## 1. Relevant industry

NATURGY ENERGY GROUP SA is an integrated energy / gas and power utility with regulated networks and liberalized energy activities. Among the provided methodologies, the closest fit is **Regulated Utilities**, though Naturgy also has unregulated power/gas exposure. For the requested ratio trend estimate, I apply the regulated-utility financial metric approach using the available consolidated data.

Because the facts do not provide enough detail for full S&P analytical adjustments such as purchased power obligations, hybrid equity treatment, pension deficits, securitized debt, or proportional JV EBITDA, I use the baseline formulas and only apply adjustments that can be reasonably identified from the data.

---

## 2. Estimate 2021 Adjusted EBITDA

Reported EBITDA:

- 2021 EBITDA = **€3,529 million**

Potential adjustments:

- Leases: lease liabilities are already included in financial liabilities line items, and no separate lease EBITDA add-back is necessary beyond reported EBITDA unless rent expense detail is available.
- Nonrecurring gains/losses: no sufficiently clear nonrecurring operating item is provided for adjustment.
- JV proportional EBITDA: not available.
- Pension / other normalization: not available.

Therefore:

\[
\text{2021 Adjusted EBITDA} = €3{,}529m
\]

---

## 3. Estimate 2021 FFO

Formula:

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

Inputs:

- 2021 Adjusted EBITDA = **€3,529m**
- 2021 cash interest paid = **€488m**
- 2021 cash taxes paid = **€864m**

\[
\text{2021 FFO} = 3{,}529 - 488 - 864 = €2{,}177m
\]

---

## 4. Estimate 2021 Adjusted Debt

Use debt at Jan. 1, 2022 as year-end 2021 debt.

Reported financial debt components:

- Long-term borrowings: **€13,786m**
- Noncurrent lease liabilities: **€1,325m**
- Other noncurrent financial liabilities: **€3m**
- Current borrowings and current portion of noncurrent borrowings: **€1,493m**
- Current lease liabilities: **€196m**
- Other current financial liabilities: **€9m**

Total reported financial liabilities:

\[
13{,}786 + 1{,}325 + 3 + 1{,}493 + 196 + 9 = €16{,}812m
\]

Eligible cash:

- Cash and cash equivalents at Jan. 1, 2022 = **€3,965m**

No additional pension deficit, guarantees, hybrid debt portion, or other debt-like items are disclosed in the provided facts.

\[
\text{2021 Adjusted Debt} = 16{,}812 - 3{,}965 = €12{,}847m
\]

---

## 5. 2021 Adjusted Debt / Adjusted EBITDA

\[
\frac{12{,}847}{3{,}529} = 3.64x
\]

So:

\[
\text{2021 Debt / EBITDA} \approx 3.6x
\]

---

## 6. 2021 FFO / Adjusted Debt

\[
\frac{2{,}177}{12{,}847} = 0.1695
\]

So:

\[
\text{2021 FFO / Debt} \approx 16.9\%
\]

---

## 7. Estimate 2022 Adjusted EBITDA

Reported EBITDA:

- 2022 EBITDA = **€4,954m**

Adjustments:

- Same approach as 2021: no further reliable S&P adjustments are available from the provided facts.

\[
\text{2022 Adjusted EBITDA} = €4{,}954m
\]

---

## 8. Estimate 2022 FFO

Inputs:

- 2022 Adjusted EBITDA = **€4,954m**
- 2022 cash interest paid = **€520m**
- 2022 cash taxes paid = **€762m**

\[
\text{2022 FFO} = 4{,}954 - 520 - 762 = €3{,}672m
\]

---

## 9. Estimate 2022 Adjusted Debt

Use debt at Jan. 1, 2023 as year-end 2022 debt.

Reported financial debt components:

- Long-term borrowings: **€12,689m**
- Noncurrent lease liabilities: **€1,309m**
- Other noncurrent financial liabilities: **€1m**
- Current borrowings and current portion of noncurrent borrowings: **€2,110m**
- Current lease liabilities: **€177m**
- Other current financial liabilities: **€15m**

Total reported financial liabilities:

\[
12{,}689 + 1{,}309 + 1 + 2{,}110 + 177 + 15 = €16{,}301m
\]

Eligible cash:

- Cash and cash equivalents at Jan. 1, 2023 = **€3,985m**

\[
\text{2022 Adjusted Debt} = 16{,}301 - 3{,}985 = €12{,}316m
\]

---

## 10. 2022 Adjusted Debt / Adjusted EBITDA

\[
\frac{12{,}316}{4{,}954} = 2.49x
\]

So:

\[
\text{2022 Debt / EBITDA} \approx 2.5x
\]

---

## 11. 2022 FFO / Adjusted Debt

\[
\frac{3{,}672}{12{,}316} = 0.2982
\]

So:

\[
\text{2022 FFO / Debt} \approx 29.8\%
\]

---

## 12. Credit trend classification

### Signal 1: Leverage

\[
\Delta \text{Debt / EBITDA} = 2.49x - 3.64x = -1.15x
\]

Threshold:

- ≤ -0.2x = Improving

The leverage ratio improved materially, by about **1.15 turns**.

**Signal 1 = Improving**

---

### Signal 2: Cash-flow coverage

\[
\Delta \text{FFO / Debt} = 0.2982 - 0.1695 = 0.1287
\]

This is an improvement of about **12.9 percentage points**.

Threshold:

- ≥ +0.03 = Improving

**Signal 2 = Improving**

---

### Combined conclusion

Both signals point clearly to an improvement:

- Debt / EBITDA fell from about **3.6x to 2.5x**
- FFO / debt rose from about **16.9% to 29.8%**

The main driver is much stronger EBITDA and FFO in 2022, while net adjusted debt declined modestly. On the provided data, Naturgy’s credit trend from 2021 to 2022 is therefore **Improving**.

<answer>Improving</answer>