I'll work through this step-by-step, identifying the relevant industry and calculating the S&P-adjusted FFO-to-debt ratio for Ferrovial SA. ## Step 1: Identify the Relevant Industry Ferrovial SA is a transportation infrastructure company. Based on the facts provided: - It has significant "Investments In Infrastructure Projects" (€13.67 billion) - It operates airports, toll roads, and other transportation infrastructure (implied by the nature of infrastructure projects) - The company has concession-based operations with regulated/contractual frameworks This clearly fits the **Transportation Infrastructure** sector described in the S&P methodology. ## Step 2: Estimate Adjusted_EBITDA For Transportation Infrastructure, I need to reconstruct EBITDA from the available data. From the income statement data (2022-01-01 to 2023-01-01): - Revenue: €7,551,000,000 - Operating Expense: €6,825,000,000 - Profit Loss From Operating Activities: €423,000,000 Let me reconstruct EBITDA: - Gross Profit: €728,000,000 - Employee Benefits Expense: €1,446,000,000 - Miscellaneous Other Operating Expense: €4,182,000,000 - Raw Materials And Consumables Used: €1,197,000,000 Let me verify: Revenue (7,551) + Other Income (2) - Operating Expenses = 7,553 - 6,825 = 728 Gross Profit? No, let me check differently. From "Profit Loss From Operating Activities": €423,000,000 This includes depreciation and amortization. We need to add back D&A to get EBITDA. Amortisation Expense: €299,000,000 But we also need depreciation. Looking at cash flow adjustments: - "Ajustes Al Resultado Por Gastos Por Depreciacion YAmortizacion" (Depreciation and Amortization): €299,000,000 Wait - this seems to be only amortization. Let me check if there's separate depreciation. Looking at the PPE: Property Plant And Equipment increased from €354M to €479M, and Rightofuse Assets from €176M to €183M. For infrastructure companies with intangible asset model investments, the amortization of infrastructure investments is key. The "Investments In Infrastructure Projects Intangible Asset Model" grew from €11,016M to €13,504M. Looking more carefully at operating profit before impairment: - "Profit From Operations Before Impairment And Disposals Of Non Current Assets": €429,000,000 Adding back amortization: €429M + €299M = €728M? No wait, the €429M already includes amortization. Actually, let me use: EBITDA = Profit From Operations Before Impairment + Depreciation/Amortization + Interest - other items. From "Gross Profit" including discontinued: €883,000,000 (from "Gross Profit Loss Including Discontinued Operations") Let me use a cleaner approach. For infrastructure companies, S&P typically focuses on: - Operating cash flows before working capital changes From cash flow statement approach: "Cash Flows From Used In Operating Activities": €1,002,000,000 This includes working capital changes and taxes paid. Let me reconstruct more carefully: From the income statement for 2022: - Revenue and Operating Income: €7,553,000,000 - Operating Expense: €6,825,000,000 - Gross Profit: €728,000,000 Wait, let me check: 7,553 - 6,825 = 728? No, 7,553 - 6,825 = 728. Yes. Then from Gross Profit to Operating Profit: - Amortisation Expense: €299,000,000 But we need EBITDA. The "Profit From Operations Before Impairment And Disposals Of Non Current Assets" is €429,000,000. This €429M is after D&A. So EBITDA before impairment = 429 + 299 = €728,000,000? Hmm, but Gross Profit is also €728M. Let me check: 7,553 revenue - 6,825 operating expense = 728 gross profit. Then 728 - 299 amortization = 429 operating profit before impairment. Yes! That works. So EBITDA (reported/reconstructed) = €728,000,000 But wait - for infrastructure companies, we need to consider: - Share of profit of associates: €165,000,000 (this is equity-accounted) - Finance costs and other items For S&P purposes, EBITDA typically includes dividends from associates rather than equity-accounted profits, or we use proportional consolidation. Looking at the cash flow: "Dividends Received Classified As Operating Activities": €284,000,000 Also: "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method": -€165,000,000 (this removes the equity-accounted profit and replaces with dividends received) For Adjusted_EBITDA, S&P for infrastructure typically uses: - EBITDA from core operations - Plus proportional EBITDA from associates, or dividends received if more conservative Let me use a practical approach. The operating cash flow before working capital is: Cash Flows From Operating Activities: €1,002,000,000 Less: Increase Decrease In Working Capital: €83,000,000 Less: Income Taxes Paid Refund: €82,000,000 Less: Dividends Received: €284,000,000? No, dividends received are typically part of operating cash flow for infrastructure. Actually, for FFO calculation, S&P uses: FFO = Funds From Operations = Net Income + D&A + deferred taxes + other non-cash items - equity income + dividends from affiliates - gains on sales + other adjustments Let me use the direct S&P formula provided: Adjusted_EBITDA = EBITDA + adjustment_leases + nonrecurring_losses - nonrecurring_gains ± pension_adjustments ± joint_venture_proportional_EBITDA ± other_normalization_adjustments From the data: - Base EBITDA = €728,000,000 (from above, or we can use 1,002M operating cash flow + taxes + interest as check) Actually, let me verify with cash flows: Operating cash flow 1,002M includes: - Working capital increase 83M (use, so subtracted) - Taxes paid 82M (subtracted) - Dividends received 284M (added) Cash flow before working capital and taxes = 1,002 + 83 + 82 - 284 = 883? Or more carefully: OCF = Net income + D&A + other non-cash - working capital changes Let me try: Net income from continuing operations 238M + discontinued 64M = 302M total profit + D&A 299M + adjustments for reconcile profit loss 697M (this is negative, so -697? No, it's "adjustments" meaning add back) Actually "Adjustments For Reconcile Profit Loss": -€697,000,000 - this seems to be the net adjustments. Let me look at this more carefully. The cash flow statement shows: - Profit Loss: 302,000,000 - Adjustments For Reconcile Profit Loss: -697,000,000 - Adjustments For Non Controlling Interests: 116,000,000 - Adjustment For Net Profit Loss From Discontinued Operations: -64,000,000 - Adjustments For Income Tax Expense: -30,000,000 - Adjustments For Undistributed Profits Of Investments: -165,000,000 - Adjustments For Finance Income Cost: 320,000,000 - Adjustments For Gain Loss On Disposals: 6,000,000 - Ajustes Al Resultado Por Gastos Por Depreciacion YAmortizacion: 299,000,000 Sum of adjustments: -697 + 116 - 64 - 30 - 165 + 320 + 6 + 299 = -215,000,000 Then: 302 - 215 = 87,000,000 before working capital and other items? That doesn't match 1,002M. Wait, let me recheck: -697 + 116 = -581; -581 - 64 = -645; -645 - 30 = -675; -675 - 165 = -840; -840 + 320 = -520; -520 + 6 = -514; -514 + 299 = -215. 302 - 215 = 87. Then add back working capital and other items to get to 1,002. But we have "Increase Decrease In Working Capital": 83,000,000 (positive, so source) "Dividends Received Classified As Operating Activities": 284,000,000 87 + 83 + 284 = 454. Not 1,002. I'm missing something. Actually, looking more carefully at the adjustments: "Adjustments For Reconcile Profit Loss" at -697M seems to be a net figure that already includes some items. Let me check if this is the total of all other adjustments or separate. Looking at the structure, it seems like "Adjustments For Reconcile Profit Loss" is a separate line. But -697M is very large and negative. This might include working capital changes or other major items. Let me try a different approach. For transportation infrastructure, S&P often uses a simplified approach focusing on: 1. EBITDA from core operations 2. FFO = Operating Cash Flow - capex for maintenance + dividends from associates - interest paid Actually, let me use the most direct approach from S&P methodology for infrastructure: For core ratio, FFO to debt is preferred. FFO is typically: - Net income from continuing operations + D&A + deferred taxes - equity income from affiliates + dividends received from affiliates + other non-cash items - gains on asset sales From the data for 2022: - Profit Loss From Continuing Operations: €238,000,000 - Amortisation Expense: €299,000,000 - Adjustments For Income Tax Expense: -€30,000,000 (this is the tax expense, so add back? No, we need cash taxes) Actually, let me use the standard S&P formula: FFO = Adjusted_EBITDA - cash_interest - cash_taxes For Adjusted_EBITDA, I'll use operating cash flow before working capital changes + cash taxes + cash interest, or reconstruct from the income statement. From cash flow: "Interest Paid Classified As Financing Activities": €329,000,000 "Income Taxes Paid Refund Classified As Operating Activities": €82,000,000 (paid, so expense) From the income statement: "Finance Income Cost" total: -€320,000,000 (negative means expense) "Income Tax Expense Continuing Operations": €30,000,000 For EBITDA, let me use: Revenue 7,553 + other adjustments - cash operating costs = ? Or use: Gross Profit Loss Including Discontinued Operations: €883,000,000 This includes discontinued operations gross profit of 155M, so continuing gross profit = 728M But for S&P, we typically want EBITDA including discontinued if it's core, or excluding if non-core. Let me check: "Gross Profit Loss From Discontinued Operations": €155,000,000 "Gross Profit Loss Including Discontinued Operations": €883,000,000 So continuing operations gross profit = 883 - 155 = 728M, which matches. For infrastructure companies with significant associates, S&P often uses a "proportionate" approach or includes dividends. Let me look at what S&P typically does for transportation infrastructure: From the methodology: "FFO to debt is the preferred measure" and "Our preferred supplementary ratio is FFO cash interest coverage." For FFO: "FFO = Adjusted_EBITDA - cash_interest - cash_taxes" Let me estimate Adjusted_EBITDA more carefully: Starting from operating profit before impairment: €429,000,000 (continuing) + Amortisation: €299,000,000 = €728,000,000 continuing EBITDA Add discontinued operations EBITDA: From "Gross Profit Loss From Discontinued Operations": €155,000,000 We need to add D&A for discontinued. Not directly given, but we can estimate. Actually, looking at cash flows from discontinued operations in investing: not much info. Let me assume D&A for discontinued is small or included. Total EBITDA ≈ €728M + €155M = €883M (matches "Gross Profit Loss Including Discontinued Operations" which is pre-D&A? No wait, gross profit is before D&A, so yes, this is effectively EBITDA if there are no other operating expenses between gross profit and EBITDA). Actually, let me check: Gross Profit - Amortisation = Operating Profit before impairment? 728 - 299 = 429. Yes! So Gross Profit is effectively EBITDA for this company (no other major operating expenses between gross profit and operating profit). Wait, but we also have "Employee Benefits Expense" and other items in operating expenses. Let me recheck the income statement structure. Looking again: "Operating Expense" 6,825M includes: - Raw Materials And Consumables Used: 1,197M - Miscellaneous Other Operating Expense: 4,182M (includes 1M fair value adjustment) - Employee Benefits Expense: 1,446M Total: 1,197 + 4,182 + 1,446 = 6,825M. Yes. And "Gross Profit" = Revenue + Other Income - these operating expenses? No wait: Revenue and Operating Income = 7,553M Operating Expense = 6,825M Difference = 728M = Gross Profit So Gross Profit = Revenue - (Raw Materials + Other Operating Expense + Employee Benefits)? That doesn't make sense typically, but perhaps "Miscellaneous Other Operating Expense" includes other items. Actually, looking more carefully: "Gross Profit" 728M = 7,553 - 6,825. Then "Amortisation Expense" 299M is separate, giving "Profit From Operations Before Impairment" of 429M. So the structure is: Revenue + Other Income = 7,553 - Operating Expenses (including D&A?) = 6,825 = Gross Profit = 728 - Amortisation = 299 = Operating Profit before impairment = 429 Wait, but 728 - 299 = 429. So is amortization included in operating expenses? Let me check: 6,825 includes what? Raw Materials 1,197 + Misc Other Operating 4,182 + Employee Benefits 1,446 = 6,825. These don't include amortization explicitly. But "Miscellaneous Other Operating Expense" might include D&A. Actually, looking at the "Before Fair Value Adjustments Member" vs total: - Misc Other Operating Expense Before FV: 4,183, total 4,182 (includes -1 FV) - Operating Expense Before FV: 6,826, total 6,825 So the base operating expenses are 6,826 before fair value adjustments. Hmm, but then Gross Profit Before FV is 727, and total Gross Profit is 728. Let me just accept: EBITDA = Gross Profit + D&A if D&A was deducted, or = Operating Profit + D&A. From "Profit From Operations Before Impairment And Disposals": 429M + 299M amortization = 728M. But Gross Profit is also 728M. This suggests Gross Profit is already after some D&A or there's a coincidence. Actually, I think "Amortisation Expense" is deducted after Gross Profit. So: Gross Profit 728 - Amortisation 299 = 429 Operating Profit before impairment. So EBITDA = 728M? No, EBITDA = Operating Profit + D&A = 429 + 299 = 728M. Or EBITDA = Gross Profit if no other operating expenses between gross profit and EBIT, but that would mean Gross Profit = EBIT + D&A, which is unusual. Wait - in many European formats, "Gross Profit" can be after cost of sales but before S,G&A and D&A. Then Operating Profit = Gross Profit - S,G&A - D&A. But here, we have only Amortisation mentioned, not other S,G&A. Let me check if Employee Benefits and Misc Other Operating are part of cost of sales or S,G&A. Given the structure, I think "Operating Expense" includes all operating costs including what might be S,G&A, and "Gross Profit" is just Revenue - Operating Expense. Then "Amortisation" is shown separately as an adjustment. This is confusing. Let me just use: **EBITDA = 728M + 299M = 1,027M?** No wait, if 728 already includes the deduction of operating expenses but not amortization... Let me try yet again with the cash flow approach which is more reliable for S&P: From Cash Flow Statement: Cash Flows From Used In Operating Activities: €1,002,000,000 This includes: - Working capital increase: €83,000,000 (use, so negative adjustment to get to "before WC") - Income taxes paid: €82,000,000 (negative) - Dividends received: €284,000,000 (positive) - Interest received: not in operating, it's in investing (47M) For S&P FFO, we typically want: Operating Cash Flow before working capital changes - cash interest - cash taxes? No, the formula given is FFO = Adjusted_EBITDA - cash_interest - cash_taxes. Let me estimate Adjusted_EBITDA from cash flows: OCF before WC changes = 1,002 + 83 = 1,085M (adding back working capital use) But this includes taxes paid (82M) and dividends received (284M) and interest elements. Actually, standard approach: OCF before WC = Net Income + D&A + other non-cash - equity earnings + dividends from equity investees + other adjustments. From our earlier calc: 302M profit + adjustments = 87M before WC, then +83M WC +284M dividends + other = 1,002M? Not working. Let me try: 302M profit - 697M reconcile adjustment (this might be gains/losses, working capital, etc.) + 116M NCI - 64M discontinued - 30M tax - 165M undistributed affiliates + 320M finance costs + 6M disposal gains + 299M D&A = 302 - 697 + 116 - 64 - 30 - 165 + 320 + 6 + 299 = -213? Let me recalculate: 302-697=-395; -395+116=-279; -279-64=-343; -343-30=-373; -373-165=-538; -538+320=-218; -218+6=-212; -212+299=87. Then 87 + 83 (WC) + 284 (dividends) + other items = 1,002? 87 + 83 + 284 = 454. Still missing 548M. Hmm, I think "Adjustments For Reconcile Profit Loss" at -697M might already include some of the other adjustments, or the signs are different than I interpreted. Let me try a completely different approach. For European infrastructure companies, S&P often uses a simplified FFO calculation: FFO = Operating Cash Flow - Change in Working Capital - Cash Taxes (if not already deducted) + After-tax Interest Received - Cash Interest Paid Or more practically for this case, let me use the direct definition: **Adjusted_EBITDA** for infrastructure typically includes: - Operating profit before exceptional items + D&A + Proportional EBITDA from associates (or dividends received as proxy) From the data, the most reliable EBITDA proxy is: "Cash Flows From Used In Operating Activities" + "Cash Outflow For Leases" + "Income Taxes Paid" - "Dividends Received" - "Increase Decrease In Working Capital" + Interest elements... Actually, let me use a cleaner approach from S&P's typical infrastructure practice: For concession-based infrastructure with significant associates: - Use "Funds From Operations" = Cash flow from operations after working capital, before capex, with adjustments From the cash flow data: Cash Flows From Used In Operating Activities: €1,002,000,000 + Cash Outflow For Leases: €72,000,000 (this is financing, not operating) - Dividends Received: €284,000,000 (these are part of FFO for S&P, so keep them) Actually for S&P FFO, dividends from affiliates are typically INCLUDED in FFO, not excluded. So we don't subtract them. Let me try: FFO = OCF - WC changes - maintenance capex + dividends from affiliates... No, that's free cash flow. Standard S&P FFO for infrastructure: FFO = Net Income + Depreciation + Deferred Taxes + Other Non-Cash Items - Equity Earnings from Affiliates + Dividends from Affiliates - Gains on Asset Sales + Other Items From our data: - Net Income (total): €302,000,000 - D&A: €299,000,000 - Deferred Taxes: need to estimate. "Deferred Tax Assets" increased from 570M to 784M, so increase of 214M. "Deferred Tax Liabilities" increased from 687M to 924M, increase of 237M. Net deferred tax change = 214 - 237 = -23M (expense). But "Income Tax Expense" is 30M total, with cash taxes 82M, so deferred tax benefit = 82 - 30 = 52M? No wait, total tax expense 30M, cash taxes paid 82M, so there's a refund or timing difference. Actually if expense is 30M and cash paid is 82M, then deferred tax benefit is 52M. Hmm, "Income Taxes Paid Refund Classified As Operating Activities": 82,000,000. This is positive, meaning refund? Or is it "paid" and the number is just the amount? Usually this line is shown as negative if paid, positive if refund. But in the text it's shown as 82M without sign, and "Income Tax Expense" is 30M. Looking at the sign convention: "Income Taxes Paid Refund" 82M - if this is a refund, it's positive for cash flow. But in the adjustments, "Adjustments For Income Tax Expense" is -30M, meaning tax expense was deducted to get to profit, so we add back? No, -30M in the reconciliation means... actually looking at the pattern, positive numbers in adjustments seem to be add-backs to profit. Let me try yet another approach, using the most standard S&P formula for infrastructure companies: **Adjusted_EBITDA = Revenue - Cash Operating Costs + Proportional EBITDA from Associates** Or from the income statement: EBITDA = Operating Profit before impairment + D&A = 429 + 299 = 728M (continuing) + Discontinued operations EBITDA: need to estimate From discontinued operations: "Profit Loss From Discontinued Operations": €64,000,000 Gross profit from discontinued: €155,000,000 If we assume similar D&A ratio, or that operating profit from discontinued is 64M, and gross profit is 155M, then EBITDA for discontinued = 155M (if no D&A below gross profit) or more. Actually, for simplicity, let me use **Total Gross Profit Including Discontinued = €883,000,000** as a proxy for EBITDA, since this company seems to have minimal D&A below gross profit line (amortization is deducted after gross profit). But wait, we know Amortisation is 299M. Is this included in "Operating Expense" of 6,825M? If not, then Gross Profit is pre-D&A, and EBITDA = Gross Profit = 883M (including discontinued). Let me verify: 7,553 revenue - 6,825 operating expense = 728 continuing gross profit. Then 728 - 299 amortization = 429 operating profit. So yes, amortization is NOT in operating expense. Therefore EBITDA = Gross Profit = 728M continuing, or 883M total. But for S&P Adjusted_EBITDA, we need to add back leases if capitalized (IFRS 16), adjust for associates, etc. For associates: "Share Of Profit Loss Of Associates": €165,000,000 (equity accounted) "Dividends Received Classified As Operating Activities": €284,000,000 S&P typically replaces equity earnings with dividends received for FFO, or uses proportional EBITDA. For Adjusted_EBITDA, we might add proportional EBITDA of associates. "Investments In Associates": €1,892M (2023), €1,838M (2022) If we assume a typical EBITDA margin for associates, or use dividends as proxy for cash flow. For simplicity and following S&P practice for infrastructure: **use dividends received from associates as the relevant cash flow metric**, or add proportional EBITDA. Actually, looking at S&P's transportation infrastructure methodology more carefully: they mention "FFO to debt is the preferred measure" and for FFO they use standard corporate methodology adjusted for sector specifics. Let me use the most practical approach: **Adjusted_EBITDA = €883,000,000** (Gross Profit Including Discontinued Operations, which is effectively EBITDA for this cost structure) + Adjustment for leases: Under IFRS 16, leases are capitalized. "Rightofuse Assets" are 183M, "Noncurrent Lease Liabilities" 120M + "Current Lease Liabilities" 64M = 184M. The "Cash Outflow For Leases" is 72M. For EBITDA, IFRS 16 lease payments are typically not in operating expense (they're depreciation + interest). So no EBITDA adjustment needed for leases under current IFRS 16 - the operating lease expense is already excluded from this EBITDA. + Joint venture proportional EBITDA: We should add our share of associates' EBITDA. Using dividends received (284M) as conservative proxy, or using equity earnings (165M) plus some add-back. For infrastructure, S&P often uses dividends received as the relevant metric for FFO. Let me add proportional EBITDA: if associates earned 165M net profit, their EBITDA might be roughly 165M / (1-tax rate) + D&A. Rough estimate: 165M / 0.75 + D&A ≈ 220M + 50M = 270M. But we only received 284M dividends, which is close. Actually, for conservative S&P approach, use **dividends received from associates: €284,000,000** rather than equity earnings. So Adjusted_EBITDA with proportional consolidation = 883 + 284 = 1,167M? Or do we replace equity earnings with dividends? In standard S&P FFO calculation: - Start with Net Income: 302M - Subtract equity earnings: -165M - Add dividends received: +284M - Add D&A: +299M - Other adjustments This gives FFO = 302 - 165 + 284 + 299 + other = 720M + other adjustments. But for Adjusted_EBITDA, let me use: Adjusted_EBITDA = 883M (gross profit/EBITDA) + 284M (dividends from associates as proxy for proportional EBITDA) = **€1,167,000,000** Wait, but is this double counting? If we use proportional EBITDA from associates, we should not also count equity earnings in net income. Let me think... For a company with 50% of an associate, S&P might: - Report 100% of own EBITDA + 50% of associate's EBITDA (proportional consolidation) Or equivalently: - Report 100% of own EBITDA + dividends received (conservative, if associate's cash flow is stable) For FFO specifically, S&P uses: FFO = Net Income - Equity Earnings + Dividends + D&A + other adjustments So let me calculate FFO directly using the S&P formula: ## Step 3: Estimate FFO Using S&P's standard FFO formula for infrastructure: FFO = Net Income from continuing operations + Depreciation & Amortization + Deferred Income Taxes + Other Non-Cash Items - Equity Earnings from Affiliates + Dividends from Affiliates - Gains on Sales of Assets + Other Adjustments From the data (2022): - Profit Loss From Continuing Operations: €238,000,000 - Amortisation Expense: €299,000,000 (D&A proxy) - Deferred Tax: Need to calculate. Total tax expense 30M, cash taxes paid/refund 82M (refund based on positive sign in context? Or paid?). Looking at "Income Taxes Paid Refund" 82M - if positive means refund, then cash tax refund was 82M, meaning tax expense 30M was non-cash? That doesn't make sense. Let me assume cash taxes paid were 82M (negative for cash flow, but shown as absolute). Actually, from "Adjustments For Income Tax Expense": -30,000,000. In cash flow reconciliation, this is likely added back (negative expense = benefit, or add back to get to cash basis). Hmm, signs are confusing. Let me use a simpler approach. S&P FFO can also be estimated as: FFO = Cash Flow From Operations - Changes in Working Capital - Cash Interest - Cash Taxes + Dividends from Affiliates - Maintenance Capex... No that's too far. Standard S&P FFO: FFO = Funds from operations = Net income before extraordinary items + depreciation + deferred taxes + other non-cash items - equity income + dividends from affiliates - gains on asset sales + other adjustments Let me calculate: - Net income (total, including discontinued): €302,000,000 - D&A: €299,000,000 - Deferred tax benefit (estimated): From deferred tax assets increase 214M and liabilities increase 237M, net is expense of 23M. But total tax expense is 30M. If cash taxes were 82M paid, then: Tax expense 30M = Cash taxes 82M + Deferred tax benefit 52M? That gives 30 = 82 - 52 = 30. Yes! So deferred tax benefit is 52M. Wait: 82M cash paid + (-52M) deferred benefit = 30M total expense. Or 82M paid - 52M benefit = 30M. Yes, deferred tax benefit (reduction in expense) is 52M. But looking at deferred tax asset/liability changes: Assets up 214M (benefit), liabilities up 237M (expense), net 23M expense. This doesn't match 52M benefit. There may be FX translation, acquisitions, or other effects. Let me just use the cash flow approach: FFO excludes working capital changes but includes the core operating cash flows. From Cash Flow Statement, the reconciliation items: - Profit Loss: 302M - Adjustments For Reconcile Profit Loss: -697M (this is likely working capital and other items net) - Various other adjustments... Actually, let me try to identify "Cash Flow Before Working Capital" from the data. Looking at all adjustment items in cash flow: 1. Profit Loss: 302 2. Adjustments For Reconcile Profit Loss: -697 3. Adjustments For Non Controlling Interests: 116 4. Adjustment For Net Profit Loss From Discontinued Operations: -64 5. Adjustments For Income Tax Expense: -30 6. Adjustments For Undistributed Profits Of Investments: -165 7. Adjustments For Finance Income Cost: 320 8. Adjustments For Gain Loss On Disposals: 6 9. Ajustes...Depreciacion YAmortizacion: 299 Sum items 3-9: 116 - 64 - 30 - 165 + 320 + 6 + 299 = 482 Total with items 1-2: 302 - 697 + 482 = 87 Then add: - Gross Profit Loss From Discontinued Operations: 155? No, already in profit. - Working capital: 83 - Dividends received: 284 - Other items? 87 + 83 + 284 = 454. Still not 1,002. I think "Adjustments For Reconcile Profit Loss" at -697M might include major working capital or other items that I'm double counting. Let me just accept the OCF as given and work backwards. For S&P purposes, a practical FFO estimate for infrastructure: FFO = Cash Flow From Operations + Cash Interest Paid + Cash Taxes Paid - Dividends Received (if we want to exclude) + Other adjustments Or: FFO = OCF - Working Capital Changes Given OCF = 1,002M and Working Capital increase = 83M (use, so negative for cash generation): OCF before WC changes = 1,002 + 83 = 1,085M? But this includes dividends received and other items. Actually, standard approach: OCF before working capital changes = EBITDA - Cash Interest - Cash Taxes ± other items. Let me estimate: If OCF = 1,002M, and this includes: - Dividends received: 284M - Working capital use: -83M (so source was +83M to get to "before WC") - Cash taxes: -82M (paid, so add back) - Cash interest: not in operating for IFRS, it's in financing So OCF before WC, taxes, dividends = 1,002 - 284 + 83 - 82 = 719M? No, that's not right either. Let me try: OCF = 1,002M includes dividends received (284M). Excluding dividends: 718M core OCF. This includes working capital benefit of 83M and tax refund/payment of 82M. If tax was paid 82M, then pre-tax OCF = 718 + 82 = 800M. Before WC = 800 - 83 = 717M. This 717M is roughly: EBITDA - Cash Interest. If cash interest is around 320M (from finance costs), then EBITDA = 717 + 320 = 1,037M. Close to my 883M + 284M dividends = 1,167M estimate, but lower. Hmm, the 320M finance costs include infrastructure project financing (243M) and other derivatives. Cash interest paid was 329M per financing section. Let me use a cleaner S&P approach for FFO: **FFO = Net Income + D&A + Deferred Tax Benefit - Equity Earnings + Dividends from Affiliates + Other Non-Cash - Gains on Sales** = 302 + 299 + 52 (est. deferred tax benefit) - 165 + 284 + other - 6 (gain on disposal) = 302 + 299 + 52 - 165 + 284 - 6 = 766M Plus other adjustments (pension, etc.): minor or zero. So **FFO ≈ €766,000,000** or roughly €800M. Let me also try the alternative from OCF: FFO = OCF - Working Capital Changes - Dividends Received (replace with equity earnings?) + Cash Interest + Cash Taxes - Maintenance Capex... Actually for S&P FFO: Start with OCF 1,002M - Subtract: Working capital benefit 83M (to normalize) - Subtract: Dividends received 284M (replace with equity earnings 165M, difference is 119M reduction) - Add: Cash interest paid 329M (financing outflow, not in OCF) - Add: Cash taxes 82M (in OCF as outflow, add back to get pre-tax) - Subtract: Maintenance capex (not in OCF) This gets messy. Let me use the income statement approach which is more standard for S&P. **Final FFO estimate using standard S&P formula:** FFO = Profit from continuing operations + D&A - Equity earnings + Dividends from affiliates - Cash taxes + Deferred taxes - Gains + Other = 238 + 299 - 165 + 284 - 82 + 52 - 6 + 0 = 238 + 299 = 537 537 - 165 = 372 372 + 284 = 656 656 - 82 = 574 574 + 52 = 626 626 - 6 = 620 Hmm, this gives 620M. But I need to check if cash taxes are 82M paid or refunded. Looking at "Income Taxes Paid Refund Classified As Operating Activities": 82,000,000. In IFRS cash flows, this is typically shown as negative if paid. But in the text, it's shown as positive 82M. Given "Adjustments For Income Tax Expense" is -30M in the reconciliation, and total tax expense is 30M, I think cash taxes were actually paid (negative cash flow), and the 82M might be the absolute value, or there was a refund. Given the confusion, let me use a simpler and more conservative approach: **FFO = Cash Flow From Operations - Increase in Working Capital + Cash Interest + Cash Taxes - Dividends Received + Equity Earnings** = 1,002 - 83 + 329 + 82 - 284 + 165 = 1,002 - 83 = 919 919 + 329 = 1,248 1,248 + 82 = 1,330 1,330 - 284 = 1,046 1,046 + 165 = 1,211 This is too high and not right. Let me go back to basics. The S&P formula given is: **FFO = Adjusted_EBITDA - cash_interest - cash_taxes** So I need Adjusted_EBITDA first. **Adjusted_EBITDA estimate:** For transportation infrastructure, S&P typically uses: - Core EBITDA (excluding associates) + Proportional EBITDA from associates (or dividends as proxy) Core EBITDA from continuing operations: €728,000,000 (from Gross Profit, or Operating Profit 429M + D&A 299M) Core EBITDA including discontinued: €883,000,000 For associates: Use dividends received €284,000,000 as conservative proxy for cash flow contribution, or add proportional EBITDA. If we use proportional EBITDA from associates: Investments in associates are 1,892M. If they generate 15% EBITDA margin on revenue, and Ferrovial owns ~20-50%, hard to estimate. Alternatively, use equity earnings 165M / (1-0.25 tax) + D&A ≈ 220M + 50M = 270M proportional EBITDA. But dividends received were 284M, suggesting strong cash generation. For conservative S&P approach, I'll use **dividends received as the relevant cash metric for FFO, not EBITDA add-back**. So: Adjusted_EBITDA = Core EBITDA + proportional EBITDA from associates = 883M + 270M (est.) = **€1,153,000,000** Or using dividends: 883M + 284M = **€1,167,000,000** (but this overstates if dividends > EBITDA) Let me use **€1,020,000,000** as a conservative Adjusted_EBITDA (roughly 883M + 165M equity earnings + some D&A, or about 883M + 270M proportional EBITDA minus some to avoid double counting). Actually, for infrastructure with significant associates, S&P sometimes simply uses: Adjusted_EBITDA = Reported EBITDA + Dividends from Associates - Equity Earnings from Associates = 883 + 284 - 165 = **€1,002,000,000** This effectively replaces equity-accounted earnings with cash dividends. This seems reasonable. Now, **cash_interest** and **cash_taxes**: - Cash interest paid: €329,000,000 (from financing activities) - Cash taxes: €82,000,000 (paid, from operating activities - assuming positive means outflow) So **FFO = 1,002 - 329 - 82 = €591,000,000** Wait, but this seems low. Let me check if Adjusted_EBITDA should be higher. Alternative: Use OCF before WC as Adjusted_EBITDA proxy. OCF 1,002M includes dividends 284M and working capital benefit 83M, and tax outflow 82M. So: OCF before WC, with normalized tax and dividends = 1,002 - 83 - 284 + 165 (equity earnings) + 82 (cash tax) - 82 (normalize to accrual?) This is getting circular. Let me use a different approach. For European infrastructure companies, S&P's typical FFO calculation from financial statements: FFO = EBIT + D&A - Cash Interest - Cash Taxes + Dividends from Associates - Equity Earnings EBIT = Operating Profit before impairment + Interest received - Interest paid (accrual) = 429M + 1M (financing excl. infra) - 268M (finance cost before FV) ... messy with infra financing. Let me use: EBIT from continuing operations = 429M - 6M impairment + 165M equity earnings? No, equity earnings are after EBIT. Actually, "Profit Loss Before Tax" = 268M. This includes: - Operating profit 423M - Finance costs -320M + Equity earnings 165M So EBIT (with equity earnings) = 268 + 320 = 588M? Or EBIT (operating) = 423M, with equity earnings separate. Standard EBIT = 423M (operating) + 165M (equity earnings? No, these are financial/associate income). Actually, 423M operating + 165M equity earnings = 588M pre-tax before financing costs. Then 588M - 320M finance costs = 268M pre-tax. So EBIT = 588M (including equity earnings) or 423M (operating only). For EBITDA: 423M operating + 299M D&A = 722M (close to 728M gross profit). Or 588M + 299M = 887M. Using EBITDA = 887M (including equity earnings): FFO = 887M - 320M finance costs (accrual, not cash) - 30M tax expense + 52M deferred tax - 165M equity + 284M dividends = 887 - 320 - 30 + 52 - 165 + 284 = 708M Then FFO = 708M. But using cash interest 329M and cash taxes 82M: FFO = 887M - 329M - 82M - 165M + 284M = 595M These are in the same ballpark. Let me use **FFO = €620,000,000** as a reasonable midpoint. ## Step 4: Estimate Adjusted_Debt From the S&P formula: Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash Reported debt from balance sheet (2023-01-01, or average 2022-2023? S&P typically uses year-end or average. Let's use 2022 year-end = 2023-01-01 beginning balance, or 2022-01-01. Actually for 2022 fiscal year, debt at end of 2022 = 2023-01-01. Debt items at 2023-01-01: - Noncurrent Portion Of Other Noncurrent Borrowings: €10,776,000,000 - Current Borrowings And Current Portion Of Noncurrent Borrowings: €877,000,000 - Noncurrent Lease Liabilities: €120,000,000 - Current Lease Liabilities: €64,000,000 - Other Noncurrent Financial Liabilities: €838,000,000 Total reported debt = 10,776 + 877 + 120 + 64 + 838 = **€12,675,000,000** But wait, we need to check what's in "Other Noncurrent Financial Liabilities" - this may include derivatives or other items. Looking at derivatives: Noncurrent Derivative Financial Liabilities 66M, Current 47M. These are typically not debt-like for S&P unless they're hedging debt. Also "Noncurrent Debt Securities And Bank Borrowings Of Infrastructure Projects": €7,893M "Noncurrent Debt Securities And Bank Borrowings Excluding Infrastructure Projects": €2,883M Total noncurrent borrowings: 7,893 + 2,883 = 10,776M. Yes, matches. Current borrowings: "Current Debt Securities And Bank Borrowings Of Infrastructure Projects": €74M "Current Debt Securities And Bank Borrowings Excluding Infrastructure Projects": €803M Total: 877M. Yes. Leases: Already included in debt? Under IFRS 16, lease liabilities are included in borrowings. Let me check if the 10,776M + 877M includes leases. Looking at "Rightofuse Assets": €183M vs "Noncurrent Lease Liabilities" €120M + "Current Lease Liabilities" €64M = €184M. The lease liabilities are shown separately, so they may or may not be in the borrowings. Typically under IFRS 16, lease liabilities are included in "borrowings." But here they're shown separately. Let me assume total debt includes all interest-bearing liabilities: Total debt = 10,776 + 877 + 120 + 64 + 838 = 12,675M But "Other Noncurrent Financial Liabilities" 838M - what is this? Looking at 2022: 72M. Big increase. This might include derivatives, accrued interest, or other items. For S&P, we need to identify debt-like items. Looking at derivatives: Noncurrent Derivative Financial Assets 148M, Liabilities 66M. Current Derivative Financial Assets 184M, Liabilities 47M. Net derivative asset position. The 838M "Other Noncurrent Financial Liabilities" might include: - Deferred consideration - Derivatives (but these are shown separately) - Other debt-like obligations For S&P, we typically include all debt-like obligations. Let me include the 838M as debt-like. Pension deficit: "Noncurrent Provisions For Employee Benefits": €2M. Very small, likely not a pension deficit. S&P typically adds pension deficit if material. Here, minimal. Hybrid debt: Not identified. There are "Perpetual Subordinated Bonds" in equity section, but these are small (-8M movement). Not material. Guarantees: Not explicitly stated. May be included in "Other Noncurrent Financial Liabilities" or provisions. Provisions: Noncurrent Provisions €416M + Current Provisions €930M = €1,346M. S&P sometimes treats certain provisions as debt-like if they're recurring obligations. For transportation infrastructure concessions, S&P typically treats: - Debt as reported + Capitalized lease obligations (if not already in debt) + Provisions for concession obligations (if debt-like) - Cash and liquid investments Eligible cash: S&P typically deducts "surplus cash" or a portion of cash. For infrastructure, they may deduct all cash or only non-restricted cash. Cash at 2023-01-01: - Cash And Cash Equivalents: €5,130,000,000 - Cash And Cash Equivalents Infrastructure Projects: €168,000,000 - Current Restricted Cash And Cash Equivalents Infrastructure Projects: €38,000,000 - Other Cash And Cash Equivalents Infrastructure Projects: €130,000,000 Total cash: 5,130 + 168 + 38 + 130 = 5,466M But "Cash And Cash Equivalents Excluding Infrastructure Projects": €4,962M And "Cash And Cash Equivalents Infrastructure Projects": €168M Restricted cash: €38M current restricted + €597M noncurrent restricted = €635M total restricted. For S&P, eligible cash deduction typically includes: - All cash and cash equivalents (excluding restricted cash for specific projects if non-recourse) For infrastructure projects with non-recourse debt, S&P may exclude project-level cash and debt from corporate adjustments if they're ring-fenced. Looking at the structure: Ferrovial has significant infrastructure project debt (€7,893M noncurrent + €74M current = €7,967M) and project cash (€168M + €38M restricted + €130M other = €336M, plus €597M noncurrent restricted financial assets). The "Restricted Cash Relating To Infrastructure Projects And Other Financial Assets" is €597M noncurrent. For S&P's Adjusted_Debt, if the infrastructure project debt is non-recourse to the parent, they may still include it if it's consolidated. But they might deduct associated cash. Conservative approach: Include all debt, deduct all cash: Adjusted_Debt = 12,675M - 5,130M (readily available cash) = €7,545,000,000 Or deduct more cash: 12,675M - 5,466M (total cash) = €7,209,000,000 But for infrastructure, S&P often uses a "net debt" approach with certain adjustments. Let me look at what debt is truly corporate vs project. The debt excluding infrastructure projects: - Noncurrent: €2,883M - Current: €803M Total corporate debt: €3,686M Plus lease liabilities: €184M Plus other financial liabilities: €838M Corporate debt-like: 3,686 + 184 + 838 = €4,708M Cash excluding infrastructure projects: €4,962M Net corporate debt: 4,708 - 4,962 = -254M (net cash!) But this ignores the infrastructure project debt. For consolidated S&P ratios, we typically include all consolidated debt. Total consolidated debt: €12,675M Total consolidated cash: €5,466M Adjusted_Debt = 12,675 - 5,466 = **€7,209,000,000** Or if we only deduct readily available cash (excluding restricted): Adjusted_Debt = 12,675 - (5,466 - 38 - 597) = 12,675 - 4,831 = €7,844,000,000 Or using a more standard S&P approach for infrastructure: Adjusted_Debt = Gross Debt - Cash = 12,675 - 5,130 = €7,545,000,000 Let me use **€7,500,000,000** as a rounded estimate, or more precisely €7,545M. Actually, let me be more precise. S&P typically uses: - Debt including leases, pension deficit, etc. - Less: Cash and cash equivalents (excluding restricted cash if not readily available) From the balance sheet at 2023-01-01: "Cash And Cash Equivalents": €5,130,000,000 (this includes some infrastructure cash? No, separate line shows 168M for infrastructure) Actually "Cash And Cash Equivalents" 5,130M and "Cash And Cash Equivalents Infrastructure Projects" 168M are separate. Total cash and equivalents = 5,298M? But then there's also restricted cash 38M and other infrastructure cash 130M. Total cash-like: 5,130 + 168 + 38 + 130 = 5,466M. But "Cash And Cash Equivalents" in current assets is 5,130M, and the infrastructure cash is part of... actually let me check if 5,130M includes or excludes the 168M. "Cash And Cash Equivalents Excluding Infrastructure Projects": €4,962,000,000 "Cash And Cash Equivalents Infrastructure Projects": €168,000,000 "Current Restricted Cash And Cash Equivalents Infrastructure Projects": €38,000,000 "Other Cash And Cash Equivalents Infrastructure Projects": €130,000,000 Sum: 4,962 + 168 + 38 + 130 = 5,298M. But "Cash And Cash Equivalents" is 5,130M. The difference is 168M. So 5,130M = 4,962M + 168M? Yes! 4,962 + 168 = 5,130. So "Cash And Cash Equivalents" 5,130M includes infrastructure project cash of 168M. The additional 38M + 130M = 168M are other infrastructure cash items, possibly included in "Other Current Receivables" or separate. Total liquid cash = 5,130M (main cash) + 38M (restricted current) + 130M (other) = 5,298M? Or is 38M and 130M already in 5,130M? Probably not, as they're shown separately. Actually, "Cash And Cash Equivalents" is a single line item of 5,130M. The restricted cash of 38M is separate. The 130M "Other Cash And Cash Equivalents Infrastructure Projects" might be in noncurrent or other current assets. For S&P, eligible cash is typically "Cash And Cash Equivalents" less restricted cash. So: Eligible cash = 5,130 - 38 (restricted) = 5,092M? Or include all 5,130M if restricted is minor. I'll use **eligible cash = €5,130,000,000** (all cash and equivalents, treating restricted as minor), or more conservatively **€4,962,000,000** (excluding infrastructure project cash that might be ring-fenced). If we exclude infrastructure project cash and restricted cash: Eligible cash = 4,962M (corporate only) Adjusted_Debt = 12,675 - 4,962 = **€7,713,000,000** Or if we include all cash: 12,675 - 5,130 = **€7,545,000,000** Let me use a middle ground: **€7,600,000,000** approximately. Actually, for more precision, let me check S&P's typical treatment. They usually deduct all cash and liquid investments that are not restricted for specific purposes. Given the infrastructure project cash might be restricted for project debt service, I'll deduct only the corporate cash: Adjusted_Debt = Gross Debt - Corporate Cash = 12,675 - 4,962 = **€7,713,000,000** Or if we treat all cash as available: 12,675 - 5,130 = 7,545M. I'll use **€7,545,000,000** as the more common S&P approach (deducting all cash and equivalents). Wait, let me recheck gross debt. I had: - Noncurrent borrowings: 10,776M - Current borrowings: 877M - Lease liabilities: 184M (120+64) - Other noncurrent financial liabilities: 838M Total: 12,675M But is "Other Noncurrent Financial Liabilities" debt-like? Looking at 2022, it was only 72M. The increase to 838M suggests something major happened - perhaps acquisition-related payables, derivatives, or other items. If this includes derivatives or non-debt items, we should exclude. Looking at derivatives: Noncurrent derivative liabilities are 66M, assets 148M. Current derivative liabilities 47M, assets 184M. These are not in "Other Noncurrent Financial Liabilities" specifically - they're shown separately. The 838M might include: - Deferred consideration for acquisitions - Put options to non-controlling interests - Other debt-like obligations For S&P, these are typically included in debt-like obligations. So I'll keep them. Final Adjusted_Debt = **€7,545,000,000** (using 5,130M cash deduction) or **€7,713,000,000** (using 4,962M). Let me use **€7,600,000,000** as a reasonable rounded estimate. ## Step 5: Calculate FFO / Adjusted_Debt Using my estimates: - FFO: €620,000,000 (from earlier calculation) - Adjusted_Debt: €7,600,000,000 FFO / Adjusted_Debt = 620 / 7,600 = **0.0816** or about 8.2% But this seems low for an infrastructure company. Let me recheck my FFO estimate. Rechecking FFO with alternative approach: FFO = Cash Flow From Operations - Working Capital Changes + Cash Interest - Cash Taxes... No. Actually, let me use the most direct S&P formula from the methodology: FFO = Adjusted_EBITDA - cash_interest - cash_taxes If Adjusted_EBITDA = 1,002M (from earlier, replacing equity earnings with dividends) Cash interest = 329M Cash taxes = 82M (or less if refunded) FFO = 1,002 - 329 - 82 = 591M Or if Adjusted_EBITDA = 883M (core only, no associates): FFO = 883 - 329 - 82 = 472M Or if we add proportional EBITDA from associates (270M estimated): Adjusted_EBITDA = 883 + 270 = 1,153M FFO = 1,153 - 329 - 82 = 742M The range is 472M to 742M. My 620M is in the middle. Let me try yet another approach using S&P's typical infrastructure FFO: FFO = Net Income + D&A + Deferred Taxes + Other Non-Cash - Equity Earnings + Dividends - Gains = 302 + 299 + 52 - 165 + 284 - 6 = 766M This is higher. If I use this FFO: FFO / Adjusted_Debt = 766 / 7,600 = 0.1008 or 10.1% Or with Adjusted_Debt = 7,545M: 766 / 7,545 = 0.1015 Hmm, but this FFO of 766M doesn't deduct cash interest or cash taxes, which the S&P formula requires. The formula FFO = Adjusted_EBITDA - cash_interest - cash_taxes should give a different number. Let me reconcile: If Adjusted_EBITDA = 1,153M (core 883 + associates 270), then: FFO = 1,153 - 329 - 82 = 742M But my "Net Income + adjustments" gave 766M. The difference is 24M, which could be working capital, non-cash items, or my estimate errors. Let me use **FFO = €700,000,000** as a reasonable estimate. Then FFO / Adjusted_Debt = 700 / 7,545 = 0.0928 or about 9.3%. Or with FFO = 766M: 766 / 7,545 = 0.1015. Let me refine using more precise numbers. Looking at the cash flow statement again, the "Cash Flows Before Financing Activities" is €270,000,000. This is after capex and before financing. Cash Flows From Operating Activities: 1,002M Cash Flows From Used In Investing Activities: -732M Cash Flows Before Financing Activities: 270M For FFO, S&P typically uses pre-capex, so from operations before financing: FFO ≈ Cash Flow From Operations before working capital - cash interest - cash taxes + dividends from affiliates Or: FFO = EBIT + D&A - Cash Interest - Cash Taxes ± other items. Let me try: EBIT (including equity earnings) = 588M (from 268M pre-tax + 320M finance costs) + D&A 299M = 887M EBITDA-like - Cash interest 329M - Cash taxes 82M = 476M But this excludes dividends vs equity earnings adjustment. If we add dividends 284 and subtract equity earnings 165: = 476 - 165 + 284 = 595M This is close to my 620M estimate. I think **FFO ≈ €600,000,000 to €650,000,000** is reasonable. Let me use **€620,000,000**. For Adjusted_Debt, let me also check if we should use average debt or year-end. S&P typically uses year-end or average. For 2022 fiscal year, using year-end 2022 (=2023-01-01): Gross debt at 2023-01-01: 12,675M Gross debt at 2022-01-01: Need to calculate. At 2022-01-01: - Noncurrent Portion Of Other Noncurrent Borrowings: 9,513M? No wait, "Noncurrent Portion Of Other Noncurrent Borrowings" 2022-01-01: Not directly given. We have: - "Noncurrent Debt Securities And Bank Borrowings Of Infrastructure Projects" 2022-01-01: 7,362M - "Noncurrent Debt Securities And Bank Borrowings Excluding Infrastructure Projects" 2022-01-01: 2,151M - Total noncurrent borrowings: 9,513M But "Noncurrent Portion Of Other Noncurrent Borrowings" 2022-01-01 is not shown. Let me check: it's not in the 2022-01-01 data. Hmm, the line might be new or renamed. Actually looking: "Noncurrent Portion Of Other Noncurrent Borrowings" 2023-01-01: 10,776M. This matches 7,893 + 2,883 = 10,776. So at 2022-01-01: 7,362 + 2,151 = 9,513M. Current borrowings 2022-01-01: 47 + 1,049 = 1,096M Lease liabilities 2022-01-01: 115 + 58 = 173M Other noncurrent financial liabilities 2022-01-01: 72M Total debt 2022-01-01: 9,513 + 1,096 + 173 + 72 = 10,854M Average debt: (10,854 + 12,675) / 2 = 11,765M Using average debt for S&P ratios is common. But the formula says "Adjusted_Debt" which typically means year-end or latest. Let me use year-end 2022 = 12,675M. Cash 2022-01-01: 5,536M (Cash And Cash Equivalents) + other cash items. Actually "Cash And Cash Equivalents" 2022-01-01: 5,536M "Cash And Cash Equivalents Infrastructure Projects" 2022-01-01: 207M "Current Restricted Cash And Cash Equivalents Infrastructure Projects" 2022-01-01: 47M "Other Cash And Cash Equivalents Infrastructure Projects" 2022-01-01: 160M Total cash 2022-01-01: 5,536 + 207 + 47 + 160 = 5,950M? But 5,536 includes 207? Check: "Cash And Cash Equivalents Excluding Infrastructure Projects" 2022-01-01: 5,329M. Plus infrastructure 207M = 5,536M. Yes. So total cash 2022-01-01: 5,329 + 207 + 47 + 160 = 5,743M? Or 5,536 + 47 + 160 = 5,743M. Net debt 2022-01-01: 10,854 - 5,536 = 5,318M (using main cash) or 10,854 - 5,329 = 5,525M (excluding infra cash). Average net debt: (5,318 + 7,545) / 2 = 6,432M? Or using more consistent cash measure. This is getting complex. For simplicity and consistency with S&P practice, I'll use **year-end 2022 gross debt less year-end 2022 cash**. Adjusted_Debt at 2023-01-01 (end 2022) = 12,675 - 5,130 = **€7,545,000,000** Or if we want to be more conservative and exclude restricted cash-like items: Adjusted_Debt = 12,675 - 4,962 = **€7,713,000,000** I'll use **€7,600,000,000** as a rounded figure, or more precisely **€7,545,000,000**. ## Final Calculation Using: - FFO = €620,000,000 (conservative estimate from multiple approaches) - Adjusted_Debt = €7,545,000,000 FFO / Adjusted_Debt = 620 / 7,545 = **0.0822** Or with FFO = 700M: 700 / 7,545 = **0.0928** Or with FFO = 766M: 766 / 7,545 = **0.1015** Given the range, and that infrastructure companies typically have FFO/debt around 10-15%, let me use a more refined estimate. From the S&P formula with Adjusted_EBITDA = 1,002M (OCF-based): FFO = 1,002 - 329 - 82 = 591M But this uses OCF which includes working capital. If we adjust for working capital benefit of 83M: FFO = 591 - 83 = 508M? No, OCF already includes WC. Actually, let me use the cleanest approach: Adjusted_EBITDA = EBIT + D&A + proportional EBITDA from associates = 588M (EBIT with equity earnings) + 299M D&A + 105M (additional proportional D&A from associates, estimated) = 992M ≈ **€1,000,000,000** FFO = 1,000 - 329 - 82 = **€589,000,000** FFO / Adjusted_Debt = 589 / 7,545 = **0.0781** Or with Adjusted_Debt = 7,713 (less cash): 589 / 7,713 = **0.0764** This seems low. Let me check if cash taxes are really 82M. If there was a tax refund: FFO = 1,000 - 329 - (-82) = 1,000 - 329 + 82 = 753M? No, tax refund would increase FFO. Actually, looking at "Income Taxes Paid Refund" with positive 82M in the context - in cash flow statements, this is typically shown as negative if paid. But the sign convention in the text shows positive numbers. Given "Adjustments For Income Tax Expense" is -30M in the reconciliation (meaning add back to profit?), I think the 82M might be a refund. If cash tax refund was 82M: FFO = 1,000 - 329 + 82 = 753M? No, tax refund reduces tax expense, so FFO increases. Actually, the standard formula is FFO = Adjusted_EBITDA - cash_interest - cash_taxes. If cash_taxes is negative (refund), then -(-82) = +82, so FFO increases. But this seems wrong. Let me assume cash taxes paid were 82M (outflow), so FFO = 1,000 - 329 - 82 = 589M. Given all the uncertainty, let me use a final estimate based on the most defensible calculation: **Adjusted_EBITDA** = Gross Profit Including Discontinued (883M) + Dividends from Associates (284M) - Equity Earnings (165M) + D&A already in Gross Profit (0, since Gross Profit is pre-D&A) = 883 + 284 - 165 = **€1,002,000,000** Wait, this double counts. Let me just use: Core EBITDA 883M + proportional EBITDA from associates. If associates contributed 165M net income with minimal D&A (infrastructure projects are often equity-accounted with D&A), proportional EBITDA ≈ 165M / (1-0.25) + small D&A ≈ 220M. But dividends were 284M, suggesting higher cash flow. Use **Adjusted_EBITDA = €1,100,000,000** (883M + 217M estimated proportional EBITDA) FFO = 1,100 - 329 - 82 = **€689,000,000** FFO / Adjusted_Debt = 689 / 7,545 = **0.0913** Or with Adjusted_Debt = 7,600: 689 / 7,600 = **0.0907** Given all calculations, I estimate the ratio is approximately **0.09 to 0.10**. Let me use my most precise final numbers: - FFO = €650,000,000 (mid-range of 589-766M) - Adjusted_Debt = €7,600,000,000 (mid-range) FFO / Adjusted_Debt = 650 / 7,600 = **0.0855** Or with precise: 620 / 7,545 = **0.0822** I'll go with **0.0900** as a rounded estimate, or more precisely calculate with final refined numbers: Final refined calculation: - Adjusted_EBITDA = Revenue and Operating Income (7,553) - Operating Expense (6,825) + D&A (299) + Discontinued gross profit (155) + Dividends from associates (284) - Equity earnings (165) = 7,553 - 6,825 + 299 + 155 + 284 - 165 = 1,301M? No, this is wrong. Simplest correct approach: - EBITDA = Operating Profit before impairment (429M) + Amortisation (299M) + Discontinued operations EBITDA (est. 155M gross profit, assume minimal D&A below this) = 883M - Plus proportional EBITDA from associates: Use dividends 284M as conservative proxy = 284M - Adjusted_EBITDA = 883 + 284 = 1,167M? But this overstates if dividends > EBITDA. Actually, for FFO calculation, S&P uses: FFO = Net Income + D&A + Deferred Taxes + Other Non-Cash - Equity Earnings + Dividends - Gains = 302 + 299 + 52 - 165 + 284 - 6 = 766M Then FFO / Adjusted_Debt = 766 / 7,545 = **0.1015** But this FFO of 766M is before deducting cash interest! The S&P formula says FFO = Adjusted_EBITDA - cash_interest - cash_taxes. The "Net Income + adjustments" approach gives a different metric (more like "funds from operations" in a broader sense). For S&P's specific definition: FFO = Adjusted_EBITDA - cash_interest - cash_taxes If Adjusted_EBITDA = 1,167M (883 + 284), then: FFO = 1,167 - 329 - 82 = 756M Close to 766M. The difference is due to my estimates. Using FFO = 756M and Adjusted_Debt = 7,545M: Ratio = 756 / 7,545 = **0.1002** Or with Adjusted_Debt = 7,713M (less cash): 756 / 7,713 = **0.0980** Given the precision of the data, I'll use **0.1000** or more precisely **0.0980 to 0.1002**. Let me finalize with: - FFO = €700,000,000 (conservative, using lower Adjusted_EBITDA estimate) - Adjusted_Debt = €7,545,000,000 Ratio = 700 / 7,545 = **0.0928** Or with FFO = 756M: 756 / 7,545 = **0.1002** I'll use **0.1000** as a rounded figure, or calculate more carefully: Actually, let me recalculate Adjusted_EBITDA more carefully for infrastructure: For transportation infrastructure with significant associates, S&P typically: 1. Consolidates proportional EBITDA from associates, OR 2. Uses dividends received as proxy for FFO contribution If we use approach 2 (more conservative for debt coverage): Adjusted_EBITDA = Core EBITDA + Dividends from Associates = 883M + 284M = 1,167M But then FFO = 1,167 - 329 - 82 = 756M However, this includes dividends twice if we also adjust for equity earnings in net income. The cleanest is: FFO = (Net Income - Equity Earnings + Dividends) + D&A + Deferred Taxes + Other Non-Cash - Gains = (302 - 165 + 284) + 299 + 52 - 6 = 421 + 299 + 52 - 6 = 766M Then FFO / Adjusted_Debt = 766 / 7,545 = **0.1015** But wait, this 766M is NOT the same as "Adjusted_EBITDA - cash_interest - cash_taxes". Let me check: Adjusted_EBITDA would need to be 766 + 329 + 82 = 1,177M Is 1,177M reasonable for Adjusted_EBITDA? Core EBITDA 883M + 284M dividends = 1,167M. Close to 1,177M. The 10M difference is from other items. So using consistent definitions: Adjusted_EBITDA ≈ €1,177,000,000 FFO = 1,177 - 329 - 82 = €766,000,000 Adjusted_Debt = €7,545,000,000 FFO / Adjusted_Debt = 766 / 7,545 = **0.1015** Or using slightly different Adjusted_Debt with less cash: 766 / 7,713 = **0.0993** Given all this, my best estimate is approximately **0.10** or **0.1000**. Let me use the most defensible single number: **0.1002** or rounded **0.1000**. Actually, rechecking with more conservative Adjusted_Debt (excluding infrastructure project cash): Adjusted_Debt = 12,675 - 4,962 = 7,713M FFO = 766M Ratio = 766 / 7,713 = **0.0993** Or with FFO = 700M (more conservative): 700 / 7,713 = **0.0908** Given the uncertainty range, I'll use **0.0950** as a middle estimate, or more precisely: Final calculation with best estimates: - FFO = €720,000,000 (slightly conservative from 766M) - Adjusted_Debt = €7,600,000,000 (middle of range) Ratio = 720 / 7,600 = **0.0947** Rounded to four decimal places: **0.0947** or **0.1000** if using higher FFO. Let me go with my most detailed calculation: FFO = 766M, Adjusted_Debt = 7,545M, Ratio = 0.1015 Or with average debt: Debt 2022-01-01 was 10,854M, cash 5,536M, net 5,318M. Average net debt (5,318 + 7,545)/2 = 6,432M. Ratio with average = 766 / 6,432 = 0.1191. But S&P typically uses year-end or current, not average for this ratio. I'll use year-end figures: **0.1015** Rounding: **0.1015** or approximately **0.1000**. Given potential overestimation of FFO or underestimation of debt, let me be slightly more conservative: FFO = €700,000,000 Adjusted_Debt = €7,545,000,000 Ratio = 700 / 7,545 = **0.0928** Or FFO = 650M: 650 / 7,545 = **0.0862** I think **0.0900 to 0.1000** is the right range. Let me use **0.0950** as final. Actually, let me recalculate once more with fresh eyes, using the exact S&P formulas provided: **Step 2: Adjusted_EBITDA** = EBITDA (reported or reconstructed) + adjustment_leases + nonrecurring_losses - nonrecurring_gains ± pension_adjustments ± joint_venture_proportional_EBITDA ± other_normalization_adjustments EBITDA = Operating Profit before impairment + D&A = 429M + 299M = 728M (continuing) + Discontinued operations EBITDA: Gross profit 155M, assume no significant D&A below = 155M = 883M total EBITDA + Joint venture proportional EBITDA: Use dividends received 284M as conservative proxy, or equity earnings 165M + estimated D&A. Let's use proportional EBITDA = 284M (dividends represent cash-generative capacity) = 883 + 284 = 1,167M But wait - if we use dividends, we're not using proportional EBITDA. S&P says "± joint_venture_proportional_EBITDA". For infrastructure, if associates are integral, we add proportional EBITDA. If associates have EBITDA margin of 50% and Ferrovial owns 30-50%, hard to estimate. Use dividends as proxy: 284M ≈ proportional EBITDA if payout is 100%. Adjusted_EBITDA = 883M + 284M = **€1,167,000,000** Adjustments: - Leases: Already capitalized under IFRS 16, no EBITDA adjustment needed (lease payments are depreciation + interest, not in EBITDA) - Nonrecurring: "Impairment And Gains Or Losses On Disposal Of Non Current Assets" = -6M (loss, so add back? No, it's already in operating profit). "Gain Loss On Disposals" adjustment in cash flow is 6M (positive, meaning gain). In 2021 there was huge 1,139M gain, but in 2022 only 6M. Negligible. - Pension: "Noncurrent Provisions For Employee Benefits" = 2M, minimal - Other: Fair value adjustments total 0 for 2022 So Adjusted_EBITDA ≈ **€1,167,000,000** **Step 3: FFO** = Adjusted_EBITDA - cash_interest - cash_taxes = 1,167 - 329 - 82 = **€756,000,000** **Step 4: Adjusted_Debt** = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash Reported debt: - Noncurrent borrowings: 10,776M - Current borrowings: 877M - Lease liabilities: 184M (already in borrowings? Under IFRS 16 yes, but shown separately. Assume included in 10,776+877 or add separately) Actually, under IFRS 16, lease liabilities ARE included in "borrowings". Let me check: Right-of-use assets 183M vs lease liabilities 184M. The lease liabilities should be in the debt figures. Looking at 2022: ROU assets 176M, lease liabilities 173M. Close match suggests lease liabilities are likely included in borrowings or shown separately. To avoid double counting, I'll use only the explicit borrowings + other financial liabilities: - Noncurrent Portion Of Other Noncurrent Borrowings: 10,776M - Current Borrowings: 877M - Other Noncurrent Financial Liabilities: 838M = 12,491M Or if lease liabilities are NOT in borrowings: 12,491 + 184 = 12,675M (matches my earlier calc) Pension deficit: 2M minimal, ignore or include in provisions Guarantees: Not explicitly stated Hybrid debt: None material Other debt-like: Provisions 1,346M? S&P sometimes includes certain provisions. Eligible cash: 5,130M (Cash And Cash Equivalents) Adjusted_Debt = 12,675 - 5,130 = **€7,545,000,000** Or if we exclude restricted cash and infrastructure cash: = 12,675 - 4,962 = **€7,713,000,000** Using 7,545M for now. **Step 5: FFO / Adjusted_Debt** = 756 / 7,545 = **0.1002** Or with Adjusted_Debt = 7,713M: = 756 / 7,713 = **0.0980** Using the more conservative debt figure (excluding infrastructure cash that may be ring-fenced): **0.0980** Or with slightly more conservative FFO (using core EBITDA only, no associates): Adjusted_EBITDA = 883M, FFO = 883 - 329 - 82 = 472M Ratio = 472 / 7,545 = **0.0626** (too low, not right for this company) The associate contributions are essential. Using dividends is conservative. Final answer: I'll use **0.0980** or rounded **0.1000**. Given the calculations, my best estimate is: 0.1002