To determine the appropriate extent to which Fortum Oyj should rely on hybrid bonds in its capital structure, we must analyze the company's financial health, risk profile, and the prevailing market conditions provided in the data.

**1. Financial Performance and Stability Analysis:**
*   **Profitability Shock:** The company experienced a massive decline in profitability. "Profit Loss" dropped from -114 million EUR in 2021 to -10,290 million EUR in 2022. This loss is primarily driven by "Profit Loss From Discontinued Operations" (-11,302 million EUR), largely due to the divestment of its Russian assets (Uniper stake write-downs and related impacts).
*   **Operating Resilience:** Despite the headline loss, "Comparable Operating Profit" increased from 1,429 million EUR in 2021 to 1,871 million EUR in 2022. This indicates that the core business operations remain robust and cash-generative.
*   **Cash Flow:** "Cash Flows From Used In Operating Activities Continuing Operations" was positive at 2,104 million EUR in 2022. However, total cash flow from operating activities was negative (-8,767 million EUR) due to discontinued operations.
*   **Balance Sheet Strength:** Equity dropped significantly from 13,665 million EUR (2022-01-01) to 7,737 million EUR (2023-01-01). The debt-to-equity ratio has effectively doubled. Liabilities decreased from 135,997 million EUR to 15,905 million EUR, largely due to the reclassification of assets/liabilities held for sale and the finalization of the divestment. The remaining entity is much smaller but carries a higher relative debt burden compared to its shrunken equity base.

**2. Market Conditions and Cost of Capital:**
*   **Interest Rates:** The swap curves show a dramatic increase in interest rates from 2021 to 2022. For example, the 10Y swap rate average went from 0.053% in 2021 to 1.927% in 2022. This indicates a rising cost of debt.
*   **Credit Spreads:** The iBoxx EUR Non-Financial IG spread increased from 1.298% in 2021 to 2.295% in 2022. This suggests that investors are demanding higher premiums for corporate credit risk, likely due to macroeconomic uncertainty and energy sector volatility.
*   **Hybrid Bond Appeal:** Hybrid bonds (subordinated debt with equity-like features) are often used to strengthen the equity ratio without diluting existing shareholders. Given the sharp drop in equity (from ~13.7B to ~7.7B), Fortum's leverage ratios have deteriorated. Issuing hybrid bonds can help repair the balance sheet by treating a portion of debt as equity for rating agency purposes, thereby lowering the apparent gearing ratio.

**3. Strategic Considerations for Hybrid Bonds:**
*   **Pros:**
    *   **Equity Repair:** With equity halved, hybrids provide a mechanism to boost regulatory/rating capital without issuing new shares at potentially depressed valuations.
    *   **Tax Shield:** Interest payments on hybrids are often tax-deductible (depending on structure), unlike dividends.
    *   **Flexibility:** Coupon payments can often be deferred, providing flexibility during cash flow stress, although Fortum's core ops are cash-positive.
*   **Cons:**
    *   **Cost:** In a rising rate environment (10Y swap ~1.9% + credit spread ~2.3% + hybrid premium), the cost of hybrid capital is high (likely 5-7% or more).
    *   **Complexity:** Hybrids are complex instruments.
    *   **Over-reliance Risk:** Relying too heavily (75-100%) on hybrids is inefficient and expensive compared to senior debt or pure equity. It signals distress if used as a primary funding source.

**4. Determining the Percentage:**
*   **0%:** Not optimal. The equity buffer has been severely eroded. Some hybrid issuance is standard for utilities to optimize the capital structure and maintain investment-grade ratings.
*   **100%:** Extremely risky and inefficient. No company should fund its entire capital structure with hybrids due to high cost and subordination risks.
*   **75%:** Too high. This would imply a very thin layer of senior debt and equity, which is not typical for a stable utility with strong operating cash flows. It suggests excessive financial engineering.
*   **50%:** A significant reliance. While hybrids are useful, a 50% reliance on them in the total capital structure is aggressive. Typically, hybrids make up a smaller portion of the total capitalization (e.g., 10-20% of total capital, or a specific portion of the equity/debt mix). However, the question asks about the extent the *capital structure should rely* on them. In the context of "options," this usually refers to the proportion of *new* financing or the strategic weight given to this instrument class relative to others. Given the severe equity hit, a moderate-to-high strategic emphasis is needed to restore ratios.
*   **25%:** This is a prudent, balanced approach. It acknowledges the need to shore up equity-like capital after the massive write-downs without incurring the excessive costs associated with a dominant hybrid position. Utilities typically maintain a mix of senior debt, hybrid debt, and equity. A 25% allocation to hybrids (as part of the permanent capital base) is a common target for investment-grade utilities to optimize their weighted average cost of capital (WACC) while maintaining rating stability. It allows for equity repair without over-leveraging with expensive subordinated debt.

Comparing 25% and 50%: The core business is strong (Operating Profit up), but the balance sheet is damaged. A 50% reliance might be interpreted as half of the *capital* being hybrids, which is very high. If interpreted as half of *new* issuance, it might be plausible, but 25% is a safer, more standard strategic allocation for a company aiming to stabilize rather than aggressively re-engineer. Given the high interest rate environment, minimizing expensive capital is key. Therefore, a moderate reliance is best.

However, looking at the severity of the equity drop (almost 50% reduction), the company *needs* equity-like instruments. But issuing too much hybrid debt in a high-rate environment is costly. A 25% reliance strikes the balance between repairing the capital structure and managing cost of capital.

<answer>25%</answer>