**Step 1: Identify the relevant industry for "Acciona SA"** Acciona S.A. is a global conglomerate primarily focused on renewable energy (wind, solar, hydro), water management, and infrastructure services (transport, urban services). * **Regulated Utilities:** While Acciona has some regulated assets (e.g., water concessions, some transmission), a significant portion of its renewable generation operates in merchant markets or under PPAs (Power Purchase Agreements) which are not strictly "regulated utilities" in the sense of cost-of-service regulation with guaranteed returns on equity defined by a regulator. However, the methodology for "Unregulated Power And Gas" is more appropriate for the renewable generation side, and "Transportation Infrastructure" for the infrastructure side. * **Unregulated Power And Gas:** This sector covers renewable generation companies. Acciona is a major player here. The methodology notes that if a company derives significant cash flow from regulated activities or "strongly protected unregulated revenue" (like long-term PPAs), it might qualify for different volatility tables, but the core business risk assessment follows this sector. * **Transportation Infrastructure:** Acciona has infrastructure concessions, but this is likely a smaller part of the overall EBITDA compared to Energy and Services. Given the mixed nature, Acciona is often treated as a diversified utility/infrastructure company. However, looking at the provided methodologies, **Unregulated Power And Gas** is the most relevant for its core growth engine (Renewables), while **Regulated Utilities** might apply to its water/transmission assets. S&P often rates Acciona using a blend, but typically leans towards the **Unregulated Power and Gas** or a general corporate framework if the regulated portion isn't dominant enough to dictate the entire profile. However, a key distinction in the provided text is the "Volatility tables". Acciona has a significant portion of its revenue from renewables which often have long-term contracts (PPAs) or feed-in tariffs, which can be considered "strongly protected". Let's look at the financial data to see if we can derive the metrics. The prompt asks to estimate S&P's credit trend. We need to calculate Adjusted EBITDA, FFO, and Adjusted Debt. The provided data includes: * Profit Loss From Operating Activities (EBIT) * Dotacion Amortizacion YVariacion De Provisiones (Depreciation & Amortization + Provisions) * Finance Costs * Debt items (Loans, Lease Liabilities, etc.) * Cash Let's reconstruct EBITDA. EBITDA = Operating Profit + Depreciation & Amortization. Note: "Dotacion Amortizacion YVariacion De Provisiones" includes provisions. Usually, EBITDA adds back D&A. Provisions are often non-cash but might be part of working capital or operating adjustments. For a standard reconstruction: EBITDA ≈ Operating Profit + D&A. **2021 Data (Year ended 2022-01-01 represents FY2021? No, the labels are "2021-01-01 - 2022-01-01" which is FY2021. And "2022-01-01 - 2023-01-01" which is FY2022. Wait, standard reporting: * "Revenue 2021-01-01 - 2022-01-01": This is the fiscal year 2021. * "Revenue 2022-01-01 - 2023-01-01": This is the fiscal year 2022. Let's verify the dates. FY2021: Jan 1, 2021 to Dec 31, 2021. The label says "2021-01-01 - 2022-01-01". This covers the full year 2021. FY2022: Jan 1, 2022 to Dec 31, 2022. The label says "2022-01-01 - 2023-01-01". This covers the full year 2022. **Step 2: Estimate 2021 Adjusted_EBITDA** * **Operating Profit (Profit Loss From Operating Activities):** 829,000,000 EUR * **Depreciation & Amortization:** The line item is "Dotacion Amortizacion YVariacion De Provisiones": 714,000,000 EUR. * This item includes provisions. To be precise, we should ideally separate D&A from provisions. However, without a breakdown, we often add back the entire amount for a rough EBITDA, or subtract the change in provisions if we want EBITDA. But "Dotacion" usually refers to the expense charged. Let's assume this is the primary D&A proxy. * Let's check if there are other non-cash items. "Impairment Loss...": -67,000,000 EUR (This is a gain/reversal, so it reduced expenses, meaning it increased operating profit. To get to EBITDA, we usually add back D&A and Impairment. Since it's a reversal (negative expense), it's already in the Operating Profit. We should subtract it if we are adding back gross D&A? Or just treat Operating Profit + D&A. * Standard EBITDA = Operating Income + D&A + Impairment. * Here, Impairment is a reversal of 67M. This means Operating Profit is *higher* by 67M due to this non-cash gain. To get to a cash-flow-like EBITDA, we should subtract this gain. * So, EBITDA ≈ 829M + 714M - 67M = 1,476M EUR. * Let's refine. "Dotacion Amortizacion..." is 714M. This is likely D&A + Provisions expense. * Let's look at Cash Flow from Operations (CFO) to cross-check. * CFO 2021: 574,000,000 EUR. * CFO = Net Income + D&A + Changes in WC + Other. * Net Income 2021: 404,000,000 EUR. * Adjustments to reconcile: 717,000,000 EUR. * This 717M is close to the 714M D&A/Provisions. * Let's stick to the Operating Profit + D&A approach. * EBITDA_2021 = 829M (Op Profit) + 714M (D&A/Prov) = 1,543M. * Adjustments for non-recurring/other: The impairment reversal of 67M is a non-cash gain included in Op Profit. We should subtract it to normalize. * Adjusted EBITDA_2021 ≈ 1,543M - 67M = 1,476M EUR. * Are there lease adjustments? S&P adds back lease interest to EBITDA? No, S&P defines EBITDA before lease interest? Actually, under IFRS 16, operating profit is after depreciation of ROU assets and interest on lease liabilities is in Finance Costs. EBITDA usually adds back the depreciation of ROU assets. The "Dotacion" likely includes ROU depreciation. * Let's assume **Adjusted_EBITDA 2021 = 1,476 million EUR**. **Step 3: Estimate 2021 FFO** * **Formula:** FFO = Adjusted_EBITDA - Cash_Interest - Cash_Taxes * **Cash Interest:** * Finance Costs (P&L): 235,000,000 EUR. * Interest Paid (Cash Flow): 206,000,000 EUR. * S&P uses *cash* interest paid. * Cash Interest 2021 = 206,000,000 EUR. * **Cash Taxes:** * Income Tax Expense (P&L): 171,000,000 EUR. * Income Taxes Paid (Cash Flow): 82,000,000 EUR. * S&P uses *cash* taxes paid. * Cash Taxes 2021 = 82,000,000 EUR. * **FFO 2021** = 1,476M - 206M - 82M = **1,188 million EUR**. **Step 4: Estimate 2021 Adjusted_Debt** * **Formula:** Adjusted_Debt = Reported_Debt + Leases + Pension_Deficit + Hybrids + Other_Debt_Like - Eligible_Cash * **Reported Debt (Interest-bearing):** * Noncurrent Loans: 2,073,000,000 EUR * Current Loans: 280,000,000 EUR * Participaciones Preferentes... (Preferred Shares/Debt-like): * Noncurrent: 2,364,000,000 EUR * Current: 1,666,000,000 EUR * Note: "Participaciones Preferentes" are often treated as debt by rating agencies if they are mandatory redeemable or have fixed coupons. Acciona's preferred shares are often perpetual but may have step-ups. S&P typically treats certain hybrids as 50% debt or 100% debt depending on terms. Given the label "Obligaciones Y Otros Valores Negociables" (Bonds and other negotiable securities), these are likely bonds/debt instruments, not just equity-like prefs. The label combines Preferred Shares AND Bonds. Let's look at the magnitude. 2.3B + 1.6B = ~4B. This is significant. * However, usually "Loans Received" is the core bank debt. "Participaciones Preferentes..." might include hybrid equity. Without specific terms, standard corporate methodology often treats "Preferred Shares" as equity unless they are mandatory redeemable. But "Obligaciones" means Bonds. The line item mixes them. Let's look at "Noncurrent Portion of Noncurrent Loans Received" vs "Participaciones...". * Let's assume the "Participaciones Preferentes..." line is largely debt-like or hybrid. S&P often counts 50% of hybrids as debt. Or if they are bonds, 100%. Given "Obligaciones" (Bonds) is in the name, let's treat them as debt for a conservative estimate, or check if there's a separate equity line. * Actually, looking at Acciona's structure, they have issued perpetual hybrids. S&P typically gives 50% credit for hybrids. * Let's look at the "Loans Received" specifically: * Noncurrent Loans: 2,073 M * Current Loans: 280 M * Total Bank/Bond Debt (excluding hybrids/prefs): 2,353 M. * Now the "Participaciones Preferentes..." line: * Noncurrent: 2,364 M * Current: 1,666 M * Total: 4,030 M. * If these are hybrids, 50% debt credit = 2,015 M. * If these are bonds, 100% debt credit = 4,030 M. * Let's look at Interest Costs. Finance Costs are 235M. * If Total Debt was ~2.3B (Loans) + ~4B (Prefs/Bonds) = 6.3B. Interest at 4% would be ~250M. This matches the 235M finance costs closely. If the 4B was equity, interest would be much lower on the 2.3B loans (approx 90-100M). The fact that finance costs are 235M suggests the "Participaciones..." instruments carry interest/coupons and are debt-like. * Let's assume **100% of "Participaciones Preferentes..." is debt** for the purpose of "Adjusted Debt" calculation, or at least a significant portion. Given the label includes "Obligaciones" (Bonds), it's safer to treat them as debt. * Total Interest-Bearing Debt = Loans (2,073 + 280) + Prefs/Bonds (2,364 + 1,666) = 2,353 + 4,030 = **6,383 million EUR**. * **Leases:** * Noncurrent Lease Liabilities: 430,000,000 EUR * Current Lease Liabilities: 68,000,000 EUR * Total Leases = **498 million EUR**. * **Pension Deficit:** Not explicitly provided in liabilities. "Noncurrent Provisions" are 301M, "Current Provisions" 317M. These likely include pensions but also other provisions. Without specific pension deficit data, we assume 0 adjustment or that it's included in provisions which are not added to debt in standard FFO/Debt calc unless specified. We will assume **0** for pension deficit adjustment to keep it simple, or that it's negligible/netted. * **Eligible Cash:** * Cash and Cash Equivalents: 2,318,000,000 EUR. * S&P allows deduction of unrestricted cash. * **Adjusted_Debt 2021** = (6,383 + 498) - 2,318 = 6,881 - 2,318 = **4,563 million EUR**. **Step 5: Calculate 2021 Adjusted_Debt / Adjusted_EBITDA** * Ratio = 4,563 / 1,476 = **3.09x** **Step 6: Calculate 2021 FFO / Adjusted_Debt** * Ratio = 1,188 / 4,563 = **0.260** (or 26.0%) --- **Step 7: Estimate 2022 Adjusted_EBITDA** * **Operating Profit (Profit Loss From Operating Activities):** 1,334,000,000 EUR * **Depreciation & Amortization:** "Dotacion Amortizacion...": 762,000,000 EUR * **Impairment:** "Impairment Loss...": -15,000,000 EUR (Reversal/Gain). * **EBITDA 2022** = 1,334M + 762M - 15M = **2,081 million EUR**. * **Adjusted_EBITDA 2022** = **2,081 million EUR**. **Step 8: Estimate 2022 FFO** * **Cash Interest:** * Interest Paid (Cash Flow): 209,000,000 EUR. * **Cash Taxes:** * Income Taxes Paid (Cash Flow): 215,000,000 EUR. * **FFO 2022** = 2,081M - 209M - 215M = **1,657 million EUR**. **Step 9: Estimate 2022 Adjusted_Debt** * **Reported Debt (Interest-bearing):** * Noncurrent Loans: 2,624,000,000 EUR * Current Loans: 553,000,000 EUR * Total Loans: 3,177 M * Participaciones Preferentes... (Noncurrent): 3,101,000,000 EUR * Participaciones Preferentes... (Current): 1,139,000,000 EUR * Total Prefs/Bonds: 4,240 M * Total Interest-Bearing Debt = 3,177 + 4,240 = **7,417 million EUR**. * **Leases:** * Noncurrent Lease Liabilities: 439,000,000 EUR * Current Lease Liabilities: 72,000,000 EUR * Total Leases = **511 million EUR**. * **Eligible Cash:** * Cash and Cash Equivalents: 2,360,000,000 EUR. * **Adjusted_Debt 2022** = (7,417 + 511) - 2,360 = 7,928 - 2,360 = **5,568 million EUR**. **Step 10: Calculate 2022 Adjusted_Debt / Adjusted_EBITDA** * Ratio = 5,568 / 2,081 = **2.68x** **Step 11: Calculate 2022 FFO / Adjusted_Debt** * Ratio = 1,657 / 5,568 = **0.298** (or 29.8%) --- **Step 12: Classify the credit trend** * **Signal 1: Leverage (Adjusted_Debt / Adjusted_EBITDA)** * 2021: 3.09x * 2022: 2.68x * Change: 2.68 - 3.09 = **-0.41x** * Threshold: ≤ -0.2x is **Improving**. * Signal 1: **Improving** * **Signal 2: Cash-flow coverage (FFO / Adjusted_Debt)** * 2021: 0.260 * 2022: 0.298 * Change: 0.298 - 0.260 = **+0.038** * Threshold: ≥ +0.03 is **Improving**. * Signal 2: **Improving** * **Combination:** * Both signals are Improving. **Conclusion:** The credit trend is Improving. Improving