Iberdrola should make **moderate-to-high use of hybrid bonds**, but not up to the full S&P equity-credit cap.

Key considerations:

- **Starting point already includes hybrids.** Iberdrola issued about **€2.74bn of perpetual subordinated obligations in 2021**, paid **€169m** of hybrid coupons in 2022, and had no new hybrid issuance in 2022. This means hybrids are already accepted as part of the capital structure, reducing execution risk and supporting continued use.

- **Capital intensity is high.** The group is a large regulated/integrated utility with substantial asset growth:
  - Property, plant and equipment rose from about **€80.0bn to €86.3bn**.
  - Construction in progress increased from **€9.1bn to €11.5bn**.
  - Investing cash outflow was about **€10.2bn**, close to operating cash flow of **€10.4bn**.
  This points to continuing heavy network and renewables investment needs.

- **Leverage and refinancing pressure are meaningful.** Financial liabilities increased materially:
  - Noncurrent financial liabilities rose from **€37.2bn to €44.2bn**.
  - Current financial liabilities rose from **€21.3bn to €25.1bn**.
  - Debt issuance/disposals were **€14.8bn**, while repayments were **€10.3bn**, showing active refinancing and funding requirements.
  Hybrid issuance would therefore provide useful rating and leverage flexibility.

- **Credit profile remains solid, but not free of pressure.** EBITDA increased to **€13.2bn**, operating cash flow improved to **€10.4bn**, and equity is large at **€58.1bn**. The business risk profile is supported by regulated utility characteristics, scale, geographic diversity, and essential infrastructure activities. However, finance costs increased sharply from **€2.27bn to €3.04bn**, and rising rates weaken headroom.

- **Market cost is less attractive than in 2020–2021.** Euro swap rates rose sharply in 2022, and subordinated nonfinancial IG spreads also widened. Hybrid issuance would likely increase average funding cost versus legacy debt, so maximizing hybrids to 15% is not clearly warranted. Still, for a capital-intensive utility, the cost may be justified if used selectively to preserve credit metrics.

- **Practical issuance constraint matters.** The prompt limits issuance to up to **€3bn per year**, so over the next 18 months Iberdrola could reasonably issue around **€3bn–€4.5bn**. Given total adjusted capital is very large, this supports a target around the mid-range rather than the full 15% cap.

Overall, Iberdrola has **high capex and meaningful refinancing needs**, but also strong scale, cash generation, and an established investment-grade utility profile. Hybrid issuance would be valuable for balance-sheet optimization and rating headroom, but the increased cost of subordinated capital and the already solid credit profile argue against going to the maximum S&P cap. The most appropriate choice is therefore **7.5% of total adjusted capital**.

<answer>7.5%</answer>