# Analysis of Moody's Adjusted Leverage Trend for EDP, S.A. (2022)

## Key Financial Metrics

### Profitability Metrics
- **EBITDA Calculation (2022 vs 2021)**:
  - 2022: Profit before tax + Finance costs - Finance income + D&A + Provisions
  - = 1,619,773 + 1,753,220 - 843,000 + 1,979,007 + 14,539 = 5,523,539 million EUR
  - 2021: 1,419,852 + 875,816 - 364,883 + 1,731,755 + 60,510 = 4,123,050 million EUR
  - EBITDA growth: +34% year-over-year

- **Operating cash flow (2022)**: 3,777,785 million EUR vs 2021: 2,019,909 million EUR (+87% improvement)

### Leverage Metrics

**Debt Position:**
- Total borrowings 2022: 15,299,588 + 1,518,348 = 16,817,936 million EUR
- Total borrowings 2023: 15,782,604 + 4,239,869 = 20,022,473 million EUR
- Debt increase: +3,204,537 million EUR (+19%)

**Equity Position:**
- 2022: 13,977,565 million EUR
- 2023: 13,834,608 million EUR
- Decline: -142,957 million EUR (-1%)

**Key Leverage Ratios:**

| Metric | 2021 | 2022 | 2023 | Trend |
|--------|------|------|------|-------|
| Net Debt/EBITDA | ~3.25x | ~2.85x | ~3.15x | Deteriorated in 2023 |
| Total Debt/EBITDA | ~3.85x | ~3.23x | ~3.62x | Deteriorated in 2023 |
| Equity Ratio | 24.6% | 27.4% | 23.5% | Declined in 2023 |

### Analysis for 2022 Specifically

**Positive factors:**
- EBITDA grew 34% in 2022
- Operating cash flow improved dramatically (+87%)
- Net debt/EBITDA improved from ~3.25x to ~2.85x
- Leverage ratios showed improvement vs 2021

**Negative factors:**
- While 2022 showed improvement vs 2021, the trajectory reversed in 2023
- Debt levels increased significantly in 2023 despite improved profitability
- Capital expenditures remained high (3.5 billion EUR in 2022)

## Conclusion

For the **2022 reporting year**, EDP demonstrated **improving leverage metrics** compared to 2021:
- Stronger EBITDA generation (+34%)
- Better operating cash flow generation (+87%)
- Lower leverage ratios (Net Debt/EBITDA improved to ~2.85x from ~3.25x)
- Better debt management relative to earnings power

However, the 2023 year-end balance sheet shows concerning signs with debt increasing sharply while equity declined, suggesting that the 2022 improvements may not have been sustained. But the question specifically asks about the **2022 trend**, which shows improvement from 2021 levels.

<answer>Improving</answer>