EDP, S.A. should use hybrid bonds to a **moderate-to-high extent**, but not up to the full S&P equity-credit cap.

Key considerations:

- **Leverage and funding needs are meaningful.** Total borrowings increased materially, with long-term borrowings of about **€15.8bn** and current borrowings of about **€4.2bn** at year-end 2022, implying sizeable refinancing and debt-management needs. Current borrowings rose sharply from about **€1.5bn** a year earlier.
- **Capex intensity is high.** Cash payments for PP&E and intangibles were about **€3.5bn** in 2022, while investing cash flow was negative **€3.2bn**. This reflects EDP’s ongoing energy-transition and renewables investment program.
- **Operating cash flow improved strongly**, rising to about **€3.8bn** from **€2.0bn**, which partly offsets the need for aggressive hybrid issuance. EBITDA-like profit before provisions, depreciation, financials, tax and CESE rose to about **€4.5bn**, supporting credit quality.
- **Credit metrics are under pressure but not distressed.** Finance costs doubled to about **€1.75bn**, and debt increased, but profitability and cash generation remain solid. This suggests hybrid issuance would be useful for rating headroom, but not absolutely required at the maximum cap.
- **Business risk profile is relatively supportive.** EDP is a large integrated utility with regulated networks and significant renewables exposure across multiple geographies. However, it also has unregulated power exposure, substantial investment needs, and some earnings/cash flow volatility.
- **Market conditions are less favorable than in 2020–2021.** Euro swap rates rose sharply in 2022, and hybrid/subordinated spreads are materially higher. Hybrid issuance would likely increase the cost of capital compared with senior debt, arguing against full-cap utilization.
- **Existing capital structure already appears to include hybrid-like instruments or substantial non-common-equity capital support**, and the prompt asks to consider the starting point. This reduces the need to immediately maximize new hybrid capacity.
- **Annual issuance constraint matters.** With total adjusted capital roughly in the tens of billions, moving all the way to 15% within 18 months could require very large issuance and may exceed the practical annual issuance guidance of up to **€3bn per year**.

Overall, EDP has **high capex and elevated leverage pressure**, and hybrid bonds would provide meaningful rating flexibility and improve adjusted debt metrics. However, the company’s solid operating cash flow, large utility scale, still-substantial equity base, and the higher cost of hybrids argue against the maximum 15% recommendation.

A recommendation of **11.25% of total adjusted capital** best balances the need for capital-structure support with cost and execution discipline.

<answer>11.25%</answer>