## 1. Relevant industry

ENGIE is a large integrated energy utility group with regulated gas/power networks, renewables, supply, generation, and energy management/trading activities. Among the provided methodologies, the closest fit is **Regulated Utilities / Unregulated Power and Gas**, with a mixed utility profile.

Because the data provided is consolidated financial statement data and does not provide the detailed S&P adjustments for leases, pensions, proportional JVs, purchase power obligations, or regulated/unregulated segmentation, I use the baseline formulas with simplified observable inputs.

---

## 2. Estimate 2021 Adjusted EBITDA

A practical reconstruction from the income statement:

\[
EBITDA \approx Current\ Operating\ Income\ including\ operating\ MtM + Depreciation,\ Amortization\ and\ Provisions
\]

For 2021:

- Current operating income including operating MtM = €6.116bn
- Depreciation, amortization and provisions = €4.840bn

\[
Adjusted\ EBITDA_{2021} \approx 6.116 + 4.840 = 10.956\text{ bn}
\]

No reliable data is provided for lease capitalization, pension deficit EBITDA adjustments, nonrecurring normalization, or proportional JV EBITDA, so no further adjustment is made.

**2021 Adjusted EBITDA ≈ €10.956bn**

---

## 3. Estimate 2021 FFO

Baseline:

\[
FFO = Adjusted\ EBITDA - cash\ interest - cash\ taxes
\]

Inputs:

- Adjusted EBITDA = €10.956bn
- Interest paid classified as financing activities = €0.719bn
- Income taxes paid = €0.603bn

\[
FFO_{2021} = 10.956 - 0.719 - 0.603 = 9.634\text{ bn}
\]

**2021 FFO ≈ €9.634bn**

---

## 4. Estimate 2021 Adjusted Debt

Use reported borrowings less eligible cash.

At Jan. 1, 2022 / end-2021:

- Long-term borrowings = €30.458bn
- Current borrowings and current portion of noncurrent borrowings = €10.590bn
- Total reported debt = €41.048bn
- Cash and cash equivalents = €13.890bn

\[
Adjusted\ Debt_{2021} \approx 41.048 - 13.890 = 27.158\text{ bn}
\]

No data is provided to quantify leases, pension deficit, guarantees, PPAs, or hybrid debt treatment. ENGIE has deeply subordinated perpetual notes, but without S&P equity-credit treatment data, I do not add them as debt.

**2021 Adjusted Debt ≈ €27.158bn**

---

## 5. 2021 Adjusted Debt / Adjusted EBITDA

\[
Debt/EBITDA_{2021} = \frac{27.158}{10.956} = 2.48x
\]

**2021 Adjusted Debt / Adjusted EBITDA ≈ 2.48x**

---

## 6. 2021 FFO / Adjusted Debt

\[
FFO/Debt_{2021} = \frac{9.634}{27.158} = 0.355
\]

**2021 FFO / Adjusted Debt ≈ 35.5%**

---

## 7. Estimate 2022 Adjusted EBITDA

For 2022:

- Current operating income including operating MtM = €4.309bn
- Depreciation, amortization and provisions = €5.187bn

\[
Adjusted\ EBITDA_{2022} \approx 4.309 + 5.187 = 9.496\text{ bn}
\]

**2022 Adjusted EBITDA ≈ €9.496bn**

---

## 8. Estimate 2022 FFO

Inputs:

- Adjusted EBITDA = €9.496bn
- Interest paid classified as financing activities = €0.822bn
- Income taxes paid = €1.504bn

\[
FFO_{2022} = 9.496 - 0.822 - 1.504 = 7.170\text{ bn}
\]

**2022 FFO ≈ €7.170bn**

---

## 9. Estimate 2022 Adjusted Debt

At Jan. 1, 2023 / end-2022:

- Long-term borrowings = €28.083bn
- Current borrowings and current portion of noncurrent borrowings = €12.508bn
- Total reported debt = €40.591bn
- Cash and cash equivalents = €15.570bn

\[
Adjusted\ Debt_{2022} \approx 40.591 - 15.570 = 25.021\text{ bn}
\]

**2022 Adjusted Debt ≈ €25.021bn**

---

## 10. 2022 Adjusted Debt / Adjusted EBITDA

\[
Debt/EBITDA_{2022} = \frac{25.021}{9.496} = 2.63x
\]

**2022 Adjusted Debt / Adjusted EBITDA ≈ 2.63x**

---

## 11. 2022 FFO / Adjusted Debt

\[
FFO/Debt_{2022} = \frac{7.170}{25.021} = 0.287
\]

**2022 FFO / Adjusted Debt ≈ 28.7%**

---

## 12. Credit trend classification

### Signal 1: Leverage

\[
\Delta Debt/EBITDA = 2.63x - 2.48x = +0.16x
\]

Thresholds:

- ≤ -0.2x = Improving
- between -0.2x and +0.2x = Stable
- ≥ +0.2x = Deteriorating

A +0.16x increase is within the stable band.

**Leverage signal: Stable**

---

### Signal 2: Cash-flow coverage

\[
\Delta FFO/Debt = 0.287 - 0.355 = -0.068
\]

This is a decline of about 6.8 percentage points.

Thresholds:

- ≥ +0.03 = Improving
- between -0.03 and +0.03 = Stable
- ≤ -0.03 = Deteriorating

The decline is materially worse than the -0.03 deterioration threshold.

**Cash-flow coverage signal: Deteriorating**

---

### Combined conclusion

The leverage signal is **Stable**, while the FFO/debt signal is **Deteriorating**. Under the stated rule, if one signal is Stable and the other is Improving or Deteriorating, the final classification is the non-Stable category.

The deterioration is driven by lower reconstructed EBITDA and higher cash taxes/interest, which reduced estimated FFO despite a modest reduction in net debt.

<answer>Deteriorating</answer>