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

Key considerations:

- **Existing hybrid-bond track record is supportive.** EDP has issued hybrids since 2013 and also issued hybrid bonds in 2021 or 2022. This is a strong signal that hybrids are an accepted and practical part of its capital structure, reducing execution and policy concerns.

- **Leverage is meaningfully elevated.** S&P net debt / EBITDA of **4.06x** and FFO / net debt of **18.84%** indicate a capital-intensive utility with constrained but still investment-grade-compatible credit metrics. Hybrid issuance would provide meaningful support to adjusted leverage metrics because S&P typically grants partial equity credit to qualifying hybrids.

- **Funding needs are substantial.** EDP is in a capital-intensive power and utility sector with large renewable and network investment requirements. Cash payments for property, plant, equipment, and intangibles were about **€3.5 billion** in 2022, and investing cash flow was negative by about **€3.2 billion**. Current borrowings also increased sharply to about **€4.24 billion** at year-end 2022, indicating refinancing and liquidity management needs.

- **Business risk profile is relatively supportive.** EDP benefits from a mix of regulated utility activities and renewable/unregulated power activities. Its scale is large, geographically diversified, and supported by essential electricity and gas operations. This supports access to capital markets, but the unregulated and renewables exposure means it is not a purely low-risk regulated utility.

- **Credit trend is not severely negative.** Moody’s adjusted leverage trend is described as **improving**, and operating cash flow improved materially in 2022. This argues against using the maximum 15% allocation, which would be more appropriate where downgrade risk is acute or where hybrid support is essential to rating preservation.

- **Market cost is less favorable than in 2020-2021.** Euro swap rates rose sharply in 2022, and subordinated/non-financial IG spreads also widened. Hybrid issuance would likely increase EDP’s funding cost versus senior debt, so issuing up to the full cap would not be optimal unless absolutely necessary.

- **Annual issuance constraint matters.** Given the maximum practical hybrid issuance of around **€3 billion per year**, moving fully to 15% of adjusted capital within 18 months could be aggressive depending on the starting stock of outstanding hybrids. A moderate-high target is more realistic.

Overall, EDP has a clear rationale for continued hybrid use: elevated leverage, high capex, meaningful refinancing needs, and a proven history of issuing hybrids. However, improving leverage trends, strong liquidity, and higher hybrid funding costs argue against the maximum 15% recommendation. The most balanced recommendation is therefore **11.25% of total adjusted capital**.

<answer>11.25%</answer>