Iberdrola is a large, diversified regulated and integrated utility with substantial ongoing investment needs, and it already has an established hybrid capital strategy: first issuance in 2013 and recent issuance in 2021/2022, including €2.74bn of perpetual subordinated obligations in 2021. That recent usage is a strong indicator that hybrids are an accepted and useful part of its capital structure.

Credit metrics show meaningful but not acute leverage pressure. S&P net debt/EBITDA of 3.91x and FFO/net debt of 19.65% are consistent with a leveraged utility profile where hybrid equity credit can provide useful support, especially given high capex. Cash flow from operations was €10.4bn, but investing cash outflow was also very large at €10.2bn, including €6.3bn of PPE purchases and additional financial investments. Debt issuance exceeded repayments by about €4.6bn in 2022, indicating continuing external funding needs.

However, the case does not appear to support using the full 15% S&P cap. Moody’s adjusted leverage trend is stable, profitability and EBITDA improved, operating cash flow rose materially, and there is no evidence of transformational M&A or imminent downgrade risk that would make maximum hybrid reliance necessary. Iberdrola also appears to retain strong market access and a robust regulated-utility business risk profile, supported by scale, geographic/regulatory diversity, and recurring cash flows.

The main constraint is market cost. Rates rose sharply in 2022: 5Y–10Y swaps moved from near zero/negative levels to about 1.7%–1.9%, and subordinated spreads increased. Therefore, new hybrid issuance would likely be more expensive than the group’s legacy cost of debt, so it should be used selectively rather than aggressively. Still, given Iberdrola’s high investment program and existing hybrid practice, the incremental cost is likely acceptable for maintaining rating flexibility.

Considering the maximum practical issuance guidance of up to €3bn per year and the next-18-month horizon, a moderate-to-meaningful level is appropriate. The best fit among the options is 7.5% of total adjusted capital: enough to support leverage metrics and funding flexibility, but below the more aggressive 11.25%–15% levels that would imply significant or urgent rating pressure.

<answer>7.5%</answer>