Step 1 — Relevant industry Ørsted A/S is primarily a renewable power generation and energy company, with large offshore wind and other power/gas activities. Based on the provided methodologies, the closest fit is Unregulated Power And Gas rather than Regulated Utilities, because the company is not presented as a rate-regulated network utility and has material exposure to generation, trading, power/gas markets, and renewables. I therefore use the general corporate baseline formulas, with no additional sector-specific adjustments beyond leases and hybrid treatment where observable from the provided data. --- Step 2 — Estimate 2021 Adjusted EBITDA Reported EBITDA 2021: - Profit/loss from operating activities before interest, taxes, depreciation and amortisation = DKK 24,296m Lease adjustment: - Lease liabilities are already included in adjusted debt below. - No separate lease interest/depreciation split is provided to add back beyond reported EBITDA. - Since reported EBITDA is already before depreciation/amortisation and lease liabilities are captured in debt, I do not make an additional EBITDA adjustment. Nonrecurring gains/losses and other normalizations: - Gains/losses on disposals are outside operating profit and not included in reported EBITDA. - Other income and expenses are embedded in EBITDA, but the facts do not clearly identify recurring versus nonrecurring components. - No pension/JV proportional EBITDA adjustment is possible from the data. Estimated 2021 Adjusted EBITDA: - Adjusted EBITDA 2021 = DKK 24,296m --- Step 3 — Estimate 2021 FFO Formula: FFO = Adjusted EBITDA − cash interest − cash taxes Inputs 2021: - Adjusted EBITDA = DKK 24,296m - Interest paid classified as operating activities = DKK 3,985m - Income taxes paid classified as operating activities = DKK 1,380m Calculation: - FFO 2021 = 24,296 − 3,985 − 1,380 - FFO 2021 = DKK 18,931m --- Step 4 — Estimate 2021 Adjusted Debt Use balance sheet at 2022-01-01 as the end-2021 position. Reported borrowings and leases: - Long-term borrowings = DKK 31,502m - Short-term borrowings = DKK 19,493m - Noncurrent lease liabilities = DKK 6,812m - Current lease liabilities = DKK 720m Hybrid capital: - Hybrid capital = DKK 17,984m - S&P often gives intermediate equity credit to qualifying hybrids. A common simplifying assumption is 50% debt / 50% equity treatment. - Hybrid debt portion = 50% × 17,984 = DKK 8,992m Eligible cash: - Cash = DKK 8,624m - No restrictions are provided, so I treat cash as eligible cash. Calculation: - Gross debt before cash = 31,502 + 19,493 + 6,812 + 720 + 8,992 - Gross debt before cash = DKK 67,519m - Adjusted Debt 2021 = 67,519 − 8,624 - Adjusted Debt 2021 = DKK 58,895m --- Step 5 — 2021 Adjusted Debt / Adjusted EBITDA Calculation: - Adjusted Debt / Adjusted EBITDA 2021 = 58,895 / 24,296 - Adjusted Debt / Adjusted EBITDA 2021 = 2.42x --- Step 6 — 2021 FFO / Adjusted Debt Calculation: - FFO / Adjusted Debt 2021 = 18,931 / 58,895 - FFO / Adjusted Debt 2021 = 0.321, or 32.1% --- Step 7 — Estimate 2022 Adjusted EBITDA Reported EBITDA 2022: - Profit/loss from operating activities before interest, taxes, depreciation and amortisation = DKK 32,057m Adjustments: - No clear lease EBITDA adjustment is available. - No clearly separable nonrecurring items are adjusted. - No pension/JV proportional adjustment is possible from provided facts. Estimated 2022 Adjusted EBITDA: - Adjusted EBITDA 2022 = DKK 32,057m --- Step 8 — Estimate 2022 FFO Formula: FFO = Adjusted EBITDA − cash interest − cash taxes Inputs 2022: - Adjusted EBITDA = DKK 32,057m - Interest paid classified as operating activities = DKK 8,548m - Income taxes paid classified as operating activities = DKK 1,263m Calculation: - FFO 2022 = 32,057 − 8,548 − 1,263 - FFO 2022 = DKK 22,246m --- Step 9 — Estimate 2022 Adjusted Debt Use balance sheet at 2023-01-01 as the end-2022 position. Reported borrowings and leases: - Long-term borrowings = DKK 60,451m - Short-term borrowings = DKK 2,830m - Noncurrent lease liabilities = DKK 7,697m - Current lease liabilities = DKK 569m Hybrid capital: - Hybrid capital = DKK 19,793m - Hybrid debt portion = 50% × 19,793 = DKK 9,896.5m Eligible cash: - Cash = DKK 16,178m Calculation: - Gross debt before cash = 60,451 + 2,830 + 7,697 + 569 + 9,896.5 - Gross debt before cash = DKK 81,443.5m - Adjusted Debt 2022 = 81,443.5 − 16,178 - Adjusted Debt 2022 = DKK 65,265.5m --- Step 10 — 2022 Adjusted Debt / Adjusted EBITDA Calculation: - Adjusted Debt / Adjusted EBITDA 2022 = 65,265.5 / 32,057 - Adjusted Debt / Adjusted EBITDA 2022 = 2.04x --- Step 11 — 2022 FFO / Adjusted Debt Calculation: - FFO / Adjusted Debt 2022 = 22,246 / 65,265.5 - FFO / Adjusted Debt 2022 = 0.341, or 34.1% --- Step 12 — Year-on-year credit trend Signal 1: Leverage - 2021 Adjusted Debt / EBITDA = 2.42x - 2022 Adjusted Debt / EBITDA = 2.04x - Change = 2.04 − 2.42 = -0.38x Threshold: - ≤ -0.2x = Improving Leverage signal: Improving Signal 2: Cash-flow coverage - 2021 FFO / Adjusted Debt = 0.321 - 2022 FFO / Adjusted Debt = 0.341 - Change = 0.341 − 0.321 = +0.020 Threshold: - Between -0.03 and +0.03 = Stable Cash-flow coverage signal: Stable Combining signals: - Leverage indicates Improving. - FFO/debt indicates Stable. - Per the stated rules, if one signal is Stable and the other is Improving, return the non-Stable category. Final credit trend: Improving Improving