# Analysis of EDP's Adjusted Leverage Trend for 2022

## Step 1: Calculate Net Debt for 2022 and 2023

**2023 (as of 2023-01-01):**
- Long-term Borrowings: €15,782,604,000
- Current Borrowings: €4,239,869,000
- Total Debt: €20,022,473,000
- Cash and Cash Equivalents: €4,900,205,000
- Net Debt 2023: €20,022,473,000 - €4,900,205,000 = **€15,122,268,000**

**2022 (as of 2022-01-01):**
- Long-term Borrowings: €15,299,588,000
- Current Borrowings: €1,518,348,000
- Total Debt: €16,817,936,000
- Cash and Cash Equivalents: €3,222,409,000
- Net Debt 2022: €16,817,936,000 - €3,222,409,000 = **€13,595,527,000**

## Step 2: Calculate EBITDA for 2022 and 2023

**For the period 2022-01-01 to 2023-01-01:**

EBITDA = EBIT + D&A
- EBIT (Profit before financial costs): €2,529,993,000
- Depreciation & Amortisation: €1,979,007,000
- EBITDA 2023: €2,529,993,000 + €1,979,007,000 = **€4,509,000,000**

**For the period 2021-01-01 to 2022-01-01:**
- EBIT: €1,930,785,000
- Depreciation & Amortisation: €1,731,755,000
- EBITDA 2022: €1,930,785,000 + €1,731,755,000 = **€3,662,540,000**

## Step 3: Calculate Net Debt / EBITDA Ratios

**For 2023 (using 2022-2023 EBITDA):**
- Net Debt / EBITDA = €15,122,268,000 / €4,509,000,000 = **3.36x**

**For 2022 (using 2021-2022 EBITDA):**
- Net Debt / EBITDA = €13,595,527,000 / €3,662,540,000 = **3.71x**

## Step 4: Calculate the Year-on-Year Gap

Gap = 3.36x - 3.71x = **-0.35x**

## Step 5: Assess Against the Stability Criteria

According to the definition:
- **Improving**: gap < -0.3x (i.e., more negative than -0.3x)
- **Stable**: gap between -0.3x and +0.3x
- **Deteriorating**: gap > +0.3x

The calculated gap of -0.35x is **lower than -0.3x** (more negative), indicating an improvement in the leverage ratio. The Net Debt / EBITDA ratio decreased from 3.71x to 3.36x, representing a meaningful reduction in adjusted leverage despite increases in net debt. This improvement was driven by a 23.1% increase in EBITDA, which more than offset the 11.2% increase in net debt.

<answer>Improving</answer>