I'll analyze ENGIE's capital structure and determine the appropriate reliance on hybrid bonds.

## Key Observations

**1. Existing Hybrid Bond Usage:**
ENGIE already has significant hybrid/deeply subordinated perpetual notes:
- 2023: €3,393M
- 2022: €3,767M
- 2021: €3,913M

These are declining over time, suggesting some redemptions/buybacks (€374M decrease in 2022).

**2. Capital Structure Analysis:**
- Total Equity (2023): €39,285M
- Equity attributable to owners: €34,253M
- Hybrid notes represent ~10% of parent equity (~€3.4B of €34.3B)
- Long-term borrowings: €28,083M
- Current borrowings: €12,508M
- Total debt: ~€40.6B
- Debt-to-equity ratio: roughly 1:1

**3. Financial Performance:**
- Revenue grew 62% (€57.9B to €93.9B) but profitability collapsed
- Net income dropped from €3,758M to €390M
- Profit from continuing operations went negative (-€1,793M)
- Significant impairments (€2,774M) and non-recurring items (-€1,328M)
- Finance costs nearly doubled (€2,061M to €3,700M)

**4. Credit and Market Considerations:**
- Rising interest rate environment (swap curves moved from negative to ~1.7-1.9%)
- Corporate bond spreads widened
- Sub-sen delta of 0.2 (20bps additional spread for subordinated vs senior)
- The company has investment-grade characteristics but is under financial stress

**5. Hybrid Bond Rationale:**
- ENGIE is a large utility/infrastructure company with stable underlying cash flows (€8.5B operating cash flow)
- Hybrids receive partial equity credit from rating agencies, helping maintain investment-grade ratings
- The company already uses hybrids as part of its capital mix
- Given high leverage and deteriorating profitability, some hybrid usage makes sense to maintain rating flexibility
- However, 100% hybrid would be inappropriate due to higher cost and limited market appetite
- The existing ~€3.4B in hybrids represents a moderate portion of the capital structure

**6. Optimal Mix:**
Given that ENGIE is a regulated utility with predictable cash flows, hybrid bonds serve a useful but supplementary role. They help optimize the capital structure by providing equity credit while being tax-deductible. However, the bulk of financing should still come from traditional senior debt (cheaper) and pure equity. The current proportion (~8-10% of total capital from hybrids) suggests a moderate but not dominant role. Given the rising rate environment and widening spreads, maintaining roughly 25% of the capital structure in hybrids balances rating support with cost efficiency.

<answer>25%</answer>