Let’s break this down step-by-step. --- **1. Company profile and sector classification** VERBUND AG is Austria’s largest electricity company. It operates predominantly in hydro and renewable generation, as well as electricity transmission and distribution. Given its revenue mix — generation, grid, and some retail — it fits best under **Unregulated Power and Gas** (due to its large merchant renewable generation) but also has aspects of a **Regulated Utility** (due to grid operations). Its revenue nearly doubled in 2022 due to the European energy price spike, and EBITDA rose from ~€1.58bn to ~€3.16bn. Profit after tax nearly doubled. This indicates a strong, but potentially volatile, earnings profile tied to commodity prices. --- **2. Current financial position and credit metrics** From the balance sheet: - **Equity (2023):** €8.32bn - **Total assets:** €19.16bn - **Noncurrent + current financial liabilities:** ~€3.95bn - **Cash:** €409m - **Adjusted debt** would include lease liabilities and possibly pension provisions, but still, leverage appears moderate. We can approximate: - **FFO to debt** and **DCF to debt** would likely be very strong in 2022 given massive cash flow generation (operating cash flow ~€2bn), making credit metrics very comfortable. - Even if power prices normalize, the company likely retains significant rating headroom. --- **3. Refinancing needs and capex** - Investing activities show ~€1.1bn in capex in 2022, up from ~€0.85bn in 2021. - Financing activities show net borrowing inflow in 2022, but moderate. - No major acquisition appears imminent; capex is high but can likely be funded internally given current cash generation. - No indication of “transformational” M&A or financial stress. --- **4. Hybrid issuance rationale** - Hybrids are typically used to support ratings under leverage pressure, fund large M&A, or optimize cost of capital. - VERBUND currently has strong coverage metrics, ample liquidity, and very high profitability. - The cost of hybrid debt would likely be higher than its current average cost of debt (given IG credit profile and current subordinated spreads). - No current hybrid capital is mentioned in the structure. --- **5. Guideline matching** - **0%** fits: strong rating profile, low refinancing pressure, and higher cost of hybrid relative to current debt. - The company does not need hybrid issuance to preserve metrics or ratings. - Issuing hybrids would not materially improve an already strong credit profile and would increase funding costs unnecessarily. --- **Conclusion:** VERBUND should issue **0%** hybrid bonds over the next 18 months. 0%