**1. Identify the relevant industry for "Fortum Oyj".** Fortum Oyj is a Finnish energy company. Based on the facts provided, it operates in power and gas. The business includes "Unregulated Power And Gas" segments and potentially "Regulated Utilities" segments. However, Fortum's scale, and the presence of significant derivative assets/liabilities and merchant exposure, suggest the "Unregulated Power And Gas" methodology is the most applicable for the group's consolidated profile. The methodology for "Unregulated Power And Gas" will be used, with potential adjustments based on the facts. **2. Estimate the 2021 "Adjusted_EBITDA".** We apply the formula: `Adjusted_EBITDA = EBITDA + nonrecurring_losses - nonrecurring_gains ± others` First, calculate reported EBITDA for 2021: - EBITDA can be derived from Operating Profit + Depreciation. - "Profit Loss From Operating Activities" 2021: 4,325,000,000 EUR - "Depreciation And Amortisation Expense" 2021: 587,000,000 EUR - Reconstructed EBITDA = 4,325,000,000 + 587,000,000 = 4,912,000,000 EUR (Note: The provided "Operating Profit Before Depreciations Ebitda" for 2021 is 4,913,000,000 EUR, which matches closely; I will use the provided 4,913,000,000 EUR). We also have "Comparable EBITDA" for 2021: 2,016,000,000 EUR. From the facts: - "Comparable Operating Profit" 2021: 1,429,000,000 EUR - "Items Affecting Comparability" 2021: 2,897,000,000 EUR (this is a net gain, reducing comparability) S&P calculates Adjusted EBITDA, which typically excludes non-recurring items. The "Items Affecting Comparability" total is +2,897,000,000 EUR. This represents gains. We should subtract non-recurring gains. - "Impairment Loss" 2021: 35,000,000 EUR (loss) - "Capital Gains And Other Related Items" 2021: 2,673,000,000 EUR (gain) - "Changes In Fair Values Of Derivatives" 2021: -264,000,000 EUR (loss) - "Other Adjustments" 2021: 6,000,000 EUR (gain) Sum = 35 - 264 + 2,673 + 6 = 2,450,000,000 EUR gain? Wait, the total is 2,897,000,000 EUR. There's a discrepancy, but 2,897 is the given sum. We'll use it. To estimate Adjusted EBITDA for S&P, we start with the Comparable EBITDA, which already excludes Items Affecting Comparability. S&P Comparable EBITDA = 2,016,000,000 EUR. Now, we need to consider other S&P adjustments: - "Share Of Profit Loss Of Associates And Joint Ventures": 168,000,000 EUR. For the "Unregulated Power And Gas" sector, we might proportionally consolidate JVs, but here the data is limited. I'll use the equity method contribution + dividends or use the Comparable EBITDA, which likely includes dividends/equity income? The methodology says: `± joint_venture_proportional_EBITDA`. Given no other data, I will use the reported Comparable EBITDA as a base, which likely includes the equity method share. Adjustments for proportionate consolidation are complex and data is missing, so I will assume Comparable EBITDA is a reasonable proxy for S&P Adjusted EBITDA before overhead/capex adjustments, but we must incorporate joint ventures properly if possible. Given the constraints, I'll treat "Comparable EBITDA" as the baseline for Adjusted EBITDA, and adjust for non-cash JV income if not received in cash. No details on dividends from JVs vs. share of profit. - Let's check "Adjustments For Undistributed Profits Of Investments...": For 2021, this was 168,000,000 EUR in the cash flow statement. This suggests the profit was not received in cash? Wait, "Adjustments For Undistributed Profits" typically subtracts the share of profit and adds back dividends. The line is just "+168m". This is confusing, let's use Comparable EBITDA = 2,016,000,000 EUR. Are there any lease adjustments? The facts don't provide explicit lease data to add back. Pension adjustments? `Other Comprehensive Income Net Of Tax Gains Losses On Remeasurements Of Defined Benefit Plans` is given, but the cash flow impact is not directly provided. Let's stick to the given "Comparable EBITDA" as the best estimate for S&P's adjusted EBITDA. 2021 Adjusted_EBITDA = 2,016,000,000 EUR. **3. Estimate the 2021 "FFO".** Formula: `FFO = Adjusted_EBITDA - cash_interest - cash_taxes` - Adjusted_EBITDA (2021): 2,016,000,000 EUR - Cash Interest: "Interest Paid Classified As Operating Activities" 2021: 147,000,000 EUR - Cash Taxes: "Income Taxes Paid Refund Classified As Operating Activities" 2021: 279,000,000 EUR FFO (2021) = 2,016,000,000 - 147,000,000 - 279,000,000 = 1,590,000,000 EUR. **4. Estimate the 2021 "Adjusted_Debt".** Formula: `Adjusted_Debt = reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items - eligible_cash` We need to find the balance sheet values for 2021-01-01? The methodology uses averages, but for a year-end snapshot we use the end of the period. The facts are given for 2022-01-01 (end of 2021) and 2023-01-01 (end of 2022). Reported Debt (2022-01-01): - "Other Noncurrent Financial Liabilities" 2022-01-01: 8,701,000,000 EUR - "Noncurrent Derivative Financial Liabilities" 2022-01-01: 16,657,000,000 EUR (This is huge. Are these operating? Yes. In S&P methodology, material derivative liabilities can be considered debt-like, especially for energy firms. We'll include a portion or all? Typically, S&P includes excessive margin calls/net derivative liabilities as debt. I will include all Noncurrent Derivative Liabilities.) - "Other Current Financial Liabilities" 2022-01-01: 8,519,000,000 EUR - "Current Derivative Financial Liabilities" 2022-01-01: 71,947,000,000 EUR (Huge. Likely related to Uniper/commodity trading. Should be included as debt.) - Margin Liabilities 2022-01-01: 985,000,000 EUR. Total Financial Liabilities = 8,701 + 16,657 + 8,519 + 71,947 + 985 = 106,809,000,000 EUR. Pension Deficit: - "Noncurrent Recognised Liabilities Defined Benefit Plan" 2022-01-01: 1,190,000,000 EUR. Leases: Included in borrowings? "Repayments Of Non Current Borrowings And Repayments Of Lease Liabilities" suggests leases are part of the financial liabilities mentioned. We'll assume they are captured. Eligible Cash: - "Liquid Funds" 2022-01-01: 7,592,000,000 EUR. - "Margin Receivables" 2022-01-01: 9,163,000,000 EUR. (Current Derivative Financial Assets are also huge, 65,392,000,000 EUR. To be conservative and follow typical S&P adjustments for energy traders, we net margin liabilities with margin receivables? Let's calculate Total Derivative Assets: Noncurrent 17,096 + Current 65,392 = 82,488. Total Derivative Liabilities: Noncurrent 16,657 + Current 71,947 = 88,604. Net derivative liability = 6,116. If we use the net derivative approach, Adjusted Debt is much smaller.) Given the massive gross amounts, S&P typically nets derivative assets and liabilities for energy merchants if cash flows are netted. Let's assume a netting approach is more representative. However, the presence of margin receivables and payables suggests a gross-up might be needed. Let's keep it simple: S&P usually adds net derivative liability to debt. Net Derivative Liability = 88,604 - 82,488 = 6,116,000,000 EUR. But wait, Trade Receivables and Payables are also massive. Let's reconstruct using a simplified S&P view: Adjusted Debt = Other Noncurrent Financial Liabilities + Other Current Financial Liabilities + Pension Deficit + Net Derivative Liability - Eligible Cash. (Assuming Margin Liabilities are netted in derivatives). - Other Noncurrent Financial Liabilities: 8,701m - Other Current Financial Liabilities: 8,519m - Pension: 1,190m - Net Derivative Liability: 6,116m - Sum = 24,526m - Cash: 7,592m - Margin Receivables: Let's assume they are netted. - Adjusted Debt = 24,526 - 7,592 = 16,934,000,000 EUR. Wait, for a pure-play unregulated utility, standard S&P leverage calculation uses gross debt. But the derivatives here are overwhelmingly trading related. Let's use the Net Debt approach: Gross Debt (all financial liabilities) - Cash - Margin Receivables - Other Current Financial Assets? Gross Financial Liabilities = 106,809m Cash + Cash Equivalents = 7,592m + Margin Receivables 9,163m + Other Current Financial Assets 715m + Noncurrent Derivative Assets 17,096m + Current Derivative Assets 65,392m? If we net Derivative Assets against Derivative Liabilities, we already get a small net derivative liability of 6,116m. Then Adjusted Debt = 8,701 (Noncurrent Fin) + 8,519 (Current Fin) + 1,190 (Pension) + 6,116 (Net Derivatives) - 7,592 (Cash) = 16,934m. Let's use this figure. Let's refine: Trade payables are operating, so we shouldn't include "Trade And Other Current Payables" in debt, but "Other Current Financial Liabilities" is debt. This matches the 8,519m figure. 2021 Adjusted_Debt = 16,934,000,000 EUR. **5. Calculate the 2021 "Adjusted_Debt / Adjusted_EBITDA".** 16,934m / 2,016m = 8.40x. **6. Calculate the 2021 "FFO / Adjusted_Debt".** 1,590m / 16,934m = 0.0939 (9.4%). **7. Estimate the 2022 "Adjusted_EBITDA".** Comparable EBITDA 2022: 2,436,000,000 EUR. Items Affecting Comparability are already excluded. Let's check "Items Affecting Comparability" 2022: -593,000,000 EUR. This is a loss. S&P adjusts for this. Comparable EBITDA = 2,436m. Adjusted EBITDA = 2,436,000,000 EUR. **8. Estimate the 2022 "FFO".** Adjusted EBITDA = 2,436m. Cash Interest 2022: 201,000,000 EUR. Cash Taxes 2022: 167,000,000 EUR. FFO = 2,436 - 201 - 167 = 2,068,000,000 EUR. **9. Estimate the 2022 "Adjusted_Debt".** Balance Sheet at 2023-01-01: - Noncurrent Derivative Assets: 343m - Current Derivative Assets: 1,486m - Noncurrent Derivative Liabilities: 756m - Current Derivative Liabilities: 3,973m Net Derivative Liability = (756 + 3,973) - (343 + 1,486) = 4,729 - 1,829 = 2,900m. - Other Noncurrent Financial Liabilities: 3,658m - Other Current Financial Liabilities: 4,127m - Pension Deficit: 13m Total Gross Debt-like items = 3,658 + 4,127 + 13 + 2,900 = 10,698m. Cash = 3,919m. Margin Receivables = 2,607m. (Will net in derivatives? Already netted as net derivative liabilities. Do we subtract from Gross Debt? S&P usually subtracts "surplus" cash. Let's just subtract "Liquid Funds".) Adjusted Debt = 10,698 - 3,919 = 6,779,000,000 EUR. **10. Calculate the 2022 "Adjusted_Debt / Adjusted_EBITDA".** 6,779m / 2,436m = 2.78x. **11. Calculate the 2022 "FFO / Adjusted_Debt".** 2,068m / 6,779m = 0.305 (30.5%). **12. Classify the year-on-year credit trend.** - **Leverage (Debt/EBITDA)**: 2021 = 8.40x, 2022 = 2.78x. Change = 2.78 - 8.40 = -5.62x. Threshold: ≤ -0.2x is **Improving**. - **Cash-flow coverage (FFO/Debt)**: 2021 = 0.094, 2022 = 0.305. Change = 0.305 - 0.094 = +0.211. Threshold: ≥ +0.03 is **Improving**. Both signals agree on **Improving**. Improving