Fortum’s case supports **some use of hybrid bonds, but not the maximum S&P equity-credit capacity**.

Key considerations:

- **Capital structure and leverage pressure:** Fortum ended 2022 with equity of about **€7.7bn** and substantial financial liabilities: roughly **€3.7bn noncurrent financial liabilities** and **€4.1bn current financial liabilities**, partly offset by **€3.9bn cash**. The balance sheet was materially reshaped by the Uniper/discontinued operations crisis, with reported total loss of **€10.3bn** and equity down from **€13.7bn to €7.7bn**. This creates a clear rationale for capital-structure strengthening.

- **Operating recovery in continuing operations:** Continuing operations remain profitable and cash-generative. Comparable EBITDA increased to **€2.4bn** from **€2.0bn**, and continuing operating cash flow was **€2.1bn**. This reduces the need for a very aggressive hybrid recommendation.

- **Refinancing and liquidity needs:** The company repaid significant noncurrent borrowings in 2022, but still has meaningful current financial liabilities. Liquidity is adequate, with **€3.9bn cash**, but the next 18 months may still involve refinancing and balance-sheet stabilization after a period of severe volatility.

- **Hybrid cost environment:** 2022 market rates rose sharply. The 5Y–10Y swap curve moved from near-zero/negative levels in 2020–2021 to around **1.7%–1.9%** in 2022, and subordinated/hybrid spreads also widened. Therefore, hybrids would likely be meaningfully more expensive than historical senior debt. This argues against pushing to **11.25% or 15%** unless absolutely necessary.

- **Rating methodology angle:** Fortum is more exposed to unregulated power and generation than a pure low-risk regulated utility, so rating headroom is more sensitive to commodity, hedging, and market volatility. Hybrid equity credit could provide useful support to adjusted debt metrics, but Fortum’s continuing business has strong EBITDA and cash flow, meaning hybrid issuance is helpful rather than essential.

- **Existing hybrid starting point:** No explicit outstanding hybrid balance is provided in the facts. If there is no current hybrid in adjusted capital, a moderate first step is more appropriate than immediately maximizing the 15% S&P cap.

Overall, Fortum has **moderate-to-significant leverage and rating-headroom pressure**, but not enough evidence of transformational capex/M&A or extreme refinancing needs to justify **11.25% or 15%**. A **7.5% target** best balances the need for meaningful rating flexibility with the higher cost of hybrid capital.

<answer>7.5%</answer>