REN should use hybrid bonds only to a **moderate** extent over the next 18 months.

REN is a regulated energy network utility, so its business risk profile is structurally supportive: essential infrastructure, largely regulated activities, and relatively stable operating cash flow. 2022 operating cash flow was strong at about **€613m**, despite being down from about **€700m** in 2021. EBITDA-like cash generation is also robust: operating profit of **€240m** plus depreciation/amortisation of **€249m** implies roughly **€489m** of EBITDA before other adjustments.

However, the balance sheet is leveraged. At year-end 2022:

- Reported equity: **€1.52bn**
- Long-term borrowings: **€1.70bn**
- Current borrowings: **€0.64bn**
- Gross borrowings: about **€2.33bn**
- Cash: **€0.37bn**
- Net debt: about **€1.97bn**

This implies net debt/EBITDA of roughly **4.0x**, and gross debt/EBITDA of about **4.8x**. For a regulated utility this is not extreme, but it leaves some sensitivity to higher rates, refinancing conditions, and regulatory timing.

There are also meaningful refinancing needs. Current borrowings and current portion of noncurrent debt were about **€639m**, while finance costs increased from **€54m** in 2021 to **€67m** in 2022. The rate environment had shifted sharply by 2022: euro swap rates moved from near-zero or negative levels in 2020-2021 to around **1.7%-1.9%**, and subordinated/nonfinancial IG spread indications also widened. Therefore, new hybrid issuance would likely be more expensive than REN’s historical senior debt cost.

That said, REN does not appear to face a transformational capex or M&A requirement. Investing cash outflow was about **€102m** in 2022, lower than the prior year, while purchases of intangible assets were about **€202m**, consistent with ongoing regulated network investment rather than an exceptional expansion program. The large **€1bn** transitional gas price stabilization asset and matching liability inflate the balance sheet but appear economically neutral.

A hybrid could still be useful because S&P typically gives partial equity credit to qualifying hybrids, which would improve adjusted debt and capital structure metrics. Assuming total adjusted capital is broadly equity plus gross adjusted debt, REN’s starting capital base is roughly **€3.85bn** before any hybrid adjustment. A **7.5%** hybrid layer would correspond to roughly **€290m** of hybrid capital, comfortably below the €3bn annual issuance constraint and large enough to provide meaningful leverage support without over-optimizing the structure. By contrast:

- **0%** seems too conservative given refinancing needs, higher interest rates, and moderate leverage pressure.
- **3.75%** would provide only limited flexibility.
- **11.25% or 15%** would be excessive because there is no evidence of transformational investment, acute downgrade risk, or very high funding stress.
- Hybrid cost would likely increase the average cost of debt, so maximizing the S&P equity-credit cap would not be efficient.

Overall, REN has a stable regulated utility profile but moderately constrained leverage and refinancing exposure in a higher-rate environment. The most balanced recommendation is therefore **7.5% of total adjusted capital**.

<answer>7.5%</answer>