**Assessment of Terna S.p.A.’s hybrid‑bond issuance requirement (next 18 months)**  

| Metric | 2022 (EUR bn) | Comment |
|--------|--------------|---------|
| **Revenue & operating income** | 2.964 | Stable, essential‑service, regulated transmission |
| **EBITDA** (Operating profit + D&A) | ≈ 2.06 | High margin (~70 % of revenue) – typical for a regulated utility |
| **Net profit** | 0.858 | Solid, supports cash generation |
| **Operating cash flow** | 2.32 | Strong, covers capex and interest |
| **Capex (PPE + intangible)** | ≈ 1.70 | High relative to EBITDA (≈ 0.8×) – reflects grid expansion and renewable integration |
| **Total debt** (long‑term + short‑term + current portion) | ≈ 10.77 | Includes €1.91 bn current portion due within 1 year |
| **Cash & liquid assets** | 2.16 | Comfortable but not enough to cover all refinancing + capex without new financing |
| **Net debt / EBITDA** | ≈ 4.2× | Borderline for an ‘A‑range’ rating; leverage is a rating‑sensitivity driver |
| **FFO / Net debt** | ≈ 25 % | Adequate, but leaves limited headroom if debt rises further |
| **Existing hybrid bond** | 0.989 | Already counted as equity‑credit; ≈ 5.9 % of total adjusted capital (equity + adjusted debt ≈ 16.9 bn) |
| **Remaining hybrid‑equity‑credit capacity** | ≤ 1.55 bn (≈ 9 % of capital) | Up to the 15 % regulatory cap (≈ 2.54 bn total hybrid) |

### Key considerations

1. **Refinancing needs** – ≈ €2.35 bn of debt matures in the next 12 months (current portion + short‑term borrowings). This is a *moderate‑to‑high* refinancing requirement, not a “low” one.

2. **Capex intensity** – Annual capex (~€1.5 bn) is significant relative to operating cash flow. Continued high investment is needed to maintain and expand the transmission network, driven by Italy’s energy‑transition goals.

3. **Leverage pressure** – Net‑debt/EBITDA of ~4.2× places Terna at the upper end of the ‘A’ rating band. Any additional debt without equity‑credit could push the ratio above 4.5× and trigger a negative outlook.

4. **Rating flexibility** – Hybrid instruments receive equity‑credit from S&P, lowering adjusted debt and improving leverage metrics. Even a modest amount of new hybrid issuance (≈ 1 %–2 % of capital) would provide meaningful rating headroom.

5. **Cost of hybrid vs. senior debt** – Given current market conditions (5‑year swap ~1.7 %, iBoxx IG corporate ~1.1 %), a hybrid would be priced at a modest premium to senior debt (likely 2–3 %). The incremental cost is limited and aligns with the “slightly increase” description for the 7.5 % bucket.

6. **Existing hybrid** – Already 5.9 % of capital; the company is not starting from zero. Adding more hybrid is therefore a *capital‑structure optimization* rather than a new experiment.

### Decision framework

| Criterion | 0 % | 3.75 % | 7.5 % | 11.25 % | 15 % |
|-----------|-----|--------|-------|---------|------|
| Refinancing needs | Low | Moderate | **Moderate‑high** | High | Very high |
| Capex intensity | Low | Moderate | **High** | High | Very high |
| Leverage pressure | Low | Mild | **Moderate** | Significant | Material |
| Rating headroom | Limited | Some | **Moderately constrained** | Tight | Very tight |
| Need for equity‑credit | None | Limited | **Meaningful improvement** | Strong | Critical |
| Cost impact | Materially higher | Higher | **Slightly higher** | Marginal | In line |

Terna’s profile best matches the **7.5 %** bucket: moderate refinancing (≈ €2 bn maturing), high capex, moderately constrained rating headroom, and the ability of a hybrid issuance to meaningfully improve adjusted leverage with only a slight cost increase.

### Proposed issuance

- **New hybrid volume**: ~€1.3 bn (≈ 7.5 % of total adjusted capital).  
- **Resulting total hybrid**: €0.989 bn (existing) + €1.3 bn ≈ €2.3 bn, representing ≈ 13.5 % of capital – still below the 15 % cap and comfortably within the per‑year limit of €3 bn.

This amount would replace a portion of the upcoming senior refinancing, lower adjusted net‑debt, and help maintain the ‘A’ rating while keeping the cost of debt only marginally higher.

**Final recommendation**

<answer>7.5%</answer>