ENGIE should utilize hybrid bonds to a **moderate extent**, but not up to the S&P 15% equity-credit cap.

Key considerations:

- **Existing hybrid track record is supportive.** ENGIE has issued hybrid bonds recently and first used them in 2014. At year-end 2022, “deeply subordinated perpetual notes” were still material at about **€3.4 billion**, though down from €3.8 billion at the start of the year. This indicates hybrids are already an accepted part of ENGIE’s capital structure, which strongly supports continued use.

- **Credit metrics are acceptable but not unconstrained.** S&P net debt / EBITDA of **3.25x** and FFO / net debt of **24.8%** suggest a solid investment-grade profile, but with some leverage sensitivity given the scale of the balance sheet, commodity volatility, and energy-market stress in 2022. Hybrid equity credit would provide useful rating headroom.

- **Operating cash flow improved, but earnings were volatile.** Cash flow from operations increased to **€8.6 billion** from €7.3 billion, but reported profit fell sharply to **€390 million**, and continuing operations were loss-making. This reflects significant exceptional items, financial costs, impairments, and commodity/derivative volatility. Hybrids can help absorb this volatility from a credit-metric perspective.

- **Funding and capex needs are meaningful.** ENGIE remains capital intensive, with purchases of PP&E and intangibles of about **€6.4 billion** in 2022. It also has sizable refinancing activity, with borrowings repaid of **€11.0 billion** and new borrowings of **€8.7 billion**. However, this does not appear to be a transformational capex or acquisition program requiring maximum hybrid use.

- **Leverage trend is improving.** Moody’s adjusted leverage trend is noted as improving, which argues against aggressive hybrid issuance at 11.25% or 15%. ENGIE does not appear to need hybrids to preserve investment grade in the near term.

- **Hybrid cost is less attractive than in 2020-2021.** Euro swap rates rose sharply in 2022, and subordinated spreads also widened. New hybrid issuance would likely be materially more expensive than legacy debt and prior hybrid issuance. That argues against maximizing issuance, especially given the already improving leverage trend.

- **Capacity constraint over 18 months matters.** With a practical maximum of about **€3 billion per year**, ENGIE could issue perhaps €3 billion-€4.5 billion over the next 18 months. Given existing hybrid outstanding of about €3.4 billion, an incremental issuance program would likely move ENGIE toward a mid-level hybrid share, but not the full 15% S&P cap.

Overall, ENGIE has a clear rationale to maintain and potentially modestly increase hybrid capital: it is a capital-intensive utility with material refinancing needs, volatile 2022 earnings, and an established hybrid history. However, improving leverage trends, strong operating cash flow, and higher market costs argue against an aggressive recommendation.

The most appropriate level is therefore **7.5% of total adjusted capital**.

<answer>7.5%</answer>