A2A Energia / A2A group appears to have a meaningful but not extreme rationale for hybrid issuance over the next 18 months.

Key considerations:

- **Leverage and debt trajectory are under pressure.** Financial liabilities increased materially in 2022: noncurrent financial liabilities rose from about **€4.3bn to €5.9bn**, while current financial liabilities also increased to about **€1.0bn**. Gross financial debt is therefore around **€6.9bn**, against equity of **€4.47bn**.
- **Net debt is more moderate because cash is high.** Cash and equivalents increased sharply to **€2.58bn**, implying net financial debt of roughly **€4.3bn**. This reduces immediate refinancing stress, but the increase in borrowings shows elevated funding activity.
- **Cash generation is positive but thin after investment.** Operating cash flow was strong at **€1.26bn**, but investing cash outflow was **€1.14bn**, leaving free cash flow of only **€118m**. Capex and acquisitions remain sizeable, including around **€856m PPE capex**, **€384m intangible capex**, and **€497m acquisition outflows**.
- **Profitability is stable but margins are low due to pass-through energy costs.** EBITDA increased modestly to **€1.505bn**, while revenue doubled due to energy price effects. EBITDA margin is low, but for a utility this is partly distorted by commodity pass-through and trading/supply activity.
- **Hybrid issuance would improve S&P-adjusted leverage metrics.** For S&P-style treatment, hybrids can receive partial equity credit, reducing adjusted debt and strengthening adjusted capitalization. Given the group’s rising debt and large investment needs, this would provide useful rating headroom.
- **But maximum hybrid use is not clearly warranted.** There is no evidence of acute liquidity distress, transformational M&A, or an imminent downgrade scenario requiring the full 15% cap. Cash balances are high, free cash flow turned positive, and EBITDA remained resilient.
- **Cost of hybrid capital has become less attractive.** Market rates rose sharply in 2022: 5–10 year swaps moved from near zero/negative levels in 2020–2021 to around **1.7%–1.9%** in 2022, and subordinated spreads also widened. A new hybrid would likely be meaningfully more expensive than existing senior debt, arguing against aggressive use.

Overall, the company has **moderate-to-high funding needs** and some leverage pressure, but not enough evidence of severe rating stress or transformational capital requirements to justify 11.25% or 15%. A mid-level hybrid allocation would provide meaningful balance-sheet support while avoiding excessive high-cost subordinated capital.

<answer>7.5%</answer>