**Step 1 – Industry identification**  
Naturgy Energy Group S.A. is a large, integrated energy group with regulated gas‑distribution and electricity‑generation assets in Spain. It falls under the **Regulated Utilities** sector of S&P’s methodology.

**Step 2 – Adjusted EBITDA (2021 & 2022)**  

| Item (€ million) | 2021 | 2022 |
|------------------|------|------|
| Reported EBITDA (Beneficio Bruto De Explotacion) | 3 529 | 4 954 |
| Non‑recurring / unusual items (net) | –39 | +331 |
| • Gains on disposal of PP&E | –5 | –8 |
| • Other gains/losses | –133 | +111 |
| • Increase in credit‑loss allowance (non‑cash) | +99 | +228 |
| **Adjusted EBITDA** | **3 490** | **5 285** |

*No separate operating‑lease expense is available, so the lease adjustment is treated as zero (the right‑of‑use depreciation is already embedded in the reported EBITDA).*

**Step 3 – FFO (2021 & 2022)**  

| Item (€ million) | 2021 | 2022 |
|------------------|------|------|
| Adjusted EBITDA | 3 490 | 5 285 |
| Cash interest paid (interest classified as operating) | 488 | 520 |
| Cash taxes paid (income taxes classified as operating) | 864 | 762 |
| **FFO** | **2 138** | **4 003** |

**Step 4 – Adjusted Debt (2021 & 2022)**  

| Component (€ million) | 2021 | 2022 |
|-----------------------|------|------|
| Long‑term borrowings | 13 786 | 12 689 |
| Current borrowings & current portion of non‑current | 1 493 | 2 110 |
| Non‑current lease liabilities | 1 325 | 1 309 |
| Current lease liabilities | 196 | 177 |
| Other non‑current financial liabilities | 3 | 1 |
| Other current financial liabilities | 9 | 15 |
| **Total debt** | **16 812** | **16 301** |
| Less: cash & cash equivalents | 3 965 | 3 985 |
| **Adjusted Debt** | **12 847** | **12 316** |

**Step 5 – Adjusted Debt / Adjusted EBITDA**

- 2021: 12 847 / 3 490 ≈ **3.68 ×**
- 2022: 12 316 / 5 285 ≈ **2.33 ×**  
Change = 2.33 − 3.68 = **–1.35 ×** → ≤ –0.2 × → **Improving**

**Step 6 – FFO / Adjusted Debt**

- 2021: 2 138 / 12 847 ≈ **0.166** (16.6 %)
- 2022: 4 003 / 12 316 ≈ **0.325** (32.5 %)  
Change = 0.325 − 0.166 = **+0.159** → ≥ +0.03 → **Improving**

**Step 7 – Combine signals**  

Both leverage (–1.35 ×) and cash‑flow coverage (+15.9 pp) moved in the improving direction. The two signals agree, so the overall credit trend is **Improving**.

<answer>Improving</answer>