Veolia should utilize hybrid bonds to a **moderately high but not maximum** extent over the next 18 months.

Key considerations:

- **Existing hybrid capital is already material.** Veolia has a long history of hybrid issuance, with first issuance in 2010 and hybrid activity in 2021/2022. Deeply subordinated securities stood at about **€3.50 billion** at Jan. 1, 2023, up from **€2.46 billion** at Jan. 1, 2022, partly due to the Suez hybrid contribution, even though Veolia also repaid €500 million of hybrid debt in 2022. This indicates hybrids are an established and acceptable capital structure tool for the company.

- **Leverage pressure is significant.** S&P net debt/EBITDA of **3.92x** and FFO/net debt of **19.72%** point to constrained rating headroom for an infrastructure/utility-type issuer. Moody’s adjusted leverage trend is also described as **deteriorating**, reinforcing the case for balance-sheet support.

- **The Suez acquisition materially enlarged the balance sheet and debt base.** Total assets rose from **€53.1 billion** to **€73.3 billion**, goodwill nearly doubled, and noncurrent financial liabilities excluding concession liabilities increased from **€10.5 billion** to **€19.7 billion**. This suggests integration/acquisition-related leverage pressure and refinancing needs remain relevant.

- **Cash generation is solid but leverage remains elevated.** Operating cash flow improved to **€4.15 billion** in 2022, but dividends, debt repayments, acquisition-related cash flows, and capex requirements remain substantial. Industrial investments increased to about **€2.78 billion**, consistent with a capital-intensive utility/environmental services business.

- **Business risk profile is supportive but not enough to remove the need for capital structure optimization.** Veolia benefits from scale, geographic diversification, essential services, and a significant regulated/concession-style revenue base. However, it is not a pure low-risk regulated utility; it has exposure to competitive environmental services, integration risk from Suez, and rising financing costs.

- **Market conditions are less favorable than in 2020-2021.** Euro swap rates rose sharply in 2022, and subordinated spreads also widened. Hybrid coupons would therefore likely be materially higher than historic debt costs. This argues against pushing issuance to the full 15% cap unless absolutely necessary.

- **Capacity constraint matters.** With a maximum issuance assumption of up to **€3 billion per year**, Veolia could still add meaningful hybrid support over 18 months, but it already has a sizeable hybrid stock. Moving to the absolute S&P equity-credit cap would be aggressive and may not be cost-efficient.

Overall, Veolia has **significant leverage pressure and established hybrid-market access**, supporting a recommendation above the mid-point. However, because it already has substantial outstanding hybrids and the cost of new issuance has risen meaningfully, a full 15% recommendation appears excessive. The best fit is therefore **11.25% of total adjusted capital**: a strong but not maximum use of hybrids to preserve rating flexibility and support deleveraging after the Suez transaction.

<answer>11.25%</answer>