I need to analyze EDP's capital structure and determine the appropriate reliance on hybrid bonds. Let me work through this systematically.

## Key Considerations for Hybrid Bonds

Hybrid bonds are debt instruments with equity-like features (perpetual or long-dated, subordinated, deferrable coupons). They're treated partially as equity by rating agencies (typically 50-100% equity credit). The optimal usage depends on:

### 1. **Current Capital Structure Analysis**

From the balance sheet (2022 year-end / 2023-01-01):
- **Total Assets**: €58,816 million
- **Total Equity**: €13,835 million (23.5% of assets)
- **Total Liabilities**: €44,982 million (76.5% of assets)
- **Non-current liabilities**: €27,557 million
- **Current liabilities**: €17,425 million
- **Long-term borrowings**: €15,783 million
- **Current borrowings**: €4,240 million

**Debt-to-Equity ratio**: Roughly (€15,783m + €4,240m + other financial liabilities) / €13,835m ≈ 2.5-3x depending on definition

The company already has significant leverage with substantial debt.

### 2. **Financial Performance & Cash Flow**

From 2022:
- **Revenue**: €20,651 million (+37.8% YoY)
- **Net profit**: €1,170 million (+5.9% YoY)
- **Operating cash flow**: €3,778 million
- **Investing cash flow**: -€3,232 million (heavy capex)
- **Financing cash flow**: +€1,100 million

**Key observations**:
- Strong revenue growth but profit growth lagging (margin pressure from energy costs)
- Operating cash flow is healthy at €3.8bn
- Heavy capital expenditure (€3.5bn in PP&E/intangibles) - this is capital-intensive infrastructure
- Free cash flow is tight after capex

### 3. **Business Model Characteristics**

EDP is a utility with:
- Regulated/partially regulated operations (generation, transmission, distribution)
- Long-lived tangible assets (€24.2bn property plant & equipment)
- Stable, predictable cash flows from regulated activities
- Heavy ongoing investment needs (energy transition, renewables)

**Utilities are ideal candidates for hybrid bonds** because:
- Stable cash flows support coupon payments
- Long asset lives match long-dated hybrid maturities
- Regulated returns provide visibility
- Need to maintain investment-grade ratings for low funding costs
- High capex needs benefit from diverse funding sources

### 4. **Rating Agency & Market Considerations**

The swap curve data shows:
- **2022**: Significant rise in rates (5Y swap from -0.264% to 1.726%; 10Y from 0.053% to 1.927%)
- **Corporate bond spreads**: iShares Core Euro Corp Bond at 1.085% average in 2022
- **IG non-financial spread**: 2.295% average in 2022

Rising rate environment in 2022 makes:
- Fixed-rate hybrids attractive for issuers (locking in before further rises)
- But also increases all-in costs

The sub-senior delta of 0.2 suggests subordinated debt trades at meaningful spread to senior.

### 5. **Equity Cushion & Credit Quality**

Current equity is only 23.5% of assets. This is on the lower side for a capital-intensive utility. Hybrid bonds would:
- Improve equity credit with rating agencies (typically 50% treated as equity)
- Lower leverage metrics on a rating-adjusted basis
- Provide cheaper funding than pure equity (no dilution, tax-deductible coupons)

However, EDP already has:
- Significant non-controlling interests (€4,951m, 36% of equity)
- Complex equity structure with various reserves

### 6. **Optimal Hybrid Allocation Analysis**

| Factor | Assessment | Implication for Hybrids |
|--------|-----------|------------------------|
| Business stability | High (regulated utility) | **Favors more hybrids** |
| Cash flow predictability | Good | **Favors more hybrids** |
| Current leverage | Moderate-high | **Moderate hybrid use** |
| Capex intensity | Very high | **Favors more hybrids** |
| Equity base | Relatively thin | **Favors some hybrids** |
| Rating importance | Critical for utility funding | **Favors moderate hybrids** |
| Interest rate environment | Rising (2022) | **Moderate - timing matters** |

**Too little hybrid (0-25%)**: Misses opportunity to optimize capital structure, improve rating agency equity credit, and lower WACC.

**Too much hybrid (75-100%)**: 
- Risk of rating agencies reducing equity credit if overused
- Coupon deferral risk if financial stress occurs
- Market capacity constraints for hybrid issuance
- Could signal equity weakness

**The sweet spot**: Utilities typically use hybrids for **25-50% of their equity-like capital** (i.e., as partial replacement for equity or subordinated debt, not as primary funding).

Given:
- EDP's already substantial leverage
- The need to maintain investment-grade ratings
- Heavy capex requirements for energy transition
- Stable but not spectacular profitability
- Rising rate environment making issuance more expensive

A **25%** reliance on hybrid bonds relative to total equity-like capital seems most appropriate. This provides:
- Meaningful rating agency equity credit
- Diversification of funding sources
- Without over-reliance on a complex instrument
- Maintains headroom for senior debt capacity

However, looking at this from a "capital structure reliance" perspective (hybrids as % of total capital or as replacement for equity), utilities often target hybrids at roughly **50% of equity** or about **15-25% of total capital**.

Given the options and EDP's specific profile (thin equity base, high capex, stable cash flows, need for rating optimization), **25%** represents a prudent, value-enhancing level that provides benefits without excessive risk.

<answer>25%</answer>