Based on the provided facts for “ENI S.P.A.”, here is the step-by-step analysis: **1. Identify the relevant industry** ENI S.P.A. is a major integrated oil and gas company. The relevant methodology among those provided is "Oil And Gas Exploration And Production" (with considerations for National Oil Companies, though ENI is not a typical NOC, the E&P methodology applies). **2. Estimate 2021 Adjusted_EBITDA** We start with the baseline formula and make sector-specific adjustments. *Adjusted_EBITDA = EBITDA (reported or reconstructed) + adjustment_leases + nonrecurring_losses - nonrecurring_gains ± pension_adjustments ± joint_venture_proportional_EBITDA ± other_normalization_adjustments* - **Reconstructed EBITDA:** Profit Loss From Operating Activities (2021): 12,341,000,000 + Depreciation And Amortisation Expense (2021): 7,063,000,000 + Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss (2021): 167,000,000 + Write Off Of Tangible And Intangible Assets (2021): 387,000,000 **EBITDA = 12,341 + 7,063 + 167 + 387 = 19,958,000,000** - **Adjustment for leases:** We add back lease depreciation (component of Depreciation And Amortisation Expense) and lease interest (component of Finance Costs). For simplicity and following the spirit of S&P adjustments, we add back the Depreciation of Right-of-Use assets and Finance Costs on leases. From the Cash Flow Statement: Payments Of Lease Liabilities (2021): 939,000,000. The difference between lease depreciation + interest and this payment is typically an approximation. Lacking detailed breakdown, operating EBITDA already excludes lease interest. The "Payments of Lease Liabilities" is a reduction of debt. To adjust EBITDA, we add back lease depreciation. We do not have the exact lease depreciation for 2021, but the change in Right-of-Use Assets (2021-01-01: 4,821,000,000; 2022-01-01: 4,821,000,000 - we have 2022-01-01 and 2023-01-01 values) suggests depreciation. Wait, we have "Rightofuse Assets" 2022-01-01: 4,821,000,000 and 2023-01-01: 4,446,000,000. The 2021 end is 2022-01-01. We don't have 2021-01-01 Right-of-Use Assets. We will approximate: Finance Costs (2021): 4,216,000,000. We don't know the interest portion on leases. Since S&P typically adds back the entire lease payment to EBITDA (as it's considered a "lease depreciation and interest" proxy) or adjusts via debt, the simpler, verifiable route is to add back the lease liability payments. No, the standard is to add back lease depreciation and interest to EBITDA, and then gross up debt. We lack data to perfectly split. Let's proxy: Payments of Lease Liabilities (939M) is cash outflow for principal and interest. The full expense recognized in P&L (Depreciation + Interest on lease) might be similar in magnitude over time, but this is approximate. Using standard S&P adjustments, we can approximate the pre-IFRS 16 EBITDA by adding back the operating lease expense. Given the lack of exact lease interest, I'll add back lease payments as a proxy for the operating lease expense (this is a common simplification). Adjusted EBITDA (2021) = 19,958 + 939 = 20,897,000,000 - **Nonrecurring items:** Impairment Loss Reversal (2021): 167,000,000 (loss). Already added back in EBITDA reconstruction. Other Income And Revenues: 1,196,000,000. Other Operating Income Expense (2021): 903,000,000. Write Off Of Tangible And Intangible Assets (2021): 387,000,000 (loss). Already added back. Without deeper data, we'll use the reconstructed EBITDA as a base and add back the operating lease payments. No further adjustments for impairment/write-offs are needed as they were added back. **2021 Adjusted EBITDA = 19,958,000,000 + 939,000,000 = 20,897,000,000** **3. Estimate 2021 FFO** *FFO = Adjusted_EBITDA - cash_interest - cash_taxes* - **Cash Interest:** Finance Costs (2021): 4,216,000,000. Finance Income (2021): 3,723,000,000. Net finance cost (P&L) = 4,216 - 3,723 = 493,000,000. We need cash interest paid. Interest Paid Classified As Operating Activities (2021): 792,000,000. Interest Received Classified As Operating Activities (2021): 28,000,000. Net cash interest = 792 - 28 = 764,000,000. We also need cash interest from leases? The cash flow statement says Payments Of Lease Liabilities (2021) = 939,000,000. This includes principal and interest. If we use the simplified approach where Adjusted_EBITDA adds back the lease payment, we should subtract the total payment as an interest proxy. Correct approach: FFO = Adjusted_EBITDA (which already has leases added back) - Net Cash Interest (Non-Lease) - Lease Payments. FFO = 20,897,000,000 - 764,000,000 - 939,000,000 = 19,194,000,000. - **Cash Taxes:** Income Taxes Paid (2021): 3,726,000,000. **2021 FFO = 19,194,000,000 - 3,726,000,000 = 15,468,000,000** **4. Estimate 2021 Adjusted_Debt** *Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash* - **Reported Debt (2021-01-01 values):** Shortterm Borrowings: 2,299,000,000 Current Portion Of Longterm Borrowings: 1,781,000,000 Longterm Borrowings: 23,714,000,000 Total reported debt = 2,299 + 1,781 + 23,714 = 27,794,000,000 - **Leases:** Current Lease Liabilities: 948,000,000 Noncurrent Lease Liabilities: 4,389,000,000 Total Leases = 5,337,000,000 - **Pension Deficit:** Noncurrent Provisions For Employee Benefits: 819,000,000 Other Longterm Provisions: 13,593,000,000. (We assume the employee benefits are the main pension-related item). S&P typically includes the unfunded pension liability. We'll use Noncurrent Provisions For Employee Benefits as a proxy for pension deficit = 819,000,000. - **Other debt-like items (hybrids, guarantees, etc.):** Not explicitly identifiable from the data. We'll assume 0 for this simplified analysis. - **Eligible Cash:** Cash And Cash Equivalents (2021-01-01): 8,254,000,000. (S&P typically uses surplus cash, but we'll use the full amount as an estimate). **2021 Adjusted Debt = 27,794,000,000 + 5,337,000,000 + 819,000,000 - 8,254,000,000 = 25,696,000,000** **5. Calculate 2021 Adjusted_Debt / Adjusted_EBITDA** 25,696 / 20,897 = 1.23x **6. Calculate 2021 FFO / Adjusted_Debt** 15,468 / 25,696 = 0.602 --- **7. Estimate 2022 Adjusted_EBITDA** - **Reconstructed EBITDA:** Profit Loss From Operating Activities (2022): 17,510,000,000 + Depreciation And Amortisation Expense (2022): 7,205,000,000 + Impairment Loss Reversal Of Impairment Loss (2022): 1,140,000,000 + Write Off Of Tangible And Intangible Assets (2022): 599,000,000 EBITDA = 17,510 + 7,205 + 1,140 + 599 = 26,454,000,000 - **Adjustment for leases:** Payments Of Lease Liabilities (2022): 994,000,000 Adjusted EBITDA (2022) = 26,454 + 994 = 27,448,000,000 **2022 Adjusted EBITDA = 27,448,000,000** **8. Estimate 2022 FFO** - **Cash Interest:** Interest Paid (2022): 851,000,000. Interest Received (2022): 116,000,000. Net cash interest = 851 - 116 = 735,000,000. - **FFO Calculation:** FFO = Adjusted EBITDA - Net Cash Interest - Lease Payments FFO = 27,448 - 735 - 994 = 25,719,000,000 - **Cash Taxes:** Income Taxes Paid (2022): 8,488,000,000. **2022 FFO = 25,719,000,000 - 8,488,000,000 = 17,231,000,000** **9. Estimate 2022 Adjusted_Debt** - **Reported Debt (2022-01-01 values):** Shortterm Borrowings: 4,446,000,000 Current Portion Of Longterm Borrowings: 3,097,000,000 Longterm Borrowings: 19,374,000,000 Total reported debt = 4,446 + 3,097 + 19,374 = 26,917,000,000 - **Leases:** Current Lease Liabilities: 884,000,000 Noncurrent Lease Liabilities: 4,067,000,000 Total Leases = 4,951,000,000 - **Pension Deficit:** Noncurrent Provisions For Employee Benefits: 786,000,000. - **Eligible Cash:** Cash And Cash Equivalents (2022-01-01): 10,155,000,000. **2022 Adjusted Debt = 26,917,000,000 + 4,951,000,000 + 786,000,000 - 10,155,000,000 = 22,499,000,000** **10. Calculate 2022 Adjusted_Debt / Adjusted_EBITDA** 22,499 / 27,448 = 0.82x **11. Calculate 2022 FFO / Adjusted_Debt** 17,231 / 22,499 = 0.766 --- **12. Classify Year-on-Year Credit Trend** - **Signal 1: Leverage (Debt/EBITDA)** Change = 0.82x - 1.23x = -0.41x. This is ≤ -0.2x → **Improving**. - **Signal 2: Cash-flow coverage (FFO/Debt)** Change = 0.766 - 0.602 = +0.164 (i.e., +16.4 percentage points). This is ≥ +0.03 → **Improving**. Both signals agree and strongly point to an improving credit trend. Improving