To determine to what extent Terna S.p.A.’s capital structure should rely on hybrid bonds, let’s analyze:

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**1. Business Profile & Stability of Cash Flows**  
Terna is Italy’s electricity transmission grid operator – a regulated monopoly with highly predictable revenue.  
- Revenue 2022: €2,898M (up from €2,535M in 2021).  
- Profit from operating activities: €1,333.5M (2022) vs. €1,200.4M (2021).  
- Operating cash flow improved markedly (€2,323.7M in 2022 vs. €832.3M in 2021).  

The company’s regulated asset base (RAB) model guarantees stable, long-term cash flows, a key criterion for hybrid bond issuance (equity-like cash flow certainty supports debt service).

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**2. Leverage & Existing Hybrids**  
- 2022 equity: €6,169.1M (up strongly from €4,713M in 2021).  
- Non-current borrowings: €8,416.7M (slightly down from €8,835M).  
- A perpetual hybrid bond was issued in 2022: €989M, classified in equity under “Capital Instruments Bonds Hybrid Perpetual.”  
- The hybrid coupon paid: €21.1M (2022).

Thus, hybrids comprised about **16% of total equity** (989 / 6,169) in 2022 and about **4.3% of total assets** (989 / 22,803) – a meaningful but not dominant share.

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**3. Interest Rate Environment**  
From the swap curve data:  
- 10Y swap average: -0.143% (2020) → 0.053% (2021) → 1.927% (2022).  
- Subordinated bond spreads (iBoxx EUR Non-Financial IG) widened from 1.298% (2021) to 2.295% (2022).

Rising rates make fixed-coupon hybrids more costly. Over-reliance on hybrids in a rising rate scenario would increase the weighted average cost of capital.

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**4. Rating & Market Access**  
Hybrids typically receive 50% equity credit from rating agencies. Issuing too many could signal higher risk, widening credit spreads.  
Terna’s credit metrics remain strong, but with long-term borrowings of €8.4B and total debt around €10.5B, the debt/equity ratio is about 1.7x (excluding hybrid equity). Adding significantly more hybrids could pressure credit metrics.

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**5. Optimal Share of Hybrids**  
Given:  
- Highly stable regulated revenues,  
- Already a €989M hybrid component,  
- Rising rate environment discouraging excess fixed-income issuance,  
- Need for balance between cost of capital and credit rating preservation,

a **moderate** additional reliance (up to ~25% of capital structure as hybrids) is reasonable. 0% would forgo the equity-credit benefit; 100% would be imprudent and far too expensive. 25% reflects a continuation of current strategy without over-concentration.

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<answer>25%</answer>