Naturgy should make **moderate use of hybrid bonds**, but not up to the S&P maximum cap.

Key considerations:

- **Leverage is meaningful but not distressed.** Gross financial liabilities, including leases, are about **€16.3 billion** at year-end 2022, while cash is nearly **€4.0 billion**, implying net financial debt around **€12.3 billion**. Against EBITDA of **€5.0 billion**, net debt/EBITDA is roughly **2.5x**, which is acceptable for a large utility group, though not especially conservative given energy-market volatility.

- **Credit metrics improved materially in 2022.** EBITDA increased from **€3.5 billion to €5.0 billion**, operating cash flow rose sharply to **€4.2 billion**, and equity increased to **€10.0 billion** from **€8.9 billion**. This reduces the urgency for aggressive hybrid issuance.

- **Funding needs are present but manageable.** Current financial liabilities rose to about **€2.3 billion**, and capex/investment outflows increased to around **€1.7 billion**. Naturgy also paid substantial shareholder distributions of about **€1.5 billion** and bought back shares. This indicates ongoing funding pressure, but not a transformational capex or M&A burden requiring maximum hybrid use.

- **Business risk is relatively supportive.** Naturgy has a large, diversified gas and power utility profile, with regulated and infrastructure-like activities that support cash-flow stability. However, it also has exposure to unregulated gas/power markets, commodity volatility, derivatives, and political/regulatory intervention risk in energy markets. This argues for some rating cushion.

- **Hybrid bonds would be useful for rating flexibility.** Because S&P typically gives partial equity credit to qualifying hybrids, issuance could improve adjusted debt metrics and support investment-grade headroom, especially if market volatility or capex rises over the next 18 months.

- **But hybrid cost is now materially higher.** Euro swap rates rose sharply in 2022, with 5–10 year swaps around **1.7%–1.9%**, and subordinated nonfinancial IG spreads around **2.3%**. A new hybrid coupon would likely be meaningfully above Naturgy’s legacy cost of debt. That limits the economic attractiveness of maximizing hybrids.

- **No evidence of a need to reach the 15% cap.** The company does not appear to face very high refinancing needs, a large acquisition pipeline, or acute downgrade risk that would make hybrid issuance “substantially required.”

Overall, the appropriate recommendation is **moderate issuance**, enough to provide meaningful leverage and rating flexibility while avoiding excessive high-cost subordinated debt. This points to **7.5% of total adjusted capital**, rather than 3.75% because leverage optimization is useful and funding needs are not negligible, but below 11.25% or 15% because the balance sheet and cash generation remain solid.

<answer>7.5%</answer>