjustment: EBITDA = Operating Income + D&A + Impairment. * EBITDA = 17,510 + 7,205 + 1,140 = 25,855,000,000 EUR. * *Self-Correction/Refinement*: Sometimes "Profit Loss From Operating Activities" in these reports is effectively EBIT. Let's verify. * Revenue: 132,512 * Purchases/Costs: 102,529 * Employee Benefits: 3,015 * Other Operating: -1,736 * D&A: 7,205 * Impairment: 1,140 (Assuming expense) * Write-offs: 599 * Approx Operating Profit = 132,512 - 102,529 - 3,015 - 1,736 - 7,205 - 1,140 - 599 = 16,288. This is close to 17,510 but not exact, likely due to "Share of profit of equity accounted investments" (1,841) and other items included in Operating Profit by ENI. ENI often includes equity income in Operating Profit. * S&P usually excludes equity income from EBITDA. * Let's use the reported "Profit Loss From Operating Activities" and add back D&A and Impairment. * EBITDA = 17,510 + 7,205 + 1,140 = 25,855 million EUR. * Note: If the 1,140 is a reversal (gain), we should subtract it. However, in cash flow statements, positive adjustments to profit usually mean the item reduced profit (expense). If it were a gain, it would be a negative adjustment (subtraction) to reconcile to cash. Since it is positive 1,140 in the adjustments list, it was likely a net expense/charge. * Let's check "Write Off": 599. This is also a non-cash charge. S&P often adds this back too. * Adjusted EBITDA = 17,510 + 7,205 + 1,140 + 599 = 26,454 million EUR. * Let's stick to the core EBITDA (D&A + Impairment) as a baseline, but S&P "Funds From Operations" or "EBITDA" definitions often include add-backs for impairments and write-offs. Let's use **26,454,000,000 EUR** as a robust EBITDA estimate including write-offs. **2. Calculate Net Debt** S&P Net Debt = Gross Debt - Cash and Cash Equivalents. Gross Debt includes Short-term borrowings, Current portion of long-term borrowings, Long-term borrowings, and often Lease Liabilities (S&P treats leases as debt). * **Short-term Borrowings:** 4,446,000,000 EUR * **Current Portion Of Longterm Borrowings:** 3,097,000,000 EUR * **Longterm Borrowings:** 19,374,000,000 EUR * **Current Lease Liabilities:** 884,000,000 EUR * **Noncurrent Lease Liabilities:** 4,067,000,000 EUR * **Total Gross Debt:** 4,446 + 3,097 + 19,374 + 884 + 4,067 = 31,868,000,000 EUR. * **Cash And Cash Equivalents:** 10,155,000,000 EUR (From Balance Sheet 2023-01-01). * Note: The prompt provides "Cash And Cash Equivalents" 2023-01-01 as 10,155,000,000. * There is also "Cash And Cash Equivalents If Different From Statement Of Financial Position" at 10,181,000,000. S&P usually uses the reported cash from the balance sheet but may adjust for restricted cash. Without specific restriction details, we use the primary Balance Sheet figure or the one explicitly labeled for the statement of financial position. The difference is small (26m). We will use 10,155,000,000. * Are there other liquid assets to subtract? S&P sometimes subtracts "Cash and short-term investments". * "Current Financial Assets At Fair Value Through Profit Or Loss": 8,251,000,000 EUR. * "Other Current Financial Assets": 1,504,000,000 EUR. * Standard "Net Debt" usually just subtracts Cash & Cash Equivalents. "Net Debt" in strict banking terms is Debt - Cash. S&P's "Debt/EBITDA" usually uses "Gross Debt" minus "Cash and Cash Equivalents". Sometimes they use "Net Debt" which might include short-term investments if they are highly liquid and not part of operations. However, the most common standard definition for this ratio is (Total Debt - Cash & Cash Equivalents) / EBITDA. * Let's calculate Net Debt = 31,868 - 10,155 = 21,713,000,000 EUR. **3. Calculate Ratio** * **Net Debt:** 21,713,000,000 EUR * **EBITDA:** 26,454,000,000 EUR (Including Write-offs) or 25,855,000,000 EUR (Excluding Write-offs). * Let's check the S&P methodology nuance. S&P Global Ratings typically defines EBITDA as reported operating income plus depreciation, amortization, and exploration expenses (if expensed), and adds back impairments. Write-offs are often added back as non-recurring. * Let's use the more inclusive EBITDA: 26,454,000,000 EUR. * Ratio = 21,713 / 26,454 ≈ 0.82. Let's double check the Debt components. Does S&P include "Other Noncurrent Financial Assets" or similar in debt? No, those are assets. Does S&P include "Trade And Other Current Payables"? No, that's working capital. Does S&P include "Provisions"? No. Let's re-verify the "Cash" deduction. If we strictly follow "Net Debt" = Interest Bearing Debt - Cash. Interest Bearing Debt = Short Term Borrowings + Current LT Debt + LT Borrowings + Lease Liabilities. Sum = 4,446 + 3,097 + 19,374 + 884 + 4,067 = 31,868. Cash = 10,155. Net Debt = 21,713. Let's re-verify EBITDA. Operating Profit: 17,510. + D&A: 7,205. + Impairment: 1,140. + Write-offs: 599. EBITDA = 26,454. Ratio = 21,713 / 26,454 = 0.8207... Alternative EBITDA calculation: If we exclude Write-offs (599): EBITDA = 25,855. Ratio = 21,713 / 25,855 = 0.839... If we exclude Impairments and Write-offs (assuming they are non-operating or one-off, but S&P usually adds them back to get to a recurring earnings power view, or keeps them if they are recurring. In Oil & Gas, impairments are common. S&P usually adds them back for leverage ratios to smooth volatility). Let's consider if "Current Financial Assets At Fair Value" should be netted against debt. S&P sometimes calculates "Net Debt" by subtracting cash and *cash equivalents* and sometimes *short-term investments* if they are considered part of liquidity management. However, the standard "Net Debt" label usually implies just Cash & Cash Equivalents. If we subtracted the 8,251 in financial assets, Net Debt would drop significantly to ~13.4bn, ratio ~0.5. But "Financial Assets at FV" are not strictly cash equivalents. We will stick to Cash & Cash Equivalents. Let's consider if Lease Liabilities should be included. S&P *does* include lease liabilities in debt for leverage ratios (Debt/EBITDA). So the inclusion of 884 + 4,067 is correct. Let's consider if there is any "Minority Interest" adjustment in EBITDA. S&P EBITDA is usually pre-minority interest (Consolidated). The Operating Profit is consolidated. Final check on numbers: Debt: Short-term borrowings: 4,446 Current portion LT: 3,097 LT Borrowings: 19,374 Current Lease: 884 Non-current Lease: 4,067 Total Debt = 31,868 Cash: 10,155 Net Debt = 21,713 EBITDA: Op Profit: 17,510 D&A: 7,205 Impairment: 1,140 Write-off: 599 Total EBITDA = 26,454 Ratio: 21,713 / 26,454 = 0.82 If we use the stricter EBITDA (without write-offs): 25,855. Ratio: 0.84 If we do not add back Impairment (assuming it's cash or recurring? No, impairment is non-cash): EBITDA = 17,510 + 7,205 = 24,715. Ratio: 21,713 / 24,715 = 0.88 S&P Methodology specifically states: "EBITDA is earnings before interest, taxes, depreciation, and amortization. We generally add back noncash charges such as impairment losses." It also often adds back exploration expenses if expensed (not applicable here likely, as they are capitalized or in D&A) and non-recurring items. Write-offs are non-cash. So 0.82 seems the most accurate S&P-aligned estimate. 0.82