## 1. Relevant industry

Fortum Oyj is primarily a power and heat utility with generation, electricity sales, and related energy activities. Based on the provided methodologies, the closest fit is **Unregulated Power And Gas**, rather than a pure regulated utility, because Fortum has meaningful exposure to merchant/market power prices and commodity/hedging volatility.  

Therefore, I apply the **Unregulated Power And Gas** framework, using the baseline S&P-style credit metrics:
- Adjusted EBITDA
- FFO
- Adjusted Debt
- Debt / EBITDA
- FFO / Debt

No detailed lease, pension, guarantee, hybrid, or purchased-power-contract adjustments are provided, so I use reported figures and available debt-like liabilities as approximations.

---

## 2. Estimate 2021 Adjusted EBITDA

Available reported measures:
- Operating Profit Before Depreciations EBITDA 2021: **EUR 4,913m**
- Comparable EBITDA 2021: **EUR 2,016m**
- Items affecting comparability 2021: **EUR 2,897m**

For S&P-style analysis, nonrecurring gains should generally be removed. The 2021 reported EBITDA was inflated by large positive items affecting comparability, especially capital gains and related items.

Thus, I use **Comparable EBITDA** as the best proxy for Adjusted EBITDA.

\[
\text{Adjusted EBITDA}_{2021} = 2{,}016m
\]

**2021 Adjusted EBITDA = EUR 2.016bn**

---

## 3. Estimate 2021 FFO

Baseline formula:

\[
\text{FFO} = \text{Adjusted EBITDA} - \text{cash interest} - \text{cash taxes}
\]

Available 2021 cash items:
- Interest paid: **EUR 147m**
- Income taxes paid: **EUR 279m**

\[
\text{FFO}_{2021} = 2{,}016 - 147 - 279 = 1{,}590m
\]

**2021 FFO = EUR 1.590bn**

---

## 4. Estimate 2021 Adjusted Debt

Reported interest-bearing debt is not given directly. As a proxy, I use financial liabilities:
- Other noncurrent financial liabilities at 2022-01-01: **EUR 8,701m**
- Other current financial liabilities at 2022-01-01: **EUR 8,519m**

Gross financial debt proxy:

\[
8{,}701 + 8{,}519 = 17{,}220m
\]

Eligible cash:
- Liquid funds / cash and cash equivalents at 2022-01-01: **EUR 7,592m**

\[
\text{Adjusted Debt}_{2021} = 17{,}220 - 7{,}592 = 9{,}628m
\]

I exclude derivative liabilities because they are very large and volatile, and the corresponding derivative assets are also very large. Including gross derivatives would distort debt-like leverage.

**2021 Adjusted Debt = EUR 9.628bn**

---

## 5. 2021 Adjusted Debt / Adjusted EBITDA

\[
\frac{9{,}628}{2{,}016} = 4.78x
\]

**2021 Adjusted Debt / Adjusted EBITDA = 4.78x**

---

## 6. 2021 FFO / Adjusted Debt

\[
\frac{1{,}590}{9{,}628} = 0.165
\]

**2021 FFO / Adjusted Debt = 0.165, or 16.5%**

---

## 7. Estimate 2022 Adjusted EBITDA

Available reported measures:
- Operating Profit Before Depreciations EBITDA 2022: **EUR 1,842m**
- Comparable EBITDA 2022: **EUR 2,436m**
- Items affecting comparability 2022: **EUR -593m**

The 2022 reported EBITDA includes negative comparability items. S&P-style adjusted EBITDA typically normalizes for nonrecurring losses and gains. Comparable EBITDA is therefore the better proxy.

\[
\text{Adjusted EBITDA}_{2022} = 2{,}436m
\]

**2022 Adjusted EBITDA = EUR 2.436bn**

---

## 8. Estimate 2022 FFO

Available 2022 cash items:
- Interest paid: **EUR 201m**
- Income taxes paid: **EUR 167m**

\[
\text{FFO}_{2022} = 2{,}436 - 201 - 167 = 2{,}068m
\]

**2022 FFO = EUR 2.068bn**

---

## 9. Estimate 2022 Adjusted Debt

Financial liabilities proxy:
- Other noncurrent financial liabilities at 2023-01-01: **EUR 3,658m**
- Other current financial liabilities at 2023-01-01: **EUR 4,127m**

Gross financial debt proxy:

\[
3{,}658 + 4{,}127 = 7{,}785m
\]

Eligible cash:
- Liquid funds / cash and cash equivalents at 2023-01-01: **EUR 3,919m**

\[
\text{Adjusted Debt}_{2022} = 7{,}785 - 3{,}919 = 3{,}866m
\]

Again, I exclude derivative liabilities because derivative assets and liabilities appear to reflect market/hedging positions rather than conventional debt.

**2022 Adjusted Debt = EUR 3.866bn**

---

## 10. 2022 Adjusted Debt / Adjusted EBITDA

\[
\frac{3{,}866}{2{,}436} = 1.59x
\]

**2022 Adjusted Debt / Adjusted EBITDA = 1.59x**

---

## 11. 2022 FFO / Adjusted Debt

\[
\frac{2{,}068}{3{,}866} = 0.535
\]

**2022 FFO / Adjusted Debt = 0.535, or 53.5%**

---

## 12. Year-on-year credit trend

### Signal 1: Leverage

\[
\Delta \text{Debt/EBITDA} = 1.59x - 4.78x = -3.19x
\]

Threshold:
- ≤ -0.2x = Improving

Since leverage fell by **3.19x**, Signal 1 is **Improving**.

### Signal 2: Cash-flow coverage

\[
\Delta \text{FFO/Debt} = 0.535 - 0.165 = 0.370
\]

Threshold:
- ≥ +0.03 = Improving

Since FFO/debt improved by **37.0 percentage points**, Signal 2 is **Improving**.

Both signals agree.

Although Fortum reported a very large group net loss in 2022 due to discontinued operations, especially Uniper-related losses, the continuing operations’ comparable EBITDA improved, and the balance sheet deleveraged materially after major structural changes. Based strictly on the requested S&P-style ratio trend, the credit trend from 2021 to 2022 is therefore **Improving**.

<answer>Improving</answer>