To determine the optimal extent to which Fortum Oyj should utilize hybrid bonds relative to the S&P Global Ratings cap, we must analyze the company's financial health, credit profile, and the cost-benefit trade-off of hybrid instruments in the context of the provided market data.

**1. Analysis of Financial Position and Credit Profile:**
*   **Profitability & Cash Flow:** In 2022, Fortum reported a significant net loss of -10.29 billion EUR, largely driven by "Profit Loss From Discontinued Operations" (-11.3 billion EUR). However, the "Comparable Operating Profit" remained positive at 1.87 billion EUR, and "Cash Flows From Used In Operating Activities Continuing Operations" was positive at 2.1 billion EUR. This indicates that the core business is cash-generative, but the balance sheet has been severely impacted by one-off items (likely related to the Uniper situation or similar divestments/impairments).
*   **Leverage and Equity:** Total Equity dropped significantly from 13.66 billion EUR in 2021 to 7.74 billion EUR in 2022. Total Liabilities also decreased from 136 billion EUR to 15.9 billion EUR, primarily due to the reclassification or removal of assets/liabilities associated with discontinued operations. The debt-to-equity ratio needs to be managed carefully to maintain investment-grade status.
*   **Credit Rating Context:** S&P Global Ratings typically caps the equity credit for hybrid bonds at 15% of total adjusted capital (Debt + Equity). This means for every 100 EUR of hybrid bonds, only 15 EUR counts as equity for rating purposes, while 85 EUR counts as debt. This instrument is used to optimize the capital structure by boosting equity ratios without issuing pure equity, which is dilutive.

**2. Market Conditions and Cost of Capital:**
*   **Interest Rates:** The swap curves show a dramatic increase in rates from 2021 to 2022. The 5Y swap average went from -0.264% to 1.726%, and the 10Y from 0.053% to 1.927%. This implies that the cost of debt has risen significantly.
*   **Credit Spreads:** The iBoxx EUR Non-Financial IG spread increased from 1.298% in 2021 to 2.295% in 2022. This indicates a wider risk premium for corporate debt.
*   **Hybrid Bond Pricing:** Hybrid bonds carry a higher coupon than senior debt due to their subordinated nature and deferrable interest features. In a rising rate environment (as seen in 2022), the absolute cost of issuing hybrids becomes expensive. However, if the company is constrained by leverage covenants or rating agency thresholds, hybrids might still be necessary to bridge the gap between debt and equity.

**3. Strategic Consideration for Hybrid Utilization:**
*   **Rating Agency Cap:** The question asks about utilization *relative to the cap*. The cap is a maximum limit (15% of adjusted capital). Utilizing 100% of the cap means issuing enough hybrids such that their equity credit equals exactly 15% of the total adjusted capital. Utilizing 0% means issuing none.
*   **Fortum's Specific Situation:** Fortum faced a severe equity erosion in 2022. To restore its credit metrics and maintain an investment-grade rating (crucial for a utility company with high capital expenditure needs), it needs to strengthen its equity base. Issuing pure equity is dilutive and might be difficult given the stock performance (implied by the loss). Issuing senior debt increases leverage ratios, potentially leading to a downgrade.
*   **Optimal Mix:** Hybrid bonds are the standard tool for companies in this position to optimize their leverage ratios without immediate dilution. Given the significant drop in equity, Fortum would likely need to maximize the efficiency of its capital structure. However, issuing hybrids up to the full 100% of the cap is aggressive and expensive, especially in a high-rate environment. Most investment-grade utilities with stable cash flows (like Fortum's continuing ops) typically maintain a moderate level of hybrids to support their rating without overpaying for capital.
*   **Standard Practice:** For a company with Fortum's profile (utility, regulated assets, recent stress but stable core cash flow), rating agencies and treasury departments often target a utilization that provides sufficient equity credit to meet rating thresholds but avoids excessive cost. A common strategic target for such firms is to utilize hybrids to fill the gap to the cap if the rating is under pressure, or to maintain a buffer. Given the severe equity hit, maximizing the equity credit benefit is logical. However, the question asks "to what extent *should* this company utilize... relative to the cap".
*   **Interpreting the Options:**
    *   **0%:** Unlikely, as hybrids are a key part of utility capital structures.
    *   **25%:** Conservative. Might not provide enough equity credit to offset the massive equity drop.
    *   **50%:** Moderate. A balanced approach.
    *   **75%:** Aggressive.
    *   **100%:** Maximum utilization.

    Let's look at the "Bear" vs "Bull" market data. The "Bear" case shows higher rates and spreads. In a bear market (high cost of capital), companies tend to be more cautious with expensive financing like hybrids unless absolutely necessary for rating preservation. However, the "Bull" case shows lower rates. The average 2022 environment was tough.

    Crucially, S&P's methodology allows up to 15% equity credit. If a company is struggling with leverage (as Fortum is, due to the equity drop), it is standard practice to issue hybrids up to the limit allowed by the rating agency to maximize the equity benefit. This is because the primary purpose of hybrids in this context is rating support. If Fortum does not utilize the full capacity, it leaves "free" equity credit on the table that could help maintain its investment-grade status, which is vital for refinancing its substantial debt load. Therefore, from a capital structure optimization perspective aimed at preserving the credit rating amidst equity erosion, the company *should* utilize the instrument to its full allowable extent to gain the maximum equity credit benefit.

    However, there is a nuance. "Utilize relative to the cap" usually refers to the proportion of the *allowed* equity credit that is actually used. If the cap is 15% of capital, and the company issues hybrids such that the equity credit is 15% of capital, it has utilized 100% of the cap. Given the significant equity erosion (-5.9 billion EUR in equity), Fortum needs all the equity credit it can get to prevent a downgrade. Therefore, it should aim for the maximum allowable equity credit.

    Thus, the company should utilize 100% of the available cap to maximize equity credit and support its credit rating.

<answer>100%</answer>