Fortum should be advised to use **0% of total adjusted capital** in hybrid bonds over the next 18 months.

Key considerations:

- **No prior hybrid issuance:** Fortum has not issued hybrid bonds in 2021 or 2022 and has never issued them. The prompt explicitly notes that prior hybrid usage is a strong indicator of advisable future use; absence of hybrids is therefore a strong signal against recommending a meaningful hybrid layer.

- **Credit metrics are already solid:** The given S&P metrics show **Net debt / EBITDA of 1.84x** and **FFO / net debt of 45.56%** for 2022. These are strong for a utility/power group and do not indicate urgent leverage pressure requiring equity-credit instruments.

- **Leverage trend is improving:** Moody’s adjusted leverage trend is stated as **improving**, which weakens the case for issuing hybrids as a defensive rating-support tool.

- **Continuing operations generated strong cash flow:** Continuing operations produced **EUR 2.1bn operating cash flow** and **EUR 3.6bn operating and investing cash flow**, helped by divestment proceeds. Although total group results were heavily distorted by discontinued operations, the post-disposal continuing Fortum appears more focused and less leveraged.

- **Liquidity remains meaningful:** Fortum ended 2022 with **EUR 3.9bn of liquid funds**, despite the large reduction from the prior year. This reduces immediate reliance on hybrid financing.

- **Hybrid cost would likely be expensive:** Euro rates rose sharply in 2022, with 5–10 year swaps around **1.7%–1.9%** and subordinated spreads also wider. A new hybrid would likely come at a materially higher cost than Fortum’s existing debt base, especially given the market volatility around European energy companies in 2022.

- **No clear transformational capex or M&A need provided:** The data does not point to a large acquisition pipeline, extraordinary capex program, or severe refinancing wall that would justify moving toward 7.5%–15% of adjusted capital.

While Fortum experienced severe reported losses from discontinued operations and a major balance-sheet reshaping, the relevant forward-looking capital-structure case does not show a need for hybrid issuance. Given strong adjusted credit metrics, improving leverage, meaningful liquidity, higher hybrid funding cost, and no historical hybrid use, the most appropriate recommendation is **no hybrid issuance**.

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