I'll work through this step-by-step for NATURGY ENERGY GROUP SA.

## Step 1: Identify the Relevant Industry

Naturgy is a Spanish energy company. Based on the facts provided, it operates in:
- Gas distribution and supply
- Electricity generation, distribution, and supply
- LNG infrastructure

This is a **multi-utility** with both regulated and unregulated activities. Given the mix of regulated utilities (gas/electricity distribution networks) and unregulated power and gas activities (generation, supply, LNG), I need to determine which methodology applies. The company has significant regulated network activities but also substantial unregulated/market-exposed activities.

Looking at the company structure and the S&P methodologies:
- The company has network/distribution activities (regulated)
- It also has generation, LNG, and supply activities (unregulated/market exposed)

Given the mixed nature, I'll apply the **general corporate baseline formulas** with appropriate adjustments from the regulated utilities and unregulated power and gas methodologies where relevant. However, for the core FFO-to-debt calculation, the general approach is most applicable.

## Step 2: Estimate Adjusted_EBITDA

From the facts:
- "Beneficio Bruto De Explotacion Ebitda" (reported EBITDA) for 2022: **4,954,000,000 EUR**

Now I need to check for adjustments:

**Leases:** The company reports right-of-use assets and lease liabilities under IFRS 16.
- Right-of-use assets 2022: 1,229,000,000 EUR; 2023: 1,162,000,000 EUR
- Noncurrent lease liabilities 2022: 1,325,000,000 EUR; 2023: 1,309,000,000 EUR
- Current lease liabilities 2022: 196,000,000 EUR; 2023: 177,000,000 EUR

For S&P purposes, operating leases are typically added back. However, with IFRS 16 already capitalized, we need to consider if EBITDA already includes the full lease expense or if we need to adjust. Under IFRS 16, EBITDA typically includes depreciation of right-of-use assets and interest on lease liabilities is below EBITDA. The reported EBITDA of 4,954M likely already reflects IFRS 16 treatment where lease depreciation is part of operating expenses or the lease expense is split.

Actually, looking more carefully: Under IFRS 16, the "lease expense" for many leases is replaced by depreciation and interest. EBITDA typically excludes depreciation but may include the interest portion or the full former lease payment depending on classification. 

For S&P methodology, when companies report under IFRS 16, we typically:
- Add back the lease depreciation (already in EBITDA if it's part of operating costs, or it's already excluded from EBITDA)
- The interest portion of leases needs to be considered in cash interest

Given the complexity, let me check if there's a clearer approach. The S&P methodology for regulated utilities mentions: "Where substantial seasonal working capital requirements distort leverage measures, we adjust inventory and debt balances by netting the value of inventory against outstanding short-term borrowings."

For the EBITDA adjustment, I need to determine if reported EBITDA needs lease adjustment. Looking at typical S&P treatment for IFRS 16 companies: S&P typically makes an adjustment to add back the lease depreciation and subtract the lease interest to get a "lease-adjusted" EBITDA comparable to pre-IFRS 16, or they accept IFRS 16 EBITDA with adjustments to debt.

Let me use a practical approach: For FFO calculations, S&P typically uses funds from operations starting from net income and adding back non-cash items, or from EBITDA minus cash interest minus cash taxes.

Actually, let me re-read the S&P methodology more carefully. The standard approach is:
- Adjusted EBITDA = EBITDA + lease adjustments (if operating leases not already capitalized) + nonrecurring items

Under IFRS 16, since leases are already capitalized, the reported EBITDA should already be comparable to the old "EBITDA before lease expense" concept, because the operating lease expense is replaced by depreciation (below EBITDA line) and interest (below EBITDA line). So no EBITDA adjustment needed for leases under IFRS 16 for the EBITDA figure itself.

However, for debt calculations, we need to add back lease liabilities.

Let me check for nonrecurring items:
- "Other Gains Losses" 2022: -111,000,000 EUR (this is a loss)
- "Gains On Disposals Of Property Plant And Equipment" 2022: 8,000,000 EUR (gain)

These appear to be nonrecurring or below-the-line items. The "Other Gains Losses" of -111M is already reflected in operating profit (it's part of "Profit Loss From Operating Activities" calculation).

Looking at the P&L structure:
- EBITDA: 4,954M
- Amortization and impairment: -1,532M
- Credit loss allowance change: +228M
- Other gains/losses: -111M
- Operating profit: 3,083M

So "Other Gains Losses" of -111M is already below EBITDA. This suggests it's not part of EBITDA, so no adjustment needed for EBITDA.

The "Gains On Disposals Of Property Plant And Equipment" of 8M is also below EBITDA.

For pension adjustments: No explicit pension liability information is provided in the balance sheet items.

For joint ventures: "Share Of Other Comprehensive Income Of Associates And Joint Ventures" is 128M, but this is OCI, not profit share. The equity method investments are 630M (2022) and 656M (2023). No explicit share of profit of associates is shown in the P&L summary.

Given limited information on joint venture proportional EBITDA, I'll proceed with reported EBITDA.

**Adjusted_EBITDA = 4,954,000,000 EUR**

(I'll note that if there are material joint ventures, we might need to add proportional EBITDA, but the data doesn't clearly show this separately from the equity method investment income)

## Step 3: Estimate FFO

Baseline formula: FFO = Adjusted_EBITDA - cash_interest - cash_taxes

From the cash flow statement:
- "Interest Paid Classified As Operating Activities": 520,000,000 EUR
- "Income Taxes Paid Classified As Operating Activities": 762,000,000 EUR

However, S&P typically uses "cash interest" which includes all interest paid, regardless of classification. Let me check if there's interest in financing activities. Looking through the financing activities section, I don't see separate interest items.

The cash flow shows:
- Interest Paid (operating): 520M
- Interest Received (operating): 87M

For FFO, S&P uses cash interest paid (gross), not net of interest received.

**Cash interest = 520,000,000 EUR**

**Cash taxes = 762,000,000 EUR**

**FFO = 4,954,000,000 - 520,000,000 - 762,000,000 = 3,672,000,000 EUR**

Wait - let me verify this against the indirect method. The cash flow from operations is 4,242M. Let me reconcile:

Starting from profit: 1,826M (net income)
+ Adjustments to reconcile: 3,057M
+ Working capital changes: -272M
+ Other operating cash flows: -1,089M
+ Interest paid: 520M
+ Interest received: -87M (this is an inflow, so subtract from uses or add to sources)
+ Dividends received: -106M
+ Income taxes paid: 762M

Actually, the cash flow statement shows:
"Cash Flows From Used In Operating Activities": 4,242,000,000 EUR

This is the net operating cash flow. Let me verify with the components:
- Profit: 1,826M
- Adjustments: 3,057M → subtotal 4,883M
- Working capital: -272M → subtotal 4,611M
- Other inflows/outflows: -1,089M → subtotal 3,522M
- Interest paid: -520M → wait, this would reduce it

Actually, looking at the signs: "Interest Paid Classified As Operating Activities" 2022-2023: 520,000,000 EUR. The positive number suggests this is a cash outflow (positive in "used in" context, or it's reported as absolute amount).

Let me re-interpret: The line items with positive values in the cash flow section likely represent outflows when they're "used in" activities. But "Cash Flows From Used In Operating Activities" is positive 4,242M, which means net cash generated from operating activities is 4,242M.

Standard IFRS cash flow presentation:
- Operating activities: starts with profit, adjustments, then changes in working capital, then interest paid, interest received, dividends received, taxes paid

Looking at the pattern: "Interest Paid" 520M, "Interest Received" 87M, "Dividends Received" 106M, "Income Taxes Paid" 762M - these are all shown as positive numbers, suggesting they're absolute values or outflows.

But "Cash Flows From Used In Operating Activities" is positive 4,242M, meaning "cash generated from operating activities" is 4,242M.

Let me try: Profit 1,826 + adjustments 3,057 = 4,883. Working capital -272 = 4,611. Other -1,089 = 3,522. Then + interest received 87 + dividends received 106 - interest paid 520 - taxes paid 762 = 3,522 + 87 + 106 - 520 - 762 = 2,433. That doesn't equal 4,242.

Alternative: Maybe "Other Inflows Outflows Of Cash Classified As Operating Activities" (-1,089M) already includes some items.

Let me try a different reconciliation. Perhaps the 4,242M is after all these items. Let me see: 1,826 + 3,057 - 272 - 1,089 - 520 + 87 + 106 - 762 = ... no.

Actually, looking more carefully at IFRS cash flow statements: The standard format is:
1. Profit before tax
2. Adjustments to reconcile profit to net cash
3. Changes in working capital
4. Interest paid
5. Interest received
6. Dividends received
7. Income taxes paid
8. Net cash from operating activities

So: 1,826 (profit) + 3,057 (adjustments) = 4,883. But wait, profit is after tax, so we need to add back tax.

Actually, the starting point is usually "profit before tax" or "profit". Let me check: "Profit Loss" is 1,826M. If we start with profit before tax (2,546M) + adjustments...

Let me try: Profit before tax 2,546 + adjustments for depreciation etc. The "Adjustments For Reconcile Profit Loss" is 3,057M which includes depreciation 1,532M and other adjustments 1,525M.

Starting from profit after tax 1,826: add back tax 697 = 2,523. Add adjustments 3,057 = 5,580. Working capital -272 = 5,308. Other -1,089 = 4,219. Interest paid -520, interest received +87, dividends received +106, taxes paid -762 = 4,219 - 520 + 87 + 106 - 762 = 3,130. Not matching 4,242.

Hmm, let me try: Maybe "Other Inflows Outflows" is -1,089 but this is already after some items.

Actually, I think I need to re-read the cash flow. The items listed as separate lines after "Other Inflows Outflows" might be part of the operating cash flow calculation.

Let me try: 4,883 (profit + adjustments) - 272 (WC) - 1,089 (other) = 3,522. Then -520 (interest paid) +87 (interest received) +106 (dividends received) -762 (taxes paid) = 2,433. Still not 4,242.

Wait - maybe the "Adjustments For Reconcile Profit Loss" 3,057M already includes the tax add-back? Or maybe profit before tax is used?

Let me check: Profit before tax 2,546M. Add adjustments 3,057M = 5,603M. Less working capital 272M = 5,331M. Less other 1,089M = 4,242M. Then interest paid, received, dividends, taxes are part of... no, that gets to 4,242 before those items.

Actually, I think the sequence might be:
- Profit before tax: 2,546M
- Adjustments: 3,057M → 5,603M
- Working capital: -272M → 5,331M  
- Interest received: +87M → 5,418M
- Dividends received: +106M → 5,524M
- Interest paid: -520M → 5,004M
- Income taxes paid: -762M → 4,242M

Yes! That matches. So "Other Inflows Outflows Of Cash Classified As Operating Activities" (-1,089M) might include other items, or my interpretation is off.

Actually re-checking: 5,331 - 1,089 = 4,242. So "Other Inflows Outflows" of -1,089M brings us to 4,242M. Then the interest and tax items are... hmm, but 4,242 is the final answer.

Let me try: 2,546 + 3,057 - 272 - 520 + 87 + 106 - 762 = 4,242? = 2,546 + 3,057 = 5,603; -272 = 5,331; -520 = 4,811; +87 = 4,898; +106 = 5,004; -762 = 4,242. Yes!

So the "Other Inflows Outflows" of -1,089M is NOT part of this calculation, or it's included differently.

Wait, I need to re-read. The items listed:
- "Increase Decrease In Working Capital" -272M
- "Other Inflows Outflows Of Cash Classified As Operating Activities" -1,089M
- "Interest Paid" 520M
- "Interest Received" 87M
- "Dividends Received" 106M
- "Income Taxes Paid" 762M

Hmm, but my calculation without "Other Inflows Outflows" gives 4,242. So maybe "Other Inflows Outflows" is already included in the 3,057M adjustments, or it's a separate presentation.

Actually, looking at typical IFRS statements, "Other inflows/outflows" might include items like provisions changes, fair value changes, etc.

Regardless, the net operating cash flow is 4,242M.

For S&P FFO, the standard definition is:
FFO = Funds From Operations = Net income from continuing operations + depreciation and amortization + deferred income taxes + other non-cash items

Or alternatively: FFO = EBITDA - cash interest - cash taxes (when using the EBITDA approach)

Let me use the more precise S&P definition. From the cash flow approach, FFO is typically:
- Net income + D&A + deferred taxes + other non-cash - working capital changes (sometimes)

Actually, S&P FFO is typically calculated as:
FFO = Net income + depreciation and amortization + deferred income taxes + other non-cash items - gains on asset sales + other adjustments

Or from the EBITDA approach: EBITDA - cash interest - cash taxes

Using EBITDA approach: 4,954 - 520 - 762 = 3,672M

But let me verify with the net income approach:
Net income 1,826 + D&A and impairment 1,532 + deferred tax (change in deferred tax assets/liabilities) + other non-cash items.

Deferred tax assets: 2,267M (2022) to 2,210M (2023), so decrease of 57M
Deferred tax liabilities: 1,787M (2022) to 1,951M (2023), so increase of 164M

Net deferred tax liability increase = 164 - (-57) = 221M... or deferred tax expense is part of the 697M total tax.

Actually, the income tax expense is 697M, cash taxes paid are 762M. So deferred tax benefit = 697 - 762 = -65M (or deferred tax expense is negative, meaning benefit).

FFO = 1,826 + 1,532 + (-65, adjustment for deferred taxes) + other non-cash...

This gets complicated. Let me stick with the EBITDA approach which is cleaner.

But wait - S&P FFO from EBITDA is: EBITDA - cash interest - cash taxes. However, this assumes EBITDA is "clean" and comparable.

Actually, I realize I need to check if the 4,954M EBITDA includes all the right components. Let me verify from the P&L:

Revenue 33,965
- Raw materials 27,194
+ Other income 183
- Employee benefits 547
- Misc operating expenses 1,511
+ Gains on disposals 8
+ Government grants 50
= EBITDA? 

33,965 - 27,194 + 183 - 547 - 1,511 + 8 + 50 = 4,954. Yes, matches!

So EBITDA = 4,954M is correct.

Now for FFO using S&P standard: 
FFO = EBITDA - cash interest - cash taxes + dividends received (sometimes included, sometimes not)

S&P typically includes dividends received from investments as part of FFO if they're from operating activities. The cash flow shows dividends received of 106M classified as operating.

However, in the EBITDA approach, dividends received are typically NOT included in EBITDA, so we'd need to add them if we want them in FFO.

Actually, let me check S&P methodology more precisely. FFO typically includes:
- Operating cash flows before working capital changes
- Which includes dividends received from operating activities

From the indirect method, FFO would be:
Net income + D&A + deferred taxes + other non-cash - gain/loss on sales + dividends received from investments ± other items

Or: Operating cash flow before working capital changes - interest paid + interest received (sometimes)...

Actually, the most common S&P formula is:
FFO = Net income + depreciation and amortization + deferred income taxes + other non-cash items

Let me calculate this:
Net income: 1,826M
+ D&A and impairment: 1,532M
+ Increase in credit loss allowance: -228M (this is a negative adjustment, meaning it reduced profit but was non-cash? Actually, "Increase Decrease In Allowance Account For Credit Losses" is -228M, meaning decrease in allowance, which is a gain. This is likely already in profit.)
+ Other gains/losses: -111M (loss, already in profit)

Hmm, the "Adjustments For Reconcile Profit Loss" of 3,057M already includes all these items.

Let me try: FFO = Operating cash flow before working capital changes
= 4,242 (net operating CF) + 272 (working capital) - 87 (interest received) - 106 (dividends received) + 520 (interest paid) + 762 (taxes paid) ... no that's getting messy.

Actually, "cash generated from operations before working capital changes" or "operating cash flow before changes in working capital" is a common metric.

From the cash flow: Profit 1,826 + Adjustments 3,057 = 4,883M. This is "cash generated from operations before working capital changes" if we start with profit after tax and add back non-cash items.

But wait, we need to add back tax to get to pre-tax. Or the adjustments include tax add-back.

Let me check: Profit before tax 2,546. Add adjustments (excluding tax) = ?

The adjustments of 3,057 include:
- Depreciation and amortization: 1,532
- Other adjustments: 1,525

If starting from profit after tax 1,826, to get to "cash from operations before working capital":
1,826 + 697 (tax expense) + 1,532 (D&A) + other non-cash items - gains on sales + ...

Actually, let me just use: 1,826 + 1,532 + (other adjustments that are non-cash). The "Other Adjustments To Reconcile Profit Loss" is 1,525M. This likely includes items like provisions, deferred taxes, gains/losses, etc.

So FFO ≈ 1,826 + 3,057 = 4,883M before working capital. Then subtract working capital changes to get to 4,611M, then other items.

But S&P FFO is typically after working capital changes or before? Actually, S&P FFO is usually "funds from operations" which is closer to "cash from operations before working capital changes" or sometimes includes working capital.

Standard S&P FFO definition: Net income + depreciation + deferred taxes + other non-cash items. This is BEFORE working capital changes.

So FFO = 4,883M (approximately)? But then we need to subtract cash interest and cash taxes to get from EBITDA to FFO? No, that's a different approach.

Let me reconcile: EBITDA 4,954 - cash interest 520 - cash taxes 762 = 3,672. But this doesn't include dividends received, and assumes clean EBITDA.

Alternatively, from net income: 1,826 + 1,532 (D&A) + deferred tax benefit/expense + other non-cash. If total adjustments are 3,057 and this includes everything to get from profit to "cash before working capital", then FFO = 4,883M.

But 4,883 ≠ 3,672. What's the difference?

The EBITDA approach (4,954 - 520 - 762 = 3,672) gives a lower number because:
- EBITDA includes other income (183M), gains on disposals (8M), government grants (50M) which are pre-tax
- Net income approach starts lower and adds back more

Actually, let me check: 4,954 (EBITDA) - 1,532 (D&A) - 228 (credit loss decrease, a gain) - 111 (other losses, so +111 expense?) = ... no.

From EBITDA to operating profit: 4,954 - 1,532 (D&A) + 228 (credit loss decrease, positive) - 111 (other losses) = 3,539. But reported operating profit is 3,083. Difference of 456M.

Hmm, let me recalculate: 4,954 - 1,532 = 3,422. Then +228 (decrease in allowance is a gain, so this reduces expenses, meaning it was subtracted to get to operating profit? Actually, if allowance decreases, that's a gain/reduction in expense, so it would be added to profit).

Wait, the line says "Increase Decrease In Allowance Account For Credit Losses Of Financial Assets" 2022-01-01 - 2023-01-01: -228,000,000 EUR. The negative means decrease in allowance (reduction in expense, or gain).

So from EBITDA 4,954: subtract D&A 1,532 = 3,422. Add credit loss decrease 228 = 3,650. Subtract other losses 111 = 3,539. But operating profit is 3,083. Difference is 456M.

Looking at the P&L items I might have missed: "Other Income" 183M and "Gains On Disposals" 8M and "Revenue From Government Grants" 50M are already IN EBITDA (they're income items). 

Hmm, let me recalculate EBITDA from the components:
Revenue 33,965
- Raw materials 27,194 = 6,771
+ Other income 183 = 6,954
- Employee benefits 547 = 6,407
- Misc operating expenses 1,511 = 4,896
+ Gains on disposals 8 = 4,904
+ Government grants 50 = 4,954

Yes, that's correct. Gains on disposals and government grants are included in EBITDA.

Now from EBITDA 4,954 to operating profit 3,083:
- D&A and impairment: -1,532 → 3,422
- Credit loss allowance change: +228 → 3,650 (decrease in allowance is income/gain)
- Other gains/losses: -111 → 3,539

Still not 3,083. Difference of 456M. 

Wait - I need to check if "Other Income" 183M is part of operating or non-operating. Looking at typical presentation, other income might be operating. But let me check if there are other expenses I missed.

Actually, looking back at the original data, I see "Beneficio Bruto De Explotacion Ebitda" is explicitly given as 4,954M. And "Profit Loss From Operating Activities" is 3,083M. The difference should be explained by depreciation, amortization, and impairment.

4,954 - 1,532 = 3,422. Then there must be other items of -339M to get to 3,083.

Looking at the items: "Increase Decrease In Allowance Account For Credit Losses Of Financial Assets" -228M (negative means decrease, so this is a gain of 228M). "Other Gains Losses" -111M (negative means loss of 111M).

So: 3,422 + 228 - 111 = 3,539. Still not 3,083.

Hmm, maybe "Other Gains Losses" is not part of the operating profit calculation, or there's something else.

Actually, re-reading: The sequence might be:
EBITDA 4,954
- D&A and impairment 1,532 = EBIT before other items 3,422
+ Credit loss decrease 228 = 3,650
- Other losses 111 = 3,539
= Operating profit? But reported is 3,083.

Maybe "Other Income" 183M is not in EBITDA? Let me check: if I exclude other income from EBITDA: 4,954 - 183 = 4,771. Then 4,771 - 1,532 + 228 - 111 = 3,356. Still not 3,083.

Or maybe gains on disposals 8M is not in operating profit? 4,954 - 8 = 4,946. Then 4,946 - 1,532 + 228 - 111 = 3,531.

Let me try removing government grants: 4,954 - 50 = 4,904. 4,904 - 1,532 + 228 - 111 = 3,489.

I think there might be additional operating expenses not explicitly listed, or the EBITDA figure includes/excludes certain items differently.

Actually, looking more carefully at the data structure, I notice "Other Income" and "Gains On Disposals" and "Revenue From Government Grants" are listed separately from the main expense items. In standard IFRS, "other income" can include non-operating items.

But regardless, the company explicitly reports EBITDA as 4,954M and operating profit as 3,083M. I'll use these as given.

For FFO calculation, let me use the cash flow approach which is more reliable:

From the cash flow statement, operating cash flow is 4,242M. This includes:
- Working capital changes: -272M
- Interest paid: -520M
- Interest received: +87M
- Dividends received: +106M
- Taxes paid: -762M

S&P FFO is typically defined as cash from operations before working capital changes, or sometimes as:
FFO = Net income + D&A + deferred taxes + other non-cash items

From the indirect method presentation:
Profit 1,826M
+ Adjustments 3,057M = 4,883M (this is "cash generated from operations before working capital changes")

Is this FFO? Not quite, because it includes interest paid and received, dividends received, and taxes paid or accrued.

Actually, standard S&P FFO calculation from cash flows:
FFO = Cash flow from operating activities
      + Changes in working capital
      - Interest paid (if classified as operating)
      + Interest received (if classified as operating, sometimes excluded)
      - Dividends received (sometimes)
      + Income taxes paid (or use tax expense)

Or more commonly:
FFO = Net income + depreciation and amortization + deferred income taxes + other non-cash items

Using: 1,826 + 3,057 = 4,883M. But this includes working capital changes? No, working capital is separate at -272M.

So "cash before working capital changes" = 4,883M. Then working capital -272M gives 4,611M. Then other items (interest, dividends, taxes) bring to 4,242M.

For S&P FFO, the standard is usually closer to 4,883M (before working capital) or sometimes 4,611M (after working capital but before financing items).

Actually, let me check S&P's precise definition. S&P FFO typically includes:
- Net income
+ Depreciation and amortization
+ Deferred income taxes
+ Other non-cash items

And EXCLUDES:
- Working capital changes
- Gains/losses on asset sales (if included in net income)
- Interest and dividend income (sometimes)

But in practice, S&P often uses "funds from operations" as a variant of EBITDA minus cash interest minus cash taxes, or as operating cash flow plus interest paid minus working capital changes.

Let me use the most common S&P approach for utilities:
FFO = EBITDA - cash interest - cash taxes

This gives: 4,954 - 520 - 762 = 3,672M

But I need to check if dividends received should be included. For utilities with investments, dividends from equity investments are often part of operating cash flows and could be considered in FFO.

If I include dividends received: 4,954 - 520 - 762 + 106 = 3,778M

Or using the "cash before working capital" approach: 4,883M. This is higher because it starts from net income which is after interest expense (not just cash interest) and after tax expense (not cash taxes).

The difference: 4,883 - 3,672 = 1,211M. This represents:
- Interest expense (accrual) vs cash interest: Finance costs 837M - cash interest 520M = 317M
- Tax expense 697M vs cash taxes 762M = -65M
- Other non-cash items in net income: other gains/losses, credit loss changes, etc.

Actually, I think the most standard S&P FFO for this type of company is:

FFO = Net income + depreciation and amortization + deferred taxes + other non-cash items
= 1,826 + 1,532 + (deferred tax adjustment) + other items

Or more simply, using the cash flow: FFO = 4,883M (before working capital) or FFO = 4,611M (after working capital, before interest and tax items in the CF).

Actually, I recall now: S&P's standard FFO definition is:
FFO = Funds from operations = Net income from continuing operations + depreciation and amortization + deferred income taxes + other non-cash items

Where "other non-cash items" typically includes things like stock-based compensation, gains/losses on asset sales, impairment charges, etc.

From the cash flow, the 3,057M adjustments include:
- D&A and impairment: 1,532M
- Other adjustments: 1,525M

So FFO = 1,826 + 3,057 = 4,883M (if starting from profit after tax and adding all adjustments back).

But wait - is profit after tax the right starting point? Usually we want continuing operations. The company has discontinued operations with -23M loss. So profit from continuing operations = 1,849M.

FFO from continuing operations = 1,849 + adjustments for continuing operations. If the 3,057M adjustments apply to total operations, we need to split. But discontinued operations are small (-23M), so approximately 1,849 + 3,057 = 4,906M.

Hmm, this is getting messy with different approaches giving different answers.

Let me try a different, more practical approach. S&P's FFO for utilities is often calculated as:

FFO = Operating cash flow + interest paid - interest received (if netted) + working capital changes + other adjustments

Or: FFO = EBITDA - cash interest - cash taxes + dividends received

I'll use: 4,954 - 520 - 762 + 106 (dividends) = 3,778M

But actually, looking at S&P's typical utility methodology, they often use:
FFO = Net income + D&A + deferred taxes + other non-cash - preferred dividends

And for debt-like adjustments, they focus on the debt side.

Let me go with a cleaner approach. The S&P Global Ratings methodology typically defines FFO as:

"Funds from operations (FFO): Net income from continuing operations adjusted for non-cash items, such as depreciation and amortization, deferred income taxes, and gains or losses on the sale of assets."

For practical purposes, FFO ≈ Cash flow from operating activities before changes in working capital, or equivalently EBITDA - cash interest - cash taxes ± other items.

Given the data, I'll use:
**FFO = EBITDA - cash interest - cash taxes = 4,954 - 520 - 762 = 3,672,000,000 EUR**

But I want to verify this is conservative enough. Let me also consider if dividends received should be added. In many utility calculations, S&P includes dividend income as part of FFO if it's from operating activities. Adding 106M gives 3,778M.

However, looking at the cash flow classification, "Dividends Received Classified As Operating Activities" suggests these are operating. But in EBITDA, dividend income is typically not included (it's below EBITDA, in investment income or similar).

Actually, checking: Is dividend income in EBITDA? Dividends from investments are typically NOT in EBITDA; they're below operating profit. So if we want FFO to reflect total funds available, we might add dividends.

But S&P's standard FFO formula using EBITDA is: FFO = EBITDA - cash interest - cash taxes. This doesn't include dividends. The dividends would be captured if we used the net income approach (since dividend income is in net income).

Let me verify with net income: 1,826M includes what? It includes finance income 164M, which includes interest received and possibly dividends. Looking at the P&L: "Finance Income" 164M, "Finance Costs" 837M, "Share Of Other Comprehensive Income Of Associates And Joint Ventures" 128M (this is OCI, not in profit).

Actually, "Share Of Other Comprehensive Income Of Associates" is in OCI, not profit. The profit share from equity method investments would be in operating profit or finance income.

Looking at the P&L structure, there's no explicit "share of profit of associates" line. This might be included in "Other Income" or "Finance Income".

Given the ambiguity, I'll use the conservative approach:
**FFO = 3,672,000,000 EUR** (EBITDA - cash interest - cash taxes)

Or if I include dividends received (which are like operating income for a utility with investments):
**FFO = 3,778,000,000 EUR**

I'll use 3,672M as the base, but note that 3,778M is an alternative.

Actually, rethinking: The standard S&P FFO for companies with material investments often includes dividends received. Let me check the cash flow: dividends received 106M are classified as operating. This suggests they're part of core operations.

I'll use **FFO = 3,778,000,000 EUR** including dividends, as this is more representative of funds available for debt service.

Wait - I need to be more careful. Let me re-read S&P's typical definition. In many S&P methodologies, FFO is:

FFO = Net income + depreciation + amortization + deferred taxes + other non-cash items - gain on sale of assets

This is NOT EBITDA - interest - taxes. The EBITDA approach is a shortcut that gives similar but not identical results.

Using the proper definition: FFO = 1,826 + 1,532 + deferred tax adjustment + other non-cash items.

From the cash flow, total adjustments are 3,057M. This includes D&A 1,532M and other adjustments 1,525M. The other adjustments likely include deferred taxes, gains/losses, provisions, etc.

So FFO = 1,826 + 3,057 = 4,883M? But this is "cash before working capital", not true FFO, because it includes changes in provisions and other items that might be working-capital related or might not.

Actually, the 3,057M is "Adjustments For Reconcile Profit Loss" which is explicitly to reconcile profit to operating cash flow. It includes non-cash items and other adjustments.

Let me try to be precise. S&P FFO typically excludes working capital changes. So:
FFO = Operating cash flow + changes in working capital - interest paid + interest received (if included in operating CF) - dividends received (if included) + taxes paid... no, this gets circular.

Standard approach: 
FFO = Net income 
      + Depreciation and amortization 
      + Deferred income taxes 
      + Other non-cash expenses (like stock comp, impairment, loss on sale)
      - Gain on sale of assets
      - Other non-cash income

From the data, I can identify:
- D&A and impairment: 1,532M (explicit)
- Deferred taxes: need to calculate
- Other gains/losses: -111M (loss, so add back? No, it's already a loss, so it reduced profit. If it's non-operating or non-recurring, we might adjust.)

Actually, "Other Gains Losses" of -111M means a loss of 111M. If this is non-recurring or non-operating, we might add it back to get to "normalized" FFO. But S&P FFO typically uses reported net income, not adjusted.

Let me use the most straightforward S&P definition I can apply with available data:

FFO = EBITDA - cash interest - cash taxes

This is commonly used when EBITDA is clean and available. It gives:
**FFO = 4,954 - 520 - 762 = 3,672,000,000 EUR**

I'll proceed with this, but I'll also calculate with dividends to see the range: 3,778M.

Given that S&P typically wants a conservative measure, and dividends might not be sustainable, I'll use **3,672,000,000 EUR**.

## Step 4: Estimate Adjusted_Debt

Baseline formula: Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash

**Reported debt:**
From the balance sheet:
- Noncurrent financial liabilities: 13,999M (2023), 15,114M (2022)
- Current financial liabilities: 2,302M (2023), 1,698M (2022)

Total financial liabilities (reported debt) at year-end 2022: 15,114 + 1,698 = **16,812,000,000 EUR**

Or using 2023: 13,999 + 2,302 = 16,301M. But for 2022 fiscal year, we should use 2022 year-end or average.

S&P typically uses year-end debt or average. For ratios, they often use average debt for the year. Let me calculate:

Debt at 2022-01-01: 15,114 + 1,698 = 16,812M
Debt at 2023-01-01: 13,999 + 2,302 = 16,301M

Average debt: (16,812 + 16,301) / 2 = 16,556.5M

Or they might use closing debt: 16,301M (at end of 2022, which is 2023-01-01).

Actually, for 2022 fiscal year, the closing balance is as of 2023-01-01. Let me use closing debt: **16,301,000,000 EUR** or average **16,556,500,000 EUR**.

I'll use average debt for the ratio as is standard: **16,556,500,000 EUR**

**Leases:**
Under IFRS 16, leases are already included in debt. The lease liabilities are:
- Noncurrent lease liabilities: 1,309M (2023), 1,325M (2022)
- Current lease liabilities: 177M (2023), 196M (2022)

Total lease liabilities: 1,486M (2023), 1,521M (2022)

Since these are already included in financial liabilities (specifically in "Noncurrent Financial Liabilities" and "Current Financial Liabilities"), I need to check if they're double-counted.

Looking at the structure: "Longterm Borrowings" 12,689M + "Noncurrent Lease Liabilities" 1,309M + "Other Noncurrent Financial Liabilities" 1M = 13,999M total noncurrent financial liabilities.

Similarly for current: "Current Borrowings And Current Portion Of Noncurrent Borrowings" 2,110M + "Current Lease Liabilities" 177M + "Other Current Financial Liabilities" 15M = 2,302M.

So leases are INCLUDED in the reported financial liabilities. For S&P adjusted debt, we typically add operating leases if not already capitalized, but under IFRS 16 they are capitalized. However, S&P often makes a debt-like adjustment for leases even under IFRS 16, or they may accept the capitalized amounts.

Actually, S&P's standard approach for IFRS 16 companies is to make an adjustment to "add back" the operating lease liability to get a comparable debt measure, because they view leases as debt-like. But since IFRS 16 already includes them in debt, we might not need to add them separately.

However, looking at S&P's methodology more precisely: For IFRS 16, S&P typically does NOT add leases to debt because they're already included. But they may adjust EBITDA to add back lease depreciation and subtract lease interest to get comparable EBITDA.

For debt, since leases are already in reported debt, no additional lease adjustment is typically needed for IFRS 16 companies.

But wait - S&P might still make a distinction between "debt" and "lease debt" for certain purposes. For the adjusted debt formula, if leases are already in reported debt, we don't add them again.

**Pension deficit:**
No explicit pension liability is shown in the balance sheet. There are "Noncurrent Provisions" and "Current Provisions" which might include pension provisions, but no separate detail.

Looking at equity components: no pension reserve shown. The "Reservas" and other equity items don't suggest a material pension deficit.

I'll assume **pension deficit = 0** for lack of explicit data.

**Guarantees:**
No explicit guarantees disclosed in the data.

**Hybrid debt portion:**
No hybrid debt explicitly identified.

**Other debt-like items:**
- "Pasivo Derivados Comerciales No Corriente" (Noncurrent commercial derivatives liability): 1,664M (2023), 730M (2022)
- "Pasivo Derivados Comerciales Corriente" (Current commercial derivatives liability): 1,624M (2023), 2,704M (2022)

These are derivative liabilities. S&P typically includes derivative liabilities that are debt-like (like interest rate swaps hedging debt) but may exclude commercial/commodity derivatives that are part of normal operations.

For a utility with commodity exposure, commercial derivatives related to energy procurement/sales are typically NOT added to debt. They're operating items.

However, if these derivatives are speculative or not hedge-accounted, S&P might view them differently. Given the context, these appear to be commercial (commodity) derivatives, not financial debt-like derivatives.

I'll exclude commercial derivatives from adjusted debt.

- "Deferred Tax Liabilities": 1,951M (2023), 1,787M (2022). These are not debt-like; they're a non-debt liability.

- "Deferred Income Including Contract Liabilities": 926M (2023), 889M (2022). These are operating liabilities, not debt.

- "Other Noncurrent Nonfinancial Liabilities": 2,100M (2023), 1,118M (2022). Need to assess if debt-like. These could include various provisions and deferred items. Without more detail, I'll assume they're not debt-like.

**Eligible cash:**
Cash and cash equivalents: 3,985M (2023), 3,965M (2022)

Average cash: (3,985 + 3,965) / 2 = 3,975M

Or closing cash: 3,985M

S&P typically uses closing cash or average cash. For conservative measure, they might use closing cash or subtract all cash. Standard is to subtract "available cash" which is cash and short-term investments.

I'll use average cash: **3,975,000,000 EUR**

Or if using closing: 3,985M.

For the ratio, let me use closing cash as is common in point-in-time balance sheet analysis: **3,985,000,000 EUR** or average **3,975,000,000 EUR**.

Actually, for FFO/debt, S&P typically uses average debt and closing or average cash depending on methodology version. Let me use:
- Average debt: 16,556.5M
- Closing cash: 3,985M (conservative, less cash subtraction)

Or: Closing debt 16,301M - closing cash 3,985M = 12,316M

Average debt 16,556.5M - average cash 3,975M = 12,581.5M

I'll use the more standard approach with some averaging: **Adjusted_Debt = 16,556,500,000 - 3,975,000,000 = 12,581,500,000 EUR**

Wait - I need to reconsider. Should I use average or closing? For leverage ratios, S&P typically uses closing debt for point-in-time measures, or average for coverage ratios. FFO/debt is a coverage ratio, so average debt is appropriate. But cash is typically closing or average.

Let me check S&P standard practice: For FFO/debt, they typically use "debt" at a point in time or average. The formula is often: FFO / Debt, where Debt is total debt minus cash.

Using closing figures (more conservative for debt, less conservative for cash):
Debt at 2023-01-01: 16,301M
Cash at 2023-01-01: 3,985M
Adjusted debt = 16,301 - 3,985 = 12,316M

Using average:
Average debt: 16,556.5M
Average cash: 3,975M
Adjusted debt = 12,581.5M

The difference is small (~265M or 2%). I'll use **average debt minus average cash = 12,581,500,000 EUR** as it's more representative of the year's position.

But actually, for simplicity and given the data, let me use closing debt minus closing cash as this is most commonly cited:

**Adjusted_Debt = 16,301,000,000 - 3,985,000,000 = 12,316,000,000 EUR**

Or with average: 12,581,500,000 EUR.

Hmm, I need to decide. Let me use a hybrid: average debt, closing cash (conservative):
16,556.5M - 3,985M = 12,571.5M

Or the most common S&P approach: closing debt, closing cash: 12,316M.

I'll use **12,316,000,000 EUR** (closing) as it's clearly identifiable and commonly used.

Wait - I need to double-check the debt figure. Is 16,301M correct?

Noncurrent financial liabilities 2023-01-01: 13,999M
Current financial liabilities 2023-01-01: 2,302M
Total: 16,301M

But what about "Liabilities Included In Disposal Groups Classified As Held For Sale"? This was 26M in 2022 and 0 in 2023. These are non-current liabilities held for sale, not necessarily debt. I'll exclude them.

Also, are there any other debt-like items? Let me check "Trade And Other Current Payables" - these are operating payables, not debt.

"Other Current Nonfinancial Liabilities" - 414M (2023), 559M (2022). Not debt-like.

"Other Noncurrent Nonfinancial Liabilities" - 2,100M (2023), 1,118M (2022). These might include deferred income, provisions, etc. Not typically debt-like unless specified.

So debt = 16,301M seems right for closing.

## Step 5: Calculate FFO / Adjusted_Debt

Using:
- FFO = 3,672,000,000 EUR (EBITDA - cash interest - cash taxes)
- Adjusted_Debt = 12,316,000,000 EUR (closing debt - closing cash)

FFO / Adjusted_Debt = 3,672 / 12,316 = **0.2981**

Or with FFO including dividends (3,778M): 3,778 / 12,316 = 0.3068

Or with average debt and average cash (12,581.5M):
3,672 / 12,581.5 = 0.2919
3,778 / 12,581.5 = 0.3003

Let me also try with average debt and closing cash, or other combinations.

Actually, I want to reconsider the FFO calculation. Let me use a more comprehensive approach that matches S&P's typical utility calculation.

S&P often calculates FFO for utilities as:
FFO = Net income + depreciation + amortization + deferred taxes + other non-cash items - gain on sale + dividends from investments

From available data:
- Net income: 1,826M
- D&A and impairment: 1,532M
- Deferred tax: need to estimate
- Other non-cash: other adjustments of 1,525M (but this includes many items)

Actually, the cash flow statement's "Adjustments For Reconcile Profit Loss" of 3,057M is the total adjustment from profit to cash before working capital. This includes:
- D&A and impairment: 1,532M
- Other adjustments: 1,525M

The "Other Adjustments" of 1,525M likely includes:
- Deferred tax (expense 697M - cash tax 762M = -65M, or benefit)
- Gain/loss on disposals, credit loss changes, etc.

If I simply do: FFO = 1,826 + 3,057 = 4,883M, then subtract working capital changes -272M = 4,611M, this is "cash from operations before interest and tax financing items" or similar.

But S&P FFO is typically after working capital changes or before? Let me think...

Actually, standard S&P FFO is BEFORE working capital changes. It's "funds from operations" not "cash from operations". Working capital changes are excluded because they're volatile and can be managed.

So FFO = 4,883M? Then we need to subtract interest and taxes? No, FFO is already after interest expense and tax expense (accrual basis), not cash basis.

Hmm, this is confusing because S&P uses multiple definitions. Let me clarify:

Definition 1: FFO = Net income + D&A + deferred taxes + other non-cash. This is accrual-based, before working capital.
Definition 2: FFO = EBITDA - cash interest - cash taxes. This is cash-based, before working capital.
Definition 3: FFO = Operating cash flow + interest paid - working capital changes. This is cash-based, after working capital.

These give different results because of timing differences (accrual vs cash, working capital effects).

For the FFO/debt ratio, S&P typically wants a measure of cash flow available for debt service. The most common utility formula is:

FFO = Net income + D&A + deferred taxes + other non-cash - preferred dividends

Or equivalently: FFO = Cash from operations - working capital changes + interest paid (if interest was classified as financing) - interest received (if classified as investing)...

Given the complexity, let me use the EBITDA-based formula as it's clean and widely used:

FFO = EBITDA - cash interest - cash taxes = 4,954 - 520 - 762 = 3,672M

But I want to check if this is too conservative. The net income + D&A approach gives 4,883M or so. The difference is 1,211M, which represents:
- Tax expense vs cash taxes: 697M vs 762M = -65M (cash taxes higher)
- Interest expense vs cash interest: 837M vs 520M = 317M (accrual interest higher)
- Other items: dividends received 106M, other non-cash adjustments

Actually, 4,883M (from net income + adjustments) vs 3,672M (from EBITDA - cash interest - cash taxes):
Difference = 1,211M

This = (tax expense 697M - cash taxes 762M) + (interest expense 837M - cash interest 520M) - dividends received 106M + other items
= -65M + 317M - 106M + ... = 146M + other items. Not matching 1,211M.

Hmm, let me recalculate. 4,883 - 3,672 = 1,211M.

From EBITDA 4,954 to net income 1,826:
- D&A 1,532M
- Credit loss decrease -228M (gain)
- Other losses 111M
- Finance costs 837M
- Finance income -164M
- Fair value gains -13M
- Exchange losses 5M
- Share of profit of associates? Not shown separately, maybe in other income
- Tax expense 697M
- Discontinued operations 23M loss

So: 4,954 - 1,532 + 228 - 111 - 837 + 164 + 13 - 5 - 697 - 23 = 1,826? 
= 4,954 - 1,532 = 3,422
+ 228 = 3,650
- 111 = 3,539
- 837 = 2,702
+ 164 = 2,866
+ 13 = 2,879
- 5 = 2,874
- 697 = 2,177
- 23 = 2,154

But net income is 1,826, not 2,154. Difference of 328M.

I must be missing something. Maybe "Other Income" 183M is not in operating profit? Or there's share of profit of associates not accounted for.

Actually, I think "Share Of Other Comprehensive Income Of Associates" 128M is in OCI, not profit. But there might be "Share of profit of associates" in the P&L that's not separately shown, perhaps included in "Other Income" or "Finance Income".

Given the complexity and data limitations, I'll stick with the EBITDA-based FFO as it's directly calculable and commonly used:

**FFO = 3,672,000,000 EUR**

For adjusted debt, let me reconsider. S&P typically includes:
- All interest-bearing debt
- Capitalized leases (already in IFRS 16 debt)
- Pension deficits
- Derivatives that are debt-like
- Less: cash and equivalents

Using closing 2022 figures:
Debt: 16,301M
Cash: 3,985M
Adjusted debt: 12,316M

But wait - should I use 2022 year-end or average? The fiscal year is 2022, ended Dec 31, 2022, which corresponds to 2023-01-01 in the data labels.

For FFO/debt, S&P sometimes uses closing debt at year-end. Let me use that.

However, I want to check if there are any other adjustments needed per the regulated utilities methodology.

From the regulated utilities section: "Where substantial seasonal working capital requirements--for example, at natural gas distribution utilities--distort leverage measures, we adjust inventory and debt balances by netting the value of inventory against outstanding short-term borrowings."

Naturgy has inventories of 1,828M (2023) and 878M (2022). These increased significantly. Short-term borrowings are part of current borrowings 2,110M (2023) and 1,493M (2022).

The seasonal working capital adjustment would be: if inventory is seasonal and funded by short-term debt, net inventory against short-term borrowings.

But this is optional and only if it "distorts leverage measures." Given the significant inventory increase, let me consider this.

Inventory 2023: 1,828M; 2022: 878M. Average: 1,353M.
Current borrowings 2023: 2,110M; 2022: 1,493M. Average: 1,801.5M.

If I net inventory against short-term borrowings: 1,353M of inventory vs 1,801.5M of current borrowings. The adjustment would reduce both, but only if we're confident inventory is seasonal and will convert to cash.

This adjustment is complex and data-dependent. I'll skip it unless clearly needed.

Actually, re-reading the methodology: "we adjust inventory and debt balances by netting the value of inventory against outstanding short-term borrowings. This adjustment informs balance sheet analysis by reducing seasonal debt balances when we are very confident of near-term cost recovery."

Given Naturgy's gas distribution business has seasonal inventory (gas storage for winter), this might apply. But without explicit guidance on the seasonal component, I'll be conservative and not make this adjustment.

**Final Adjusted_Debt = 12,316,000,000 EUR**

## Final Calculation

FFO / Adjusted_Debt = 3,672 / 12,316 = 0.298148...

Rounded to four decimal places: **0.2981**

But let me also calculate with the alternative FFO including dividends:
3,778 / 12,316 = 0.3068

And with average debt/average cash:
3,672 / 12,581.5 = 0.2919

The range is 0.2919 to 0.3068. The most standard calculation is 0.2981.

However, I want to double-check one thing. Should I use FFO from continuing operations? The company has a small discontinued operations loss of 23M. If we use continuing operations net income of 1,849M instead of 1,826M, the EBITDA-based approach wouldn't change (EBITDA is from continuing operations typically). 

Actually, is EBITDA from continuing or total operations? The reported EBITDA of 4,954M likely includes continuing operations, as discontinued operations are typically below operating profit. The discontinued operations loss of 23M is likely after operating profit.

So FFO = 3,672M seems appropriate for continuing operations.

Let me verify my debt figure once more. The total financial liabilities are:
- Noncurrent: 13,999M
- Current: 2,302M
Total: 16,301M

But "Noncurrent Financial Liabilities" includes:
- Longterm Borrowings: 12,689M
- Noncurrent Lease Liabilities: 1,309M
- Other Noncurrent Financial Liabilities: 1M

And "Current Financial Liabilities" includes:
- Current Borrowings And Current Portion Of Noncurrent Borrowings: 2,110M
- Current Lease Liabilities: 177M
- Other Current Financial Liabilities: 15M

Total borrowings excluding leases: 12,689 + 2,110 + 1 + 15 = 14,815M
Total lease liabilities: 1,309 + 177 = 1,486M
Total financial liabilities: 14,815 + 1,486 = 16,301M

For S&P purposes, if they view leases as debt-like (which they do), and they're already capitalized, the total debt of 16,301M is appropriate.

Cash: 3,985M

Adjusted debt: 16,301 - 3,985 = 12,316M

One more check: Are there any restricted cash? The data doesn't show restricted cash separately. All cash is "Cash And Cash Equivalents" of 3,985M. I'll assume it's all available.

Final answer: 3,672 / 12,316 = 0.2981

Let me do the precise division: 3672 / 12316 = 0.298148749594024...

Rounded to four decimal places: **0.2981**

Actually, I want to reconsider using average vs closing one more time. S&P's FFO/debt ratio typically uses:
- FFO for the year (flow measure)
- Debt at year-end or average (stock measure)

For coverage ratios, average debt is theoretically better matched with the flow measure. But in practice, S&P often uses closing debt for simplicity.

If I use average debt (16,556.5M) and average cash (3,975M):
Adjusted debt = 12,581.5M
FFO/Debt = 3,672 / 12,581.5 = 0.2919

Or with closing debt and average cash:
16,301 - 3,975 = 12,326M
3,672 / 12,326 = 0.2979

Or with average debt and closing cash:
16,556.5 - 3,985 = 12,571.5M
3,672 / 12,571.5 = 0.2921

The differences are small. I'll use the most common convention: closing debt, closing cash.

**FFO / Adjusted_Debt = 0.2981**

Wait - I want to verify one more thing. Is the EBITDA of 4,954M for 2022 correct? Let me check the label: "Beneficio Bruto De Explotacion Ebitda" 2022-01-01 - 2023-01-01: 4954000000 EUR. Yes, this is the 2022 fiscal year.

And cash interest: "Interest Paid Classified As Operating Activities" 2022-01-01 - 2023-01-01: 520000000 EUR. Yes.

Cash taxes: "Income Taxes Paid Classified As Operating Activities" 2022-01-01 - 2023-01-01: 762000000 EUR. Yes.

Debt at 2023-01-01 (end of 2022): 16,301M. Cash: 3,985M.

Everything checks out.

<answer>0.2981</answer>