I'll work through this step-by-step.

## Step 1: Industry Identification

TenneT Holding B.V. is a transmission system operator (TSO) for electricity, owned by the Dutch State. This clearly falls under **Regulated Utilities** - specifically electricity transmission.

## Step 2: 2021 Adjusted EBITDA

**Fiscal year 2021** = period 2021-01-01 to 2022-01-01

First, reconstruct EBITDA:
- Operating profit (Profit Loss From Operating Activities) = -275M EUR
- Add back D&A = 1,165M EUR
- Add back share of JV equity method losses (since included in operating profit): The -275M already includes +62M from equity method. For EBITDA, we need to consider this.

EBITDA (basic) = Operating Profit + D&A = -275 + 1,165 = 890M EUR

However, this includes share of profit from JVs of 62M. S&P typically excludes equity method income and may add proportional EBITDA from JVs, but for simplicity and given data limitations, I'll keep it.

**S&P Adjustments:**
- **Lease adjustment**: Add back lease payments (operating lease depreciation is already in D&A; we need the cash lease payment). From cash flow: lease payments = 156M EUR. The ROU depreciation is included in D&A. S&P adds the full lease payment to EBITDA (reclassifying as a financing cost). Net effect: add lease interest portion. Actually, S&P treats operating leases as debt-like, so EBITDA is adjusted by adding back the lease depreciation (already in D&A add-back) - no further adjustment needed for EBITDA since lease depreciation is already captured.

- **Pension adjustment**: Noncurrent pension liability at 2022-01-01 = 351M. The OCI remeasurement gain of 79M (pre-tax) suggests pension service cost adjustments. For simplicity, I'll note the pension deficit but not materially adjust EBITDA.

- **Hybrid capital**: TenneT has 2,125M hybrid capital. S&P typically gives 50% equity credit to hybrids, meaning 50% of coupon is treated as interest-like. Hybrid distributions = 57M. For EBITDA, the hybrid coupon doesn't affect EBITDA directly.

**2021 Adjusted EBITDA ≈ 890M EUR**

Adding lease interest (estimated): Total lease payments 156M. Assuming ~10% interest on average lease liability, lease interest ≈ ~25M. So adjusted EBITDA with lease interest reclassification ≈ 890M + 0 (leases already handled through D&A) = **~890M EUR**

Actually, let me reconsider. S&P's EBITDA for regulated utilities typically adjusts by adding operating lease expense back. Since the company reports under IFRS 16 (ROU assets shown), leases are already capitalized, so D&A includes lease depreciation and interest is in finance costs. No further EBITDA adjustment needed for leases.

**2021 Adjusted EBITDA ≈ 890M EUR**

## Step 3: 2021 FFO

FFO = Adjusted EBITDA - cash interest - cash taxes - hybrid distributions (debt portion)

- Cash interest paid = 174M EUR
- Cash taxes paid = 246M EUR (refund, since the company has losses; looking at "Income Taxes Paid Refund" = 246M - this is an outflow shown as positive... but the company has pre-tax loss of -475M and tax benefit of -135M. The 246M likely represents a tax refund received.)

Wait, let me reconsider. The cash flow shows "Income Taxes Paid Refund Classified As Operating Activities" = 246M for 2021. Given the company has losses and negative tax expense (-135M = tax benefit), this 246M is likely a tax refund (cash inflow). However, in the cash flow reconciliation, it's listed as an adjustment. Let me look at it differently.

The cash flow starts from profit/loss and adjusts. The item "Income Taxes Paid Refund" of 246M in the context of reconciliation from net loss to operating cash flow - if taxes paid are an outflow, they'd reduce cash. But with tax benefits, this could be a refund.

Given the net loss and tax benefit, I'll treat cash taxes as approximately -135M (refund) to +0. Let me use a simplified approach:

For S&P FFO:
- Cash interest = 174M
- Hybrid debt portion interest: 50% of hybrid = debt, so 50% × 57M = 28.5M ≈ 29M treated as interest
- Cash taxes: Given the company received tax refunds, net cash taxes ≈ -246M (refund) ... Actually this seems too large. Let me assume cash taxes paid/refunded net = ~0 given the loss position.

Let me use the simpler approach:
FFO = Adjusted EBITDA - cash interest (including hybrid debt portion) - cash taxes
FFO = 890 - 174 - 29 + 246 (if refund) ... 

This is getting complex. Let me use: FFO ≈ Operating Cash Flow (excl. working capital) + interest paid - lease payments adjustments.

From cash flow: 
- Cash from operations = 5,705M (but this includes massive EEG working capital movements of -4,445M)
- Excluding EEG: 5,705 - (-4,445) ... No, the EEG WC is already part of operating CF.

Let me try: Cash from operations excl. EEG WC = -1,260M... This includes non-EEG WC changes too.

Actually, let me use: FFO = Net income + D&A + non-cash items - WC changes (approximately)

Better approach - use the reported cash flow structure:

Operating CF before WC changes (excl EEG):
Net loss = -340M
+ D&A = 1,165M
+ Loss on disposal = 0
+ Undistributed JV profits = 61M (subtract since non-cash income)
+ Dividends from JVs = 56M
+ Provisions = -59M
+ Other non-cash = 1,101M
- Income taxes paid = 246M (appears to be an adjustment)

Cash from operations excl WC (excl EEG) = -340 + 1,165 + 0 - 61 + 56 - 59 + 1,101 - 246 = 1,616M... Hmm, but the "Other non-cash items" of 1,101M is very large and likely includes finance cost accruals, etc.

Let me reconsider and use a cleaner EBITDA-based approach.

For regulated utilities like TenneT, the "energy transmission charges" represent pass-through costs that distort margins. The key is:

Revenue: 5,524M
Less: Energy transmission charges: 4,102M
Net revenue: 1,422M
Less: Employee costs: 287M
Less: Other OpEx: 303M
Less: Other gains/losses: 4M
**Operating income before D&A and equity income = 1,422 - 287 - 303 - 4 = 828M**
Plus equity income from JVs: 62M
**EBITDA (incl equity income) = 890M** ✓

**FFO calculation:**
FFO = EBITDA - cash interest - cash taxes - hybrid debt portion distributions

- Cash interest paid = 174M
- Add lease interest (already in finance costs under IFRS 16) - already captured
- Hybrid: S&P gives 50% equity credit → 50% × 57M = 28.5M treated as interest ≈ 29M
- Cash taxes: The company has losses. "Income Taxes Paid Refund" = 246M. Given the tax benefit of 135M on the P&L, the 246M likely represents tax payments made (timing differences). Let me treat it as 246M cash tax outflow for conservatism... but with losses this seems high. Perhaps it includes prior year settlements.

Let me just use: cash taxes = 246M (net taxes paid per cash flow statement)

FFO = 890 - 174 - 29 - 246 = **441M EUR**

Wait, but the 246M might actually be a refund (positive cash flow). Let me look at the sign convention. In the cash flow reconciliation, it shows:
- Starting from net loss of -340M
- Adjustments are added to get to operating cash flow
- "Income Taxes Paid Refund" = 246M as an adjustment

In a typical indirect method: you start with net income, add back non-cash items, then subtract "taxes paid" separately. If taxes paid = 246M (outflow), it would be subtracted. But it's shown as a positive adjustment. Actually, this could mean: the income tax expense was -135M (benefit) but actual cash taxes paid were 246M, so the adjustment is 246M to offset the -135M benefit and add the actual cash outflow. That means: adjustment = cash taxes paid - tax expense in P&L = 246 - (-135) = 381M... That doesn't match.

Let me reconsider. Perhaps it's: Tax adjustment = Tax P&L charge - Cash taxes = (-135) - (-246) = 111M? No...

In indirect method:
Net income: -340
Add: non-cash D&A: +1,165
...
Tax adjustment (difference between accrual and cash): The P&L shows tax benefit of 135M. If cash taxes paid were 246M, the adjustment would be +381M (adding back the 135M benefit and 246M cash outflow)... This doesn't work simply.

I think the 246M represents tax payments. Let me just assume cash taxes paid = 246M.

**2021 FFO ≈ 441M EUR**

## Step 4: 2021 Adjusted Debt

Balance sheet at 2022-01-01 (end of FY2021):

- Long-term borrowings: 12,366M
- Short-term borrowings: 1,339M
- Current bank overdrafts: 64M
- **Total reported debt: 13,769M**

S&P Adjustments:
- **Leases** (IFRS 16 already on balance sheet): NC lease liabilities: 235M + Current lease liabilities: 169M = **404M**
- **Pension deficit**: 351M (noncurrent recognized DB plan liability)
- **Hybrid capital**: 2,125M. S&P gives 50% equity credit → 50% debt = **1,062.5M ≈ 1,063M**
- **Surplus cash deduction**: S&P typically deducts surplus cash for utilities. Cash = 3,204M. However, much of this may be restricted (EEG-related). For a regulated utility, I'll conservatively deduct minimal cash. Let's deduct maybe 200M as readily available surplus.

Actually, for regulated utilities, S&P may not deduct much cash since working capital needs are significant. Let me be conservative and not deduct cash.

**2021 Adjusted Debt = 13,769 + 404 + 351 + 1,063 = 15,587M EUR**

Wait - leases are already on the balance sheet under IFRS 16, and borrowings are separately shown. So I should NOT double-count. Let me check: the balance sheet shows "Longterm Borrowings" = 12,366M and separately "Noncurrent Lease Liabilities" = 235M and "Current Lease Liabilities" = 169M. So leases are NOT included in borrowings. Good.

**2021 Adjusted Debt = 13,769 + 404 + 351 + 1,063 = 15,587M EUR**

## Step 5: 2021 Adjusted Debt / Adjusted EBITDA

= 15,587 / 890 = **17.5x**

This seems extremely high. Let me reconsider - TenneT is a regulated utility with pass-through costs that distort the picture. The "Other non-cash items" of 1,101M in the cash flow is very significant and might include regulatory deferrals or capitalized costs.

Actually, wait. Looking more carefully at the financials: Revenue = 5,524M, Operating Expenses = 5,861M, giving operating loss of -337M before equity income. Adding equity income of 62M = -275M operating profit. 

The EBITDA of 890M seems low relative to the asset base of 25B+. For a large TSO, this might actually make sense during periods of high pass-through costs and regulatory timing differences.

However, the "Other Adjustments For Noncash Items" of 1,101M in the cash flow is very large. This likely includes non-cash regulatory provisions, timing differences on regulated revenue, or similar items. For S&P's regulated utility analysis, they focus on actual cash flow generation.

Let me reconsider whether to add some of these non-cash items. The "Noncurrent Provisions" went from some level to 1,417M, and "Adjustments For Provisions" = -59M (2021). The "Other Adjustments For Noncash Items" = 1,101M is described as "other" non-cash items. This could include:
- Unrealized mark-to-market losses on financial instruments
- Regulatory timing differences (in European TSOs, costs not yet recovered through tariffs are recorded as regulatory assets/provisions)

For a regulated utility under IFRS (no regulatory accounting), timing differences between when costs are incurred and when they're recovered through tariffs create temporary P&L impacts. The large non-cash adjustment likely relates to this.

For S&P purposes, they acknowledge this: "While IFRS does not currently provide for any recognition of the effects of rate-setting for financial reporting purposes, our financial analysis focuses on the economics and actual cash flow generation."

This means S&P would look more at cash-based measures. Let me recalculate using a cash-based approach.

**Revised EBITDA approach for TenneT:**

The EBITDA should reflect the underlying cash generation capability. Given the regulatory model, the "other non-cash items" of 1,101M in 2021 represents a significant portion of value. However, EBITDA by definition only adds back D&A to operating profit - it doesn't add back other non-cash items.

But S&P for regulated utilities in Europe often adjusts for regulatory timing differences. Let me check: the company's operating cash flow excluding WC (but before EEG) can be approximated:

From the cash flow:
Operating CF excl EEG WC = -1,260M... but this INCLUDES non-EEG WC changes.

Excluding ALL working capital changes:
Start: Net loss -340
+D&A 1,165
+Loss on disposal 0
-Equity income adjustment (undistributed) -61+56 = -5 (net)
+Provisions -59
+Other non-cash 1,101
+Tax adjustment 246
= -340 + 1,165 - 5 - 59 + 1,101 + 246 = **2,108M**

Wait, that's before interest. Let me adjust:
Add back: Finance costs 202M (from P&L, already deducted in arriving at net loss)
Subtract: Finance income 2M

Cash from operations before WC, interest, and taxes ≈ 2,108 + 200 = **2,308M**

Hmm, but this includes the 1,101M "other non-cash" adjustment. This is effectively the "cash EBITDA" or funds from operations before interest and taxes.

Let me try a different approach. For regulated European TSOs, S&P often considers:
- EBITDA as reported (revenue - opex + D&A) 
- They may then adjust for specific items

The standard EBITDA = 890M seems correct from an accounting standpoint. The issue is that TenneT has massive non-cash regulatory timing items.

I'll stick with EBITDA = 890M for comparability, but note this produces very high leverage ratios typical of European TSOs during heavy investment periods.

Actually, I should reconsider. The "Other Gains Losses" of -4M in 2021 might include items S&P would normalize. And equity method income is typically excluded from S&P EBITDA for some analyses.

Let me refine:
**EBITDA (excl equity income) = 890 - 62 = 828M**

For S&P regulated utilities, they typically include equity income from regulated JVs. TenneT's JVs are likely related to transmission infrastructure. I'll include it.

**2021 Adjusted EBITDA = 890M EUR** (keeping as is)

The 17.5x leverage seems high but TenneT is in a massive investment phase for offshore wind connections and grid reinforcement. Let me proceed with these numbers.

## Step 6: 2021 FFO / Adjusted Debt

= 441 / 15,587 = **2.8%**

This also seems low but consistent with the heavy investment phase.

## Step 7: 2022 Adjusted EBITDA

**Fiscal year 2022** = period 2022-01-01 to 2023-01-01

Revenue: 8,299M
Energy transmission charges: 7,517M
Net revenue: 782M (this dropped significantly!)
Employee costs: 285M
D&A: 1,233M
Other OpEx: 322M
Other gains/losses: -38M

Operating profit before D&A and equity = 782 - 285 - 322 - 38 = 137M
Plus D&A: 1,233M → Wait, operating profit = revenue - all opex = 8,299 - 9,395 = -1,096
Plus equity income: 120M → -976M (matches reported)

EBITDA = Operating profit + D&A = -976 + 1,233 = **257M**

Including equity income of 120M (which is already in the -976M operating profit):
EBITDA = 257M

Actually wait, let me recheck:
Revenue = 8,299
Operating Expense = 9,395 (this INCLUDES D&A of 1,233 and energy charges of 7,517)
So: Revenue - OpEx = 8,299 - 9,395 = -1,096
+ Equity income = 120
= Operating profit = -976 ✓

EBITDA = -976 + 1,233 = **257M EUR**

This is a massive decline from 890M! The energy transmission charges surged from 4,102M to 7,517M while revenue only went from 5,524M to 8,299M. The net spread compressed dramatically (from 1,422M to 782M).

**2022 Adjusted EBITDA = 257M EUR**

## Step 8: 2022 FFO

FFO = EBITDA - cash interest - cash taxes - hybrid debt portion

- Cash interest paid = 202M
- Hybrid debt interest: 50% × 57M = 29M
- Cash taxes: "Income Taxes Paid Refund" = 231M

Given the pre-tax loss of -1,233M and tax benefit of -354M, cash taxes of 231M likely represents payments/settlements from prior periods.

FFO = 257 - 202 - 29 - 231 = **-205M EUR**

Negative FFO in 2022.

## Step 9: 2022 Adjusted Debt

Balance sheet at 2023-01-01 (end of FY2022):

- Long-term borrowings: 19,006M
- Short-term borrowings: 709M
- **Total reported debt: 19,715M**

S&P Adjustments:
- **Leases**: NC 574M + Current 155M = **729M**
- **Pension deficit**: 174M
- **Hybrid capital (50% debt)**: 50% × 2,125M = **1,063M**
- **Cash**: Not deducting (conservative; much is EEG-related or pre-funded capex from bond issuance)

**2022 Adjusted Debt = 19,715 + 729 + 174 + 1,063 = 21,681M EUR**

## Step 10: 2022 Adjusted Debt / Adjusted EBITDA

= 21,681 / 257 = **84.4x**

This is extremely high, reflecting the compressed margins in 2022 due to energy crisis pass-through timing.

## Step 11: 2022 FFO / Adjusted Debt

= -205 / 21,681 = **-0.9%**

## Step 12: Year-on-Year Credit Trend

**Signal 1: Leverage (Debt/EBITDA)**
- 2021: 17.5x
- 2022: 84.4x
- Change: +66.9x → **Deteriorating** (far exceeds +0.2x threshold)

**Signal 2: FFO/Debt**
- 2021: 2.8% (0.028)
- 2022: -0.9% (-0.009)
- Change: -0.037 → **Deteriorating** (exceeds -0.03 threshold)

Both signals agree: **Deteriorating**

The credit metrics deteriorated dramatically from 2021 to 2022. The key drivers were:
1. EBITDA collapsed from 890M to 257M due to the energy crisis increasing pass-through costs faster than tariff recovery
2. Debt surged from ~15.6B to ~21.7B as the company continued its massive capex program (4.4B) and raised 7.3B in new borrowings
3. The company received a 1.23B equity injection from the Dutch State, but this was insufficient to offset the deterioration

<answer>Deteriorating</answer>