# Analysis of ENGIE's Adjusted Leverage Trend for 2022

## Key Metrics Calculation

### Leverage Ratios:

**2022 (Year ending 2023-01-01):**
- Total Borrowings: 12,508 + 28,083 = 40,591 million EUR
- Cash: 15,570 million EUR
- Net Debt: 40,591 - 15,570 = 25,021 million EUR
- EBITDA (approximate): Operating Income (1,127) + D&A (5,187) = 6,314 million EUR
- Net Leverage: 25,021 / 6,314 = **3.96x**

**2021 (Year ending 2022-01-01):**
- Total Borrowings: 10,590 + 30,458 = 41,048 million EUR
- Cash: 13,890 million EUR
- Net Debt: 41,048 - 13,890 = 27,158 million EUR
- EBITDA (approximate): Operating Income (6,722) + D&A (4,840) = 11,562 million EUR
- Net Leverage: 27,158 / 11,562 = **2.35x**

## Analysis of Deterioration:

**Negative Indicators:**
1. **EBITDA Decline**: From 11,562 million EUR to 6,314 million EUR (-45%), primarily due to:
   - Operating income down 83% (6,722 → 1,127 million EUR)
   - Impairment losses jumped from 1,028 to 2,774 million EUR
   - Restructuring charges and negative non-recurring items

2. **Net Leverage Deterioration**: From 2.35x to 3.96x (+69%)

3. **Operational Challenges**:
   - Revenue growth (62%) did not translate to profit growth due to cost inflation
   - Purchases & operating derivatives surged 92% (38,861 → 74,535 million EUR)
   - Finance costs increased 79% (2,061 → 3,700 million EUR)

4. **Continuing Operations Impact**: Loss from continuing operations of -1,793 million EUR (vs. +3,678 in 2021)

**Mitigating Factors:**
- Absolute net debt declined slightly (27,158 → 25,021 million EUR)
- Cash increased by 1,680 million EUR
- Positive discontinued operations (2,183 million EUR)

## Conclusion:

Despite modest improvements in net debt position, the sharp deterioration in profitability and EBITDA coverage caused leverage to increase significantly. The 1.61x increase in net leverage ratio is a substantial deterioration for a rating agency perspective, driven by operational underperformance and higher financing costs.

<answer>Deteriorating</answer>