Use or disclosure of data contained on this sheet is subject to the restriction on the table of contents of this proposal Value Added Services: Capturing Available Rebates, Incentives, and Grants Accessing federal relief packages and the thousands of incentive and grant programs available nationwide is not always simple. Schneider Electric’s team of funding experts can help you tap into these grants, rebates, and incentives to stretch your dollars further, reduce the cost of your project, and bridge the funding gap you may be facing. Our in-house Energy Incentives Team actively monitors over 52,000 rebate and incentive programs across North America. We can assist you by researching and identifying the right funding opportunities to maximize the capital available for your project, including:
• Utility rebates and incentives
• State and federal grants
• Stimulus funds such as the Elementary and Secondary School Emergency Relief Fund (ESSER) and the Governor's Emergency Education Relief Fund (GEER)
Our experienced team can also guide you through the grant application process to ensure you secure the maximum amount of incentives available. Over the past 15 years, we have helped our clients secure more than $599M in rebates, incentives, and grants to fund their infrastructure improvement projects.
Stockton Unified
School District, CA City of El Centro, CA US Coast Guard, Puerto Rico $1.5M grant
for electric vehicle charging
$600,000 rebates
for battery storage
$12M+ of energy
improvements
funded by grants and
rebates
We helped Stockton USD
secure funding for advanced
and innovative energy
solutions to help pay for the
District’s multi-year Energy
Expenditure Plan
$1.6M grant
covered half the cost of new
turbo blowers for the City
44% reduction
in energy usage which saved
$80,000 annually
The City of El Centro utilized
funding from grants and
guaranteed savings to tackle
backlogged capital projects
which helped reduce utility
costs and the City’s carbon
footprint.
$6.5M grant
for renewable energy
3 Megawatts
Solar PV production
Renewable Energy
Services Agreement
(PPA)
within an ESPC
By leveraging Federal funding
and third-party ownership, our
team helped the US Coast
Guard increase energy
security and add resiliency to
their existing electrical grid
GRANT AND REBATE SERVICES
Schneider Electric has an
established Grants and
Rebates team which provides
federal and state funding
reporting, consulting, and
project management services.
ANDREW HENSHAW will serve as your dedicated grant
specialist. He is an industry leader in identifying, securing, and managing the grant funding and application process.
Since beginning collaboration with Schneider Electric in 2022, he has helped secure over $63M for capital needs.
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City of Cotati, CA
Energy and Water Resources Efficiency Improvement Projects August 22, 2024
Use or disclosure of data contained on this sheet is subject to the restriction on the table of contents of this proposal Service Model
State and Federal grant applications have evolved. Instead of requiring a single writer with little oversight, today a grant program requires several steps including discovery and evaluation, the application writing process, and post-submission documentation to ensure an award is secured. Schneider Electric offers a comprehensive program that maximizes your ability to secure funding for your projects. We work with our clients from kick-off through the post-submission period to ensure your grants for project funding will get the attention and support they deserve.
After years of experience, we understand key barriers you face:
• Awareness: You may know your facility needs, but you may not be aware of all the funding available.
• Time and Resources: You may be aware of the grant funding that could further your project, but you may not have the time or resources to apply.
• Competition: Or, you may even have someone willing to tackle your grant response, but you might not have the latest information to create a competitive application.
Schneider Electric is here to help. We have cultivated knowledge around grant funding cycles, project management, and program management over the last two decades, and have honed a comprehensive method that helps our clients develop a long-term funding strategy.
OUR TEAM WILL PROVIDE: TO HELP YOU ACHIEVE:
Reporting and Program Management To ensure your grant applications are submitted on time and follow all stated government guidelines
Project Management and Grant Submission
Support
To make sure you have the most competitive grant/rebate proposal possible
Post-Award Guidance and Assistance To ensure you receive the funding you’ve been awarded in a timely manner
Many federal grants allow for only a short time period of 45-60 days to learn the submission criteria and turn around an application. Some applications can even take an estimated 400 hours (fifty 8-hour days) to complete.
City of Cotati can save countless hours of time and develop your applications prior to federal funding guidance being released by utilizing our proprietary materials and methodology. These materials are comprised of a series of guides, templates and spreadsheets that directly mimic what the applicant will see in application portals, allowing the applicant to have a head start on gathering content and creating your narrative.
Qualifications:
• 20+ years’ experience specializing in grant management and writing, program development and relationship management with underserved communities in the USA. • A track record of achieving success rates an average of 30-40% higher than the national average. • Approximately 30-40% of applications in a grant program will be rejected prior to scoring because they omit certain details, documentation or inadequately explain a problem or solution. With a keen eye to detail, that 30-40% rejection rate is reduced to 0%.
• 1,000+ School Districts have utilized these services.
In the past year,
we secured for
clients:
$43.2M in clean
school bus grants
$13.8M in schoolbased mental health
$8M in School
Violence Prevention
Program (SVPP)
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City of Cotati, CA
Energy and Water Resources Efficiency Improvement Projects August 22, 2024
Use or disclosure of data contained on this sheet is subject to the restriction on the table of contents of this proposal State and Federal Grant Programs Available to Cotati
Based on initial research, we have identified several opportunities that Cotati may be able to leverage for your project. Upon selection, Schneider Electric can assist you with these options by providing oversight throughout the application process. Our grant team can identify the grant programs that best relate to your project’s overall scope of work. Below are several grant opportunities that are currently available:
PROGRAM NAME DESCRIPTION AWARD
AVAILABILITY
Environmental Protection Agency
Clean Heavy Duty Vehicle
Program
For Class 6/7 fleet vehicles
Total available:
$1,250,000,0000
Max award: TBD
Rebuilding American Infrastructure
with Sustainability and Equity
(RAISE) / Infrastructure for
Rebuilding America
(INFRA)
For major roadway infrastructure (can
include “dig once” for fiber installation)
Max award: $25M -
$75M
Safe Streets and Roads for All
For projects that improve pedestrian
and cyclist safety, including lighting
projects and traffic signals – can
include smart grid (traffic) technology,
or even building new pathways for
pedestrians, etc.
Max award: $25M
Dept. of Transportation / Dept. of
Energy Electric Vehicle
Infrastructure Program
Community and corridor roadway
charging
Max award: $15M, to
fund 80% of total project
cost
Dept. of Energy Grid Resilience
and Innovative Partnerships
Program
To ensure the reliability of the power
sector’s infrastructure
Max award for Smart
Grid: $30M
Max award for Grid
Innovation: $250M
National Telecommunications and
Information Administration Digital
Equity (NTIA)
For broadband adoption activities
(education, healthcare, workforce
development, etc.)
Max award: $3M
Inflation Reduction Act 2022 / Energy Efficiency and
Conservation Block Grant Program (EECBG)
Incentivizes investments in energy
efficiency retrofit projects (lighting,
envelope, mechanical)
30% - 60% of solar
project cost AND
~$1M - $3M of entire
EPC project discounted
Inflation Reduction Act (IRA) & EPAct Credit (179D)
Based on square footage and desired
scope, the IRA has bolstered EPC
scope cost deduction through the
EPAct of 2005.
Formulas:
25% Deduction:
$2.50/sq.ft. X SQ FT.. X
25% deduction
50% Deduction:
$2.50/sq.ft. X SQ. FT.. X
50% deduction
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Internal
IGA Pricing Proposal Sheet
5 143 of 1021
City of Cotati, CA
Energy and Water Resources Efficiency Improvement Projects August 22, 2024
Use or disclosure of data contained on this sheet is subject to the restriction on the table of contents of this proposal
5. IGA Pricing Proposal Sheet
Using the IGA Pricing Proposal Sheet (Attachment C), indicate the cost for performing the preliminary evaluation and investment grade water and energy audit.
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Internal
Sample Contract
6 145 of 1021
City of Cotati, CA
Energy and Water Resources Efficiency Improvement Projects August 22, 2024
Use or disclosure of data contained on this sheet is subject to the restriction on the table of contents of this proposal
6. Sample Contract
Provide a sample Performance Energy Contract.
Please see the following attachment for our sample energy contract. 146 of 1021
Form Last Updated: May 2024 1 Energy Service Contract
4080-1002 / 2441679.2
ENERGY SERVICE CONTRACT1
This Energy Services Contract (“Agreement”) is made effective as of [INSERT DATE] (“Effective Date”) by and between the [INSERT CUSTOMER NAME], a [JURISDICTION AND TYPE] (“Customer”), and Schneider Electric Buildings Americas, Inc., a Delaware corporation with California Contractors License Number 708952 (“ESCO””). Customer and ESCO may be referred to herein as the “Parties”, collectively, and each, individually, as a “Party”.
RECITALS
WHEREAS, ESCO is a full-service energy service contractor with the qualifications and technical capabilities to provide the design and construction services described herein; WHEREAS, Customer wishes to engage ESCO, pursuant to the terms and conditions of this Agreement, to design and construct a Project (defined below) for purposes of implementing certain “energy conservation facilities”, as such term is used and defined in California Government Code Section 4217.10 et seq.; WHEREAS, this Agreement (including the Construction Amendment hereto, when executed) will constitute an “energy service contract” within the meaning of California Government Code Section 4217.10 et seq.; WHEREAS, California Government Code Section 4217.10 et seq. (i) authorizes public agencies to enter into energy service contracts that satisfy the requirements of California Government Code Section 4217.12, (ii) allows public agencies to award such energy service contracts on the basis of the experience of the contractor, the type of technology employed by the contractor, the cost to the public agency, and any other relevant considerations, and (iii) expressly provides public agencies with the greatest possible flexibility in structuring such energy service contracts so that economic benefits may be maximized and financing and other costs associated with the design and construction of alternate energy projects may be minimized; WHEREAS, having considered the foregoing, Customer’s Governing Body has determined that ESCO has the technical and management capabilities and experience to perform the Design Work (defined below) in accordance with the scope of work and for the facilities set forth in Exhibit A, and to deliver a Project Proposal, described in Exhibit A, identifying energy improvements and operational changes (collectively, “ECMs”) to be installed or implemented at the Customer’s facilities, and including a pro forma analysis showing that the anticipated cost to Customer to implement the identified ECMs will be less than the anticipated cost to Customer for thermal, electrical, and other energy, together with anticipated operational, maintenance and other costs, that would have been consumed by Customer in the absence of the identified ECMs; and WHEREAS, if the Project Proposal is presented, on an arms’ length basis, to personnel of Customer with requisite technical training and experience, for those personnel to make judgments and determinations as to the desirability of the Project Proposal, and if the Project Proposal is deemed satisfactory by the Customer, it is the intent of the Customer to work with ESCO to negotiate and approve a Construction Amendment hereto in the manner provided in California Government Code §4217.10 et seq. in order to implement the ECMs developed by ESCO.
NOW, THEREFORE, in consideration of the foregoing and of the respective rights and obligations of the Parties set forth herein, the Parties hereby agree as follows:
ARTICLE 0
DEFINITIONS
0.1. “Applicable Law” shall mean any applicable federal, California state or local law, constitution, treaty, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement lawfully enacted, adopted, promulgated or applied by a Governmental Authority. 147 of 1021
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0.2. “Change Order” shall mean a written modification to the Agreement and/or any Contract Document, duly executed by Customer and ESCO, authorizing a change in the scope of the Work, the time for completion of any Work, and/or the compensation payable to ESCO in consideration for performance of any Work hereunder.
0.3. “Construction Amendment” shall mean an Amendment and Notice to Proceed with the Construction Phase in substantially the form attached as Schedule I to this Agreement, together with all exhibits, schedules, and/or documents attached thereto and/or expressly incorporated by reference therein, including, without limitation and as applicable, each of the Exhibits to the Construction Amendment listed below. Effective as of the Construction Amendment Effective Date, the Construction Amendment (inclusive of all exhibits, schedules, and/or documents attached thereto and/or expressly incorporated by reference therein) shall become part of this Agreement and shall modify and supersede any conflicting provisions hereof. a. The Construction Amendment shall include the following Exhibits:
i. Exhibit D: Scope of Construction Work
ii. Exhibit E: Preliminary Construction Schedule
iii. Exhibit F: Project Fee
b. The Construction Amendment may include the following Exhibits, if applicable:
i. Exhibit G: Performance Assurance Support Services Agreement (if applicable) ii. Exhibit H: Performance Guarantee (if applicable)
iii. Exhibit I: Measurement & Verification (“M&V”) Plan (if applicable) iv. Exhibit J: Customer Responsibilities for Performance Guarantee (if applicable)
0.4. “Construction Amendment Effective Date” shall mean the date on which the Construction Amendment is duly executed by both Parties.
0.5. “Construction Phase” shall mean the portion of the Project commencing as of the Construction Amendment Effective Date and concluding upon final completion of the Project.
0.6. “Construction Schedule” shall mean the Preliminary Construction Schedule attached to the Construction Amendment as Exhibit E, as updated and/or modified from time to time in accordance with this Agreement.
0.7. “Construction Work” shall mean all labor, equipment, materials and goods necessary to complete the Scope of Construction Work set forth on Exhibit D to the Construction Amendment.
0.8. “Contract Documents” shall mean, collectively, this Agreement and all schedules, exhibits, and/or documents attached hereto and/or expressly incorporated by reference herein, each as the same may be amended, modified or supplemented from time to time in accordance with the terms and conditions of this Agreement. Without limiting the generality of the foregoing, the following Exhibits are hereby expressly incorporated by reference into the Agreement, subject to the terms and conditions hereof:
a. Exhibits to the Agreement:
i. Exhibit A: Scope of Design Work
ii. Exhibit B: Preliminary Design Schedule
iii. Exhibit C: Design Fee
b. Construction Amendment (effective as of the Construction Amendment Effective Date)
0.9. “Customer” shall have the meaning set forth in the introductory paragraph to this Agreement.
Customer may occasionally be referred to as “Customer” in the Contract Documents.
0.10. “Design Fee” shall mean the dollar amount set forth on Exhibit C attached hereto, which shall be payable to ESCO as an exit fee if Customer terminates this Agreement prior to the Construction Amendment Effective Date in accordance with Section 1.4.1 hereof. 148 of 1021
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0.11. “Design Phase” shall mean the portion of the Project commencing as of the Effective Date of this Agreement and concluding immediately prior to the Construction Amendment Effective Date.
0.12. “Design Work” shall mean all labor, equipment, materials and goods necessary to complete the Scope of Design Work set forth on Exhibit A to this Agreement.
0.13. “ECM“ has the meaning set forth in the introductory paragraph to this Agreement.
0.14. “ESCO” shall have the meaning set forth in the introductory paragraph to this Agreement. ESCO may occasionally be referred to as “ESCO” in the Contract Documents.
0.15. “Facilities” shall mean Customer facilities listed under Section 3 of Exhibit A, and any additional facilities added by written agreement of the Parties.
0.16. “Governing Body” means the governing board or other governing body of the Customer.
0.17. “Governmental Authority” shall mean any nation, government, state or political subdivision thereof, and any entity lawfully exercising executive, legislative, judicial, regulatory or administrative powers on behalf of any of the foregoing.
0.18. “Hazardous Substance” means (i) any hazardous, toxic, or dangerous wastes, substances, chemicals, constituents, contaminants, pollutants, and materials and any other carcinogenic, liquids, corrosive, ignitable, radioactive, reactive, toxic, or otherwise hazardous substances or mixtures (whether solids, liquids, gases) now or at any time subject to regulation, control, remediation, or otherwise addressed under Applicable Laws; (ii) any “hazardous substance” as defined by the Resource, Conservation and Recovery Act of 1976 (42 U.S.C. §6901 et seq.), as amended, and regulations promulgated thereunder; (iii) any “hazardous, toxic or dangerous waste, substance or material” specifically defined as such in 42 U.S.C. §9601 et seq., as amended and regulations promulgated thereunder; and (iv) any hazardous, toxic or dangerous waste, substance, or material as defined in any so-called “superfund” or “superlien” law.
0.19. “Project” shall mean the improvement to Customer’s Facilities to be designed and constructed by ESCO in accordance with and subject to the terms and conditions of this Agreement, as more specifically set forth on Exhibit A (Scope of Design Work) and Exhibit D (Scope of Construction Work) hereto. For the avoidance of doubt, notwithstanding the original scope of the Project as contemplated by Exhibit A, the Scope of Construction Work attached as Exhibit D and approved by Customer upon execution of the Construction Amendment shall represent the entirety of the intended and agreed upon scope for the Project.
0.20. “Project Fee” shall mean total dollar amount payable to ESCO under the Agreement as compensation for ESCO’s performance of the Work, inclusive of the Design Fee. The Project Fee shall be determined at the conclusion of the Design Phase and shall be set forth on Exhibit F to the Construction Amendment.
0.21. “Project Proposal” shall have the meaning set forth in Section 1.3.
0.22. “Site” shall mean Customer property on or at which the Work is to be performed, specifically including Customer Facilities.
0.23. “Substantial Completion" shall mean, with respect to the entirety of the Construction Work or any portion thereof, the point at which such Work is operational, ready for use by Customer, and fully complete , except for minor items, adjustments and/or corrections (“Punch List Items”), .
0.24. “Work” shall mean the Design Work and the Construction Work, collectively. 149 of 1021
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ARTICLE 1
DESIGN PHASE OF THE PROJECT
Section 1.1. Scope of Design Work. The scope of the design services to be performed by ESCO under this Agreement is described in Exhibit A attached hereto (the “Scope of Design Work”).
Section 1.2. Government Code Section 1097.6. In accordance with California Government Code §1097.6(c)(1), ESCO’s duties and services under this Agreement shall not include preparing or assisting Customer with any portion of Customer’s preparation of a request for proposals, request for qualifications, or any other solicitation regarding a subsequent or additional contract with Customer. Customer shall at all times retain responsibility for public contracting, including with respect to any subsequent phase of this Project.
ESCO’s participation in the planning, discussions, or drawing of project plans or specifications for any subsequent or additional contract shall be limited to conceptual, preliminary, or initial plans or specifications.
ESCO shall cooperate with Customer to ensure that bidders (if Customer elects to utilize a bidding process) for a subsequent contract on any subsequent phase of this Project have access to the same information, including all conceptual, preliminary, or initial plans or specifications prepared by ESCO pursuant to this Agreement.
Section 1.3. Design Schedule. The “Preliminary Design Schedule” attached hereto as Exhibit B sets forth a preliminary schedule for the Design Phase milestones.
Section 1.4. Project Proposal. At or prior to the Design Completion Meeting described in Exhibit A, ESCO shall provide Customer with a proposal setting forth a proposed Scope of Construction Work, a proposed Project Fee, and any other information required to be included therein pursuant to Exhibit A (the “Project Proposal”). Unless the Project Proposal states otherwise, the pricing set forth in the Project Proposal will remain valid for sixty (60) days from the date of the Project Proposal (the “Project Proposal Date”).
Section 1.5. Option to Terminate Agreement or Proceed into Construction Phase. Within sixty (60) days of the Project Proposal Date, Customer shall either (i) terminate this Agreement pursuant to Section 1.5.1 below, or (ii) execute the Construction Amendment in accordance with Section 1.5.2 below.
1.5.1. Early Termination and Payment of Design Fee. If Customer does not wish to proceed into the Construction Phase on substantially the terms set forth in ESCO’s Project Proposal, Customer may terminate this Agreement for convenience immediately upon providing ESCO with written notice of termination and payment in full for the Design Fee.
1.5.2. Execution of Construction Amendment. If Customer does wish to proceed with the Construction Phase on substantially the terms set forth in ESCO’s Project Proposal, and if Customer determines that entering into the Construction Amendment to implement the ECMs identified in the Project Proposal is in the best interests of Customer and that California Government Code §4217.10 et seq. allows Customer to enter into the Construction Amendment, then the Parties shall finalize and execute a Construction Amendment reflecting substantially the terms set forth in ESCO’s Project Proposal and any negotiated revisions thereto. In such event, the Design Fee and any additional costs incurred by ESCO in the performance of the Design Work shall be rolled into and included in the Project Fee, and such total amount shall be payable in accordance with the provisions of Section 2.4.
Section 1.6. Site Investigation. In performing the Design Work, ESCO shall exercise reasonable due diligence to understand the nature, location and extent of the Project, and it shall investigate the general and local conditions which are applicable to the Site, such as physical conditions at the Site, the conditions of the ground at the Site, and the character of equipment and materials needed for the performance of the Work at the Site (the “Site Investigation”).
Section 1.7. Customer Information. In order to facilitate the Design Work and to assist ESCO in recommending an appropriate Scope of Construction Work, Customer is responsible for providing ESCO with all such access, knowledge and history as may be relevant to ESCO’s analysis and/or design, including, 150 of 1021
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without limitation, with respect to Customer’s Facilities, systems, and equipment, as well as its accounting, maintenance, and operation practices. Customer is required to disclose all known or suspected deficiencies, defects and malfunctions of or affecting the Facilities, systems, equipment and components thereof, as well as any site conditions that should be considered in planning and executing the construction services. Customer responsibilities are set forth in further detail on Exhibit A. Customer agrees that it shall provide and continue to provide Design/Builder with all such information, documentation, access, knowledge and history as is available to Customer and relevant to Design/Builder’s timely and successful completion of the Project and performance of its other obligations under the Agreement and the Scope of Work, including, without limitation, the following:
1.7.1. Drawings, Specifications and Surveys. Customer shall provide Design/Builder with copies of or access to (i) all such working drawings, specifications, surveys and “As-Built” drawings as it may have relating to the Site(s), to the Work, and/or to work being performed by other companies at the Site(s), and (ii) all such surveys as it may have describing the physical characteristics, legal boundaries and restrictions, and/or utility locations at and around the Site(s). All drawings, specifications, and surveys furnished to Design/Builder by Customer are and shall remain the property of Customer.
1.7.2. Energy Usage Data. Customer shall make available to Design/Builder, on a monthly basis or as Design/Builder may otherwise request, copies of all energy bills, energy usage data, and all other such documentation maintained by Customer.
1.7.3. Facilities Information. Customer shall promptly provide information and documentation relating to Customer’s facilities, systems, and equipment, and to its maintenance and operations practices.
Customer has disclosed, or will disclose as promptly as possible upon learning of, all known or suspected deficiencies, defects, and malfunctions of or affecting its facilities, systems or equipment and/or any components thereof, as well as any conditions of the Site(s) that should be considered in planning and executing the Work. To facilitate the exchange of relevant facilities information, Customer shall provide Design/Builder with access to Customer’s key facilities personnel and, at Design/Builder’s reasonable request, shall designate a Customer representative to ensure the timely and correct transfer of information requested by Design/Builder.
ARTICLE 2
CONSTRUCTION PHASE OF THE PROJECT
Section 2.1. Commencement of Construction Phase.
2.1.1. DIR Project Registration. Prior to executing the Construction Amendment, Customer shall register the Project with the California Department of Industrial Relations, using Form PWC 100.
2.1.2. Execution of Construction Amendment Serves as Notice to Proceed. Unless the Construction Amendment expressly provides otherwise, execution of the Construction Amendment shall serve as Customer’s notice to ESCO to commence the Construction Work.
2.1.3. Payment and Performance Bonds. Promptly following the Construction Amendment Effective Date and before commencing the Construction Work, ESCO shall provide payment and performance bonds, each with an “admitted surety insurer,” as defined by California Code of Civil Procedure §995.120, authorized to do business in the State of California, and each for an amount equal to 100% of the Project Fee. Notwithstanding any provision to the contrary herein, any performance bonds and payment bonds provided in connection with this Agreement guarantee only the performance of the Construction Work and the payment of any Subcontractors engaged by ESCO in connection therewith, respectively, and shall not be construed to guarantee the performance of: (1) any efficiency or energy savings guarantees (if applicable pursuant to Section
2.5 hereof), (2) any support or maintenance services, or (3) any other guarantees, warranties or covenants with terms beyond one (1) year in duration from the Date of Substantial Completion. 151 of 1021
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Section 2.2. Scope of Work. The scope of the construction services to be performed by ESCO pursuant to this Agreement (the “Scope of Construction Work”) shall be determined at the conclusion of the Design Phase and set forth on Exhibit D to the Construction Amendment.
Section 2.3. Construction Schedule.
2.3.1. Construction Time. The scheduled date of Substantial Completion of the Construction Work (the “Completion Date”) and any applicable milestone dates shall be determined at the conclusion of the Design Phase and shall be set forth in the “Preliminary Construction Schedule” attached to the Construction Amendment as Exhibit E.
2.3.2. Substantial Completion. Upon Substantial Completion of the Construction Work (or any portion thereof, as appropriate), ESCO will issue to Customer a “Letter of Substantial Completion” with respect to such substantially complete Work (or portion thereof). The date on which ESCO issues any such Letter of Substantial Completion shall be the “Date of Substantial Completion” with respect to the applicable Work.
2.3.3. Delays. If ESCO’s progress on the Project is at any point delayed due to changes in the requested scope of Work, labor disputes, fire, unusual delay in deliveries, abnormally severe weather conditions, unavoidable casualties, epidemic or pandemic conditions, quarantine restrictions, changes in law, unusually severe shortages in the available supply of and/or unusually severe increases in the cost of materials or equipment needed for performance of the Work, or delays of common carriers and/or any other causes which are beyond the reasonable control of ESCO, then the Parties agree to execute a Change Order reflecting an equitable extension of time. In the event of any suspension or delay due to the acts or omissions of Customer or due to Customer’s instructions to stop Work by no fault of ESCO: (i) all affected dates and milestones shall be extended to reflect such period of interruption; and (ii) the Project Fee shall be equitably adjusted to cover ESCO’s costs of demobilization, delay and remobilization related to such suspension or delay (provided, however, that ESCO shall cooperate with Customer, to the extent commercially reasonable, in mitigating such costs). If such suspension or delay continues for more than ninety (90) consecutive days, through no act or fault of ESCO, ESCO may terminate this Agreement in accordance with Article 5.
Section 2.4. Compensation, Invoicing and Payment.
2.4.1. Project Fee. The Project Fee shall be determined at the conclusion of the Design Phase and shall be set forth on Exhibit F to the Construction Amendment. The Project Fee is inclusive of, and not in addition to, the Design Fee.
2.4.2. Schedule of Values. ESCO will develop a schedule delineating the items to be completed pursuant to the Scope of Construction Work (the “Schedule of Values”) and shall endeavor to provide such Schedule of Values to Customer within ten (10) days of the Construction Amendment Effective Date.
2.4.3. Mobilization Invoice and Payment. Within one (1) month of the Construction Amendment Effective Date, Customer shall make payment to ESCO for mobilization expenses and other expenses incurred to date in connection with the Project (“Mobilization Payment”) in an amount equal to twenty percent (20%) of the Project Fee and the Design Fee. Such mobilization and other expenses may include, without limitation, the Design Fee and any design, engineering and/or development expenses incurred in connection with the Project, expenses relating to procurement of equipment, materials, and/or bonds, and any other Project start-up and mobilization expenses incurred to date.
2.4.4. ESCO Invoices. Beginning on the date that is two (2) months following the Construction Amendment Effective Date, ESCO shall provide monthly invoices to Customer seeking payment 152 of 1021
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for the Work performed in the prior month (based on the percentage completion of items delineated on the Schedule of Values).
2.4.5. Payment. Payment is due within thirty (30) days of the date of each invoice. If any payment is over thirty (30) days late from the due date stated on the invoice, ESCO may impose a penalty of one percent (1%) of the amount(s) owed for each month overdue and/or may terminate the Agreement in accordance with Article 5. If applicable, Customer’s payments may be made from an escrow account set up in accordance with Customer’s financing arrangement, in which case Customer shall be responsible for forwarding ESCO’s invoices to the escrow agent and for authorizing and directing the escrow agent to timely release the invoiced amounts to ESCO.
2.4.6. Final Payment and Release of Liens. Final payment shall not become due until ESCO has delivered to Customer a conditional release of all liens arising out of this Agreement, covering all labor, materials, and equipment for which a lien could be filed, or a bond satisfactory to Customer to indemnify Customer against such lien. The making of final payment shall constitute a waiver of claims by Customer except those arising from (1) unresolved liens, security interests or encumbrances arising out of the Agreement, (2) ESCO’s failure to perform the Construction Work in substantial compliance with the requirements of the Contract Documents, and (3) any warranties required by the Contract Documents. Customer also shall promptly record a notice of completion or notice of acceptance in the office of the county recorder in accordance with California Civil Code §9204.
2.4.7. Retention. Following payment of the Mobilization Payment, which shall not be subject to any retention, Customer may retain five percent (5%) of each monthly progress payment (the “Amounts Retained”). The Amounts Retained with respect to a given portion of the Work shall be released to ESCO within thirty (30) days of the Date of Substantial Completion of such portion of the Work, and any Amounts Retained remaining upon Substantial Completion of the Project shall be released to ESCO with the final payment. Customer may make progress payments in full without Amounts Retained at any time after fifty percent (50%) of the Work has been completed, as permitted pursuant to California Public Contract Code §9203. In lieu of Amounts Retained being held by Customer, ESCO may request that securities be substituted or Amounts Retained be held in an escrow account pursuant to California Public Contract Code §22300.
Section 2.5. Performance Guarantees. If ESCO is providing any efficiency or energy savings guarantees upon completion of the Construction Work, the terms of such efficiency or energy savings guarantees shall be set forth and/or incorporated in the Construction Amendment and the applicable Exhibits thereto. If no such terms are set forth and/or incorporated in the Construction Amendment and the applicable Exhibits thereto, then no efficiency or energy savings guarantees are being made by ESCO in connection with this Agreement.
ARTICLE 3
PERFORMANCE OF THE WORK
Section 3.1. Standard of Performance. Design/Builder shall supervise and direct the Work using such degree of care, skill and attention as is reasonably expected of professionals providing similar services within the State under similar circumstances (such circumstances to include, for example, conditions present at the Site(s) and any financial or other constraints applicable to the Project). Design/Builder shall be solely responsible for coordinating and/or performing all portions of the Work and shall have control over the means, methods, techniques, sequences and procedures used in the performance of the Work, unless the Scope of Work gives other specific instructions concerning these matters. All construction documents that are required to be prepared by Design/Builder in connection with the Work shall be prepared by qualified personnel and shall be in accordance with applicable codes, regulations, and laws. Design/Builder shall remain responsible for all Work performed, whether performed by Design/Builder or its Subcontractors.
Section 3.2. Licenses. ESCO represents and warrants that it currently has or shall timely obtain, and that it shall maintain, all licenses, permits, qualifications and approvals of whatever nature as are legally required to permit ESCO to perform the Work.
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Section 3.3. Regular Working Hours. Except as Customer, in its sole discretion, may otherwise agree, ESCO shall perform such portions of the Work as are to occur at or in Customer’s Facilities only: (i) on weekdays (i.e., any day, Monday through Friday, inclusive); and (ii) commencing at or after such time, and ending by or prior to such time, as may be specified in either an applicable local ordinance or any “Mitigation Monitoring Plan” adopted by Customer pursuant to the California Environmental Quality Act and made available to ESCO, whichever is more restrictive.
Section 3.4. Employees and Subcontractors.
3.4.1. ESCO’s Subcontractors. ESCO may use one or more subcontractors (each, a “Subcontractor”) to perform any portion(s) of the Work as ESCO may deem appropriate; provided, however, that ESCO shall remain ultimately responsible for the performance of its obligations under this Agreement. ESCO shall ensure that all of its Subcontractors have the skill, knowledge and experience necessary to perform the services assigned to them, and shall further ensure that each of its Subcontractors holds all licenses legally required for the practice of its profession.
3.4.2. ESCO’s Employees. The employees of ESCO shall at all times be under ESCO's exclusive direction and control in performing the Work. ESCO shall pay all wages, salaries, and other amounts due to such personnel in connection with their performance of services under this Agreement, as required by law. ESCO shall be responsible for all reports and obligations respecting such personnel, including, but not limited to: social security taxes, federal and state income tax withholdings, unemployment insurance, and workers' compensation insurance. ESCO shall employ only competent workers for performance of the services and shall not employ any person who is unfit or unskilled in the Work assigned to him or her.
3.4.3. Supervision by ESCO. ESCO shall at all times enforce strict discipline and good order among its Subcontractors and employees performing any portion(s) of the services. At Customer’s request, ESCO shall remove from the Site any person, regardless of whether employed by the ESCO or any Subcontractor, who is not performing the Work in a competent manner or who is a threat to the safety of persons or property at the Site, and ESCO shall not thereafter permit any such person to perform any of the Work or to be present on or at the Site. In addition, during the course of performing the Construction Work, ESCO shall have an experienced and competent superintendent (and any necessary assistants) present on the Site to supervise ESCO’s employees and Subcontractors in the performance of the Construction Work.
3.4.4. Prohibition Against Unlawful Discrimination. ESCO represents and warrants that it is an equal opportunity employer and agrees that it shall not discriminate in violation of any applicable federal, state, or other law, rule or regulation, including, but not limited, to discrimination against any employee or applicant for employment on account of such person's race, religion, color, national origin, ancestry, sex, or age. ESCO shall apply such policy of non-discrimination in connection with all activities related to ESCO's employees and Subcontractors, including with respect to initial employment, promotion, demotion, transfer, recruitment or recruitment advertising, and layoff or termination.
Section 3.5. ESCO’s Compliance with Law.
3.5.1. Compliance Generally. ESCO and each of its Subcontractors shall perform the Work in compliance with Applicable Law. Upon commencement of the Construction Phase, Customer will coordinate and conduct, and ESCO and each of its Subcontractors will attend, any mandatory construction conference held for purposes of ensuring that ESCO and its Subcontractors are aware of the Applicable Laws relevant to the Project.
3.5.2. DIR Registration. ESCO acknowledges that the Project will be subject to compliance monitoring and enforcement by the California Department of Industrial Relations (“DIR”). ESCO shall be responsible for ensuring that it and all of its Subcontractors are currently and properly registered with the DIR. Prior to commencing the Construction Work, ESCO and each of its Subcontractors shall: (i) complete, execute, and submit to Customer a "Certification Regarding Contractor 154 of 1021
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Registration" form; and (ii) provide evidence of registration to Customer. Notwithstanding anything to the contrary, if at any time during the performance of the Construction Work, ESCO or any of its Subcontractors is not properly registered with the DIR (including, without limitation, if the registration expires or the DIR revokes the registration), such failure of registration shall constitute a material breach of this Agreement for purposes of Section 5.2 hereof (Customer Termination for Cause).
3.5.3. Labor Laws. ESCO and each of its Subcontractors shall, at no additional cost to Customer, comply with all applicable provisions of the California Labor Code and the regulations promulgated thereunder (collectively, the “Labor Laws”). To the extent required by California Labor Code §1771 or other applicable law, all employees of ESCO and ESCO’s subcontractors performing Work at the Site will be paid the per diem prevailing wages for the employee’s job classification in the locality in which the Work is performed. In accordance with California Labor Code §§1773 and 1773.2, Customer will obtain from the Director of Industrial Relations the general prevailing rate of per diem wages and the general prevailing rate for holiday and overtime work, in the locality in which the Work is to be performed, for each craft, classification or type of worker needed to execute the Work at the Site, and will cause copies of such determinations to be kept on file at its principal office and posted at each Site. Customer will promptly notify ESCO of any changes to any such prevailing wage determination.
(a) No Disqualification. ESCO represents and warrants that neither it, nor any of its Subcontractors, has been debarred by the California Labor Commissioner pursuant to Section 1777.1 of the California Labor Code or otherwise.
(b) Failure to Comply. Any failure of ESCO or its Subcontractors to comply with applicable Labor Laws shall constitute a material breach of this Agreement for purposes of Section 5.2 hereof (Customer Termination for Cause). In addition, Customer may withhold payment to ESCO as necessary to satisfy any civil wage or other penalty assessment issued by the California Labor Commissioner.
Section 3.6. Reliance on Customer Information. In performing the Work, ESCO shall be entitled to rely on the accuracy and completeness of any and all information provided to ESCO by Customer, including without limitation the information required to be provided pursuant to Section 1.6 of this Agreement, except where it would be unreasonable to do so.
Section 3.7. ESCO’s Warranties and Disclaimers. ESCO warrants to Customer that, for a period of one (1) year from the applicable Date of Substantial Completion of Work covered by a Letter of Substantial Completion (the “Warranty Period”), the materials and equipment manufactured by ESCO will be of good quality and new unless the Contract Documents require or permit otherwise, and further warrants that such Work will conform to the requirements of the Contract Documents and will be free from defects, except for those inherent in the quality of the Work the Contract Documents require or permit. Work, materials, or equipment not conforming to these requirements may be considered defective. ESCO’s warranty excludes remedy for damage or defect caused by abuse, alterations to the Work not executed by or on behalf of ESCO, improper or insufficient maintenance, improper operation, or normal wear and tear and normal usage. ESCO shall repair or replace defective material or equipment and re-perform Work to correct any defect within the applicable Warranty Period. In the event warranty Work by the ESCO is necessary, the ESCO shall provide an additional one-year warranty on the corrected Work only from the date the corrected Work is completed or the end of the initial warranty period, whichever is later. ESCO does not warrant products not manufactured by ESCO, but it will pass on to Customer any manufacturer’s warranty to the extent permitted. THE
FOREGOING WARRANTIES AND REMEDIES ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES AND REMEDIES, WHETHER STATUTORY, EXPRESS OR IMPLIED (INCLUDING ALL
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND ALL WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OR TRADE). 155 of 1021
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ARTICLE 4
CHANGES
Section 4.1. Change Orders. Customer may request changes in the Scope of Design Work and/or the Scope of Construction Work by submitting a description of the requested changes to ESCO in writing. In response to any such request and within fifteen (15) business days thereof, ESCO shall provide to Customer a written proposal that describes in reasonable detail: (i) the proposed change to the scope of Work; (ii) the impact of the change on the time required for performance of ESCO's obligations; (iii) the impact of the change on the compensation to be paid by Customer to ESCO; and (iv) if applicable pursuant to Section 2.5 hereof, the impact of the change on any efficiency or energy savings guarantees (a “Change Proposal”). ESCO may likewise submit a Change Proposal to Customer in the event this Agreement authorizes or requires the Parties to negotiate and/or execute a Change Order or in the event ESCO otherwise wishes to request a Change Order in good faith; in such event, the Change Proposal shall include a description of the contractual, legal or other basis for requesting the proposed changes.
Section 4.2. Change Order Process. Within five (5) business days following ESCO’s delivery of a Change Proposal, the Parties shall meet and confer, acting reasonably and in good faith, to negotiate a mutually acceptable Change Order in accordance with the principles set forth herein. Promptly following agreement on the terms and conditions of the Change Order, the Parties shall execute the same. If the Parties do not agree upon the terms and conditions of the Change Order, then either party may submit the matter to dispute resolution pursuant to Section 8.12 (Dispute Resolution and Claims). No change shall be valid or binding on the Parties unless, and except to the extent, incorporated into a Change Order.
Section 4.3. Materials and Equipment Procurement. In the event a significant delay in acquiring materials or equipment or a significant increase in the price of materials or equipment occurs during the performance of the Agreement by no fault of ESCO, the Project Fee and/or the Completion Date, as appropriate, shall be equitably adjusted by Change Order. A change in the price of an item of material or equipment will be considered significant when the price of an item increases by five percent (5)% between the Project Proposal Date and the date on which such item is due to be purchased and/or installed in accordance with the Schedule of Values or the Construction Schedule.
Section 4.4. Unforeseen Conditions. “Unforeseen Site Conditions” shall mean and include any subsurface, concealed or latent conditions, including without limitation the presence of hazardous materials, that differ materially from those conditions (i) actually known by ESCO, (ii) accurately reflected in available existing data, (iii) expected based on the results of ESCO’s Site Investigation, and/or (iv) that would have been identified, discovered and/or confirmed by the exercise of reasonable due diligence in ESCO’s Site Investigation. In the event ESCO encounters Unforeseen Site Conditions at the Site or that otherwise impact the Project, ESCO shall notify Customer of such conditions promptly and before such conditions are further disturbed, but in no event later than three (3) business days after observing such conditions. To the extent ESCO incurs additional costs or delays as a result of Unforeseen Site Conditions, the Parties shall execute a Change Order reflecting an equitable adjustment to the Project Fee and/or the Completion Date, as appropriate.
ARTICLE 5
SUSPENSION AND TERMINATION
Section 5.1. Termination for Convenience by Customer. Customer may terminate this Agreement for convenience as set forth in Section 1.5.1.
Section 5.2. Termination for Cause by Customer. If ESCO repeatedly or materially breaches this Agreement, Customer has provided written notice to ESCO detailing the alleged breach, and within thirty (30) days of ESCO’s receipt of such written notice ESCO has neither cured the alleged breach nor diligently commenced to cure such breach, Customer may terminate this Agreement effective immediately upon the receipt of written notice by ESCO. Nothing in this Agreement shall be deemed or construed as a waiver by ESCO of any rights it may have with respect to a wrongful suspension or termination by Customer. 156 of 1021
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Section 5.3. Suspension or Termination for Cause by ESCO. If Customer fails to make any payment(s) to ESCO as required in this Agreement or repeatedly or materially fails, refuses or neglects to fulfill any of its other obligations or responsibilities under this Agreement or the Contract Documents, ESCO may, after delivery of written notice and providing Customer thirty (30) days to cure such failure, refusal or neglect, suspend the Work or terminate this Agreement. If ESCO suspends the Work pursuant to this Section, the Work schedule and any anticipated completion dates shall be adjusted accordingly. If ESCO terminates the Agreement pursuant to this Section, ESCO shall be entitled to recover payment from Customer in accordance with Section 5.4 below. Nothing in this Agreement shall be deemed or construed as a waiver by Customer of any rights it may have with respect to a wrongful suspension or termination by ESCO.
Section 5.4. Compensation to ESCO Upon Termination. In the event of any termination other than a termination pursuant to Section 1.4.1 or a termination for cause by Customer pursuant to Section 5.2, Customer shall compensate ESCO: (i) for such portion of the Work as has been completed prior to the effective date of termination; (ii) for services in progress by ESCO and any of its Subcontractors at such time, including any overhead and/or anticipated profit attributable to such Work in progress, and (iii) for any costs and damages incurred by reason of the termination, including any proven loss with respect to subcontracts, materials, equipment, tools and machinery. In the event of a termination pursuant to Section 1.4.1, Customer shall pay the Design Fee to ESCO on the date of such termination.
Section 5.5. ESCO to Provide Copies of Project Documents. Not later than sixty days following the effective date of a termination pursuant to this Article 5, ESCO shall provide to Customer copies of all Project Documents (defined in Section 8.4).
Section 5.6. Effect of Termination. Termination of this Agreement and/or any of the Contract Documents shall release ESCO of all remaining obligations under the Agreement and the Contract Documents as of the effective date of termination, including, without limitation, any efficiency or energy savings guarantees (if applicable pursuant to Section 2.5 hereof).
Section 5.7. Survival of Obligations. The Parties' respective rights and obligations pursuant to this Article 5, Article 7 (subject to Section 7.9), and Article 8 shall survive termination of this Agreement.
ARTICLE 6
INSURANCE
Section 6.1. Required Insurance. ESCO shall, at its sole cost and expense, maintain in effect the following policies of insurance for the applicable period(s) set forth in Section 6.2:
(i) Commercial General Liability Insurance. A policy of commercial general liability insurance, written on an “occurrence” basis, with a limit of two million dollars ($2,000,000) per occurrence (“General Liability Policy”).
(ii) Automobile Liability Insurance. A policy of automobile liability insurance, written on an “occurrence” basis, with a combined single limit of one million dollars ($1,000,000) per accident for bodily injury and property damage (“Auto Liability Policy”). The Auto Liability Policy must include coverage for owned, hired and non-owned automobiles. (iii) Workers' Compensation and Employer’s Liability Insurance. Workers' compensation insurance as required by California law, and employer's liability insurance, written on an “occurrence” basis, with a limit of two million dollars ($2,000,000). (iv) Professional Liability Insurance. Professional liability insurance, written on a claims made (and reported) basis, with a limit of two million dollars ($2,000,000) per claim (“Professional Liability Policy”).
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Section 6.2. Duration of Insurance. The Policies shall be procured by ESCO prior to ESCO’s commencement of the Project and, except for the Professional Liability Policy, shall be maintained in effect for at least one year following the earlier of the Project Completion Date or termination of this Contract. ESCO shall maintain the Professional Liability Policy in effect for at least three years following the earlier of the Project Completion Date or termination of this Contract..
Section 6.3. Insurer Rating Standards. The insurance policies required pursuant to this Article 6 must be issued by one or more insurers that are (i) licensed to do business in the State and (ii) have an A.M. Best Company rating of not less than “A-” and a financial size category of not less than “VII.” Section 6.4. Additional Insureds. At Customer’s request, ESCO shall include Customer and Customer's directors, officers, employees, and agents as additional insureds on ESCO’s General Liability Policy and Auto Liability Policy. The additional insured endorsements will be on ESCO’s most current versions of ISO Form CG 2010 and ISO Form CG 2037 or their substantial equivalents.
Section 6.5. Waiver of Subrogation. Each of the General Liability Policy and the Auto Liability Policy shall provide a waiver of transfer of rights of recovery in favor of Customer.
Section 6.6. ESCO Insurance is Primary. The General Liability Policy and the Auto Liability Policy shall be endorsed to provide that they are primary and non-contributory.
Section 6.7. Premiums, Deductibles and Self-Insured Retentions. ESCO shall be solely responsible for paying deductibles and self-insured retentions applicable to any of the insurance policies that ESCO is required to have in effect pursuant to this Article 6.
Section 6.8. Evidence of Coverage. Prior to commencing the Work, ESCO shall provide to Customer a duly authorized and executed certificate of insurance evidencing that the insurance policies required to be maintained by ESCO pursuant to this Article 6 are in effect (each a “Certificate of Insurance”) Section 6.9 Notice of Change in Policies. ESCO shall notify Customer within thirty (30) days of its receipt of written notice from an applicable insurer that a policy required hereunder will expire without renewal or will be canceled, terminated, or materially reduced in coverage.
Section 6.10 Review of Coverage. Customer’s failure to identify any non-compliance with the requirements of this Article shall not be deemed as a waiver of such requirements.
Section 6.11 Subcontractor Insurance. ESCO shall require each Subcontractor to maintain such levels and types of insurance coverage as are appropriate for the Work to be performed by such Subcontractor.
ARTICLE 7
INDEMNIFICATION AND LIABILITY
Section 7.1. Indemnification of Customer. ESCO shall, at its own cost and expense, indemnify, defend and hold harmless Customer and Customer’s officers, directors, employees and agents (“Indemnified Parties”) from and against all damages, penalties, losses, costs and expenses (including reasonable attorneys’ fees) arising out of any third-party claim for personal injury or tangible property damage, but only to the extent caused by the negligence or misconduct of ESCO or any of ESCO’s agents (including Subcontractors of any tier) in connection with this Contract, and provided that the Indemnified Parties (i) give ESCO prompt written notice of any such claim, and (ii) provide such cooperation and information as ESCO may reasonably require in the defense or handling of any such claim. ESCO shall not be responsible for any settlement or consent to judgment made by or on behalf of an Indemnified Party without ESCO’s prior written consent.
Section 7.2. Defense of Customer. ESCO shall control the defense and handling of any claims for which ESCO is required to indemnify Customer and/or Customer Agents pursuant to Section 7.1, at ESCO’s sole cost and expense, using qualified and appropriately experienced legal counsel selected and retained by ESCO. ESCO’s obligations under Section 7.1 shall not apply to any claim that is settled or otherwise resolved by Customer and/or any Customer Agent without ESCO’s prior written consent. 158 of 1021
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Section 7.3. Limitation on ESCO Obligations. ESCO shall not be obligated to indemnify or hold harmless Customer or any Customer Agent pursuant to this Article 7 to the extent any claim, demand, action, judgment, damage, loss, cost or expense results from the negligence or misconduct of Customer or any of Customer Agents. ESCO shall be reimbursed for any costs and expenses incurred in the defense or handling of any claim to the extent such claim is determined by a court or arbitrator of competent jurisdiction to be attributable to the negligence or misconduct of Customer or any Customer Agent.
Section 7.4. Applicability of Civil Code Section 2782.8. To the extent ESCO or any Subcontractor will provide “design professional services” in connection with this Agreement, this Article 7 shall be interpreted consistent with, and shall be limited by, California Civil Code Section 2782.8 as in effect on the Effective Date, and any obligation to indemnify Customer and/or Customer Agents shall apply only to the extent arising from the negligence, recklessness, or willful misconduct of ESCO or any of the ESCO Agents.
Section 7.5. Notice; Cooperation. Customer and Customer Agents shall promptly provide written notice to ESCO of any claims, demands, actions, judgments, damages, losses, costs and/or expenses for which ESCO may be responsible pursuant to this Article 7. Customer and Customer Agents shall fully cooperate with ESCO, at ESCO’s cost and expense, to the extent reasonably necessary or appropriate in connection with the performance of ESCO’s obligations pursuant to this Article 7.
Section 7.6. Insurance Not a Limitation. The obligations of ESCO pursuant to this Article 7 shall not be deemed or construed to be conditioned upon, limited by or expanded by the existence of any insurance coverage maintained by a Party or other person or entity.
Section 7.7. Subcontractor Indemnity. ESCO shall require each of its Subcontractors to comply with the requirements of this Article 7 related to indemnifying, holding harmless, and defending Customer, except to the extent Customer agrees in writing to apply a different set of standards or requirements to a particular Subcontractor.
Section 7.8. Limitations of Liability.
(i) NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT OR THE CONTRACT
DOCUMENTS TO THE CONTRARY, IN NO EVENT SHALL EITHER PARTY, ITS OFFICERS,
DIRECTORS, AFFILIATES OR EMPLOYEES BE LIABLE FOR ANY FORM OF INDIRECT,
SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING, BUT NOT LIMITED TO,
LOSS OF USE, LOSS OF PRODUCTION, LOSS OF PRODUCT, LOSS OF REVENUE, LOSS
OF PROFITS OR LOSS OF DATA DAMAGES, WHETHER SUCH DAMAGES ARISE IN
CONTRACT OR TORT AND IRRESPECTIVE OF FAULT, NEGLIGENCE OR STRICT LIABILITY
OR WHETHER SUCH PARTY HAS BEEN ADVISED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES.
(ii) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT OR THE CONTRACT
DOCUMENTS AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE MAXIMUM
LIABILITY OF ESCO FOR DAMAGES UNDER THIS AGREEMENT AND THE CONTRACT
DOCUMENTS SHALL NOT EXCEED THE AMOUNTS ACTUALLY PAID BY CUSTOMER FOR THE SERVICE(S) GIVING RISE TO THE CLAIM. THE PRECEDING SENTENCE SHALL NOT
APPLY TO ANY CLAIM FOR THIRD PARTY CLAIMS OF BODILY INJURY OR TANGIBLE PROPERTY DAMAGE, OR TO ANY OTHER CLAIM TO THE EXTENT OF ESCO’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
Section 7.9. Survival of Obligations. With respect to acts, omissions or incidents occurring prior to completion of the Project and/or termination of this Agreement, the Parties' respective rights and obligations pursuant to this Article 7 shall survive completion of the Project and/or termination of this Agreement for the applicable statute of limitations.
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ARTICLE 8
MISCELLANEOUS
Section 8.1. Relationship of the Parties. ESCO is, for any and all purposes of or related to this Agreement, an independent contractor to Customer. In no event shall ESCO or any of its Subcontractors, or any officer, employee or agent of either, be deemed or construed to be a public official, officer, employee, consultant, or agent of Customer for purposes of conflict of interest laws or any other applicable law. Nothing herein shall be deemed to establish a relationship of principal and agent between ESCO and Customer, or any of their respective agents or employees, and neither this Agreement nor any of the Contract Documents may be construed as creating any form of legal association or arrangement that would impose liability upon one Party for the act or failure to act of the other Party.
Section 8.2. Taxes. ESCO and Customer agree to take all necessary measures to comply with all tax laws and regulations that apply to this Contract. ESCO shall be responsible for and pay when due all taxes for which ESCO is liable by reason of the performance of this Contract. Customer shall be responsible for and pay when due all taxes, if any, for which Customer is liable by reason of the performance of this Contract Section 8.3. Project Records. ESCO shall keep and maintain all such books and records as are necessary for proper administration and performance of the Agreement and/or as are required by law and/or this Agreement to be maintained (to the extent exclusively related to the performance of the Agreement, “Project Records”). Pursuant to Government Code Section 8546.7, the California State Auditor has the right, for a period of three years after final payment is made under this Agreement, to examine and audit this Agreement at the request of Customer or as part of any audit of Customer. To the extent required by Government Code Section 8546.7 during such three-year period, ESCO shall allow the California State Auditor and Customer to examine and/or audit this Agreement and the relevant Project Records at ESCO’s offices during normal business hours and upon reasonable advanced notice.
Section 8.4. Ownership and Use of Documents. Any and all final documents (both originals and reproductions) that have been obtained or prepared for Customer by ESCO pursuant to this Agreement and that have been paid for by Customer in accordance with this Agreement (each a “Project Document”) shall be deemed and construed to be and remain the property of Customer. Assuming Customer has paid in full for the Project Documents, Customer shall have the right to use the Project Documents, for their intended purposes and, at Customer's sole discretion, for any other purpose, with no additional compensation due to ESCO.
Except as expressly agreed in writing, Customer shall not be required to employ ESCO in connection with any future use of the Project Documents. However, notwithstanding anything to the contrary, Customer acknowledges and agrees that the Project Documents are prepared with the expectation and intent that the Project is to be performed and completed by or on behalf ESCO; in the event Customer terminates this Agreement pursuant to Section 1.4.1, Customer acknowledges and agrees that the Project Documents are not intended to be, and shall not be, relied upon by Customer or any third party in performing or completing any aspect of the Project. Customer shall indemnify and hold ESCO harmless for any liabilities caused by Customer’s use of the Project Documents other than in connection with ESCO’s completion of the Project.
Section 8.5. Intellectual Property Rights. Nothing in this Agreement shall be deemed or construed to result in Customer acquiring any interest or rights in any intellectual property owned, possessed or developed by ESCO or any third parties (“ESCO Intellectual Property”), including without limitation any ESCO Intellectual Property in or underlying the Project Documents. However, ESCO hereby grants Customer a perpetual, paidup, worldwide license to make use of ESCO Intellectual Property to the extent that such ESCO Intellectual Property is necessary for the proper use, operation and/or maintenance of the Project Documents and/or any other products, services or deliverables provided by ESCO pursuant to this Agreement. ESCO shall indemnify, defend and hold harmless Customer and Customer Agents for any infringement of third-party intellectual property rights caused by ESCO or any of its Subcontractors in connection with this Agreement.
Section 8.6. Force Majeure. Notwithstanding anything to the contrary, ESCO shall not be held responsible (whether by actual or liquidated damages, termination for default, or otherwise) for any delay or nonperformance that is caused by circumstances beyond ESCO’s reasonable control (such as, for example, acts of God or the public enemy, acts of Governmental Authorities, fires, floods, epidemics and/or pandemics, quarantine restrictions, strikes, unusually severe weather, unusually severe shortages in the available supply 160 of 1021
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of materials or equipment needed for performance of the Work, Unforeseen Site Conditions, and delays of common carriers). In the event that ESCO’s performance hereunder is impacted by such force majeure circumstances, then upon ESCO’s reasonable request (with appropriate supporting documentation), the Parties shall execute a Change Order reflecting such equitable changes to this Agreement as may be necessary or appropriate under the circumstances.
Section 8.7. Export Control. The products, software, services, information, other deliverables and/or the technologies embedded therein (hereinafter referred to as “Deliverables”) provided by ESCO under this Agreement contain or may contain components and/or technologies from the United States of America (“US”), the European Union (“EU”) and/or other nations. Customer acknowledges and agrees that the assignment and/or usage of Deliverables under this Agreement shall fully comply with applicable US, EU and other national and international export control laws and/or regulations. Unless any applicable export licenses have been obtained from the relevant authority and the ESCO has approved, the Deliverables shall not (i) be exported and/or re-exported to any destination or party (including without limitation to any individual, group and/or legal entity) restricted by the applicable export control laws and/or regulations; or (ii) be used for those purposes and fields restricted by the applicable export control laws and/or regulations. Customer also agrees that the Deliverables will not be used either directly or indirectly in any rocket systems, unmanned air vehicles, and/or nuclear weapons delivery systems, nor will they be used in any design, development, production or use for any weapons (which may include, without limitation, chemical, biological or nuclear weapons). If any necessary or advisable licenses, authorizations or approvals are not obtained, whether arising from inaction by any relevant Governmental Authority or otherwise, or if any such licenses, authorizations or approvals are denied or revoked, or if the applicable export control laws and/or regulations would prohibit ESCO from fulfilling any order, or would in ESCO’s judgment otherwise expose ESCO to a risk of liability under the applicable export control laws and/or regulations if it fulfilled the order, ESCO shall be excused from all obligations under such order and/or this Agreement.
Section 8.8. Ethics and Compliance with Laws. Each Party shall comply in all respects with all Applicable Law governing the duties, obligations, and business practices of that Party. Neither Party shall take any action in violation of any Applicable Law that could result in liability being imposed on the other Party. In the event Customer has concerns related to ESCO’s ethics or any potential violations ESCO’s code of conduct, Customer is welcome to make use of ESCO’s Trust Line. The Trust Line is a confidential channel through which customers can ask questions and raise concerns. Reports can be made using the following link:
https://secure.ethicspoint.eu/domain/media/en/gui/104677/index.html.
Section 8.9. Cybersecurity.
8.9.1. Customer’s Obligations for Its Systems. Customer is solely responsible for the implementation and maintenance of a comprehensive security program (“Security Program”) that contains reasonable and appropriate security measures and safeguards to protect its computer network, systems, machines, and data (collectively, “Systems”), including those Systems on which it runs the Deliverables provided by ESCO, against Cyber Threats. “Cyber Threat” means any circumstance or event with the potential to adversely impact, compromise, damage, or disrupt Customer’s Systems or that may result in any unauthorized access, acquisition, loss, misuse, destruction, disclosure, and/or modification of Customer’s Systems, including through malware, hacking, or similar attacks. Without limiting the foregoing, Customer shall at a minimum:
(i) have qualified and experienced personnel with appropriate expertise in cybersecurity maintain Customer’s Security Program, and have such personnel regularly monitor cyber intelligence feeds and security advisories applicable to Customer’s Systems or Customer’s industry;
(ii) promptly update or patch its Systems or implement other appropriate measures based on any reported Cyber Threats and in compliance with any security notifications or bulletins, whether publicly disclosed on ESCO’s security notification webpage at https://www.se.com/ww/en/work/support/cybersecurity/security-notifications.jsp or otherwise provided to Customer;
(iii) regularly monitor its Systems for possible Cyber Threats; (iv) regularly conduct vulnerability scanning, penetration testing, intrusion scanning, and other cybersecurity testing on its Systems; and
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(v) meet the recommendations of ESCO’s Recommended Cybersecurity Best Practices, available at https://www.se.com/us/en/download/document/7EN52-0390/, as may be updated by ESCO from time to time, and then-current industry standards.
8.9.2. Customer’s Use of the Deliverables. ESCO may release Updates and Patches for its Deliverables from time to time. Customer shall promptly install any Updates and Patches for such Deliverables as soon as they are available in accordance with ESCO’s installation instructions and using the latest version of the Deliverables, where applicable. An "Update" means any software that contains a correction of errors in a Deliverable and/or minor enhancements or improvements for a Deliverable, but does not contain significant new features. A “Patch” is an Update that fixes a vulnerability in a Deliverable. Customer understands that failing to promptly and properly install Updates or Patches for the Deliverables may result in the Deliverables or Customer’s Systems becoming vulnerable to certain Cyber Threats or result in impaired functionality, and ESCO shall not be liable or responsible for any losses or damages that may result.
8.9.3. Identification of Cyber Threats. If Customer identifies or otherwise becomes aware of any vulnerabilities or other Cyber Threats relating to the Deliverables for which ESCO has not released a Patch, Customer shall promptly notify ESCO of such vulnerability or other Cyber Threat(s) via the ESCO Report a Vulnerability page
(https://www.se.com/ww/en/work/support/cybersecurity/report-a-vulnerability.jsp#Public Agencies) and further provide ESCO with any reasonably requested information relating to such vulnerability (collectively, “Feedback”). ESCO shall have a non-exclusive, perpetual and irrevocable right to use, display, reproduce, modify, and distribute the Feedback (including any confidential information or intellectual property contained therein) in whole or part, including to analyze and fix the vulnerability, to create Patches or Updates for its Public Agencies, and to otherwise modify its Deliverables, in any manner without restrictions, and without any obligation of attribution or compensation to Customer; provided, however, ESCO shall not publicly disclose Customer’s name in connection with such use or the Feedback (unless Customer consents otherwise). By submitting Feedback, Customer represents and warrants to ESCO that Customer has all necessary rights in and to such Feedback and all information it contains, including to grant the rights to ESCO described herein, and that such Feedback does not infringe any proprietary or other rights of third parties or contain any unlawful information.
Section 8.10. Notices.
8.10.1. General Requirements. Any and all demands and notices required or permitted to be given pursuant to this Agreement (each a “Notice”) must be in writing and must be given or served in accordance with this Section 8.10.
8.10.2. Methods of Delivery. Each Notice must be sent via: (i) personal delivery, with the name and signature of the recipient obtained upon delivery; (ii) registered or certified United States mail, with postage prepaid and return receipt requested; (iii) FedEx, U.P.S. or other reliable, private delivery service, with the name and signature of the recipient obtained upon delivery; or (iv) electronic mail, with the reference line indicating that it is a “Notice Pursuant to Energy Service Contract”, with confirmation of transmission from the sender's machine or device retained in the sender's files (a copy of which shall be provided to the recipient upon request), and with the original Notice deposited for delivery pursuant to clauses (ii) or (iii) above within 12 hours after electronic transmission. Neither Party may unreasonably refuse to accept delivery of any Notice in an attempt to avoid the giving or service of the Notice, and any such refusal by a Party shall be deemed and construed as a material breach of such Party's obligations pursuant to this Agreement. 162 of 1021
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8.10.3. Effect of Receipt. A Notice shall be deemed given or served only upon actual receipt by the addressee. In the case of electronic mail, “actual receipt” must be confirmed by a “Read Receipt” or other confirmation of receipt by the recipient. Notwithstanding the foregoing, if any Notice (including, without limitation, any Notice sent by electronic mail) is delivered after 4:00 p.m. on any weekday, on a weekend (Saturday or Sunday), on any federal or State of California holiday, or on any Customer furlough day mandated by the State of California or the Governing Body, the Notice shall be deemed to have been given or served as of 9:00a.m. on the next business day.
8.10.4. Applicability of Notice Requirements. The requirements of this Section 8.10 shall not be deemed or construed to apply to: (i) communications between Customer and/or ESCO necessary for day-to-day administration of this Agreement or performance of the Work; or (ii) service of process in accordance with any Applicable Law or court rule.
8.10.5. Contact Information; Changes. Notice must be addressed and delivered to a Party at the address set forth below, with attention to such Party’s representative named below. A Party must give Notice, in accordance with this Section 8.10, of each change in such Party's address, person to whom attention should be directed, or e-mail address. If any such information applicable to a Party changes and such Party does not give Notice of such change, any subsequent Notices addressed and delivered based on such Party's prior contact information shall be deemed and construed to have been properly given or served in accordance with this Section 8.10, regardless of whether “actual receipt” has occurred.
Customer:
[INSERT CUSTOMER NAME]
[INSERT ADDRESS]
[INSERT ADDRESS]
Attention: [INSERT NAME]
ESCO:
Schneider Electric Buildings Americas, Inc.
1650 West Crosby Rd
Carrollton, TX 75006
Attention: Tammy Fulop
Section 8.11. Governing Law. This Agreement shall be governed by and interpreted in accordance with California law, regardless of any conflict-of-laws provisions applicable in California or any other jurisdiction.
Section 8.12. Claims and Dispute Resolution.
8.12.1. Informal Process. If a dispute arises out of or relates to this Agreement, the transaction contemplated by this Agreement, or the breach of this Agreement (a “Dispute”), either Party may initiate the dispute resolution process set forth in this Section 8.12 by giving notice to the other Party. Within fifteen (15) business days after notice of the Dispute, ESCO’s senior project management personnel will meet with Customer’s project representative in a good faith attempt to resolve the Dispute.
8.12.2. Claims Process Under Public Contract Code. In the event that a remedy acceptable to both Customer and ESCO cannot be found pursuant to Section 8.12.1, ESCO may commence the dispute resolution process set forth in California Public Contract Code §9204 et seq., which can be summarized as follows (the following is a summary only and is not intended to modify in any way the requirements and timeframes set forth in the statute):
(a) A “claim” means a separate demand by a contractor for one or more of the following: (i) a time extension, including, without limitation, for relief from damages or penalties for delay assessed by a public entity under a contract for a public works project; (ii) payment by the public entity 163 of 1021
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of money or damages arising from work done by, or on behalf of, the contractor pursuant to the contract for a public works project and payment for which is not otherwise expressly provided or to which the claimant is not otherwise entitled; and (iii) payment of an amount that is disputed by the public entity. The claimant shall furnish reasonable documentation to support the claim.
(b) Upon receipt of a claim, the public entity shall conduct a reasonable review of the claim and shall provide the claimant a written statement identifying what portion of the claim is disputed and what portion is undisputed. If the claimant disputes the public entity’s written response, or if the public entity fails to respond to a claim within the time prescribed by statute, the claimant may demand in writing an informal conference to meet and confer for settlement of the issues in dispute.
(c) Following the conclusion of the meet and confer conference, if the claim or any portion of the claim remains in dispute, the public entity shall provide the claimant a written statement identifying the portion of the claim that remains in dispute and the portion that is undisputed.
Any payment due on an undisputed portion of the claim shall be processed and made in accordance with the statute. Any disputed portion of the claim, as identified by the contractor in writing, shall be submitted to nonbinding mediation, with the public entity and the claimant sharing the associated costs equally.
(d) Notwithstanding the foregoing, upon receipt of a claim, the Parties may mutually agree to waive, in writing, mediation and proceed directly to the commencement of binding arbitration, as set forth in Section 8.13.
Section 8.13. Arbitration. Customer and ESCO agree that if the claim or Dispute is not governed by, or cannot be resolved by the process set forth in, Public Contract Code §9204 et seq. and summarized in Section 8.12, the exclusive means to resolve the claim or Dispute will be arbitration pursuant to Public Contract Code §10240 et seq., and the provisions of Public Contract Code §20104 et seq. shall not apply.
Notwithstanding any other provision of law, arbitrators appointed for purposes of this Section 8.13 shall be experienced in construction law and shall be paid necessary and reasonable hourly rates not to exceed their customary rate. Such fees and expenses shall be paid equally by the Parties, except where the arbitrator, for good cause, determines a different division.
Section 8.14. Multiparty Proceeding. Either Party may join third parties whose joinder would facilitate complete resolution of the Dispute and matters arising from the resolution of the Dispute.
Section 8.15. Interpretation of Agreement.
8.15.1. Fair and Reasonable Interpretations. Prior to execution and delivery of this Agreement, each Party has received, or had unqualified opportunities to receive, independent legal advice from its legal counsel with respect to the advisability of executing this Agreement and the meaning of the provisions herein. Therefore, the provisions of this Agreement shall be construed based on their fair and reasonable meaning, and not for or against any Party based on whether such Party or its legal counsel was primarily responsible for drafting this Agreement or any particular provision herein.
8.15.2. Headings and Captions. The headings and captions set forth in this Agreement are for the convenience of the reader only and shall not be deemed or construed to establish, define or limit the meaning of any Article, Section or other provision herein.
8.15.3. Applicable Law Deemed Included. Each and every provision required by any Applicable Law to be included in this Agreement is hereby deemed to be so included, and this Agreement shall be construed and enforced as if all such provisions are so included. If, for any reason, any provision 164 of 1021
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required by any Applicable Law is not expressly included herein, or is not correctly included herein, then, upon request of either Customer or ESCO, the Parties shall amend this Agreement to include or incorporate, or to correctly include or incorporate, such provision.
Without limiting the generality of the foregoing, the following provisions are hereby included at Customer’s direction, to the extent legally required:
(a) Trenching. Pursuant to California Labor Code §6705, if the Work is a public work involving an estimated expenditure in excess of $25,000 and includes the excavation of any trench or trenches five (5) feet or more in depth, ESCO will, in advance of excavation, submit to Customer and/or a registered civil or structural engineer, employed by Customer, to whom authority to accept has been delegated, a detailed plan showing the design of shoring, bracing, sloping, or other provisions to be made for worker protection from the hazard of caving ground during the excavation of such trench or trenches, which provisions will be no less effective than the current and applicable CAL-OSHA Construction Safety Orders. No excavation of such trench or trenches may be commenced until this detailed plan has been accepted by Customer or by the person to whom authority to accept has been delegated by Customer.
Pursuant to California Labor Code §6705, nothing in this Section 8.13.3(a) imposes tort liability on Customer or any of its employees.
(b) California Public Contract Code §7104. If the Work is a public work involving digging trenches or other excavations that extend deeper than four (4) feet below the surface of the ground:
(i) ESCO will promptly, and before the following conditions are disturbed, notify Customer, in writing, of any:
(1) Material that ESCO believes may be material that is hazardous waste, as defined in California Health and Safety Code §25117, that is required to be removed to a Class I, Class II, or Class III disposal site in accordance with provisions of existing law; (2) Subsurface or latent physical conditions at the site differing from those indicated by information about the site made available to ESCO before the Effective Date; (3) Unknown physical conditions at the site of any unusual nature, different materially from those ordinarily encountered and generally recognized as inherent in work of the character provided for in this Agreement.
(ii) Customer will promptly investigate the conditions and, if it finds that the conditions do materially so differ or do involve hazardous waste, and cause a decrease or increase in ESCO’s cost of, or the time required for, performance of any part of the Work will issue a Change Order under the procedures described in this Agreement. (iii) If a dispute arises between Customer and ESCO, whether the conditions materially differ, or involve hazardous waste, or cause a decrease or increase in ESCO’s cost of, or time required for, performance of any part of the Work, ESCO will not be excused from any scheduled completion date provided for by this Agreement but will proceed with all Work to be performed under this Agreement. ESCO will retain any and all rights provided either by contract or by law which pertain to the resolution of disputes and protests between the Parties.
(c) [Lead-Based Paint. Pursuant to California Education Code §32244, no lead-based paint, lead plumbing and solders, or other potential sources of lead contamination will be utilized on this Project. Customer acknowledges and agrees that actions to abate existing risk factors for lead are expressly excluded from the Scope of Work, and ESCO will have no obligation to take any such abatement action.]
(d) [To the extent Customer is funding the Project or a portion of the Project with a Federal award, the “Contract Provisions for Non-Federal Entity Contracts Under Federal Awards” set forth 165 of 1021
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under Appendix II to Part 200 of Title 2 of the Code of Federal Regulations are hereby incorporated in this Agreement and shall apply to such portion of the Project as if set forth in full herein.]
Section 8.16. Severability. If any provision of this Agreement is determined to be invalid, illegal, or unenforceable as written, such provision shall be construed consistent with and to the fullest extent permitted under Applicable Law, and any such determination shall not affect or impair the validity, legality and enforceability of the remaining provisions.
Section 8.17. Entire Agreement. This Agreement, together with the Contract Documents, constitutes the entire understanding and agreement between the Parties pertaining to the performance by ESCO of the services required by this Agreement, and all prior and contemporaneous agreements, representations and understandings of the Parties relating to such subject matter, whether oral or written, are hereby superseded and replaced.
Section 8.18. Modifications of Agreement. This Agreement may be amended or otherwise modified only by means of a written instrument duly approved, signed, and delivered by both Parties.
Section 8.19. Waiver. A waiver by a Party of any provision of this Agreement shall be binding only if the waiver is set forth in writing and has been duly approved and signed by the waiving Party. Unless so specified in the written waiver, a waiver by a Party of any provision of this Agreement shall not constitute a waiver of any other provision(s) herein, similar or not, and shall not be construed as a continuing waiver. Except as waived in accordance with this Section, a Party’s failure to require performance of any requirement of this Agreement shall not, in any manner, affect the Party's right to enforce the same or any other provision of this Agreement at a later time.
Section 8.20. Successors and Assigns. Neither Party may assign this Agreement without the express written consent of the other Party, and any attempt to do so shall be null and void. Subject to the foregoing, this Agreement shall inure to the benefit of, and be binding on, the Parties' authorized successors and assigns.
Section 8.21. Third-Party Beneficiaries. The Parties have entered into this Agreement solely for their own purposes, and this Agreement shall not be deemed or construed to: (i) benefit any third party; (ii) create any right for any third party; or (iii) except as provided by law, provide a basis for any claim, demand, action or other proceeding by any third party.
Section 8.22. Agreement is Public Record. Subject to any legally permissible exceptions, this Agreement is a public record which Customer may disclose in accordance with California law.
Section 8.23. Execution of Agreement.
8.23.1. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same instrument. Signature pages may be detached from counterpart originals and combined to physically form one or more copies of this Agreement having original signatures of both Parties.
8.23.2. Due Authority of Signatories. Each person signing this Agreement represents and warrants that he or she has been duly authorized by appropriate action of the Party he or she represents to execute, and thereby bind such Party to, this Agreement. 166 of 1021
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In Witness Whereof, the Parties have executed this Agreement as evidenced by the signatures of their authorized representatives below.
[INSERT CUSTOMER NAME] Schneider Electric Buildings Americas, Inc.
By: By:
Print Name: Print Name:
Print Title: Print Title:
Date Signed: Date Signed:
Fed. Tax ID No:
167 of 1021
Exhibits to Energy Service Contract
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Exhibit A
Scope of Work - Design Phase of the Project
1. Responsibilities
Customer Will:
A. Provide ESCO with all such access, knowledge and history as may be relevant to ESCO’s analysis and/or design, including, without limitation:
(i) access to Customer’s Facilities, systems and equipment, including remote network access, as necessary or appropriate to facilitate ESCO’s analysis and design (i.e. enabling ESCO to take equipment inventory, determine operating schedules, evaluate known operational deficiencies, perform an energy efficiency analysis, measure actual energy use, etc.); (ii) access to key personnel to discuss operating requirements, maintenance practices, and other information relevant to ESCO’s analysis;
(iii) information relating to any and all known or suspected deficiencies, defects and malfunctions of or affecting the Facilities, systems, equipment and components thereof; (iv) information relating to any site conditions that should be considered in planning and executing the construction services;
(v) twenty-six (26) months of electric, gas, and water data, including utility billings on meters for all premises owned by Customer; and
(vi) access to copies or loans of such documentation as may be relevant to ESCO’s analysis, including, as applicable and without limitation, Facility plans, equipment lists, and/or other utility invoices.
B. Meet with ESCO to establish Project criteria and make Project decisions in a timely manner.
C. Promptly inform ESCO if at any point Customer becomes aware of any portions of scope that will not be included or funding that will not be available for final Project implementation.
D. [Additional items may be inserted.]
ESCO Will:
A. Compile information reasonably requested by Customer for purposes of any grant applications being submitted by the Customer in connection with the Project.
B. Conduct a Project programming meeting, Facility walk-through(s) and personnel interview(s) to gain an understanding of Facility operations, concerns, needs, and desired performance criteria.
C. Work with Customer to refine performance requirements, financial criteria, and Project scope.
D. Provide Customer a water, energy, revenue, and cost savings analysis demonstrating the simple ROI effect of project finances and operations.
E. Provide Customer a Net Present Value lifecycle financial analysis cash flow.
F. If applicable, provide an energy analysis report sufficient to demonstrate that the anticipated cost to Customer of the recommended project developed will be less than the anticipated marginal cost to Customer of thermal, electrical, or other energy that would have been consumed by Customer in the absence of the Project in accordance with Government Code section 4217.10 et seq.
G. Provide Customer with a Project Proposal setting forth the following:
(i) Proposed Scope of Construction Work
(ii) Proposed Preliminary Construction Schedule
168 of 1021
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(iii) Proposed lump-sum Construction Fee
(iv) If applicable:
▪ A proposed form of Performance Assurance Support Services Agreement ▪ A proposed Performance Guarantee
▪ A proposed Measurement & Verification (“M&V”) Plan
▪ A proposed schedule of Customer Responsibilities for Performance Guarantee
2. Phases of Design
The Design Scope of Work shall consist of two phases: Conceptual Development (Up to Mid-Term Design Meeting) and Design Development (up to Design Completion Meeting).
A. Conceptual Development (Project Scoping)
i. At the Mid-term meeting, ESCO shall demonstrate for Customer whether recommended improvement measures are viable and whether financial benefits (including grants) can be derived by their implementation in an amount sufficient to cover costs associated with the Project.
ii. Scope of work includes a description of the Energy Conservation Measures (ECM), Energy Generation Measures (EGM) and/or Facility Improvement Measures (FIM), a clear understanding of grant criteria and estimated probability of securing grants, calculation of energy and operational savings, and preliminary costs for the construction of the scope.
B. Design Development (Design Completion)
(i) At the Design Completion Meeting, ESCO shall provide Customer with a Project Proposal setting forth:
▪ A proposed final Scope of Construction Work (detailing any included ECMs, EGMs and/or FIMs);
▪ A proposed Preliminary Construction Schedule;
▪ The proposed Project Fee.
▪ If applicable, any proposed energy and/or other operational savings guarantees.
3. Facilities Included
The Design Services will be performed in the following Customer facilities. Any additional facilities to be added in the future must be by mutual agreement between Customer and ESCO:
Facilities
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Exhibit B
Preliminary Schedule – Design Phase of the Project
Following is the preliminary schedule for the Design Phase. A firm development schedule will be developed and presented for acceptance by Customer once ESCO has discussed development requirements and timing with Customer.
Item Target Schedule
Customer approves selection of ESCO and to move forward with Project at regularly scheduled Council Meeting.
Customer signs Energy Service Contract authorizing ESCO to proceed with design services
Customer provides complete utility information, building plans, etc.
ESCO and Customer conduct a Kick-Off Meeting
General Information of Grant package submitted
Mid-term Meeting (Preliminary scope of Work, budgetary costs, budgetary savings, grant summary and probability review and other financing options) Design Completion Meeting
Technical, Environmental and Financial Grant Packages Submitted Customer and ESCO complete negotiations of construction services scope and pricing and iron out all details for the Council package.
Customer posts public notice 2 weeks prior to Council Meeting of approving going forward with the Construction Phase
Customer approves resolution authorizing of Construction Amendment at regularly scheduled board meeting.
Construction Amendment is executed and serves as NTP allowing ESCO to proceed with the Construction Work.
TBD
A construction kick-off meeting is held to prepare for the Construction Phase. TBD 170 of 1021
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EXHIBIT C
Design Fee
Design Fee:
The “Design Fee” shall be: $[__________].
171 of 1021
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SCHEDULE I
FORM OF CONSTRUCTION AMENDMENT
This Amendment and Notice to Proceed with the Construction Phase (this “Construction Amendment”) is executed and made effective as of [INSERT DATE] (the “Construction Amendment Effective Date”) by and between the [INSERT CUSTOMER NAME], a [JURISDICTION AND TYPE] (“Customer”), and Schneider Electric Buildings Americas, Inc., a Delaware corporation with California Contractors License Number 708952 (“ESCO”). This Construction Amendment is executed pursuant to and made part of the Agreement (defined and described below). The Agreement, as amended by this Construction Amendment, shall be referred to herein as the "Amended Agreement", and any capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Agreement.
RECITALS
WHEREAS, the Parties previously entered into that certain Energy Service Contract dated as of [INSERT DATE OF ORIGINAL AGREEMENT] (the "Agreement"), whereby Customer engaged ESCO to perform all of the Design Work and the Construction Work for the Project described therein; WHEREAS, Section 1.4 of the Agreement provides that, following review of ESCO’s Project Proposal at the end of the Design Phase, Customer may either (i) terminate the Agreement, or (ii) move forward with the Construction Phase by executing this Construction Amendment; WHEREAS, pursuant to California Government Code Section 4217.12, Customer held a regularly scheduled public hearing on [DATE], of which two weeks advance public notice was given, regarding this Construction Amendment and its subject matter;
WHEREAS, at such meeting, Customer accepted the Project Proposal, and determined that ESCO has the technical and management capabilities and experience to implement the Project Proposal, and that the anticipated cost to Customer to implement the ECMs identified in the Project Proposal will be less than the anticipated cost to Customer for thermal, electrical, and other energy, together with anticipated operational, maintenance and other costs, that would have been consumed by Customer in the absence of the identified ECMs in compliance with California Government Code Sections 4217.10 through 4217.18; WHEREAS, Customer has further determined that the Agreement, as amended hereby, constitutes an “energy service contract” within the meaning of California Government Code Section 4217.10 et seq., that entering into this Construction Amendment to implement the Project Proposal is in the best interests of Customer, and that California Government Code Section 4217.10 et seq. allows Customer to enter into this Construction Amendment, and Customer now wishes to engage ESCO, pursuant to the terms and conditions of this Construction Amendment, to finalize the design and construct the Project for purposes of implementing the ECMs; and
WHEREAS, effective as of the Construction Amendment Effective Date, this Construction Amendment shall become part of the Agreement and shall serve to incorporate the details of the Construction Phase therein.
NOW, THEREFORE, in consideration of the foregoing and of the respective rights and obligations of the Parties set forth in the Amended Agreement, the Parties hereby agree as follows:
I. CONSTRUCTION AMENDMENT
The following provisions shall modify, supplement, and become part of the Agreement, as applicable:
Section 1. Amended Agreement. This Construction Amendment and all of the Exhibits attached hereto are hereby made part of the Agreement as if set forth in full therein. In the event of any conflict between the provisions of the Agreement and the provisions of this Construction Amendment, the provisions of this Construction Amendment shall prevail.
172 of 1021
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Section 2. Scope of Construction Services. In accordance with Section 2.2 of the Agreement, the Scope of Construction Work to be performed by ESCO in connection with the Project is set forth on Exhibit D, attached hereto and incorporated in the Agreement by this reference.
Section 3. Construction Time. In accordance with Section 2.3 of the Agreement, the Preliminary Construction Schedule, setting forth the Completion Date for the Construction Work and any applicable milestone dates, is attached hereto as Exhibit E and incorporated in the Agreement by this reference.
Section 4. Project Fee. In accordance with Section 2.4.1 of the Agreement, the Project Fee is set forth on Exhibit F, attached hereto and incorporated in the Agreement by this reference. The Project Fee is inclusive of the Design Fee (such Design Fee having been rolled into the Project Fee pursuant to Section 1.4.2 of the Agreement).
Section 5. Notice to Proceed. In accordance with Section 2.1.1 of the Agreement, the execution of this Construction Amendment serves as Customer’s Notice to Proceed with the Construction Work [Section 6. No Performance Guarantee. Notwithstanding anything to the contrary, ESCO is not providing any energy or efficiency savings guarantees in connection with the Project or the Agreement.] OR
[Section 6. Performance Guarantee. Upon completion of the Construction Work, ESCO shall provide certain energy and/or efficiency savings guarantees to Customer, subject to the terms and conditions of this Section 6 and Exhibits G – J, attached hereto and incorporated in the Agreement by this reference.
Subsection 6.1. Exhibits. Each of the following Exhibits shall be attached hereto and, subject to the terms and conditions hereof, shall be incorporated in full herein:
Exhibit G: Performance Assurance Support Services Agreement (“PASS Agreement”) Exhibit H: Performance Guarantee
Exhibit I: Measurement & Verification (“M&V”) Plan
Exhibit J: Customer Responsibilities for Performance Guarantee Subsection 6.2. Definitions. For purposes of this Construction Amendment, and for purposes of Exhibits G-J to the extent not defined therein, each of the below terms shall be defined as follows:
(i) “Actual Savings” means the sum of the total savings realized, as determined using the M&V Plan attached hereto as Exhibit I, plus all adjustments and non-measured savings.
(ii) “Annual Savings Guarantee” means the amount of energy and/or efficiency savings guaranteed by ESCO for each Guarantee Year, as set forth on Exhibit H hereto. (iii) “Guarantee Year” means the twelve (12) month period beginning on the Savings Guarantee Commencement Date and each subsequent twelve (12) month anniversary during the guarantee term.
(iv) “Performance Guarantee” means the sum of the Annual Savings Guarantee for each year of the guarantee term as set forth on Exhibit H hereto, unless terminated earlier in accordance with the Contract Documents.
(v) “Savings Guarantee Commencement Date” means the first day of the Customer’s first utility billing period following the month in which ESCO delivers to Customer a Letter of Substantial Completion for the Construction Work. 173 of 1021
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Subsection 6.3. Performance Services. For the initial one (1) year beginning on the Savings Guarantee Commencement Date, Customer shall receive, at no additional cost, the services described in the PASS Agreement attached hereto as Exhibit G (the “PASS Services”). At the end of the initial term of the PASS Agreement, and at the end of each subsequent term thereafter, Customer may either (1) continue with the same level of PASS Services as were provided in the previous term, (2) change the PASS Services level in accordance with the terms of the PASS Agreement, or (3) terminate the PASS Agreement and the Performance Guarantee in accordance with the termination provisions thereof.
Subsection 6.4. Customer Responsibilities for Performance Guarantee. The Customer agrees to fulfill its responsibilities as set forth on Exhibit J, attached hereto. If the Customer fails or neglects to fulfill any of its obligations or responsibilities under Exhibit J, ESCO may, after delivery of written notice and providing the Customer thirty (30) days to cure such failure or neglect, terminate the Agreement and any applicable Contract Documents (including, without limitation, Exhibits G - J hereto) in accordance with Section
5.3 of the Agreement.]
II. GENERAL PROVISIONS
The following provisions shall govern the interpretation and enforcement of this Construction Amendment:
Section 1. No Other Modifications. The provisions of Part I of this Construction Amendment, together with the Exhibits referenced therein, shall be construed as the sole extent of the modifications being made to the Agreement pursuant to this Construction Amendment. Except as hereby modified, the Agreement shall continue in full force and effect in accordance with its provisions.
Section 2. Governing Law. This Construction Amendment shall be governed by and interpreted in accordance with California law, regardless of any conflict-of-laws provisions applicable in California or any other jurisdiction.
Section 3. Severability. If any provision of this Construction Amendment is determined to be invalid, illegal, or unenforceable as written, such provision shall be construed consistent with and to the fullest extent permitted under applicable law, and any such determination shall not affect or impair the validity, legality and enforceability of the remaining provisions.
Section 4. Entire Agreement. The Amended Agreement, together with the Contract Documents, constitutes the entire understanding and agreement between the Parties pertaining to the performance by ESCO of the services required by the Amended Agreement.
Section 5. Counterparts. This Construction Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same instrument. Signature pages may be detached from counterpart originals and combined to physically form one or more copies of this Construction Amendment having original signatures of both Parties.
Section 6. Due Authority of Signatories. Each person signing this Construction Amendment represents and warrants that he or she has been duly authorized by appropriate action of the Party he or she represents to execute, and thereby bind such Party to, this Construction Amendment. 174 of 1021
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In Witness Whereof. The Parties have executed this Construction Amendment as evidenced by the signatures of their authorized representatives below.
[INSERT CUSTOMER NAME] Schneider Electric Buildings Americas, Inc.
By: By:
Print Name: Print Name:
Print Title: Print Title:
Date Signed: Date Signed:
Fed. Tax ID No:
175 of 1021
Internal
Acknowledgments
7 176 of 1021
City of Cotati, CA
Energy and Water Resources Efficiency Improvement Projects August 22, 2024
Use or disclosure of data contained on this sheet is subject to the restriction on the table of contents of this proposal
7. Acknowledgements
Acknowledgement of receipt of any City responses to written questions received during the proposal period. The City will only respond to written questions with written responses, which are posted to the City website with the RFP. Any questions must be received no later than 5 business days prior to the RFP due date. 177 of 1021
Internal
Audited Financial StatementAppendix A:
A
178 of 1021
450Schneider Electric Universal Registration Document 2023 | www.se.com Schneider Electric Universal Registration Document 2023 | www.se.com Chapter 5 – Consolidated financial statements Chapter 5 – Consolidated financial statements at December 31, 2023
FINANCIAL STATEMENTS
5 Consolidated
financial
statements
at December 31,
2023
5.1 Consolidated statement
of income 452
5.2 Consolidated statement
of cash flows 454
5.3 Consolidated balance sheet 455
5.4 Consolidated statement
of changes in equity 457
5.5 Notes to the consolidated
financial statements 458
5.6 Statutory Auditors’ report
on the consolidated
financial statements 511
5.7 Extract of the management
report for the year ended
December 31, 2023 516 179 of 1021
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I N T E G R A T E D
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FINANCIAL STATEMENTS
5.1 Consolidated statement of income
(in millions of euros except for earnings per share) Note Full Year 2023 Full Year 2022 Revenue 3 35,902 34,176
Cost of sales (20,890) (20,300)
Gross profit 15,012 13,876
Research and development 4 (1,168) (1,040)
Selling, general and administrative expenses (7,432) (6,819) Adjusted EBITA * 3 6,412 6,017
Other operating income and expenses 6 98 (433)
Restructuring costs (147) (227)
EBITA ** 6,363 5,357
Amortization and impairment of purchase accounting intangibles 5 (430) (424) Operating income 5,933 4,933
Interest income 79 24
Interest expense (387) (130)
Finance costs, net (308) (106)
Other financial income and expense 7 (222) (109)
Net financial income/(loss) (530) (215)
Profit from continuing operations before income tax 5,403 4,718 Income tax expense 8 (1,285) (1,211)
Share of profit/(loss) of associates 12 51 29
PROFIT FOR THE YEAR 4,169 3,536
attributable to owners of the parent 4,003 3,477
attributable to non-controlling interests 166 59
Basic earnings (attributable to owners of the parent) per share (in euros per share) 19 7.15 6.23 Diluted earnings (attributable to owners of the parent) per share (in euros per share) 19 7.07 6.15 * Adjusted EBITA (Earnings Before Interest, Taxes, Amortization of Purchase Accounting Intangibles): Operating profit before amortization and impairment of purchase accounting intangible assets, before goodwill impairment, other operating income and expenses and restructuring costs. ** EBITA (Earnings Before Interest, Taxes and Amortization of Purchase Accounting Intangibles): Operating profit before amortization and impairment of purchase accounting intangible assets and before goodwill impairment.
The accompanying notes are an integral part of the consolidated financial statements. 181 of 1021
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Other comprehensive income
REPORTI N T E G R A T E D
(in millions of euros) Note Full Year 2023 Full Year 2022 Profit for the year 4,169 3,536
Other comprehensive income:
Translation adjustment (1,034) 631
Revaluation of assets and liabilities due to hyperinflation 31 44 Cash-flow hedges (46) 36
Income tax effect of cash flow hedges 19 6 (4)
Gains and losses recorded in equity with recycling (1,043) 707 Net gains/(losses) on financial assets 20 (8)
Income tax effect of gains/(losses) on financial assets 19 (6) 2 Actuarial gains/(losses) on defined benefit plans 20 (119) 137 Income tax effect of actuarial gains/(losses) on defined benefit plans 19 69 (25) Gains and losses recorded in equity with no recycling (36) 106 Other comprehensive income for the year, net of tax (1,079) 813 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 3,090 4,349
attributable to owners of the parent 2,950 4,284
attributable to non-controlling interests 140 65
The accompanying notes are an integral part of the consolidated financial statements. 182 of 1021
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FINANCIAL STATEMENTS
5.2 Consolidated statement of cash flows
(in millions of euros) Note Full Year 2023 Full Year 2022 Profit for the year 4,169 3,536
Share of (profit)/losses of associates (51) (29)
Income and expenses with no effect on cash flow:
Depreciation of property, plant and equipment 11 743 750 Amortization of intangible assets other than goodwill 10 717 732 Impairment losses on non-current assets 60 61
Increase/(decrease) in provisions 21 87 32
Losses/(gains) on disposals of business and assets (252) 70 Difference between tax paid and tax expense (164) 139
Other non-cash adjustments 220 102
Net cash provided by operating activities 5,529 5,393
Decrease/(increase) in accounts receivable 62 (305)
Decrease/(increase) in inventories and work in progress (382) (553) (Decrease)/increase in accounts payable 493 73
Decrease/(increase) in other current assets and liabilities 205 (254) Change in working capital requirement 378 (1,039)
TOTAL I – CASH FLOWS FROM / (USED IN) OPERATING ACTIVITIES 5,907 4,354 Purchases of property, plant and equipment 11 (914) (707) Proceeds from disposals of property, plant and equipment 52 69 Purchases of intangible assets 10 (451) (386)
Net cash used by investment in operating assets (1,313) (1,024) Acquisitions and disposals of businesses, net of cash acquired & disposed 2 611 (297) Other long-term investments (89) 40
Increase in long-term pension assets 20 (257) (130)
Sub-total 265 (387)
TOTAL II – CASH FLOWS FROM / (USED IN) INVESTING ACTIVITIES (1,048) (1,411) Issuance of bonds 22 3,509 1,092
Repayment of bonds 22 (1,299) (829)
Sale/(purchase) of treasury shares (703) (219)
Increase/(decrease) in other financial debt 939 143
Increase/(decrease) of share capital 19 284 208
Transaction with non-controlling interests* 2 (4,702) (73) Dividends paid to Schneider Electric’s shareholders 19 (1,767) (1,618) Dividends paid to non-controlling interests (84) (157)
TOTAL III – CASH FLOWS FROM / (USED IN) FINANCING ACTIVITIES (3,823) (1,453) TOTAL IV – NET FOREIGN EXCHANGE DIFFERENCE (240) (70)
TOTAL V – IMPACT OF RECLASSIFICATION OF ITEMS HELD FOR SALE (4) (20) INCREASE/(DECREASE) IN NET CASH AND CASH EQUIVALENTS: I + II + III + IV + V 792 1,400 Net cash and cash equivalents, beginning of the year 18 3,863 2,463 Increase/(decrease) in cash and cash equivalents 792 1,400 NET CASH AND CASH EQUIVALENTS, END OF THE YEAR 18 4,654 3,863 * In 2023, transactions with non-controlling interests mainly relate to the purchase of AVEVA’s non-controlling interests.
The accompanying notes are an integral part of the consolidated financial statements. 183 of 1021
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5.3 Consolidated balance sheet
REPORTI N T E G R A T E D
Assets
(in millions of euros) Note Dec. 31, 2023 Dec. 31, 2022 NON-CURRENT ASSETS:
Goodwill, net 9 24,664 25,136
Intangible assets, net 10 5,837 6,373
Property, plant and equipment, net 11 4,209 3,935
Investments in associates and joint ventures 12 1,206 1,241 Non-current financial assets 13 1,245 1,125
Deferred tax assets 14 1,636 1,616
TOTAL NON-CURRENT ASSETS 38,797 39,426
CURRENT ASSETS:
Inventories and work in progress 15 4,519 4,346
Trade and other operating receivables 16 8,388 7,514
Other receivables and prepaid expenses 17 2,290 2,156
Cash and cash equivalents 18 4,696 3,986
TOTAL CURRENT ASSETS 19,893 18,002
Assets held for sale 2 209 940
TOTAL ASSETS 58,899 58,368
The accompanying notes are an integral part of the consolidated financial statements. 184 of 1021
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FINANCIAL STATEMENTS
Liabilities
(in millions of euros) Note Dec. 31, 2023 Dec. 31, 2022 EQUITY: 19
Share capital 2,291 2,284
Additional paid in capital 2,937 2,660
Retained earnings 21,528 19,812
Translation reserve (294) 683
Equity attributable to owners of the parent 26,462 25,439 Non-controlling interests 706 655
TOTAL EQUITY 27,168 26,094
NON-CURRENT LIABILITIES:
Pensions and other post-employment benefit obligations 20 1,069 1,186 Other non-current provisions 21 959 994
Non-current financial liabilities 22 11,592 7,330
Non-current purchase commitments over non-controlling interests 22 50 194 Deferred tax liabilities 14 703 885
Other non-current liabilities 848 865
TOTAL NON-CURRENT LIABILITIES 15,221 11,454
CURRENT LIABILITIES:
Trade and other operating payables 7,596 6,254
Accrued taxes and payroll costs 4,013 3,787
Current provisions 21 1,061 1,036
Other current liabilities 1,379 1,887
Current financial liabilities 22 2,341 3,133
Current purchase commitments over non-controlling interests 22 80 4,554 TOTAL CURRENT LIABILITIES 16,470 20,651
Liabilities held for sale 2 40 169
TOTAL EQUITY AND LIABILITIES 58,899 58,368
The accompanying notes are an integral part of the consolidated financial statements.
5.3 Consolidated balance sheet
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5.4 Consolidated statement of changes
REPORTI N T E G R A T E D
in equity
(in millions of euros)
Number of
shares
(thousands) Capital
Additional
paid-in
capital
Retained
earnings
Translation
reserve
Equity
attributable to
owners of the
parent
Noncontrolling
interests Total
Dec. 31, 2021 569,033 2,276 2,456 19,694 14 24,440 3,669 28,109 Profit for the year – – – 3,477 – 3,477 59 3,536
Other comprehensive income – – – 138 669 807 6 813
Comprehensive income for the year – – – 3,615 669 4,284 65 4,349 Capital increase 2,060 8 204 – – 212 – 212
Dividends – – – (1,618) – (1,618) (157) (1,775)
Purchase of treasury shares – – – (219) – (219) – (219) Share-based compensation expense – – – 161 – 161 23 184 AVEVA minority interest buy out – – – (1,881) – (1,881) (2,907) (4,788) IAS 29 Hyperinflation – – – 53 – 53 – 53
Other – – – 7 – 7 (38) (31)
Dec. 31, 2022 571,093 2,284 2,660 19,812 683 25,439 655 26,094 Profit for the year – – – 4,003 – 4,003 166 4,169
Other comprehensive income – – – (76) (977) (1,053) (26) (1,079) Comprehensive income for the year – – – 3,927 (977) 2,950 140 3,090 Capital increase 1,743 7 277 – – 284 – 284
Dividends – – – (1,767) – (1,767) (84) (1,851)
Purchase of treasury shares – – – (703) – (703) – (703) Share-based compensation expense – – – 196 – 196 – 196
IAS 29 Hyperinflation – – – 68 – 68 – 68
Other – – – (5) – (5) (5) (10)
Dec. 31, 2023 572,836 2,291 2,937 21,528 (294) 26,462 706 27,168 The accompanying notes are an integral part of the consolidated financial statements. 186 of 1021
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FINANCIAL STATEMENTS
5.5 Notes to the consolidated financial
statements
Contents
Note Note
1 Summary of accounting policies 459
2 Changes in the scope of consolidation 471
3 Segment information 473
4 Research and development expenditures 474
5 Impairment losses, depreciation and
amortization expenses 474
6 Other operating income and expenses 475
7 Other financial income and expenses 475
8 Income tax expenses 475
9 Goodwill 477
10 Intangible assets 478
11 Property, plant and equipment 480
12 Investments in associates and joint ventures 482
13 Non-current financial assets 483
14 Deferred taxes by nature 484
15 Inventories and work in progress 484
16 Trade and other operating receivables 485
17 Other receivables and prepaid expenses 485
18 Cash and cash equivalents 486
19 Shareholder’s equity 486
20 Pensions and other post-employment benefit obligations 489 21 Provisions for contingencies and charges 493
22 Current and non-current financial liabilities 493
23 Classification of financial instruments 496
24 Employees 501
25 Related party transactions 502
26 Commitments and contingent liabilities 502
27 Subsequent events 503
28 Statutory Auditors’ fees 503
29 Consolidated companies 504
The following notes are an integral part of the consolidated financial statements.
The Schneider Electric Group’s consolidated financial statements for the financial year ended December 31, 2023 were authorized for issue by the Board of Directors on February 14, 2024. They will be submitted to shareholders for approval at the Annual General Meeting of May 23, 2024.
The Group’s main businesses are described in Chapter 1 of the Universal Registration Document. 187 of 1021
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Note 1: Summary of accounting policies
REPORTI N T E G R A T E D
1.1 – Accounting standards
The consolidated financial statements have been prepared in compliance with the international accounting standards (IFRS) as adopted by the European Union as of December 31, 2023. The same accounting methods were used as for the consolidated financial statements for the year ended December 31, 2022.
The IFRS standards and interpretations as adopted by the European Union are available at the following website: https://finance.ec.euro pa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/financial-reporting Standards, interpretations and amendments endorsed by the European Union whose application is mandatory as of January 1, 2023
The following standards and interpretations that were applicable during the period did not have a material impact on the consolidated financial statements as of December 31, 2023:
• Amendments to IAS 12 – Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction; • Amendments to IAS 12 – Income taxes: International Tax Reform – Pillar Two Model Rules; • Amendments to IAS 1 – Presentation of Financial Statements. IFRS Practice Statement 2: Disclosure of Accounting policies; • Amendments to IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates; • IFRS 17 and amendments – Insurance Contracts.
Standards, interpretations and amendments unendorsed by the European Union as of December 31, 2023 or whose application is not mandatory as of January 1, 2023 • Amendments to IAS 21 – The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability; • Amendments to IAS 7 – Statement of Cash Flows and IFRS 7 - Financial Instruments: Disclosures on Supplier Finance Arrangements; • Amendments to IAS 1 – Presentation of Financial Statements: Classification of Liabilities as Current or Non-current; Deferral of Effective Date; Non-current Liabilities with Covenants;
• Amendments to IFRS 16 – Leases: Lease Liability in a Sale and Leaseback.
The Group is currently assessing the potential effect on the Group’s consolidated financial statements of the standards not yet applicable as of December 31, 2023. At this stage of analysis, the Group does not expect any material impact on its consolidated financial statements.
Climate-related matters
The potential impacts on the Group’s assets and liabilities measurement as well as on significant judgements and estimates, from the climate-related matters, have been analyzed through both climate transition risk and opportunities, physical risks perspective and carbon neutral external commitments perspective. The Group is committed to be carbon neutral in its operations by 2025, net-zero CO2 emissions in its operation by 2030, will be carbon neutral along the whole of its value chain by 2040 and net zero along the whole value chain by 2050.
Those objectives are concretely declined in the Group’s Sustainability strategy through the SSI and SSE programs that are externally reported respectively on a quarterly and annually basis.
To achieve its emission reduction objectives and meet net zero commitments taken, the Group has defined a roadmap and key actions to enable both its own operations and supply chain’s decarbonization, leading to direct consequences on processes, site transition, R&D and investment priorities:
• Redesign of the investment monitoring and approval tool in December 2022 to support internal and external reporting, monitor investments allowing our sites to transition to Zero-CO2 sites and prioritize low-carbon investments. In 2023, trainings and change management have been performed to ensure adoption.
• Significant investments on both industrial processes (sites electrification) and real estate portfolio (EV chargers installation) planned to decarbonize operations by 2030 (scopes 1 & 2) in line with company-wide energy climate targets (150 Zero-CO2 sites by 2025, double
energy productivity by 2030, 100% of electricity from renewables by 2030, shift 100% of corporate vehicle fleet to electric vehicles by 2030). Specifically on manufacturing and distribution centers, the Group has defined a priority list and planned to invest progressively on more electrification, sustainable and efficient systems (heatpumps, microgrids, solar panels, thermal insulation...) between 2024 and 2030 to achieve net-zero ready operations by 2030.
• Implementation of a process to follow carbon footprint evolution at an early stage of new product development to reduce the footprint of future generations of products. The Group committed on a step up in R&D in coming years, from an existing circa 5% of Group revenues dedicated to strategic R&D investment to a future circa 7%, with a strong focus on sustainability. Around 8 billion of euros (absolute amount) have been invested in R&D between 2017 and 2022. 188 of 1021
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The actual and potential financial links and effects of the Group’s external commitments or the specific climate risks identified are detailed as follows:
• The Group has performed an evaluation of physical risks on its sites with an independent expert. No material impact to disclose, notably on evaluation and useful life of tangible assets or in the impairment tests performed at Group Level. The Group is not a capital-intensive company, majority of its sites are leased and not owned, and the individual residual value of its tangible assets in the most at-risk locations is not material. Additionally, the multi hub position of the Group with agile capacity to relocate its production in case of climate disaster is a way to significantly mitigate risks and potential effects. Also, the Group has a low dependence on water in its production processes, and its sites are slightly located in flood zones or coastal zones. Finally, the Group is on an opportunistic position regarding world’s desire for electrification & other company’s net zero commitments. In 2023, the Group has worked on quantifying investments and additional costs, as well as opportunities to achieve long-term net zero carbon commitments, taking into consideration several scenarios in order to integrate them into the Group’s impairment tests. The Group has not identified any risk of impairment at December 2023. • The Schneider Sustainability Impact (SSI), which includes a climate target, is used as a criterion in the annual variable compensation of the Corporate Officer and for the the 64,000 employees, which benefit from such compensation (20% weight). In the same way, the Schneider Sustainability External & Relative Index (SSERI) is used for the long-term incentive plan granted to 3,000+ employees including the Corporate Officer (25% weight).
• To further tie climate-related issues to financial planning, Schneider successfully launched the first-ever sustainability-linked convertible bonds in 2020. This bond has been linked to three SSI targets by including the objective to save and avoid 800 million tons of CO2 on the
customers’ end by 2025. In 2022, the Group has also linked its bank fundings with the SSI performance with the signature of a KPIs linked facility.
1.2 – Basis of presentation
The financial statements have been prepared on a historical cost basis, except for the following:
• derivative instruments and certain financial assets, measured at fair value; • assets held for sale - measured at the lower of carrying amount and fair value less costs to sell; • defined benefit pension plans - plan assets measured at fair value.
Financial liabilities are measured using the amortized cost model. The book value of hedged assets and liabilities, under fair-value hedge, corresponds to their fair value, for the part corresponding to the hedged risk.
1.3 – Use of estimates and assumptions
The preparation of financial statements requires the Group management and subsidiaries to make estimates and assumptions that are reflected in the amounts of assets and liabilities reported in the consolidated balance sheet, revenues and expenses in the statement of income and the commitments created during the reporting period. Actual results may differ.
These assumptions and estimates mainly concern:
• the measurement of the recoverable amount of goodwill, property, plant and equipment and intangible assets (Note 1.8 and 1.9) and the measurement of impairment losses (Note 1.11);
• the measurement of the recoverable amount of non-current financial assets (Note 1.12 and 13); • the realizable value of inventories and work in progress (Note 1.13); • the recoverable amount of trade and other operating receivables (Note 1.14); • the valuation of share-based payments (Note 1.20);
• the calculation of provisions or risk contingencies (Note 1.21); • the measurement of pension and other post-employment benefit obligations (Note 1.19 and Note 20); • the recoverability of deferred tax assets (Note 14);
• the measurement of provisions covering uncertainties over income tax treatment (Note 1.21); • the estimation of the margin at completion for Construction contracts (Note 1.24); • the assumptions retained to evaluate the lease liability (IFRS 16): lease term and discount rate (Note 1.10).
1.4 – Consolidation principles
Subsidiaries, over which the Group exercises exclusive control, either directly or indirectly, are fully consolidated.
The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.
Accounting policies of subsidiaries, joint-venture and associates have been changed when necessary to ensure consistency with the policies adopted by the Group.
Group investments in entities controlled jointly with a limited number of partners, such as joint ventures and companies over which the Group has significant influence (“associates”) are accounted for by the equity method. Significant influence is presumed to exist when more than 20% of voting rights are held by the Group.
Under equity method, the net assets and net result of a company are recognized pro rata to the interest held by the Group in the share capital.
On acquisition of an investment in a joint venture or an associate, goodwill relating to the joint venture or the associate is included in the carrying amount of the investment.
5.5 Notes to the consolidated financial statements
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I N T E G R A T E D
When the Group’s share of losses in an equity-accounted investment equals or exceed its interest in the entity, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the other entity.
Companies acquired or sold during the year are included in or removed from the consolidated financial statements as of the date when effective control is acquired or relinquished.
Any acquisition or disposal of an interest in a subsidiary that doesn’t change the control is considered as a shareholder transaction and must be recognized directly in equity.
A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognized in a separate reserve within equity attributable to owners.
Intra-group transactions and balances are eliminated.
The list of consolidated main subsidiaries, joint ventures and associates can be found in Note 29.
The reporting date for all companies included in the scope of consolidation is December 31, with the exception of certain immaterial associates accounted for by the equity method. For the latter however, financial statements up to September 30 of the financial year have been used (maximum difference of three months in line with the standards).
1.5 – Business combinations
Business combinations are accounted for using the acquisition method, in accordance with IFRS 3 - Business Combinations. Acquisition costs are presented under “Other operating income and expenses” in the statement of income.
All acquired assets, liabilities and contingent liabilities are recognized at their fair value at the acquisition date, the fair value can be adjusted during a measurement period that can last for up to 12 months from the date of acquisition.
The differential between the cost of acquisition excluding acquisition expenses and the Group’s share in the fair value of assets and liabilities at the date of acquisition is recognized in goodwill. When the cost of acquisition is lower than the fair value of the identified assets and liabilities acquired, the badwill is immediately recognized in the statement of income.
Goodwill is allocated to Cash-Generating Units (CGUs) or groups of cash-generating units that benefit from business combination synergies.
Goodwill is not amortized but tested for impairment at least annually and whenever there is an indication that it may be impaired (see Note
1.11 below). Any impairment losses are recognized under “Amortization and impairment of purchase accounting intangible”.
The full goodwill method is applied at Group level, therefore, non-controlling interests are valued at fair value.
In accordance with IAS 32, put options granted to minority shareholders are recorded as financial liabilities at the option’s estimated strike price.
The share in the net assets of subsidiaries is reclassified from “Non-controlling interests” to “Purchase commitments over non-controlling interests” and the differential between the value of the non-controlling interests and the liability, corresponding to the commitment, is recorded in equity.
1.6 – Translation of the financial statements of foreign subsidiaries The consolidated financial statements are prepared in euros.
The financial statements of subsidiaries that use another functional currency are translated into euros as follows:
• assets and liabilities are translated at the official closing rates; • income statement, backlog and cash flow items are translated at average annual exchange rates.
The functional currency of an entity is the currency of the primary economic environment in which it carries out its operations. In most cases, the functional currency corresponds to the local currency. However, a functional currency other than the local currency can be retained for certain entities, if it represents the currency of the main transactions carried out by the entity and that it ensures faithful representation of its economic environment.
Translation adjustments are recorded in consolidated equity under “Translation reserve”.
Upon exit from the scope of consolidation, the cumulative translation reserve of a company whose functional currency is not the euro are recycled in the income statement and are part of the gain or loss on disposal. 190 of 1021
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FINANCIAL STATEMENTS
The Group applies IAS 29 - Financial Reporting in Hyperinflationary Economies to the Group’s subsidiaries in countries with hyperinflationary economies (Argentina and Türkiye). IAS 29 - Financial Reporting in Hyperinflationary Economies requires the nonmonetary assets and liabilities and income statements of countries with hyperinflationary economies to be restated to reflect the changes in the general purchasing power of their functional currency, thereby generating a profit or loss on the net monetary position which is recognized in net income within “Other financial income and expenses”. In addition, the financial statements of the subsidiaries in these countries are translated at the closing exchange rate of the reporting period concerned, in accordance with IAS 21. In 2023, all the necessary conditions were met to consider Türkiye and Argentina as a hyperinflationary country within the meaning of IFRS. The Group has applied IAS 29 to Argentina in its financial statements from January 1, 2018 and to Türkiye in its financial statements from January 1, 2022.
The Group used the Consumer Price Index (CPI) for both Argentina and Türkiye to remeasure its income statement items, cash flows and non-monetary assets and liabilities. This index was up 211% for Argentina and up 65% for Türkiye between December 2022 and December 2023.
1.7 – Foreign currency transactions
Foreign currency transactions are recorded using the exchange rate in effect at the transaction date or at the hedging rate. At the balance sheet date, monetary items in foreign currency (e.g. payables, receivables, etc.) are translated into the functional currency of the entity at the closing rate or at the hedging rate. Gains or losses on translation of foreign currency transactions are recorded under “Net financial income/ (loss)”. Foreign currency hedging is described below, in Note 1.23.
However, certain long-term receivables and loans to subsidiaries are considered to be part of a net investment in a foreign operation, as defined by IAS 21 - The Effects of Changes in Foreign Exchange Rates. As such, the impact of exchange rate fluctuations is recorded in equity and recognized in the statement of income when the investment is sold or when the long-term receivable or loan is reimbursed.
1.8 – Intangible assets
Intangible assets acquired separately or as part of a business combination Intangible assets acquired separately are initially recognized in the balance sheet at historical cost. They are subsequently measured using the amortized cost model.
Intangible assets (mainly trademarks, technologies and customer relationships) acquired as part of business combinations are recognized in the balance sheet at fair value at the combination date, appraised externally for the most significant assets and internally for the rest, and that represents its historical cost in consolidation. The valuations are performed using generally accepted methods, based on future inflows.
Intangible assets are generally amortized on a straight-line basis over their useful life or, alternatively, over the period of legal protection.
Amortized intangible assets are tested for impairment when there is any indication that their recoverable amount may be less than their carrying amount.
Amortization expenses and impairment losses on intangible assets acquired in a business combination are presented on a separate statement of income line item, “Amortization and impairment of purchase accounting intangible” assets.
Trademarks
The trademarks are recognized at fair value at the acquisition date. The trademarks fair value is determined using the relief from royalty method.
Trademarks acquired as part of a business combination are not amortized when they are considered to have an indefinite life.
The criteria used to determine whether or not such trademarks have indefinite lives and, as the case may be, their lifespan, are as follows:
• brand awareness;
• outlook for the brand in light of the Group’s strategy for integrating the trademark into its existing portfolio.
Indefinite-lived trademarks are tested for impairment at least annually and whenever there is an indication they may be impaired. When necessary, an impairment loss is recorded.
Internally generated intangible assets
Research and development costs
Research costs are expensed in the statement of income when incurred. Development costs for new projects are capitalized if, and only if:
• the project is clearly identified and the related costs are separately identified and reliably monitored; • the project’s technical feasibility has been demonstrated and the Group has the intention and financial resources to complete the project and to use or sell the resulting products;
• the Group has allocated the necessary technical, financial and other resources to complete the development; • it is probable that the future economic benefits attributable to the project will flow to the Group.
Development costs that do not meet these criteria are expensed in the financial year in which they are incurred.
5.5 Notes to the consolidated financial statements
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I N T E G R A T E D
Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.
Before the commercial launch, capitalized development projects are tested for impairment at least annually. From the date of the commercial launch, capitalized development projects are amortized over the lifespan of the underlying technology, which generally ranges from three to ten years. The amortization expenses of such capitalized projects are included in the cost of the related products and classified into “Cost of sales” when the products are sold.
As for development-related assets which are in the amortization period, they are tested for impairment in case an impairment risk has been identified.
Software implementation
External and internal costs relating to the implementation of Enterprise Resource Planning (ERP) applications are capitalized when they relate to the programming, coding and testing phase. They are amortized over the applications’ useful lives.
1.9 – Property, plant and equipment
Property, plant and equipment is primarily comprised of land, buildings and production equipment and is carried at acquisition cost, less accumulated depreciation and any accumulated impairment losses.
Each component of an item of property, plant and equipment with a useful life that differs from that of the whole item is depreciated separately on a straight-line basis. The main useful lives are as follows:
• buildings: 20 to 40 years;
• machinery and equipment: 3 to 10 years;
• other: 3 to 12 years.
The useful life of property, plant and equipment used in operating activities, such as production lines, reflects the related products’ estimated life cycles.
Useful lives of items of property, plant and equipment are reviewed periodically and may be adjusted prospectively if appropriate. The depreciable amount of an asset is determined after deducting its residual value, when the residual value is material.
Depreciation is expensed in the period and included in the production cost of inventory or the cost of internally generated intangible assets.
It is recognized in the statement of income under “Cost of sales”, “Research and development costs” or “Selling, general and administrative expenses”, as the case may be.
Items of property, plant and equipment are tested for impairment whenever there is an indication they may be impaired. Impairment losses are charged to the statement of income under “Other operating income and expenses”.
Since 2019, property, plant and equipment also includes right-of-use assets, in accordance with the recommended treatment in IFRS 16 Leases, and as described in the following note.
1.10 – Leases
Scope of the Group’s contracts
The lease contracts identified within all the Group entities fall under the following categories:
• real estate: office buildings, factories, and warehouses; • vehicles: cars and trucks;
• forklifts used mainly in factories or storage warehouses.
The Group has retained the exemption for low-value assets (i.e. assets with a cost lower than USD 5,000). Thus, the defined scope does not include small office or IT equipment, mobile phones or other small equipment, which all correspond to low-value equipment. Short term contracts (i.e. less than 12 months without purchase option) are also exempted under the standard. In this case, for example, for occasional vehicle or accommodation rentals.
Rental obligation
At the inception date of the lease, the Group recognizes the lease liabilities, measured at the present value of the lease payments to be made over the term of the lease. The present value of payments is calculated mainly using the marginal borrowing rate of the contracting entity’s country, at the contract starting date.
Rental payments include fixed payments (net of rental incentives receivable), variable payments based on an index or rate initially measured using the index or rate as at the commencement date and amounts that should be paid under residual value guarantees. Besides, the simplification allowing not to split services components has not been elected by the Group. Therefore, only the rents are taken into account in the lease payments.
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Lease payments also include, when applicable, the exercise price of a purchase option reasonably certain to be exercised by the Group and the payment of penalties for the termination of a lease, if the term of the lease takes into account the fact that the Group has exercised the termination option.
Variable lease payments that are not dependent on an index or rate are recognized as an expense in the period in which the event or condition that triggers the payment occurs.
After the start date of the contract, the amount of rental obligations is increased to reflect the increase in interest and reduced for lease payments made.
In addition, the carrying amount of the lease liabilities is revalued in the event of a reassessment or modification in the lease (e.g. change in the term of the lease, change in lease payments, application of annual indexation, etc.).
The obligation is recorded under other current and other non-current liabilities.
Right-of-use assets
The Group accounts for the assets related to the right-of-use on the lease starting date (i.e. the date on which the underlying asset is available).
Assets are measured at cost, less accumulated depreciation and impairment losses, and adjusted for the revaluation of lease liabilities.
The cost of right-of-use assets includes the amount of lease liabilities, initial direct costs incurred and lease payments made on or before the effective date, minus lease inducements received. They are recognized as tangible assets, in the Balance Sheet.
Unless the Group is reasonably certain that it will become the owner of the leased asset at the end of the lease term, the recorded right-ofuse assets are depreciated using the linear method over the shortest period of time between estimated life of the underlying asset and the duration of the lease. The assets related to the right-of-use are subject to depreciation.
Determining the duration of contracts
The duration of the Group’s contracts varies according to geographies.
The real estate contracts have variable durations depending on the countries and local regulations. Vehicles and forklifts are generally contracted between 3 and 6 years.
In certain geographies, the Group’s real estate contracts offer unilateral options for termination of contracts (particularly in France with contracts 3-6-9).
According to the recommendation of IFRIC, on a case-by-case analysis and based on Real Estate teams’ expertise, experience strategy and projects, the Group is determining the most probable duration to perform our calculations.
In most of cases, the duration chosen is the enforceable duration of the real estate contracts, in particular on the most strategic buildings and factories.
1.11 – Impairment of assets
The Group assesses the recoverable amount of its long-lived assets as follows:
• for all property, plant and equipment subject to depreciation and intangible assets subject to amortization, the Group carries out a review at each balance sheet date to assess whether there is any indication that they may be impaired. Indications of impairment are identified based on external or internal information. If such an indication exists, the Group tests the asset for impairment by comparing its carrying amount to the higher of fair value minus costs to sell and value in use; • non-amortizable intangible assets and goodwill are tested for impairment at least annually and whenever there is an indication that the assets may be impaired.
Value in use is determined by discounting future cashflows that will be generated by the tested assets. These future cashflows are based on Group management’s economic assumptions and operating forecasts presented in business plans over a period generally not exceeding five years, and then extrapolated based on a perpetuity growth rate. The discount rate corresponds to the Weighted Average Cost of Capital (WACC) at the measurement date. This rate is based on the following main assumptions:
• a long-term interest rate of 3.5%, corresponding to the interest rate for 10-year OAT treasury bonds; • the average premium applied to financing obtained by the Group in 2023; • the weighted country risk premium for the Group’s businesses in the countries in question.
The perpetuity growth rate is 2.0%, unchanged from the previous financial year.
Impairment tests are performed at the level of CGUs (or groups of CGUs) to which the asset belongs. A cash-generating unit is the smallest group of assets that generates cash inflows that are largely independent of the cash flows from other assets or groups of assets. The groups of cash-generating units in 2022 were Low Voltage, Medium Voltage, Secure Power and Industrial Automation. In 2023, to reflect its ongoing strategy toward sustainability and digital transformation, the Group reorganized the level at which Goodwill is being monitored.
Hence, the groups of CGUs in 2023 are Low Voltage, Medium Voltage, Secure Power, Sustainability, EM Software, Industrial Automation and Industrial Automation Software. This change does not modify our reporting segments. Goodwill was reallocated using relative values of groups of CGUs, similarly to disposal operations.
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Net assets were allocated to the group of CGUs at the lowest possible level on the basis of the group of CGUs activities to which they belong.
Goodwill is allocated when initially recognized. The CGU allocation is done on the same basis as used by Group management to monitor operations and assess synergies deriving from acquisitions.
When the recoverable amount of an asset or CGU is lower than its book value, an impairment loss is recognized for the excess of the book value over the recoverable value. The recoverable value is defined as the highest value between the value in use and the selling price less costs to sell. When the tested CGU comprises goodwill, any impairment losses are firstly deducted from goodwill.
1.12 – Non-current financial assets
Investments in non-consolidated companies are initially recorded at their cost of acquisition and subsequently measured at fair value. The fair value of investments listed in an active market may be determined reliably and corresponds to the listed price at balance sheet date (Level 1 from the fair value hierarchy as per IFRS 7).
IFRS 9 standard allows two accounting treatments for equity instruments:
• change in fair value is recognized through “Other Comprehensive Income” in the comprehensive income statement, and in equity under “Other reserves” in the balance sheet, with no subsequent recycling in the income statement even upon sale; • change in fair value, as well as gain or loss in case of sale, are recognized in the income statement.
The election between those two methods is to be made from inception for each equity investment and is irrevocable. For significant investments not listed in an active market, the valuation is performed by external experts at least annually and whenever there is an indication that it may be impaired.
Venture capital (FCPR) / Mutual funds (SICAV) are recognized at fair value through income statement, in accordance with IFRS 9.
1.13 – Inventories and work in progress
Inventories and work in progress are measured at the lower of their initial recognition cost (acquisition cost or production cost generally determined by the weighted average price method) or of their estimated net realizable value.
Net realizable value corresponds to the estimated selling price net of remaining expenses to complete and/or sell the products. Inventory impairment losses are recognized in “Cost of sales”.
The cost of work in progress, semi-finished and finished products, includes the cost of materials and direct labor, subcontracting costs, all production overheads based on normal manufacturing capacity and the portion of development costs that are directly related to the manufacturing process (corresponding to the amortization of capitalized projects in production and product and range of products maintenance costs).
1.14 – Trade and other operating receivables
Trade and other receivables are measured at their transaction price upon initial recognition and then at amortized cost less any impairment losses based on expected credit losses model.
Trade and other operating receivables are depreciated according to the simplified IFRS 9 model. From inception, trade receivables are depreciated to the extent of the expected losses over their remaining maturity.
The credit risk of trade receivables is assessed on a collective basis country by country, as the geographical origin of receivables is considered representative of their risk profile. Countries are classified by risk profile using the assessment provided by an external agency.
The provision for expected credit losses is evaluated using (i) the probabilities of default communicated by a credit agency, (ii) historical default rates, (iii) aging balance, (iv) as well as the Group’s assessment of the credit risk considering actual guarantees and credit insurance.
Once it is known with certainty that a doubtful receivable will not be collected, the doubtful account and its related depreciation are written off through the income statement.
Accounts receivable are discounted in cases where they are due in over one year and the discounting impact is significant.
Assignment of receivables
When it can be demonstrated that the Group has transferred substantially all the risks and benefits related to assignment of receivables, particularly the credit risk, the items concerned are derecognized. Otherwise, the operation is considered as a financing operation, and the receivables remain in the balance sheet assets, with recognition of a corresponding financial liability.
1.15 – Assets held for sale and liabilities of discontinued operations Assets held for sale
Non-current assets or disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This classification occurs when the Group takes the decision to sell them and that the sale is considered highly probable.
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The assets and liabilities held for sale are presented on different lines of the balance sheet. They are measured at the lower of their carrying amount or fair value less costs to sell. Assets classified as held for sale are no longer depreciated (amortized) as of the date they are classified as assets or disposal groups held for sale.
When a sale involving the loss of control of the subsidiary is considered highly probable, all the assets and liabilities of this subsidiary are classified as being held for sale, independently of whether or not the Group retains a residual interest in the entity after its sale.
Discontinued operation
A discontinued operation is a clearly identifiable component that the Group either has abandoned or that is classified as held for sale:
• representing a separate major line of business or geographical area of operations; • being part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or, • being a subsidiary acquired exclusively with a view to resale.
Once the criteria are met, the profit and loss and the cash flow from discontinued operations are presented separately in the consolidated income statement and the consolidated cash flow statement for each period.
1.16 – Taxes
Income tax expense
The tax rate is calculated on the basis of the fiscal regulations enacted or substantively enacted at the fiscal year closing date in each country where the Group’s companies carry out their business. The Group’s applicable tax rate corresponds to the average of the theoretical tax rates in force in each country, weighted according to profit obtained in each of these countries. The average effective tax rate is calculated as follows: (current and deferred income tax expense)/(net profit before tax less share of profit of associates, and net profit from discontinued operations).
Deferred taxes
Deferred taxes are recognized for all temporary differences between the carrying amount of assets and liabilities and their tax base (excluding if it arises from the initial recognition of goodwill), the tax loss carryforwards and the unused tax credits.
Deferred taxes are based on tax rates and tax rules that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. The effect of any change in the current and deferred taxes is recognized in P&L, except to the extent that it relates to items recognized on OCI or directly in equity. In this case, the tax is also recognized in OCI or equity.
When the Group decides not to distribute profits retained by the subsidiary within the foreseeable future, no deferred tax liability is recognized.
Future tax benefits arising from the utilization of tax loss carry forwards (including amounts available for carry forward without time limit) are recognized only when they can reasonably be expected to be realized. The carrying amount of deferred tax assets is tested for impairment at each balance sheet date and an impairment loss is recognized to the extent that it is no longer probable that sufficient taxable profits will be available against which the deferred tax asset can be fully or partially offset.
Deferred tax assets and liabilities are not discounted and are recorded in the balance sheet under non-current assets and liabilities.
Deferred tax assets and liabilities related to the same unit and which are expected to reverse in the same period are offset.
1.17 – Cash and cash equivalents
Cash and cash equivalents presented in the balance sheet consist of cash, bank accounts, term deposits of three months or less and marketable securities traded on organized markets. Marketable securities are short-term, highly liquid investments that are readily convertible to known amounts of cash at maturity. They notably consist of bank deposits, commercial paper, mutual funds and equivalents.
Considering their nature and maturities, these instruments represent insignificant risk of changes in value and are treated as cash equivalents.
1.18 – Treasury shares
Schneider Electric SE shares held by the parent company or by fully consolidated companies are measured at acquisition cost and deducted from equity.
Gains/(losses) on the sale of own shares are cancelled from consolidated reserves, net of tax.
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1.19 – Pensions and other employee benefit obligations
REPORTI N T E G R A T E D
Depending on local practices and laws, the Group’ subsidiaries participate in pension, termination benefit and other long-term benefit plans. Benefits paid under these plans depend on factors such as seniority, compensation levels and payments into mandatory retirement programs.
Defined contribution plans
Payments made under defined contribution plans are recorded in the income statement, in the year of payment, and are in full settlement of the Group’s liability. As the Group is not committed beyond these contributions, no provision related to these plans has been booked.
In most countries, the Group participates in mandatory general plans, which are accounted for as defined contribution plans.
IFRIC decision – Attribution of benefits to periods of service IAS 19 – Employee Benefits The Group has taken into account the impact of the IFRIC agenda decision issued in April 2021 when measuring employee benefit obligations. This decision, without any material impact for the Group, clarifies the periods over which employee benefits should be attributed in allocating the IAS 19 expense.
Defined Benefit plans
Defined Benefit plans are measured using the projected unit credit method.
Expenses recognized in the statement of income are split between operating costs (for service costs rendered during the period) and net financial income/(loss) (for financial costs and expected return on plan assets).
The amount recognized in the balance sheet corresponds to the present value of the obligation, and net of plan assets. The valuation is performed by external actuaries.
When this is an asset, the recognized asset is limited to the present value of any economic benefit due in the form of plan refunds or reductions in future plan contributions.
Changes resulting from periodic adjustments to actuarial assumptions regarding general financial and business conditions or demographics (i.e., changes in the discount rate, annual salary increases, return on plan assets, years of service, etc.) as well as experience adjustments are immediately recognized in the balance sheet as a separate component of equity in “Other reserves” and in comprehensive income as “Other comprehensive income/loss”.
Past service cost is recorded in “Other operating income and expenses”.
Other commitments
Provisions are funded and expenses recognized to cover the cost of providing health-care benefits for certain Group retirees in Europe and the United States. The accounting policies applied to these plans are similar to those used to account for Defined Benefit pension plans.
The Group also funds provisions for all its subsidiaries to cover seniority-related benefits (primarily long service awards for its French subsidiaries). Actuarial gains and losses on these benefit obligations are fully recognized in profit or loss.
1.20 – Share-based payments
The Group grants performance shares to senior executives and certain employees.
These equity instruments are measured at fair value, on the date of grant, using the market price discounted from the expected dividend yield during the vesting period and adjusted for market conditions achievement.
The Group is using the Monte Carlo method to estimate the achievement of Relative Total Shareholder Return (TSR) vs. CAC 40 and a Panel of peer companies (market conditions).
The number of equity instruments granted can be adjusted during the vesting period to reflect the Group best estimate of non-market conditions achievement.
Main non-market conditions are the following:
• Adjusted Earnings per Share (EPS) improvement rate;
• Schneider Sustainability External and Relative Index (“SSERI”); • Service conditions.
An employee benefits expense is recognized with a corresponding increase in equity on a straight-line basis over the vesting period, in general three years.
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1.21 – Provisions and risk contingencies
A provision is recognized when it is probable that the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the loss or liability is not likely and cannot be reliably estimated, but remains possible, the Group discloses it as a contingent liability. Provisions are calculated on a case-by-case or statistical basis and discounted when the impact from discounting is significant.
Provisions are primarily set aside to cover:
• Economic risks: these provisions relate to probable tax risks, other than income tax related, arising on positions taken by the Group or its subsidiaries. Each position is assessed individually and not offset, and reflects the best estimate of the risk at the end of the reporting period. Where applicable, it includes any late-payment interest and fines. In accordance with IFRIC 23 - Uncertainty over income tax treatments, provisions covering uncertainties over income tax treatment are presented under “Accrued taxes and payroll costs” since 1st of January 2019;
• Customer risks: provisions for customer risks mainly integrate the provisions for losses at completion for some of long-term contracts.
Provisions for expected losses are fully recognized as soon as they are identified; • Product risks: these provisions comprise:
− statistical provisions for warranties: the Group funds provisions on a statistical basis for the residual cost of Schneider Electric product warranties not covered by insurance. The provisions are estimated with consideration of historical claim statistics and the warranty period;
− provisions to cover disputes concerning defective products and recalls of clearly identified products. • Environmental risks: these provisions are primarily funded to cover clean-up costs. The estimation of the expected future outflows is based on reports from independent experts;
• Restructuring costs, when the Group has prepared a detailed plan for the restructuring and has either announced or started to implement the plan before the end of the year. The estimation of the liability includes only direct expenditure arising from the restructuring.
1.22 – Financial liabilities
Financial liabilities primarily comprise bonds, commercial paper and short and long-term bank borrowings. These liabilities are initially recorded at fair value, from which any direct transaction costs are deducted. Subsequently, they are measured at amortized cost based on their effective interest rate.
1.23 – Financial instruments and derivatives
Risk hedging management is centralized. The Group’s policy is to use derivative financial instruments exclusively to manage and hedge changes in exchange rates, interest rates or prices of certain raw materials. The Group uses instruments such as foreign exchange forwards, foreign exchange options, cross currency swaps, interest rate swaps and commodities future, swaps or options, depending on the nature of the exposure to be hedged.
All derivatives are recorded in the balance sheet at fair value with changes in fair value recorded in the statement of income, except when they are qualified in a hedging relationship.
Cash flows from financial instruments are recognized in the consolidated statement of cash flows in a manner consistent with the underlying transactions.
Foreign currency hedges
The Group periodically enters into foreign exchange derivatives to hedge the currency risk associated with foreign currency transactions.
Whenever possible, monetary items (except specific financing items) denominated in foreign currency carried in the balance sheet of Group companies are hedged by rebalancing assets and liabilities per currency through foreign exchange spots realized with Corporate Treasury (natural hedge). The foreign exchange risk is thus aggregated at Group level and hedged with foreign exchange derivatives. When foreign exchange risk management cannot be centralized, the Group contracts foreign exchange forwards to hedge operating receivables and payables carried in the balance sheet of Group companies. In both cases, the Group does not apply hedge accounting because gains and losses generated on these foreign exchange derivatives naturally offset within “Net financial income/(loss)” with gains or losses resulting from the translation at end-of-year rates of payables and receivables denominated in foreign currency.
The Group also hedges future cash flows, including recurring future transactions and planned acquisitions or disposals of investments. In accordance with IFRS 9, these are treated as cash flow hedges. These hedging instruments are recognized at fair value in the balance sheet. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is accumulated in equity, under “Other reserves”, and then recognized in the income statement when the hedged item affects profit or loss.
The Group also hedges foreign exchange risk financing receivables or payables (including current accounts and loans with subsidiaries) using foreign exchange derivatives than can be documented either in Cash Flow Hedge or Fair Value Hedge depending on the nature of the derivative.
The Group may also designate foreign exchange derivatives or borrowings as hedging instruments of its investments in foreign operations (net investment hedge). Changes of value of those hedging instruments are accumulated in equity and recognized in the statement of income symmetrically to the hedged items.
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The Group qualifies foreign exchange derivative based on the spot rate. The Group adopted the cost of hedging option offered by IFRS 9 to limit volatility in the statement of income related to forward points:
• For foreign exchange derivatives hedging an item on the balance sheet: forward points are amortized in statement of income on a straightline basis. Forward points related to foreign exchange derivatives hedging financing transactions are included in “Finance costs, net”; • For foreign exchange derivatives hedging future transactions not yet recorded on the balance sheet: Forward points are recorded in the statement of income when the hedged transaction impacts the statement of income.
Interest rate hedges
Interest rate swaps allow the Group to manage its exposure to interest rate risk. The derivative instruments used are financially adjusted to the schedules, rates and currencies of the borrowings they cover. They involve the exchange of fixed and floating-rate interest payments.
The differential to be paid (or received) is accrued as an adjustment to interest income or expense over the life of the agreement. The Group applies hedge accounting as described in IFRS 9 for interest rate swaps. Gains and losses on re-measurement of interest rate swaps at fair value on the balance sheet are recognized in equity (for Cash Flow Hedges) or in profit or loss (for Fair Value Hedges).
Borrowings hedged by an interest rate derivative in a fair value hedge are revaluated at fair value for the portion of risk being hedged, with offsetting entry in the statement of income.
Cross-currency swaps may be presented as foreign exchange hedges or as interest rate hedges depending on the characteristics of the derivative.
Commodity hedges
The Group also purchases commodity derivatives including forward purchase contracts, swaps and options to hedge price risks on all or part of its forecast future purchases. According to IFRS 9, these qualify as cash flow hedges. These instruments are recognized in the balance sheet at fair value at the period-end (mark to market). The effective portion of the hedge is recognized separately in equity (under “Other reserves”) and then recognized in income (gross margin) when the underlying hedge affects consolidated income. The effect of this hedging is then incorporated in the cost price of the products sold.
1.24 – Revenue recognition
The Group’s revenues primarily include transactional sales and revenues from services, system contracts (projects) and software.
Some contracts may include the supply to the customer of distinct goods and services (for instance contracts combining build followed by operation and maintenance). In such situations, the contract is analyzed and segmented into several components (“performance obligations”), each component being accounted for separately, with its own revenue recognition method and margin rate. The selling price is allocated to each performance obligation in proportion to the specific selling price of the underlying goods and services. This allocation should reflect the share of the price to which Schneider Electric expects to be entitled in exchange for the supply of these goods or services.
Revenue associated with each performance obligation identified within a contract is recognized when the obligation is satisfied, i.e. when the control of the promised goods or services is transferred to the customer.
The following revenue recognition methods can be applied:
Recognition of revenue at a point of time
Revenue from sales is recognized at a point of time, when the control of the promised goods or services is transferred to the customer. This method is applicable for all transactional sales and for specific services such as spare parts deliveries, or on-demand services.
Recognition of revenue over time
To demonstrate that the transfer of goods is progressive and recognize revenue over time, the following cumulative criteria are required:
• the goods sold have no alternative use, and
• enforceable right to payment (corresponding to costs incurred, plus a reasonable profit margin) for the work performed to date exists, in the event of early termination for convenience by the customer.
When these criteria are fulfilled, revenue is recognized using the percentage-of-completion method, based on the percentage of costs incurred in relation to total estimated costs of the performance obligation. The cost incurred includes direct and indirect costs relating to the contracts.
Expected losses on contracts are fully recognized as soon as they are identified.
Penalties for late delivery or for the improper execution of a contract are recognized as a deduction from revenue.
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Revenue from most services contracts is recognized over time, as the customer simultaneously receives and consumes the benefits of the services provided. When costs incurred are stable over the contract’s period, revenue is linearized over the contract’s length.
Provisions for the discounts offered to distributors are accrued when the products are sold to the distributor and recognized as a deduction from revenue. Certain Group’ subsidiaries also offer cash discounts to distributors. These discounts and rebates are deducted from sales.
Consolidated revenue is presented net of these discounts and rebates.
Recognition of software revenue
The group generates software-related revenue mainly through subscriptions, licenses, maintenance and services. Revenue is recognized upon transfer of control of the promised software or service to the customers. • Subscriptions contracts are either:
− SaaS (Software as a Service: remote access to a cloud software solution, hosting and services) contracts, which are recognized linearly over the contract term;
− On premise subscriptions: containing two separate performance obligations pertaining to on premise software license and maintenance, the revenue from such arrangements is recognized in line with revenue from arrangements with multiple performance obligations.
• Software license revenue represents fees earned from granting customers licenses to use the Group’s software. It includes license revenue of perpetual and periodic license sales of software products and is recognized at a point in time when control is transferred to the client.
• Maintenance includes annual fees as well as separate support and maintenance contracts. Revenue is recognized over time on a straight-line basis over the period of the contract.
• Services include notably setup services, training services, customization services. Revenue from these services is recognized over time as the services are performed.
Backlog and balance sheet presentation
Backlog (as disclosed in Note 3) corresponds to the amount of the selling price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) at closing date and includes binding contracts only.
The cumulated amount of revenue accounted for, less progress payments and accounts receivable (presented on a dedicated line of the balance sheet) is determined on a contract-by-contract basis. If this amount is positive, the balance is recognized under “contract assets” in the balance sheet. If it is negative, the balance is recognized under “contract liabilities” (see Note 16). Reserves for onerous contracts (so called reserves for loss at completion) are excluded from contract assets and liabilities and presented among the “provisions for customer risks” item.
1.25 – Earnings per share
Earnings per share are calculated in accordance with IAS 33 - Earnings Per Share.
Diluted earnings per share are calculated by adjusting profit attributable to equity holders of the parent and the weighted average number of shares outstanding for the dilutive effect of performance shares outstanding at the balance sheet date. The dilutive effect of performance shares is determined by applying the “treasury stock” method.
1.26 – Statement of cash flows
The consolidated statement of cash flows has been prepared using the indirect method, which consists of reconciling net profit to net cash provided by operations. The opening and closing cash positions include cash and cash equivalents, comprised of marketable securities, net of bank overdrafts and facilities.
1.27 – Other operating income and expenses
Material non-recurring operations that could affect operating performance readability are classified under “Other operating income and expenses”.
They notably include:
• gains or losses from the disposal of activities or groups of assets; • costs in relation with acquisitions or separation (advisors’ fee, costs from external experts involved in the due diligence process); • costs in relation with integration (one-off costs expensed in the next three years after acquisition, in relation with upgrade or modification of existing IT systems, to reach the Group standards);
• significant provisions and impairment losses for property, plant and equipment and intangible assets; • provisions or costs relating to significant legal risks or litigations; • gain or loss related to the amendment, curtailment or settlement of a defined benefit plan.
1.28 – Other financial income and expense
Other financial income and expenses notably include:
• Bank commissions;
• Factoring fees.
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Note 2: Changes in the scope of consolidation
REPORTI N T E G R A T E D
The list of main consolidated companies can be found in Note 29.
2.1 – Scope variations
Main acquisitions of the period
Transaction with AVEVA’s non-controlling interests
On September 21, 2022, the Group confirmed its firm intention to acquire the share capital of AVEVA that it did not already own.
On November 11, 2022, the Board of Schneider Electric and the AVEVA Independent Committee announced that they reached an agreement on the terms of a cash offer of 3,225 pence per AVEVA share. Such acquisition is to be effected by means of a Court approved scheme of arrangement (the Scheme), under Part 26 of the Companies Act 2006.
On November 25, 2022, the requisite majority of AVEVA’s shareholders approved the Scheme, and passed the Special Resolution to implement the Scheme during respectively the Court Meeting and the General Meeting. This led to the immediate recognition of a current financial liability in the Group’s financial statements of GBP 4,039 million (EUR 4,554 million) as of December 31, 2022). The recognition of this liability triggered an immediate reduction in non-controlling interests and in the group share of equity.
On January 18, 2023, following the deliverance of the UK Court Order to the Registrar of Companies, the Scheme (acquisition by the Group of the outstanding AVEVA shares not already owned) became effective. AVEVA shares were unlisted from the London Stock Exchange on January 19, 2023.
The financial liability was settled in cash on January 31, 2023 for GBP 4,055 million (EUR 4,610 million at the foreign exchange closing rate incurred on January 31, 2023) including stamp duties. The Group’s transaction cash out, including EUR 71 million legal fees paid, was presented under the financing section of the cash flow statement and amounted to EUR 4,681 million.
In the context of this transaction, the Group also incurred, through hedging schemes, a negative impact on cash for EUR 106 million.
EcoAct
On November 2, 2023, the Group acquired 100% of the capital of EcoAct SAS (“EcoAct”), an international leader in climate consulting and net zero solutions headquartered in Paris, France. EcoAct will be reported within the Energy management reporting segment.
The purchase accounting as per IFRS 3R is not completed as of December 31, 2023.
Main divestments of the period
Transformer plants in Poland and Türkiye
On January 6, 2023, the Group closed the transaction for the disposal of its Transformer plants in Poland and Türkiye to Cahors Group, an international company specializing in energy distribution, headquartered in France. The businesses had around 800 employees and were reported within the Energy management reporting segment up until disposal effective date.
As of December 31, 2022, net assets were already measured at fair value less costs to sell, leading to no impact from the divestment in the consolidated statement of income of the period.
VinZero
On May 31, 2023, the Group closed the transaction for the disposal of RIB Software’s VinZero business to a European corporate. VinZero is an IT infrastructure solutions group and software partner for architecture, engineering, construction, owner-operator, and manufacturing organizations providing value-add services and consulting. The business was reported within the Energy management reporting segment up until disposal effective date. The gain on disposal was recorded under “Other operating income and expenses”.
Gutor
On August 2, 2023, the Group closed the transaction for the disposal of Gutor Electronics’ operations to Latour Capital, a French private equity investor. Gutor is a global leader in the manufacturing of industrial uninterruptible power supply (UPS) systems and the provision of related services. Gutor was reported within the Energy management reporting segment up until disposal effective date.
Telemecanique Sensors
On October 31, 2023, the Group closed the transaction for the disposal of its industrial sensors business, Telemecanique Sensors, to YAGEO. As part of the transaction, the Group granted YAGEO a license to use Telemecanique Sensors trademark. The all-cash transaction valued Telemecanique Sensors at EUR 723 million (Enterprise Value). Telemecanique Sensors was reported within the Industrial Automation reporting segment up until disposal effective date.
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Follow-up on acquisitions and divestments transacted in 2022 with effect in 2023 EV Connect Inc.
On June 21, 2022, the Group completed the purchase of a 95.52% controlling stake in EV Connect Inc. and now reports within Energy Management reporting segment. The Group holds an agreement to acquire the remaining 4.48% of non-controlling interests in 2027. The related debt has been recognized in “Non-current purchase commitments over non-controlling interests”.
In November 2023, the Group purchased 3.88% of non-controlling interests which raised its stake in EV Connect Inc. at 99.4%.
The purchase accounting as per IFRS 3R is completed as of December 31, 2023. The net adjustment of the opening balance sheet, resulting mainly from the booking of identifiable intangible assets (technology, customer relationship and trademark), led to the recognition of a EUR 255 million goodwill at acquisition date.
IFRS 5 application – Non-current Assets Held for Sale and Discontinued Operations The following businesses have been reclassified as Held for Sale as of December 31, 2023:
Autogrid
On July 20, 2022, the Group completed the acquisition of Autogrid, raising its stake from 24.2% to 91.8% controlling stake. AutoGrid is a Virtual Power Plant (VPP) and Distributed Energy Resource Management System (DERMS) provider and is reported within Energy Management reporting segment. The Group held an agreement to acquire the remaining 8.2% of non-controlling interests in 2026. The related debt was recognized in “Non-current purchase commitments over non-controlling interests” as of December 2022.
On December 14, 2023, the Group entered into an agreement with Uplight Inc. for the sale of Autogrid. In accordance with IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations, the assets and liabilities have been classified as “Assets held for sale” and “Liabilities held for sale”, for EUR 209 million and EUR 40 million respectively. The assets are mainly intangible assets (including goodwill) for EUR 197 million. No impairment loss was recognized by the Group following the IFRS 5 classification.
This transaction represents a reorganization among Schneider Electric-owned or affiliated businesses aimed at Prosumers, to better align their capabilities. The transaction, which closed on February 8, 2024, has raised the controlling stake of the Group in Uplight Inc., which will remain consolidated as an equity investment.
2.2 – Impact of changes in the scope of consolidation on the Group cash flow Changes in the scope of consolidation at December 31, 2023, decreased the Group’s cash position by a net EUR 4,091 million outflow, as described below:
(in millions of euros) Full Year 2023 Full Year 2022
Acquisitions (307) (559)
Disposals 918 262
FINANCIAL INVESTMENTS NET OF DISPOSALS 611 (297)
AVEVA (4,681) –
Others (21) (73)
TRANSACTION WITH NON-CONTROLLING INTERESTS (4,702) (73) TOTAL CASH FLOW IMPACT (4,091) (370)
In 2023, cash outflows mainly relate to the acquisitions of AVEVA’s non-controlling interests and EcoAct. Cash inflows mainly relate to the disposals of Telemecaniques Sensors, VinZero and Gutor. The main acquisitions and disposals of the year are described in Note 2.1.
In 2022, cash outflows mainly related to the acquisitions of EV Connect and Autogrid as well as other individually not significant acquisitions.
Cash inflows mainly related to the disposals of Eurotherm and of the load bank business of ASCO Power Technologies, as well as other individually not significant disposals.
5.5 Notes to the consolidated financial statements
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Note 3: Segment information
REPORTI N T E G R A T E D
The Group is organized into two reporting segments as follows:
Energy Management leverages a complete end-to-end technology offering enabled by EcoStruxure. The Group’s go-to-market is oriented to address customer needs across its four end-markets of Buildings, Data Centers, Industry and Infrastructure, supported by a worldwide partner network.
Industrial Automation includes Industrial Automation and Industrial Control activities, across discrete, process & hybrid industries.
Expenses concerning General Management that cannot be allocated to a particular segment are presented under “Central functions & digital costs”.
The Executive Committee, which is chaired by the Chief Executive Officer, has been identified as the main decision-making body for allocating resources and evaluating segment performance. Performance and decisions on the allocation of resources are assessed by the Executive Committee and are mainly based on Adjusted EBITA.
Share-based payment is presented under “Central functions & digital costs”.
The Executive Committee does not review assets and liabilities by reporting segments.
The same accounting principles governing the consolidated financial statements apply to segment data.
Details are provided in the Management Report.
Due to the substantial number of customers served by the Group, to their significant diversity in multiple sectors and to their wide geographical dispersion, the Group’s largest customer does not exceed 10% of Schneider Electric’s revenue.
3.1 – Information by reporting segment
Full Year 2023
(in millions of euros)
Energy
Management
Industrial
Automation
Central functions
& digital costs Total
Backlog 15,414 3,748 – 19,162
Revenue 28,241 7,661 – 35,902
Adjusted EBITA 5,967 1,304 (859) 6,412
Adjusted EBITA (%) 21.1% 17.0% 17.9%
On December 31, 2023, the total backlog to be executed in more than a year amounted to EUR 4,287 million.
Full Year 2022
(in millions of euros)
Energy
Management
Industrial
Automation
Central functions
& digital costs Total
Backlog 13,156 3,334 – 16,490
Revenue 26,442 7,734 – 34,176
Adjusted EBITA 5,392 1,458 (833) 6,017
Adjusted EBITA (%) 20.4% 18.9% 17.6%
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3.2 – Information by region
The geographic regions covered by the Group are:
• Western Europe;
• North America (including Mexico);
• Asia-Pacific;
• Rest of the World (Eastern Europe, Middle East, Africa, South America).
Non-current assets include net goodwill, net intangible assets and net property, plant and equipment.
Full Year 2023
(in millions of euros)
Western
Europe
of which
France
Asia
Pacific
of which
China
North
America
of which
USA
Rest of the
World Total
Revenue by country market 8,912 2,067 10,247 4,871 12,211 10,553 4,532 35,902 Non-current assets as of Dec. 31, 2023 12,396 2,823 5,616 1,154 15,338 14,958 1,360 34,710 Full Year 2022
(in millions of euros)
Western
Europe
of which
France
Asia
Pacific
of which
China
North
America
of which
USA
Rest of the
World Total
Revenue by country market 8,304 1,986 10,341 5,154 10,986 9,526 4,545 34,176 Non-current assets as of Dec. 31, 2022 12,383 2,579 5,540 1,170 16,564 16,203 957 35,444 Moreover, the Group follows the share of new economies in revenue:
(in millions of euros) Full Year 2023 Full Year 2022
Revenue – Mature countries 21,825 61% 20,243 59%
Revenue – New economies 14,077 39% 13,933 41%
TOTAL 35,902 100% 34,176 100%
Mature countries gather mainly Western Europe and North American countries.
Note 4: Research and development expenditures
Research and development expenditures are as follows:
(in millions of euros) Full Year 2023 Full Year 2022
Research and development expenditures in costs of sales (520) (448) Research and development expenditures in R&D costs * (1,168) (1,040) Capitalized development costs (328) (357)
TOTAL RESEARCH AND DEVELOPMENT EXPENDITURES ** (2,016) (1,845) * Including EUR 58 million of research and development tax credit in full year 2023 and EUR 51 million in full year 2022 ** Excluding amortization of R&D costs capitalized
In addition to the R&D expenditures, amortization expenses of capitalized development booked in the cost of sales, amounted to EUR 236 million in 2023 and EUR 242 million in 2022.
Note 5: Impairment losses, depreciation and
amortization expenses
(in millions of euros) Full Year 2023 Full Year 2022
Depreciation and amortization included in cost of sales (544) (555) Depreciation and amortization included in selling, general and administrative expenses (486) (503) Amortization expenses of purchase accounting intangible assets (396) (423) Impairment losses of purchase accounting intangible assets (34) (1) IMPAIRMENT LOSSES, DEPRECIATION AND AMORTIZATION EXPENSES (1,460) (1,482) A EUR 34 million impairment was recognized on Clipsal brand in 2023 following the annual impairment tests realized by the Group.
5.5 Notes to the consolidated financial statements
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Note 6: Other operating income and expenses
REPORTI N T E G R A T E D
Other operating income and expenses are as follows:
(in millions of euros) Full Year 2023 Full Year 2022
Gains/(losses) on assets disposals (8) 5
Gains/(losses) on business disposals 265 (108)
Impairment of assets (30) (117)
Costs of acquisitions and integrations (111) (180)
Others (18) (33)
OTHER OPERATING INCOME AND EXPENSES 98 (433)
In 2023, the gains on business disposals mainly relate to the 2023 divestments described in Note 2. The costs of acquisitions and integrations are mainly related to the recent and ongoing acquisitions of the year.
In 2022, the losses on business disposals mainly related to the divestments of our activies in Russia, Loadbank and Eurotherm. Impairment of assets mainly related to Transformers disposal as described in Note 2. The costs of acquisitions and integrations are mainly related to the recent acquisitions. In 2022, it also included EUR 28 million of share-based payments, corresponding to the acceleration of multiple AVEVA plans, in line with the terms of AVEVA’s transaction.
Note 7: Other financial income and expenses
(in millions of euros) Full Year 2023 Full Year 2022
Exchange gains and losses, net (50) (21)
Net monetary gain/(loss) (IAS 29 Hyperinflation) (39) (5) Financial component of defined benefit plan costs (54) (37) Dividends received 3 3
Fair value adjustment of financial assets 6 2
Financial interests - IFRS16 (36) (34)
Effect of discounting & undiscounting 2 18
Other financial expenses, net (54) (35)
OTHER FINANCIAL INCOME AND EXPENSES (222) (109)
Note 8: Income tax expenses
Wherever the regulatory environment allows it, the Group entities file consolidated tax returns. Schneider Electric SE files a consolidated tax return with its French subsidiaries held directly or indirectly through Schneider Electric Industries SAS.
8.1 – Analysis of income tax expense
(in millions of euros) Full Year 2023 Full Year 2022
Current taxes (1,411) (1,195)
Deferred taxes 126 (16)
INCOME TAX EXPENSE (1,285) (1,211)
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8.2 – Income tax expense by country market
Full Year 2023
(in millions of euros)
Western
Europe
of which
France
Asia
Pacific
of which
China
North
America
of which
USA
Rest of the
World Total
Revenue by country market 8,912 2,067 10,247 4,871 12,211 10,553 4,532 35,902 in % 25% 6% 29% 14% 34% 29% 13%
Income tax expense by country market* (290) (113) (528) (327) (415) (366) (52) (1,285) in % 23% 9% 41% 25% 32% 29% 4%
*after reallocation of withholding taxes on dividends
Full Year 2022
(in millions of euros)
Western
Europe
of which
France
Asia
Pacific
of which
China
North
America
of which
USA
Rest of the
World Total
Revenue by country market 8,304 1,986 10,341 5,154 10,986 9,526 4,545 34,176 in % 24% 6% 30% 15% 32% 28% 13%
Income tax expense by country market* (299) (117) (505) (333) (349) (289) (58) (1,211) in % 25% 10% 42% 28% 29% 24% 5%
* after reallocation of withholding taxes on dividends
8.3 – Tax reconciliation
(in millions of euros) Full Year 2023 Full Year 2022
Profit attributable to owners of the parent 4,003 3,477 Income tax expense (1,285) (1,211)
Non-controlling interests (166) (59)
Share of profit of associates 51 29
Profit before tax 5,403 4,718
Geographical weighted average Group tax rate 22.7% 23.3% Theoretical income tax expense (1,225) (1,101)
Reconciling items:
Tax credits and other tax reductions 139 107
Impact of tax losses (9) 24
Withholding taxes (89) (79)
Other elements without tax bases (current or deferred) (59) (80) Other permanent differences (42) (82)
INCOME TAX EXPENSE (1,285) (1,211)
EFFECTIVE TAX RATE 23.8% 25.7%
EFFECTIVE TAX RATE WITHOUT RUSSIA DECONSOLIDATION 24.6% The Company’s consolidated income from continuing operations being predominantly generated outside of France, theoretical tax expense from continuing operations is reconciled above from the Company’s weighted-average global tax rate (rather than from the French domestic statutory tax rate).
In December 2022, member states of the European Union adopted the Pillar 2 directive, introducing an overall minimum corporate tax rate of 15%, which will come into force for the financial year ending December 31, 2024. To date, the estimated impact on the group’s effective tax rate should remain less than 1%.
5.5 Notes to the consolidated financial statements
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Note 9: Goodwill
REPORTI N T E G R A T E D
9.1 – Main items of goodwill
Goodwill is broken down by groups of Cash Generating Units (CGUs) as follows, with WACC used for annual impairment test:
(in millions of euros) WACC Dec. 31, 2023
Energy Management: 14,332
Low Voltage 9.0% 7,629
Medium Voltage 8.9% 3,183
Secure Power 9.0% 2,989
Other 7.8 to 8.3% 531
Industrial Automation 10,332
Industrial Automation 9.3% 5,809
Industrial Automation Software 8.5% 4,523
TOTAL GOODWILL* 24,664
* Goodwill was reallocated using relative values of groups of CGUs.
As of December 31, 2022, the breakdown of goodwill by former groups of CGUs was:
(in millions of euros) WACC Dec. 31, 2022
Energy Management: 14,570
Low Voltage 8.6% 9,060
Medium Voltage 8.9% 2,243
Secure Power 8.7% 3,267
Industrial Automation 8.7% 10,566
TOTAL GOODWILL 25,136
The Group performed the annual impairment test of all the groups of CGUs’ assets using the same methodology as the one used on previous periods and described in Note 1.11.
Impairment tests performed in 2023 did not trigger any impairment losses on the groups of CGUs’ assets. Results of the impairment test would have been the same should the Group have kept the same group of CGUs as in 2022.
The sensitivity analysis on the test hypothesis shows that no impairment losses would be recognized in each of the following scenarios, for each group of CGUs:
• a 0.5 point increase of the discount rate;
• a 1.0 point decrease in the growth rate;
• a 0.5 point decrease in the margin rate.
9.2 – Climate-related matters
In 2023, the Group mandated external experts to evaluate the potential impact of climate-related matters and physical risks on fixed assets over the Group future cash flows. This risk assessment covered a broad spectrum of risks as outlined below:
• Policy: Legislation that are or could be enacted by governments to price and penalize Greenhouse gas (GHG) emissions • Market consumer: Consumer preferences could shift towards sustainable alternative products and services, transforming market demand • Technology: Disruptive lower-carbon technology could change in key economic sectors and risks to carbon intensive assets and operations • Liability: Litigation that could be brought by plaintiffs against companies for their liabilities in causing harm from climate change • Investor: Investors prioritize returns from lower-carbon companies, driving cost of capital and valuation changes • Reputation: Customer sentiment could be influenced by company’s actions to address climate change risk • Physical risk: key facility operational risk and physical asset damage due to extreme weather Results of the risk assessment are showing that most of those risks do not have a significant impact on the Group future cash flows. The most impactful risk would be the Policy risk. To evaluate this particular risk, external experts considered the Group scope 1, 2 and 3 GHG emissions by country and projected them over 10 years period (based on growth of the business) multiplied by current and projected country-level carbon pricing data, taken from several databases (including IEA, WB, NGFS), and projected across various climate futures based on academic research. Our scope 3 emissions, that represents almost 100% of the Policy risk, are impacting our future cash flows from a drop in demand (downstream) and an increase in our cost of sales (upstream). 206 of 1021
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However, the model, being conservative, is not considering any upside from the Group’s strong long-term position to meet the increasing demand of organizations making meaningful progress on their energy transition and decarbonization goals, neither the actions taken by the Group to decarbonate its value chain.
In addition, the Group also considered the impact on future cash flows of its Scope 1,2 & 3 GHG pathway commitments towards 2030, 2040 & 2050.
Considering the above risk assessment and our commitments, the Group has performed a sensitivity analysis to our impairment tests at groups of CGUs level and did not identify impairment risk on its assets.
9.3 – Movements during the year
The main movements during the year are summarized as follows:
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
Net goodwill at opening 25,136 24,723
Acquisitions 209 387
Disposals (7) (119)
Reclassifications (95) (536)
Translation adjustment (579) 681
NET GOODWILL AT END OF YEAR 24,664 25,136
including cumulative impairment losses (367) (367)
Acquisitions & Disposals
Movements from acquisitions and disposals are described in Note 2.
Other changes
Reclassifications mainly relates to Assets held for sale described in Note 2.
Translation adjustments mainly concern goodwill denominated in US dollar.
Note 10: Intangible assets
10.1 – Change in intangible assets
Gross value
(in millions of euros) Trademarks Software
Development
Projects (R&D)
Acquired
technologies and
customer
relationships Other Total
Dec. 31, 2021 2,861 1,041 3,823 4,786 216 12,727
Acquisitions – 26 357 1 2 386
Translation adjustments 107 3 37 129 21 297
Reclassifications 1 14 (107) (53) 55 (90)
Reclassifications to assets held for sale – (6) (39) (17) (1) (63) Changes in scope of consolidation and other 24 (3) 6 13 7 47 Dec. 31, 2022 2,993 1,075 4,077 4,859 300 13,304
Acquisitions – 114 328 – 9 451
Translation adjustments (85) (10) (56) (121) (18) (290) Reclassifications (36) 36 (174) (178) 17 (335)
Reclassifications to assets held for sale (2) – (23) (4) (1) (30) Changes in scope of consolidation and other 1 (1) (4) (20) (15) (39) Dec. 31, 2023 2,871 1,214 4,148 4,536 292 13,061
5.5 Notes to the consolidated financial statements
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Amortization and impairment
REPORTI N T E G R A T E D
(in millions of euros) Trademarks Software
Development
Projects (R&D)
Acquired
technologies and
customer
relationships Other Total
Dec. 31, 2021 (486) (858) (2,654) (2,069) (174) (6,241) Amortization (40) (70) (244) (372) (6) (732)
Impairment (9) – (4) (29) 3 (39)
Translation adjustments (10) (2) (26) (45) (5) (88)
Reclassifications (1) 31 49 41 (30) 90
Reclassifications to assets held for sale – 5 25 7 – 37 Changes in scope of consolidation and other – 3 13 27 (1) 42 Dec. 31, 2022 (546) (891) (2,841) (2,440) (213) (6,931) Amortization (35) (78) (239) (355) (10) (717)
Impairment (34) – (15) (1) – (50)
Translation adjustments 6 9 43 59 11 128
Reclassifications 35 17 136 151 (4) 335
Reclassifications to assets held for sale – – 3 1 – 4
Changes in scope of consolidation and other – – 1 6 – 7 Dec. 31, 2023 (574) (943) (2,912) (2,579) (216) (7,224) Net value
(in millions of euros) Trademarks Software
Development
Projects (R&D)
Acquired
technologies and
customer
relationships Other Total
Dec. 31, 2021 2,375 183 1,169 2,717 42 6,486
Dec. 31, 2022 2,447 184 1,236 2,419 87 6,373
Dec. 31, 2023 2,297 271 1,236 1,957 76 5,837
The amortization expenses and impairment losses of intangible assets other than goodwill restated in statement of cashflow are as follows:
(in millions of euros) Full Year 2023 Full Year 2022
Amortization expenses of intangible assets other than goodwill 717 732 Impairment losses of intangible assets other than goodwill 50 39 TOTAL* 767 771
* Includes amortization & impairment of intangible assets from purchase price allocation for EUR 430 million for the year 2023 (EUR 424 million in 2022)
10.2 – Trademarks
On December 31, 2023, the main trademarks recognized were as follows:
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
APC (Secure Power) 1,664 1,724
Clipsal (Low Voltage) 122 162
Asco (Low Voltage) 113 117
OSIsoft (Industrial Automation Software) 112 133
Aveva (Industrial Automation Software) 86 86
Invensys - Triconex and Foxboro (Industrial Automation) 50 52 L&T (Low Voltage) 36 50
Digital (Industrial Automation) 35 39
Other 79 84
TRADEMARKS NET BOOK VALUE 2,297 2,447
Indefinite-lived brands are tested on a yearly basis for impairment.
In 2023, the Group reviewed the value of the main trademarks in accordance with the valuation model described in Note 1.8. Particularly, APC brand was tested using the royalty relief method. The future cash flows used are based on Group management’s economic assumptions and operating forecasts presented in Secure Power’s business plan, and then extrapolated based on a perpetuity growth rate of 2%.
Impairment tests carried out on indefinite-lived brands in 2023 led the Group to recognize an impairment of EUR 34 million on Clipsal brand.
The sensitivity analysis on the test hypothesis shows that no material impairment losses would be recognized in the following scenarios:
• a 0.5 point increase of the discount rate;
• a 1.0 point decrease in the growth rate;
• a 0.5 point decrease in the royalty rate.
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Note 11: Property, plant and equipment
Changes in property, plant and equipment in 2023 are mainly related to the scope changes mentioned in the Note 2 and include the impacts of IFRS 16 - Leases.
Gross value
(in millions of euros) Land Buildings
Machinery and
equipment Other
Rights of use of
assets (IFRS 16) Total
Dec. 31, 2021 199 2,043 4,795 1,253 1,969 10,259
Acquisitions 3 28 127 563 356 1,077
Disposals (26) (94) (186) (95) (68) (469)
Translation adjustments – 28 59 26 22 135
Reclassifications (4) 79 211 (295) – (9)
Reclassifications to assets held for sale (6) (47) (124) (19) (10) (206) Changes in scope of consolidation and other (1) (36) (77) (19) (2) (135) Dec. 31, 2022 165 2,001 4,805 1,414 2,267 10,652
Acquisitions – 31 133 746 305 1,215
Disposals (3) (76) (176) (108) (155) (518)
Translation adjustments (3) (18) (84) (37) (30) (172)
Reclassifications 2 135 265 (378) 24
Reclassifications to assets held for sale – – – – – –
Changes in scope of consolidation and other – 1 2 (25) (27) (49) Dec. 31, 2023 161 2,074 4,945 1,612 2,360 11,152
Amortization and impairment
(in millions of euros) Land Buildings
Machinery and
equipment Other
Rights of use of
assets (IFRS 16) Total
Dec. 31, 2021 (28) (1,167) (3,739) (608) (891) (6,433)
Depreciation and impairment (1) (94) (274) (78) (308) (755) Reversals 13 75 174 70 8 340
Translation adjustments (1) (15) (49) (12) (4) (81)
Reclassifications – – – – – –
Reclassifications to assets held for sale – 26 105 9 3 143 Changes in scope of consolidation and other – 21 61 5 (18) 69 Dec. 31, 2022 (17) (1,154) (3,722) (614) (1,210) (6,717) Depreciation and impairment (1) (108) (272) (76) (303) (760) Reversals 1 69 161 81 134 446
Translation adjustments – 7 61 19 12 99
Reclassifications (2) (23) (6) 14 – (17)
Reclassifications to assets held for sale – – – – – –
Changes in scope of consolidation and other – (1) (6) 3 10 6 Dec. 31, 2023 (19) (1,210) (3,784) (573) (1,357) (6,943)
5.5 Notes to the consolidated financial statements
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Net value
REPORTI N T E G R A T E D
(in millions of euros) Land Buildings
Machinery and
equipment Other
Rights of use of
assets (IFRS 16) Total
Dec. 31, 2021 171 876 1,056 645 1,078 3,826
Dec. 31, 2022 148 847 1,083 800 1,057 3,935
Dec. 31, 2023 142 864 1,161 1,039 1,003 4,209
Reclassifications primarily correspond to assets put into use.
The cash impact of purchases of property, plant and equipment in 2023 was as follows:
(in millions of euros) Full Year 2023 Full Year 2022
Increase in property, plant and equipment (1,215) (1,077) Of which non-cash impact related to IFRS 16 305 356
Changes in receivables and liabilities on property, plant and equipment (4) 14 TOTAL (914) (707)
The depreciation and impairment of property, plant and equipment restated in the statement of cash flows were as follows:
(in millions of euros) Full Year 2023 Full Year 2022
Depreciation of property, plant and equipment 743 750
Impairment of property, plant and equipment 17 5
TOTAL 760 755
IFRS 16 debt by maturity:
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
2023 – 282
2024 284 224
2025 214 167
2026 170 133
2027 121 90
2028 82 59
2029 57 50
2030 44 37
2031 and beyond 100 69
TOTAL 1,072 1,111
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Note 12: Investments in associates and joint ventures
Investments in associates and joint ventures can be analyzed as follows:
(in millions of euros)
Delixi
Sub-Group Uplight Planon
Fuji
Electrics
Sunten
Electric
Equipments Other Total
% of interest
Dec. 31, 2022 50.0% 29.4% 25.0% 36.8% 25.0%
Dec. 31, 2023 50.0% 30.4% 25.0% 36.8% 25.0%
CLOSING VALUE DEC. 31, 2021 464 390 112 151 38 79 1,234 Net Income/(loss) 52 (28) (2) 24 2 (19) 29
Dividends distribution (25) – – (14) – (2) (41)
Perimeter changes – 1 – – – (14) (13)
Translation impacts & others (10) 51 – (6) (4) 1 32
CLOSING VALUE DEC. 31, 2022 481 414 110 155 36 45 1,241 Net Income/(loss) 52 (30) 5 19 4 1 51
Dividends distribution (20) – – (16) (3) (1) (40)
Perimeter changes – 13 – – – (2) 11
Translation impacts & others (26) (9) – (16) (3) (3) (57) CLOSING VALUE DEC. 31, 2023 487 388 115 142 34 40 1,206
12.1- Main entities consolidated under the equity method:
Delixi Electric Ltd.
In 2007, Schneider Electric joined Delixi Group to establish a win-win partnership in a joint-venture, Delixi Electric Ltd., aka “Delixi Electric”.
Delixi Electric, based in China, is specialist in manufacturing, retail and distribution of low voltage products.
The key financial indicators for the Delixi Electric subgroup (on a 100% basis) are as follows:
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
Non-current assets 754 814
Current assets 472 502
TOTAL ASSETS 1,225 1,316
Equity 643 619
Non-current liabilities 21 102
Current liabilities 560 595
TOTAL EQUITY AND LIABILITIES 1,225 1,316
Revenue 1,342 1,354
Adjusted EBITA 143 137
PROFIT FOR THE YEAR 104 104
Dividends paid 40 50
5.5 Notes to the consolidated financial statements
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Note 13: Non-current financial assets
REPORTI N T E G R A T E D
Non-current financial assets, primarily comprising investments, are detailed below:
Dec. 31, 2023 Dec. 31, 2022
(in millions of euros)
%
of interest
Acquisitions
disposals
Fair value
through
P&L
Fair value
through
Equity
FX &
others Fair value Fair value
LISTED FINANCIAL ASSETS:
Gold Peak Industries Holding Ltd 3.2 % – – – – 2 2
Others (Unit fair value lower than EUR 3 million) 1 – – – 13 12 TOTAL LISTED FINANCIAL ASSETS 1 – – – 15 14
UNLISTED FINANCIAL ASSETS: –
Funds –
SE Ventures Funds of Funds in Portfolio 8 (7) – (3) 94 96 FCPR Aster II (part A, B and C) 38,0 % (3) 3 – – 18 18
Sensetime & Stalagnate Fund China 30,0 % – 12 – (4) 70 62 FCPR SEV1 100,0 % – – – – 7 7
SICAV SESS 63,1 % – – – 1 11 10
FCPI Energy Access Ventures Fund 28,6 % 2 (1) – – 19 18 Gaia Energy Impact 50,0 % 3 – – – 3 –
SICAV Livehoods Fund SIF 19,9 % 1 (1) – – 4 4
Direct investments
SE Ventures - Claroty 5,8 % – – 5 (2) 64 61
SE Ventures - Sense 8,3 % – – (9) (2) 35 46
SE Ventures - Augury 3,0 % – – 8 (2) 40 34
SE Ventures - Scandit 2,4 % – – (2) – 17 19
SE Ventures - AnyVision 9,4 % – – – (3) 11 14
SE Ventures - Verkor 12,2 % – – 28 (2) 39 13
SE Ventures - Titan Advanced Energy Solutions 19,2 % – – (2) – 10 12 SE Ventures (Unit fair value lower than EUR 10 million) 24 – (8) (7) 121 112 Nozomi Networks 6,6 % 46 – – (1) 45 –
Star Charge 1,3 % – – – (2) 27 29
Others (Unit fair value lower than EUR 10 million) 12 – – (3) 51 42 TOTAL UNLISTED FINANCIAL ASSETS 93 6 20 (30) 686 597
PENSIONS ASSETS 9 – (43) 7 253 280
OTHER 41 – – 16 291 234
TOTAL NON-CURRENT FINANCIAL ASSETS 144 6 (23) (7) 1,245 1,125 The fair value of investments listed in an active market corresponds to the stock price on the balance sheet date. “Others” include mainly convertible and treasury bonds, as well as contributions to US employee deferred compensation trusts (“rabbi trusts”).
“SE Ventures” is a corporate venture capital fund created in partnership with Schneider Electric. SE Ventures current portfolio is composed of direct investments in various start-up companies and funds of funds. 212 of 1021
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Note 14: Deferred taxes by nature
Deferred taxes by type can be analyzed as follows:
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
Tax loss carryforwards (net) 629 724
Provisions for pensions and other post-retirement benefit obligations (net) 234 197 Non-deductible provisions and accruals (net) 474 466
Differences between tax and accounting depreciation on tangible assets (net) (41) (4) Differences between tax and accounting amortization on intangible assets (net) (752) (957) Differences on working capital (net) 207 164
Other deferred tax assets/(liabilities) (net) 182 141
TOTAL NET DEFERRED TAX ASSETS/(LIABILITIES) 933 731
of which total deferred tax assets 1,636 1,616
of which total deferred tax liabilities 703 885
Deferred tax assets recorded in respect of tax losses carried forward on December 31, 2023 essentially concern France (EUR 420 million).
These deficits can be carried forward indefinitely, and have been activated using the rate of 25.83%, in accordance with the applicable rate in the expected consumption horizon of 6 years. Unrecognized deferred tax losses amount EUR 149 million as of December 31, 2023 and are mainly related to Spain.
Note 15: Inventories and work in progress
Inventories and work in progress changed as follows:
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
COST:
Raw materials 2,279 2,021
Production work in progress 355 367
Semi-finished and finished products 1,518 1,519
Finished goods 759 681
Solution work in progress 211 200
INVENTORIES AND WORK IN PROGRESS AT COST 5,122 4,788
IMPAIRMENT:
Raw materials (338) (232)
Production work in progress (10) (9)
Semi-finished and finished products (239) (189)
Finished goods (9) (8)
Solution work in progress (7) (4)
IMPAIRMENT LOSSES (603) (442)
NET:
Raw materials 1,941 1,789
Production work in progress 345 358
Semi-finished and finished products 1,279 1,330
Finished goods 750 673
Solution work in progress 204 196
INVENTORIES AND WORK IN PROGRESS, NET 4,519 4,346
5.5 Notes to the consolidated financial statements
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Note 16: Trade and other operating receivables
REPORTI N T E G R A T E D
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
Accounts receivable 6,330 5,675
Unbilled revenue 1,911 1,662
Notes receivable 264 389
Advances to suppliers 256 276
Accounts receivable at cost 8,761 8,002
Impairment (373) (489)
ACCOUNTS RECEIVABLE, NET 8,388 7,514
On time 7,343 6,537
Less than one month past due 517 438
One to two months past due 200 174
Two to three months past due 82 102
Three to four months past due 109 119
More than four months past due 137 144
Accounts receivable result from sales to end-customers, who are widely spread both geographically and economically. Consequently, the Group believes that there is no significant concentration of credit risk.
In addition, the Group takes out substantial credit insurance and uses other types of guarantees to limit the risk of losses on trade accounts receivable.
Changes in provisions for impairment of short and long-term trade accounts receivable were as follows:
(in millions of euros) Full Year 2023 Full Year 2022
Provisions for impairment as of December 31, 2022 (489) (498) Additions (131) (133)
Utilizations 132 58
Reversal of surplus provisions 73 70
Translation adjustments 18 4
Changes in scope of consolidation and other 24 10
PROVISIONS FOR IMPAIRMENT AS OF DECEMBER 31, 2023 (373) (489) The contracts assets and liabilities, respectively reported within the “Trade and other operating receivables” and “Trade and other operating payables”, are as follows:
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
Unbilled revenue (contract assets) 1,911 1,662
Contract liabilities (2,402) (1,840)
NET CONTRACT ASSETS (491) (178)
Note 17: Other receivables and prepaid expenses
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
Other receivables 447 423
VAT receivables 746 713
Current income tax receivables 618 596
Other tax receivables 37 41
Derivative instruments 122 79
Prepaid expenses 320 304
OTHER RECEIVABLES AND PREPAID EXPENSES 2,290 2,156
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Note 18: Cash and cash equivalents
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
Marketable securities 2,024 1,716
Negotiable debt securities and short-term deposits 588 693 Cash 2,084 1,577
Total cash and cash equivalents 4,696 3,986
Bank overdrafts (42) (123)
NET CASH AND CASH EQUIVALENTS 4,654 3,863
Non-recourse factorings of trade receivables were realized in 2023 for a total amount of EUR 286 million, compared with EUR 264 million in 2022. Substantially all risks and rewards have been transferred.
Note 19: Shareholder’s equity
19.1 – Capital
Share capital
The company’ share capital at December 31, 2023 amounted to EUR 2,291,343,536 represented by 572,835,884 shares with a par value of EUR 4, all fully paid up.
On December 31, 2023, a total of 600,194,772 voting rights were attached to the 572,835,884 issued shares. Schneider Electric’s capital management strategy is designed to:
• ensure Group liquidity;
• optimize its financial structure;
• optimize the weighted average cost of capital.
The strategy must also ensure the Group has access to different capital markets under the best possible conditions. Factors taken into account for decision-making purposes include objectives expressed in terms of earnings per share, ratings or balance sheet stability.
Finally, decisions may be implemented depending on specific market conditions.
Changes in share capital and cumulative number of shares Changes in share capital since December 31, 2021 were as follows:
(in number of shares and in euros)
Cumulative
number of shares Share capital
SHARE CAPITAL AT DEC. 31, 2021 569,033,442 2,276,133,768 Cancellation of own shares – –
Capital increase 2,059,479 8,237,916
SHARE CAPITAL AT DEC. 31, 2022 571,092,921 2,284,371,684 Cancellation of own shares – –
Capital increase 1,742,963 6,971,852
SHARE CAPITAL AT DEC. 31, 2023 572,835,884 2,291,343,536 In 2023, the share premium account increased by EUR 212 million following the increases in capital.
On November 20, the Group issued convertible bonds with a total nominal amount of EUR 650 million. The equity component of these convertible bonds has been valued at EUR 65 million (after fees) and has been recognized in “Additional paid-in capital”.
5.5 Notes to the consolidated financial statements
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19.2 – Earnings per share
REPORTI N T E G R A T E D
Full Year 2023 Full Year 2022
(in thousands of shares and in euros per share) Basic Diluted Basic Diluted Issued shares (Net of treasury shares) 559,846 559,846 558,129 558,129 Performance shares – 2,807 – 3,348
Bonds convertible into shares – 3,935 – 3,684
AVERAGE WEIGHTED NUMBER OF SHARES 559,846 566,588 558,129 565,161 Earnings per share before tax 9.65 9.54 8.45 8.35
EARNINGS PER SHARE 7.15 7.07 6.23 6.15
19.3 – Dividends paid and proposed
In 2023, the Group paid out the 2022 dividend of EUR 3.15 per share, for a total of EUR 1,767 million.
At the Shareholders’ Meeting of May 23, 2024, shareholders will be asked to approve a dividend of EUR 3.50 per share for fiscal year 2023.
On December 31, 2023, Schneider Electric SE had distributable reserves in an amount of EUR 3,102 million (versus EUR 2,941 million at December 31, 2022, not including profit for the year).
19.4 – Share-based payments
Nature and extent of existing share-based payments
The Board of Directors of Schneider Electric SE and later the Management Board have set up performance shares plans for senior executives and certain employees of the Group.
Rules governing the performance shares plans are as follows:
• to receive the shares, the grantee must generally be an employee or corporate officer of the Group. Vesting is also conditional on the achievement of performance criteria;
• the vesting period is three to four years;
• the lock-up period is zero or one year.
The main characteristics of these plans were as follows at December 31, 2023:
LTIP 2020 LTIP 2021 LTIP 2022 LTIP 2023 TOTAL
Plan no. Plan 36 & 37 Plan 38 & 39 Plan 40 & 41 Plan 42 Plan 42bis & 43
Plan 37bis Plan 39bis Plan 41bis Plan 42ter
Plan 37ter Plan 39ter Plan 41ter Plan 42quater
Date of Annual Shareholders’ Meeting Apr. 25, 2017 Apr. 25, 2018 Apr. 25, 2019 May 5, 22 May 5, 22
Apr. 25, 2017 Apr. 25, 2018 May 5, 2022 May 5, 2022
Apr. 25, 2017 Apr. 25, 2018 May 5, 2022 May 5, 2022
Date of the grant by the Board Mar. 24, 2020 Mar. 25, 2021 Mar. 24, 2022 Mar. 28, 2023 May 4, 23
Oct. 21, 2020 July 29, 2021 July 27, 2022 July 26, 2023 Oct. 21, 2020 Oct.26, 2021 Oct.26, 2022 Oct. 25, 2023
Vesting date Mar. 24, 2023 Mar. 25, 2024 Mar. 24, 2025 Mar. 28, 2023 May 4, 26
Oct. 23, 2023 July 29, 2024 July 27, 2025 July 26, 2026 Oct. 23, 2023 Oct 26, 2024 Oct.26, 2025 Oct. 25, 2026
End of holding period Mar. 24, 2024 for Mar. 25, 2025 for Mar. 24, 2026 for May 4, 2027 for Plan 36 Plan 38 Plan 40 Plan 43
Number of performance shares
Outstanding as of Dec. 31, 2022 2,013,503 1,479,719 1,402,324 – 4,895,546 Granted in 2023 – – – 1,510,001 1,510,001
Delivered in 2023 (1,951,976) (403) (397) – (1,952,776) Canceled in 2023 (61,527) (77,061) (67,912) (21,071) (227,571) Outstanding as of Dec. 31, 2023 – 1,402,255 1,334,015 1,488,930 4,225,200 Schneider Electric SE has not created shares in 2023 to deliver vested plans but used existing treasury shares. 216 of 1021
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Determination of fair values
In accordance with the accounting policies described in Note 1.20, the below fair value was calculated for each plan:
Plan no.
Fair Value per
share (in euros)
LTIP 2020
Plan 36 52.9
Plan 37 – ExCom 55.2
Plan 37 – Other 57.8
Plan 37bis 90.7
Plan 37ter – ExCom 85.3
Plan 37ter – Other 89.3
LTIP 2021
Plan 38 93.4
Plan 39 – ExCom 97.3
Plan 39 – Other 102.9
Plan 39bis 116.6
Plan 39ter 117.5
LTIP 2022
Plan 40 119
Plan 41 – ExCom 123
Plan 41 – Other 128.8
Plan 41bis 107.8
Plan 41ter 111
LTIP 2023
Plan 42 – Excom 119.2
Plan 42 – Other 124.5
Plan 42bis – Excom 127.1
Plan 43 127.1
Plan 42ter 139.4
Plan 42quater 118.1
IFRS 2 expense
The expense recorded under “Selling, general and administrative expenses” breaks down as follows:
(in millions of euros) Full Year 2023 Full Year 2022
Group LTIP 144 114
Aveva – 34
WESOP discount 41 –
Other 23 18
TOTAL 208 166
Worldwide Employee Stock Purchase Plan
Every year, Schneider Electric gives its employees the opportunity to become group shareholders thanks to employee share issues. In countries that meet legal and fiscal requirements, the classic plan has been proposed to employees. Under the plan, employees may purchase Schneider Electric shares at a 15% discount to the price quoted for the shares on the stock market. Employees must then hold their shares for five years, except in certain cases provided for by law.
On April 20, 2023, the Group gave its employees the opportunity to purchase shares at a price of EUR 126.20 per share, as part of its commitment to employee share ownership. This represented a 15% discount to the reference price of EUR 148.47 calculated as the average opening price quoted for the share during the 20 days preceding the Chief Executive Officer’s decision to launch the employee share issue.
Altogether, 1.7 million shares were subscribed, increasing the capital by EUR 219 million as of July 6, 2023.
As of December 31, 2023, the share-based payment expense recorded in accordance with IFRS 2, measured by reference to the fair value of the discount amounted to EUR 41 million.
19.5 – Schneider Electric SE treasury shares
On December 31, 2023, the Group held 14,518,652 Schneider Electric shares in treasury stock, which have been recorded as a deduction from retained earnings.
The Group has repurchased 4,493,173 shares for a total amount of EUR 703 million in 2023.
5.5 Notes to the consolidated financial statements
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19.6 – Income tax recorded in equity
REPORTI N T E G R A T E D
Total income tax recorded in equity amounts to EUR 172 million as of December 31, 2023 and can be analyzed as follows:
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022 Change in tax Cash-Flow hedges 25 19 6
Available-for-sale financial assets (19) (13) (6)
Actuarial gains/(losses) on defined benefits obligations 169 100 69 Other (3) (3) –
TOTAL 172 103 69
19.7 – Non-controlling interests
In 2023, the Group finalized the acquisition of AVEVA’s non-controlling interests. L&T, for which the Group holds 65%, is the main contributor of non-controlling interests.
Note 20: Pensions and other post-employment benefit
obligations
The Group has set up various post-employment benefit plans for employees covering pensions, termination benefits, healthcare, life insurance and other benefits, as well as long-term benefit plans for active employees.
The benefits offered to each employee depends on local laws and regulations and choices made by the subsidiaries.
Defined Contribution Pension Plans
The group policy regarding pensions is to propose defined contribution pension plans, including a contribution from the employer. This is the most common active benefit offered worldwide, including for example 401k in US and PERO in France.
The contribution to these plans is booked as an operating cost and do not translate into any further obligation by the employer.
Defined Benefit Pension Plans
The Group’s main Defined Benefit pension plans are located in the United Kingdom (UK) and the United States (US). They respectively represent 62% (2022: 57%) and 17% (2022: 24%) of the Group’s total Defined Benefit Obligations (DBO) on pensions. The majority of benefit obligations under these plans, which represent 91% of the Group’s total commitment at December 31, 2023, are partially or fully funded through payments to external funds. These funds are never invested in Group assets.
United Kingdom
The Group companies operate several Defined Benefit pension plans in the UK. The main one is related to the Invensys Pension Scheme.
Pensions payable to employees depend on average final salary and length of service within the Group. These plans are registered schemes under UK tax law and managed by independent Boards of Trustees. They are closed to new entrants, and for most of them, the vested rights were frozen as they have been replaced by Defined Contributions plans.
These plans are funded by employer contributions, which are negotiated every three years based on plan valuations carried out by independent actuaries, so that the long-term financing services are ensured.
In relation to risk management and asset allocation, the Board of Trustees’ aims of each plan are to ensure that it can meet its obligations to the plan’s beneficiaries both in the short and long-term. The Board of Trustees is responsible for the plan’s long-term investment strategy and defines and manages long-term investment strategies to reduce risks, including interest rate risks and longevity risks. A certain proportion of assets hedges the liability valuation change resulting from the interest rates evolution. Those assets are primarily invested in fixed income investments, particularly intermediate and longer-term instruments.
Following the agreement reached with the Trustee of the Invensys Pension Scheme on February 2014, Schneider Electric SE guaranteed all obligations of the Invensys subsidiaries which participate in the Scheme, up to a maximum amount of GBP 1.75 billion. At December 31, 2023, plan assets exceed the value of obligations subject to this guarantee and thus this guarantee cannot be called.
Schneider UK pension plans contain provisions of pension called Guaranteed Minimum Pension (“GMP”). GMPs were accrued for individuals who subscribed to the State Second Pension prior to April 6, 1997. Historically, there was an inequality in the benefits between male and female members concerning GMP.
A High Court case concluded on October 26, 2018, confirmed that all UK pension plans must equalize “GMPs” between men and women. 218 of 1021
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United States
The United States’ subsidiaries operate several Defined Benefit pension plans. These plans are closed to new entrants, frozen to future accruals and have been replaced by Defined Contributions plans. Pensions payable to employees depend on the average final salary and the length of service within the Group.
Each year, the Group companies contribute a certain amount to the Defined Benefit pension plans. This amount is determined actuarially and is comprised of service costs, administrative expenses and payments toward any existing deficits. Since the plans are closed and frozen, there is generally no service cost component.
The companies delegate various responsibilities to Pension Committees. These committees define and manage long-term investment strategies to reduce risks, including interest rate risks and longevity risks. A certain proportion of assets hedges the liability valuation change, resulting from the interest rates evolution. Those assets are primarily invested in fixed income investments, particularly intermediate and longer-term instruments.
In October 2022, a contract was purchased from an insurer for USD 518 million covering all current retirees and a portion of non-retirees of Invensys pension plan. The buy-in contract was purchased using assets from the pension trust and is accounted for at fair value as an investment of the trust. This transaction resulted in an additional net experience adjustment of USD 24 million recognized in other comprehensive income in 2022.
Effective in December 2023, the buy-in contract was converted to buy-out contract in conjunction with the plan termination. All liabilities were transferred to the insurer with no further benefit obligation for the Invensys.
France
The French subsidiaries offer a Retirement Benefit (ICDR) that can be either taken as a lumpsum at retirement or as time off (partial or full) before retirement is effective.
This benefit is calculated based on salary and years of services in company, according to the collective agreements and there is no funding requirement.
The French pension reform voted in April 2023 increased progressively the legal retirement age from 62 to 64 years old. The accounting impacts are not significant on the Group financial statements.
Assumptions
Actuarial valuations are generally performed each year. The assumptions used vary according to the economic conditions prevailing in the country concerned, as follows:
Group weighted average rate Of which United Kingdom Of which United States Dec. 31, 2023 Dec. 31, 2022 Dec. 31, 2023 Dec. 31, 2022 Dec. 31, 2023 Dec. 31, 2022 Discount rate 4.53% 4.82% 4.58% 4.85% 5.08% 5.35%
Rate of compensation increases 2.76% 2.58% 3.51% 3.63% n.a. n.a.
The discount rate is determined based on the interest rate for investment-grade (AA) corporate bonds or, if a liquid market does not exist, government bonds with a maturity that matches the duration of the benefit obligation. In the United States, the average discount rate is determined based on a yield curve for AA and AAA investment-grade corporate bonds.
In the Euro zone, the 2023 discount rate is 3.20% for the main plans.
The rate of compensation increases includes both the salary increase and inflation rate if relevant.
Weighted average duration of defined benefit obligations plans:
Total Of which United Kingdom Of which United States
Dec. 31, 2023 Dec. 31, 2022 Dec. 31, 2023 Dec. 31, 2022 Dec. 31, 2023 Dec. 31, 2022 Weighted average duration in years 10 9.9 9.7 9.7 9.7 9.4
5.5 Notes to the consolidated financial statements
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20.1 – Changes in provisions for pensions and other post-employment benefit obligations
REPORTI N T E G R A T E D
Annual changes in obligations, the market value of plan assets and the corresponding assets and provisions recognized in the financial statements can be analyzed as follows:
(in millions of euros)
Defined benefit
obligations Plan assets Asset ceiling Net Liability
Dec. 31, 2021 (9,686) 8,871 (210) (1,025)
of which UK (6,017) 6,524 (184) 323
of which US (2,170) 1,692 – (478)
Service cost (121) – – (121)
Past service cost (2) – – (2)
Curtailments and settlements 84 (79) – 5
Interest cost (203) – (4) (207)
Interest income – 170 – 170
Net impact in P&L, (expense)/profit (242) 91 (4) (155)
of which UK (131) 121 (4) (14)
of which US (117) 41 – (76)
Benefits paid 537 (473) – 64
Plan participants’ contributions (6) 6 – –
Employer contributions – 130 – 130
Changes in the scope of consolidation 10 (2) – 8
Actuarial gains/(losses) recognized in equity 2,395 (2,284) 26 137 Translation adjustment 102 (143) 8 (33)
Other changes (32) – – (32)
Dec. 31, 2022 (6,922) 6,196 (180) (906)
of which UK (3,977) 4 339 (140) 222
of which US (1,663) 1 287 - (376)
of which France (312) 66 - (246)
Service cost (66) – – (66)
Past service cost (3) – – (3)
Curtailments and settlements 517 (509) – 8
Interest cost (300) – (8) (308)
Interest income – 254 – 254
Net impact in P&L, (expense)/profit 148 (255) (8) (115) of which UK (199) 200 (8) (7)
of which US (65) 38 – (27)
of which France (18) 2 – (16)
Benefits paid 498 (439) – 59
Plan participants’ contributions (6) 6 – –
Employer contributions – 257 – 257
Changes in the scope of consolidation 30 (32) – (2)
Actuarial gains/(losses) recognized in equity (185) 50 16 (119) Translation adjustment (43) 69 (6) 20
Other changes (10) – – (10)
Dec. 31, 2023 (6,490) 5,852 (178) (816)
of which UK (4,018) 4,351 (130) 203
of which US (1,122) 937 – (185)
of which France (353) 65 – (288)
The Group defined benefit obligations of EUR 6,490 million (2022: EUR 6,922 million) are broken down as EUR 6,246 million (2022: EUR 6,678 million) for post-employment benefits and EUR 244 million (2022: EUR 244 million) for other post-employment and long-term benefits.
The post-employment benefits are broken down between EUR 5,702 million for pension of which 97% are funded, and EUR 544 million for lump sum benefits of which 69% are funded.
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The total present value of Defined Benefit Obligations breaks down as follows between wholly or partly funded plans and wholly unfunded plans:
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
Present value of wholly or partly funded benefit obligation (5,882) (6,334) Fair value on plan assets 5,852 6,196
Effect of assets ceiling (178) (180)
Net position of wholly or partly funded benefit obligation (208) (318) Present value of wholly or partly unfunded benefit obligation (608) (588) NET LIABILITY FROM FUNDED AND UNFUNDED PLANS (816) (906) Balance Sheet impact:
surplus of plans recognized as assets* 253 280
provisions recognized as liabilities (1,069) (1,186)
* The surplus of plans recognized as assets represents the assets in excess of the liabilities, generally assumed to be recoverable, and after applying any asset ceiling
Changes in gross items recognized in equity were as follows:
(in millions of euros) Full Year 2023 Full Year 2022
Actuarial (gains)/losses on Defined Benefit Obligations arising from demographic assumptions (40) (81) Actuarial (gains)/losses on Defined Benefit Obligations arising from financial assumptions 160 (2,490) Actuarial (gains)/losses on Defined Benefit Obligations from experience effects 66 176 Actuarial (gains)/losses on plan assets (50) 2,284
Effect of asset ceiling (17) (26)
TOTAL RECOGNIZED IN EQUITY DURING THE YEAR 119 (137)
of which UK (47) (146)
of which US 1 110
The table below shows the expected timing of benefit payments under pension and other post-employment benefit plans for the next 3 years:
(in millions of euros) United Kingdom United States Rest of the World Total 2024 320 85 79 484
2025 318 86 67 471
2026 309 86 76 471
Plans asset allocation:
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
Equity 8% 5%
Bonds 79% 73%
Others 13% 22%
TOTAL 100% 100%
20.2 – Sensitivity analysis
The effect of a ± 0.5% change in the discount rate and in the rate of compensation increases on the 2023 Defined Benefit Obligations is as follows:
United Kingdom United States Rest of the World Total
(in millions of euros) +0.5% –0.5% +0.5% –0.5% +0.5% –0.5% +0.5% –0.5% Discount rate (199) 216 (50) 54 (62) 66 (311) 336
Rate of compensation increases 83 (80) – – 46 (43) 129 (123)
5.5 Notes to the consolidated financial statements
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Note 21: Provisions for contingencies and charges
REPORTI N T E G R A T E D
(in millions of euros) Economic risks Customer risks Products risks Environmental
risks Restructuring Other risks Provisions
Dec. 31, 2021 270 147 675 350 160 422 2,024
of which long-term portion 169 104 150 315 12 341 1,091 Additions 40 36 240 39 144 162 661
Utilizations (63) (50) (233) (71) (113) (116) (646)
Reversals of surplus provisions – (1) (23) (1) (7) (42) (74) Translation adjustments 9 7 – 12 (1) 14 41
Changes in the scope of consolidation
and other (50) 10 25 (10) (12) 61 24
Dec. 31, 2022 206 149 684 319 171 501 2,030
of which long-term portion 130 97 155 278 8 326 994
Additions 59 43 305 39 92 255 793
Utilizations (49) (68) (219) (45) (82) (241) (704)
Reversals of surplus provisions – (2) (24) – (4) (28) (58) Translation adjustments (7) (5) (25) (10) (2) (17) (66) Changes in the scope of consolidation
and other – 2 6 (6) (6) 29 25
Dec. 31, 2023 209 119 727 297 169 499 2,020
of which long-term portion 124 61 194 256 16 308 959
Provisions are recognized following the principles described in Note 1.21.
Reconciliation with cash flow statement:
(in millions of euros) Full Year 2023 Full Year 2022
Increase of provision 793 661
Utilization of provision (704) (646)
Reversal of surplus provision (58) (74)
Provision variance excluding employee benefit obligation 31 (59) Employee benefit obligation net variance contribution to plan assets 56 91 INCREASE/(DECREASE) IN PROVISIONS IN CASH-FLOW STATEMENT 87 32 Note 22: Current and non-current financial liabilities
The breakdown of net debt is as follows:
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
Bonds 10,843 8,627
Other bank borrowings 1,793 42
Short-term portion of bonds (999) (1,299)
Short-term portion of long-term debt (45) (40)
NON-CURRENT FINANCIAL LIABILITIES 11,592 7,330
Commercial paper 1,018 1,491
Accrued interest 109 39
Other short-term borrowings 128 141
Bank overdrafts 42 123
Short-term portion of convertible and non-convertible bonds 999 1,299 Short-term portion of long-term debt 45 40
SHORT-TERM DEBT 2,341 3,133
TOTAL CURRENT AND NON-CURRENT FINANCIAL LIABILITIES 13,933 10,463 CASH AND CASH EQUIVALENTS (4,696) (3,986)
NET FINANCIAL DEBT excl. purchase commitments over non-controlling interests 9,237 6,477 Non-current purchase commitments over non-controlling interests 50 194 Current purchase commitments over non-controlling interests 80 4,554 NET FINANCIAL DEBT incl. purchase commitments over non-controlling interests 9,367 11,225 In January 2023, the Group has drawn 1,700 million under the Term loan facility set up to fund the acquisition of the minority interest of Aveva. This term loan matures in October 2025. As of December 31,2023, the amount used remains unchanged at 1,700 million at a rate of Euribor increased by a 0.56% margin.
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22.1 – Breakdown by maturity
Dec. 31, 2023 Dec. 31, 2022
(in millions of euros) Carrying amount Interests Carrying amount 2023 – – 3,133
2024 2,341 287 1,000
2025 3,503 232 1,047
2026 1,398 158 1,397
2027 1,747 140 1,741
2028 1,268 100 756
2029 1,390 87 794
2030 and beyond 2,286 219 595
TOTAL 13,933 1,223 10,463
22.2 – Breakdown by currency
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
Euro 13,723 10,236
US Dollar 8 41
Brazilian Real 63 16
Indian Rupee 74 77
Turkish Lira 16 8
Algerian Dinar 14 13
Other 35 72
TOTAL 13,933 10,463
22.3 – Bonds
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022 Interest rate Maturity Schneider Electric SE 2023 – 500 0.000% fixed June 2023 Schneider Electric SE 2023 – 799 1.500% fixed September 2023 Schneider Electric SE 2024 999 998 0.250% fixed September 2024 Schneider Electric SE 2025 749 747 0.875% fixed March 2025 Schneider Electric SE 2025 751 – 3.380% fixed April 2025 Schneider Electric SE 2025 300 300 1.841% fixed October 2025 Schneider Electric SE 2026 (OCEANEs) 650 651 0.000% fixed June 2026 Schneider Electric SE 2026 747 747 0.875% fixed December 2026 Schneider Electric SE 2027 498 497 1.000% fixed April 2027 Schneider Electric SE 2027 746 745 1.375% fixed June 2027 Schneider Electric SE 2027 499 498 3.250% fixed November 2027 Schneider Electric SE 2028 755 756 1.500% fixed January 2028 Schneider Electric SE 2028 496 – 3.250% fixed June 2028 Schneider Electric SE 2029 795 795 0.250% fixed March 2029 Schneider Electric SE 2029 594 – 3.130% fixed October 2029 Schneider Electric SE 2030 (OCEANEs) 582 – 1.970% fixed November 2030 Schneider Electric SE 2032 595 594 3.500% fixed November 2032 Schneider Electric SE 2033 495 – 3.500% fixed June 2033 Schneider Electric SE 2034 592 – 3.380% fixed April 2034 TOTAL 10,843 8,627
Schneider Electric SE has issued bonds on different markets:
• as part of its Euro Medium Term Notes (EMTN) program, bonds traded on the Paris stock exchange. Issues that had not yet matured as of December 31, 2023 are as follow:
− EUR 800 million worth of bonds issued in September 2016, at a rate of 0.25%, maturing in September 2024; − EUR 200 million worth of bonds issued in July 2019, at a rate of 0.25%, maturing in September 2024; − EUR 750 million worth of bonds issued in March 2015, at a rate of 0.875%, maturing in March 2025; − EUR 750 million worth of bonds issued in April 2023, at a rate of 3.375%, maturing in April 2025; − EUR 200 million and EUR 100 million worth of Climate bonds issued successively in October and December 2015, at a rate of 1.841%, maturing in October 2025;
− EUR 750 million worth of bonds issued in December 2017, at a rate of 0.875%, maturing in December 2026; − EUR 500 million worth of bonds issued in April 2020, at a rate of 1.00%, maturing in April 2027; − EUR 750 million worth of bonds issued in June 2018, at a rate of 1.375%, maturing in June 2027; − EUR 500 million worth of bonds issued in November 2022, at a rate of 3.25%, maturing in November 2027; − EUR 500 million worth of bonds issued in January 2019 and EUR 250 million worth of bonds issued in May 2019, at a rate of 1.50%, maturing in January 2028;
− EUR 500 million worth of bonds issued in June 2023, at a rate of 3.25%, maturing in June 2028; − EUR 800 million worth of bonds issued in March 2020, at a rate of 0.25%, maturing in March 2029;
5.5 Notes to the consolidated financial statements
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I N T E G R A T E D
− EUR 600 million worth of bonds issued in October 2023, at a rate of 3.125%, maturing in October 2029; − EUR 600 million worth of bonds issued in November 2022, at a rate of 3.50%, maturing in November 2032; − EUR 500 million worth of bonds issued in June 2023, at a rate of 3.50%, maturing in June 2033; – EUR 600 million worth of bonds issued in January 2023, at a rate of 3.375%, maturing in April 2034.
In addition, the Group has issued a bond that is convertible into or exchangeable for a new or existing shares (OCEANEs) for EUR 650 million at a rate of 0.00%, maturing in June 2026. The OCEANE has a debt component, assessed on inception date on the basis of the market interest rate applied to an equivalent non-convertible bond, is recognized in non-current financial debts and an optional component recognized in equity. At end of December 2023, the debt component recorded at net book value amounts to EUR 651 million and the optional component to EUR 42 million.
The initial conversion and/or exchange ratio of the Bonds was one share per Bond with a nominal value set at EUR 176.44 and has been adjusted to 1.007 shares per bond in May 2023. According to Sustainability-Linked Financing Framework, if the average sustainability performance score (calculated as the arithmetic average of the scores of the three key performance indicators) does not reach a certain level by December 31, 2025, the Group will pay an amount equal to 0.50% of the face value.
The three key performance indicators from the 11 new Schneider Sustainability Impact (SSI) 2021-2025 indicators are the following:
• Climate: Deliver 800 megatons of saved and avoided CO2 emissions to our customers;
• Equality: Increase gender diversity, from hiring to front-line managers and leadership teams (50/40/30); • Generation: Train 1 million underprivileged people in energy management.
The detailed rating methodology and approach are presented in the Group’s Sustainability-Linked Financing Framework.
The Group has also issued in 2023 OCEANEs for EUR 650 million at a rate of 1.97%, maturing in November 2030. At end of December 2023, the debt component recorded at net book value amounts to EUR 584 million and the optional component to EUR 66 million. The initial conversion and/or exchange ratio of the Bonds was 426.66 shares per bond with a nominal value set at EUR 100,000.00 corresponding to EUR 234.38 per share.
For all those transactions, issue premium and issue costs are amortized per the effective interest rate method.
22.4 – Cash flow statement impact
Non Cash Variation
(in millions of euros) Dec. 31, 2022 Cash variations Scope impacts Forex and others Dec. 31, 2023 Bonds 8,627 2,210 – 6 10,843
Other borrowings 1,713 1,304 2 29 3,048
Bank overdrafts 123 (128) – 47 42
TOTAL CURRENT AND NON-CURRENT
FINANCIAL LIABILITIES 10,463 3,386 2 82 13,933
22.5 – Purchase commitments over non-controlling interests (in millions of euros) Maturity Dec. 31, 2023 Dec. 31, 2022 Current portion 80 4,554
Non-current portion 2025–2027 50 194
TOTAL PURCHASE COMMITMENTS OVER NON-CONTROLLING INTEREST 130 4,748 In 2023, purchase commitments over non-controlling interests mainly relates to ETAP, Qmerit and EnergySage. In 2022, current portion corresponded to the commitment over AVEVA’s non-controlling interests preceding the transaction described in note 2. 224 of 1021
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Note 23: Classification of financial instruments
The Group uses financial instruments to manage its exposure to fluctuations in interest rates, exchange rates and metal prices.
Financial assets and liabilities can be classified at the fair value following the hierarchy levels below:
1. Level 1: market value (non-adjusted) on active markets, for similar assets and liabilities, which the company can obtain on a given valuation date;
2. Level 2: data other than the market rate available for level 1, which are directly or indirectly observable on the market;
3. Level 3: data on the asset or liability that are not observable on the market.
23.1 – Balance sheet exposure and fair value hierarchy
Dec. 31, 2023
(in millions of euros) Carrying amount
Fair value
through P&L
Fair value
through equity
Financial
assets/liabilities
measured at
amortized cost Fair value
Fair value
hierarchy
ASSETS:
Listed financial assets 15 15 – – 15 Level 1
Venture capital (FCPR)/mutual funds
(SICAV) 132 132 – – 132 Level 3
Other unlisted financial assets 554 94 460 – 554 Level 3 Other non-current financial assets 544 – 253 291 544 Level 2 TOTAL NON-CURRENT ASSETS 1,245 241 713 291 1,245
Trade accounts receivables 8,388 – – 8,388 8,388 Level 2 Marketable securities 2,024 2,024 – – 2,024 Level 1
Negotiable debt securities and short-term
deposits 588 588 – – 588 Level 2
Cash 2,084 2,084 – – 2,084 Level 2
Derivative instruments - foreign currencies 73 42 31 – 73 Level 2 Derivative instruments - interest rates 44 44 – 44 Level 2 Derivative instruments - commodities 4 – 4 – 4 Level 2
TOTAL CURRENT ASSETS 13,205 4,782 35 8,388 13,205
LIABILITIES:
Long-term portions of non-convertible
bonds * (8,612) – – (8,612) (8,488) Level 1
Long-term portions of convertible bonds * (1,232) – – (1,232) (1,218) Level 2 Non-current purchase commitments over
noncontrolling interests (50) – (50) – (50) Level 2
Other long-term debt (1,748) – – (1,748) (1,748) Level 2 TOTAL NON-CURRENT LIABILITIES (11,642) – (50) (11,592) (11,504) Short-term portion of bonds * (999) – – (999) (977) Level 1 Short-term debt (1,342) – – (1,342) (1,342) Level 2
Trade accounts payable (7,596) – – (7,596) (7,596) Level 2 Current purchase commitments over
noncontrolling interests (80) – (80) – (80) Level 2
Other (100) – – (100) (100) Level 2
Derivative instruments - foreign currencies (48) (48) – – (48) Level 2 Derivative instruments - interest rates – – – – – Level 2 Derivative instruments - commodities (1) – (1) – (1) Level 2 TOTAL CURRENT LIABILITIES (10,166) (48) (81) (10,037) (10,144) * The majority of financial instruments listed in the balance sheet have a fair value close to their book value, except for bonds, for which the amortized cost in the balance sheet represents EUR 10,843 million compared to EUR 10,683 million at fair value.
5.5 Notes to the consolidated financial statements
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I N T E G R A T E D
Dec. 31, 2022
(in millions of euros) Carrying amount
Fair value
through P&L
Fair value
through equity
Financial
assets/liabilities
measured at
amortized cost Fair value
Fair value
hierarchy
ASSETS:
Listed financial assets 14 14 – – 14 Level 1
Venture capital (FCPR)/mutual funds
(SICAV) 119 119 – – 119 Level 3
Other unlisted financial assets 478 96 382 – 478 Level 3 Other non-current financial assets 514 – 280 234 514 Level 2 TOTAL NON-CURRENT ASSETS 1,125 229 662 234 1,125
Trade accounts receivables 7,514 – – 7,514 7,514 Level 2 Marketable securities 1,716 1,716 – – 1,716 Level 1
Negotiable debt securities and short-term
deposits 693 693 – – 693 Level 2
Cash 1,577 1,577 – – 1,577 Level 2
Derivative instruments - foreign currencies 62 62 – – 62 Level 2 Derivative instruments - interest rates – – – – – Level 2 Derivative instruments - commodities 11 – 11 – 11 Level 2 TOTAL CURRENT ASSETS 11,573 4,048 11 7,514 11,573
LIABILITIES:
Long-term portions of non-convertible
bonds * (6,677) – – (6,677) (6,210) Level 1
Long-term portions of convertible bonds * (651) – – (651) (577) Level 2 Non-current purchase commitments over
noncontrolling interests (194) – (194) – (194) Level 2
Other long-term debt (2) – – (2) (2) Level 2
TOTAL NON-CURRENT LIABILITIES (7,524) – (194) (7,330) (6,983) Short-term portion of bonds * (1,299) – – (1,299) (1,288) Level 1 Short-term debt (1,834) – – (1,834) (1,834) Level 2
Trade accounts payable (6,254) – – (6,254) (6,254) Level 2 Current purchase commitments over
noncontrolling interests (4,554) – (4,554) – (4,554) Level 2 Other (174) – – (174) (174) Level 2
Derivative instruments - foreign currencies (264) (182) (82) – (264) Level 2 Derivative instruments - interest rates (3) (3) – – (3) Level 2 Derivative instruments - commodities – – – – – Level 2
TOTAL CURRENT LIABILITIES (14,382) (185) (4,636) (9,561) (14,371) * The majority of financial instruments listed in the balance sheet have a fair value close to their book value, except for bonds, for which the amortized cost in the balance sheet represents EUR 8,627 million compared to EUR 8,075 million at fair value. 226 of 1021
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23.2 – Derivative instruments
Dec. 31, 2023
(in millions of euros)
Accounting
qualification Maturity
Nominal
sales
Nominal
purchases Fair Value
Carrying
amount in
assets
Carrying
amount in
liabilities
Carrying
amounts in
OCI
Forwards contracts CFH < 1 year 483 (296) 3 10 (7) 2
Forwards contracts CFH < 2 years 69 (30) – 1 (1) –
Forwards contracts CFH > 2 years 3 (7) – – – –
Forwards contracts FVH < 1 year 1,755 (1,659) 1 18 (17) – Forwards contracts FVH < 2 years 550 – 17 17 – 8
Forwards contracts NIH < 1 year 714 – 12 12 – 12
Forwards contracts Trading < 1 year 990 (3,944) (17) 5 (22) – Cross currency swaps CFH < 1 year 65 (18) (1) – (1) (1) Cross currency swaps NIH > 2 years 502 – 10 10 – 10
TOTAL FOREIGN CHANGE
DERIVATIVES 5,131 (5,954) 25 73 (48) 31
Forwards contracts CFH < 1 year – (409) 3 4 (1) 3
Commodities derivatives – (409) 3 4 (1) 3
Interest Rate Swap FVH > 2 years 1,050 (1,050) 44 44 – – Interest Rate Derivatives 1,050 (1,050) 44 44 – –
TOTAL 6,181 (7,413) 72 121 (49) 34
Dec. 31, 2022
(in millions of euros)
Accounting
qualification Maturity Nominal sales
Nominal
purchases Fair Value
Carrying
amount in
assets
Carrying
amount in
liabilities
Carrying
amounts in
OCI
Forwards contracts CFH < 1 year 579 (316) – 14 (14) –
Forwards contracts CFH < 2 years 31 (19) – 1 (1) –
Forwards contracts CFH > 2 years 12 (19) – 1 (1) –
Forwards contracts FVH < 1 year 1,762 (5,493) (118) 37 (155) (3) Forwards contracts NIH < 1 year 420 – 2 2 – 2
Forwards contracts Trading < 1 year 221 (1,811) 1 6 (5) – Cross currency swaps CFH < 1 year 75 (46) – 1 (1) 4
Cross currency swaps NIH < 1 year 797 – (87) – (87) (85) TOTAL FX DERIVATIVES 3,897 (7,704) (202) 62 (264) (82)
Forwards contracts CFH < 1 year – (419) 11 11 – 11
Commodities derivatives – (419) 11 11 – 11
Interest Rate Swap FVH > 2 years 250 (250) (3) – (3) –
Interest Rate Derivatives 250 (250) (3) – (3) –
TOTAL 4,147 (8,373) (194) 73 (267) (71)
5.5 Notes to the consolidated financial statements
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23.3 – Foreign currency hedges
REPORTI N T E G R A T E D
Since a significant proportion of affiliates’ transactions are denominated in currencies other than the affiliate’s functional currency, the Group is exposed to currency risks. If the Group is not able to hedge these risks, fluctuations in exchange rates between the functional currency and other currencies can have a significant impact on its results and distort year-on-year performance comparisons. As a result, the Group uses derivative instruments to hedge its exposure to exchange rates mainly through FX forwards and natural hedges. Furthermore, some long-term loans and borrowings granted to the affiliates are considered as net investment in foreign operations according to IAS 21.
Schneider Electric’s currency hedging policy is to protect its subsidiaries against risks on transactions denominated in a currency other than their functional currency. Hedging approaches are detailed in Note 1.23.
The breakdown of the nominal of foreign change derivatives related to operating and financing activities is as follows:
Dec. 31, 2023
(in millions of euros) Sales Purchases Net
US Dollar 2,304 (2,321) (17)
Chinese Yuan 97 (581) (484)
Danish Crown 22 (202) (180)
Singapore Dollar 409 (621) (212)
Swedish Crown 49 (108) (59)
Japanese Yen 29 (184) (155)
Swiss Franc 13 (107) (94)
UAE Dirham 27 (95) (68)
Brazilian real 76 (12) 64
Canadian Dollar 45 (17) 28
Australian Dollar 54 (65) (11)
Saudi Riyal 25 (41) (16)
Norwegian Krone 23 (37) (14)
British Pound 1,430 (1,114) 316
South African Rand 48 (10) 38
Hong Kong Dollar 47 (106) (59)
Others 433 (333) 100
TOTAL 5,131 (5,954) (823)
23.4 – Interest rate hedges
Interest rate risk on borrowings is managed at the Group level, based on consolidated debt and taking into consideration market conditions to optimize overall borrowing costs. The Group uses derivative instruments to hedge its exposure to interest rates through swaps or cross-currency swaps. Cross-currency swaps may be presented both as foreign exchange hedges and interest rate hedges depending on the characteristics of the derivative.
During the fiscal year 2023, the Group has set up EUR 800 million interest rate swaps to hedge its exposure.
Dec. 31, 2023 Dec. 31, 2022
(in millions of euros) Fixed Rates Floating rates Total Fixed Rates Floating rates Total Total current and non-current financial
liabilities 10,843 3,090 13,933 8,627 1,836 10,463
Cash and cash equivalent – (4,696) (4,696) (3,986) (3,986) NET DEBT BEFORE HEDGING 10,843 (1,606) 9,237 8,627 (2,150) 6,477 Impact of Hedges (1,050) 1,050 – (250) 250 –
NET DEBT AFTER HEDGING 9,793 (556) 9,237 8,377 (1,900) 6,477 228 of 1021
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23.5 – Commodity hedges
The Group is exposed to fluctuations in energy and raw material prices, in particular steel, copper, aluminum, silver, lead, nickel, zinc and plastics. If the Group is not able to hedge, compensate for or pass on to customers any such increased costs, this could have an adverse impact on its results. The Group has, however, implemented certain procedures to limit exposure to rising non-ferrous and precious raw material prices. The Purchasing departments of the operating units report their purchasing forecasts to the Corporate Finance and Treasury department. Purchase commitments are hedged using forward contracts, swaps and, to a lesser extent, options.
All commodities instruments are futures and options designated as cash flow hedge under IFRS standards, of which:
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
Fair value 3 11
Nominal amount (409) (419)
23.6 – Financial assets and liabilities subject to netting In accordance with IFRS 7 standards, this section discloses financial instruments that are subject to netting agreements.
Dec. 31, 2023
(in millions of euros) Gross amounts
Gross amounts
offset in the
statement of
financial position
Net amounts
presented in the
statement of
financial position
Related amounts
not offset in the
statement of
financial position
Net amounts as
per IFRS 7
Financial assets 121 – 121 (40) 81
Financial liabilities (49) – (49) 40 (9)
Dec. 31, 2022
(in millions of euros) Gross amounts
Gross amounts
offset in the
statement of
financial position
Net amounts
presented in the
statement of
financial position
Related amounts
not offset in the
statement of
financial position
Net amounts as
per IFRS 7
Financial assets 73 – 73 – 73
Financial liabilities (264) – (264) – (264)
The Group trades over-the-counter derivatives with tier-one banks under agreements which provide for the offsetting of amounts payable and receivable in the event of default by one of the contracting parties. These conditional offsetting agreements do not meet the eligibility criteria within the meaning of IAS 32 for offsetting derivative instruments recorded under assets and liabilities. However, they do fall within the scope of disclosures under IFRS 7 on offsetting.
23.7 – Counterparty risk
Financial transactions are entered with carefully selected counterparties. Banking counterparties are chosen according to the customary criteria, including the credit rating issued by an independent rating agency.
Group policy consists of diversifying counterparty risks and periodic controls are performed to check compliance with the related rules. In addition, the Group takes out substantial credit insurance and uses other types of guarantees to limit the risk of losses on trade accounts receivable.
23.8 – Liquidity risk
As of December 31, 2023, the Group had confirmed credit lines of EUR 2.950 million, all unused with EUR 2.850 million maturing after December 2024. Among them, EUR 2.700 million are sustainable-linked credit line with margin indexed on the annual performance of the Schneider Sustainability Impact (SSI).
With EUR 2.9 billion available committed facility and EUR 4.7 billion cash & cash equivalent, the liquidity of the Group amounts to EUR 7.6 billion end of the year. In the next 12 months, the total short term and bond maturity amounts to EUR 2.3 billion.
Loan Agreement and committed credit lines do not include any financial covenants or credit rating triggers in case of rating downgrade.
23.9 – Financial risk management
Foreign currency risk arises from the Group undertaking a significant number of foreign currency transactions in the course of operations.
These exposures arise from sales in currencies other than the Group’s presentational currency of Euro.
The main exposure of the Group in terms of currency exchange risk is related to the US dollar, Chinese Yuan and currencies linked to the US dollar. In 2023, revenue in foreign currencies amounted to EUR 29.2 billion (EUR 27.3 billion in 2022), including around EUR 11.2 billion in US dollars and EUR 4.5 billion in Chinese yuan (respectively EUR 9.9 and EUR 4.8 billion in 2022).
The Group manages its exposure to currency risk to reduce the sensitivity of earnings to changes in exchange rates. The financial instruments used to hedge the Group’s exposure to fluctuations in exchange rates are described above.
5.5 Notes to the consolidated financial statements
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The table below shows the impact of a 10% change in the US dollar and the Chinese Yuan against the Euro on Revenue and Adjusted EBITA. It includes the impact from the translation of financial statements into the Group’s presentation currency and assumes no scope impact.
Dec. 31, 2023
(in millions of euros)
Increase/
(decrease) in
average rate Revenue Adj. EBITA
US Dollar 10% 1,122 212
(10)% (1,020) (193)
Chinese Yuan 10% 454 122
(10)% (413) (111)
Dec. 31, 2022
(in millions of euros)
Increase/
(decrease) in
average rate Revenue Adj. EBITA
US Dollar 10% 990 162
(10)% (900) (147)
Chinese Yuan 10% 478 121
(10)% (434) (110)
Note 24: Employees
24.1 – Employees
The Group average number of permanent and temporary employees is as follows:
(number of employees) Full Year 2023 Full Year 2022
Production 86,482 81,506
Administration 81,562 80,833
TOTAL AVERAGE WORKFORCE 168,044 162,339
of which Western Europe 42,927 41,482
of which North America 41,145 37,839
of which Asia-Pacific 61,946 59,045
of which Rest of the world 22,026 23,973
24.2 – Employee benefit expense
(in millions of euros) Full Year 2023 Full Year 2022
Payroll costs (9,872) (8,764)
Profit-sharing and incentive bonuses (53) (62)
Share-based payments (208) (184)
EMPLOYEE BENEFITS EXPENSE (10,133) (9,010)
24.3 – Benefits granted to senior executives
In 2023, the Group granted EUR 2.2 million in attendance fees to the members of its Board of directors. The total amount of gross remuneration, including benefits in kind, paid in 2023 by the Group to the members of Senior Management, excluding executive directors, totaled EUR 37.8 million, of which EUR 10.6 million corresponded to the variable portion.
During the last three financial years, 497,792 performance shares have been allocated, excluding Corporate Officers. No stock options have been granted during the last three financial years. In 2023, performance shares were allocated under the 2023 long-term incentive plans 42 and 42bis. Since December 16, 2011, 100% of performance shares are conditional on the achievement of performance criteria for members of the Executive Committee.
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Note 25: Related party transactions
25.1 – Transactions with associates
Companies over which the Group has significant influence are accounted through the equity method. Transactions with these related parties are carried out on arm’s length terms.
Related party transactions were not material in 2023.
25.2 – Transactions with key management personnel
No transactions were carried out during the year with members of the supervisory board or management board. Compensation and benefits paid to the Group’s top senior executives are described in Note 24.
Note 26: Commitments and contingent liabilities
26.1 – Guarantees and similar undertakings
The following table discloses the maximum exposure on guarantees given and received:
(in millions of euros) Dec. 31, 2023 Dec. 31, 2022
Market counter guarantees* 3,551 3,543
Pledges, mortgages and sureties** 207 181
Other commitments given 411 435
GUARANTEES GIVEN 4,169 4,159
Endorsements and guarantees received 168 80
GUARANTEES RECEIVED 168 80
* On certain contracts, customers require some commitments to guarantee that the contract will be fully executed by the subsidiaries of the Group. The risk linked to the commitment is assessed and a provision for contingencies is recorded when the risk is considered probable and can be reasonably estimated. Market counter guarantees also include the guaranteed obligations towards pension schemes. ** Some loans are secured by property, plant and equipment and securities lodged as collateral.
26.2 – Contingent liabilities
As previously disclosed, investigations were conducted in September 2018 by the French judicial authority and French Competition Authority (“Autorité de la concurrence”) at Schneider Electric’s head office and other premises concerning the sale of electrical products through commercial distribution activities in France.
On July 4, 2022, Schneider Electric received a statement of objections (“notification de griefs”) from the French Competition Authority alleging that the pricing autonomy of some distributors in the French market would have been limited, in breach of competition rules.
Schneider Electric strongly disagrees with the allegations of the statement of objections and has submitted its response to the French Competition Authority. The hearing in front of the French Competition Authority is not yet planned, the Group is expecting it to take place in 2024 and an enforceable decision may be issued late 2024 or 2025. Should the French Competition Authority deny Schneider Electric’s arguments and conclude that anti-competitive practices have been involved, it has broad discretion to determine on a case-by-case basis the financial fine it may impose in accordance with the principles of proportionality and individuality as described in its 2021 press release (https://www.autoritedelaconcurrence.fr/sites/default/files/Communique_sanction.pdf). This potential fine could not exist and could not exceed a maximum amount of 10% of the total 2021 Group revenue according to article L. 464-2 of the French Commercial Code.
Concurrently on October 7, 2022, Schneider Electric was indicted by an investigating judge who required Schneider Electric to provide a bank guarantee of €20 million and a cash guarantee of €80 million. Schneider Electric officially contested the indictment decision and raised numerous arguments in law and fact. Procedure is ongoing.
Those actions do not mean that Schneider Electric will ultimately be found guilty of any wrongdoing. Schneider Electric firmly disagrees with all the allegations made by the French investigating judge and the French Competition Authority and intends to vigorously and fully defend itself.
Considering the difficulty in assessing the extent to which the French Competition Authority considers the arguments of Schneider Electric in its defense as well as the multiple factors contributing to the determination of a fine, it is not possible to reliably estimate the amount of any potential fine that might be incurred in the event of an adverse decision, even though it might have a significant impact on the Group. In this context, no provision has been made at this stage of the case.
Schneider Electric has other contingent liabilities relating to legal, arbitration or regulatory proceedings arising in the normal course of its business. Known or ongoing claims and litigation involving the Group, or its subsidiaries were reviewed at the date on which the consolidated financial statements were approved for issue. Based on the advice of legal counsel, all provisions deemed necessary have been made to cover the related risks.
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Note 27: Subsequent events
REPORTI N T E G R A T E D
27.1 – Issuance of bonds
On January 10, 2024, the Group has issued two bonds, for EUR 600 million at a rate of 3.00% maturing in January 2031 and for EUR 700 million at a rate of 3.25% maturing in October 2035.
27.2 – ETAP
On January 23, 2024, the Group purchased the remaining 20% minority interests of ETAP in accordance with the forward agreement concluded in 2021 when it acquired 80% of the company.
27.3 – AUTOGRID
On December 14, 2023, the Group entered into an agreement with Uplight Inc. (in which Schneider Electric holds a strategic minority investment) to sell AutoGrid to Uplight. This transaction represents a reorganization among Schneider Electric-owned or affiliated businesses aimed at Prosumers, to better align their capabilities. The transaction, which closed on February 8, 2024, has raised the controlling stake of the Group in Uplight Inc., which will remain consolidated as an equity investment.
Note 28: Statutory Auditors’ fees
Fees paid by the Group to the Statutory Auditors and their networks:
Full Year 2023
(in thousands of euros) PwC % Mazars % Total
Statutory auditors, certification, examination of the parent company and consolidated accounts 11,956 88% 9,886 97% 21,842 o/w Schneider Electric SE 1,506 942 2,448
o/w subsidiaries 10,450 8,944 19,394
Services other than statutory audit –
Audit-related services (“SACC”)* 1,681 12% 349 3% 2,030 o/w Schneider Electric SE 413 16 429
o/w subsidiaries 1,268 333 1,601
TOTAL FEES 13,637 100% 10,235 100% 23,872
* Audit related services include services required by regulations and those provided at the request of the parent company or controlled entities, in particular: the review of environmental, social and societal information, contractual audits, comfort letters, audit certificates, agreed procedures, audits of procedures and information systems, and tax services that do not impair auditor independence.
Full Year 2022
(in thousands of euros) PwC % Mazars % Total
Statutory auditors, certification, examination of the parent company and consolidated accounts 11,271 92% 9,819 95% 21,090 o/w Schneider Electric SE 1,291 971 2,262
o/w subsidiaries 9,980 8,848 18,828
Services other than statutory audit –
Audit-related services (“SACC”)* 996 8% 522 5% 1,518
o/w Schneider Electric SE 348 – 348
o/w subsidiaries 648 522 1,170
TOTAL FEES 12,267 100% 10,341 100% 22,608
* Audit related services include services required by regulations and those provided at the request of the parent company or controlled entities, in particular: the review of environmental, social and societal information, contractual audits, comfort letters, audit certificates, agreed procedures, audits of procedures and information systems, and tax services that do not impair auditor independence. 232 of 1021
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Note 29: Consolidated companies
The main companies included in the Schneider Electric Group scope of consolidation are listed below:
(in % of interest) Dec. 31, 2023 Dec. 31, 2022
Europe
Fully consolidated
Nxtcontrol GmbH Austria 100 100
RIB Saa Software Engineering Gmbh Austria 90 90
Schneider Electric ”Austria” GMBH Austria 100 100
Schneider Electric Power Drives GmbH Austria 100 100
Schneider Electric Systems Austria GmbH Austria 100 100 Schneider Electric Energy Belgium SA Belgium 100 100
Schneider Electric ESS BV Belgium 100 100
Schneider Electric NV SA Belgium 100 100
Schneider Electric Services International Belgium 100 100 Schneider Electric Systems Belgium NV/SA Belgium 100 100 Proleit Bulgaria OOD Bulgaria 100 100
Schneider Electric Bulgaria EOOD Bulgaria 100 100
Schneider Electric d.o.o. Croatia 100 100
RIB Stavebni Software S.R.O. Czech Republic 100 100
Schneider Electric A.S. Czech Republic 98.3 98.3
Schneider Electric CZ S.R.O. Czech Republic 100 100
Schneider Electric Systems Czech Republic S.R.O. Czech Republic 100 100 Orbaekvej 280 A/S Denmark 100 100
RIB A/S Denmark 100 100
Schneider Electric Danmark A/S Denmark 100 100
Schneider Electric IT Denmark ApS Denmark 100 100
Schneider Electric Eesti AS Estonia 100 100
Schneider Electric Finland Oy Finland 100 100
Schneider Electric Fire & Security OY Finland 100 100
Schneider Electric Vamp Oy Finland 100 100
Applications Logiciels Pour Ingenierie ALPI France – 100 Behar-Securite France 100 100
Boissiere Finance France 100 100
Construction Electrique du Vivarais France 100 100
Dinel France – 100
Eckardt SAS France 100 100
EcoAct SAS FR France 100 –
France Transfo France 100 100
Invensys Holding France SAS France 100 100
Merlin Gerin Ales France 100 100
Merlin Gerin Loire France 100 100
Muller & Cie France 100 100
Newlog France 100 100
Rectiphase SAS France 100 100
Sarel - Appareillage Electrique France 100 100
Scanelec France 100 100
Schneider Electric Alpes France 100 100
Schneider Electric Energy France France 100 100
Schneider Electric France France 100 100
Schneider Electric Industries SAS France 100 100
Schneider Electric International France 100 100
Schneider Electric IT France France 100 100
Schneider Electric Manufacturing Bourguebus France 100 100 Schneider Electric SE France 100 100
Schneider Electric Solar France France 100 100
Schneider Electric Systems France France 100 100
Schneider Electric Telecontrol France 100 100
Schneider Toshiba Inverter Europe SAS France 60 60
Schneider Toshiba Inverter SAS France 60 60
Societe D’Application Et D’Ingenierie Industrielle Et Informatique - SA3I France 100 100 Societe Electrique d’Aubenas France 100 100
Societe Francaise de Constructions Mecaniques Et Electriques France 100 100 Societe Francaise Gardy France 100 100
Systemes Equipements Tableaux Basse Tension, SETBT France 100 100 Transfo Services France 100 100
ABN GmbH Germany 100 100
J&K Regeltechnik GmbH Germany 100 100
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(in % of interest) Dec. 31, 2023 Dec. 31, 2022
Merten GmbH Germany 100 100
Proleit GmbH Germany 100 100
RIB Cosinus Gmbh Germany 100 100
RIB Deutschland Gmbh Germany 100 100
RIB GmbH Germany 100 100
RIB IMS Gmbh Germany 100 100
Schneider Electric Automation GmbH Germany 100 100
Schneider Electric GmbH Germany 100 100
Schneider Electric Holding Germany GmbH Germany 100 100 Schneider Electric Investment AG Germany 100 100
Schneider Electric Operations Consulting GmbH Germany 100 100 Schneider Electric Real Estate GmbH Germany 100 100
Schneider Electric Sachsenwerk GmbH Germany 100 100
Schneider Electric Systems Germany GmbH Germany 100 100 Schneider Electric AEBE Greece 100 100
Schneider Electric Hungaria Villamossagi ZRT Hungary 100 100 SE - CEE Schneider Electric Közep-Kelet Europai Korlatolt Felelösségü Tarsasag Hungary 100 100 Schneider Electric Ireland Limited Ireland 100 100
Schneider Electric IT Limited Ireland 100 100
Schneider Electric IT Logistics Europe Limited Ireland 100 100 Validation Technologies (Europe) Ltd Ireland 100 100
Eliwell Controls S.r.l. Italy 100 100
Schneider Electric Industrie Italia S.p.a. Italy 100 100 Schneider Electric S.p.a. Italy 100 100
Schneider Electric Systems Italia S.p.a. Italy 100 100
Uniflair S.p.a. Italy 100 100
Lexel Fabrika, SIA Latvia 100 100
Schneider Electric Baltic Distribution Center Latvia 100 100 Schneider Electric Latvija SIA Latvia 100 100
UAB Schneider Electric Lietuva Lithuania 100 100
Industrielle De Reassurance S.A. Luxembourg 100 100
Schneider Electric Holding Luxembourg Luxembourg 100 100 American Power Conversion Corporation (A.P.C.) B.V. Netherlands 100 100 APC International Corporation B.V. Netherlands 100 100
BTR (European Holdings) Bv Netherlands 100 100
Clovis Systems B.V. Netherlands 70 70
InTwo International B.V Netherlands 100 100
Proleit B.V. Netherlands 100 100
Schneider Electric Ecommerce Europe B.V. Netherlands 100 100 Schneider Electric Logistic Centre B.V. Netherlands 100 100 Schneider Electric Systems Netherlands N.V. Netherlands 100 100 Schneider Electric The Netherlands B.V. Netherlands 100 100 ELKO AS (Elektrokontakt AS) Norway 100 100
Lexel Holding Norge AS Norway 100 100
Schneider Electric Norge AS Norway 100 100
Schneider Electric Elda S.A. Poland 100 100
Schneider Electric Industries Polska Sp. Z o.o. Poland 100 100 Schneider Electric Polska Sp. Z o.o. Poland 100 100
Schneider Electric Systems Poland Sp. Z o.o. Poland – 100 Schneider Electric Transformers Poland SpZoo Poland – 100 Schneider Electric Portugal, LDA Portugal 100 100
Schneider Electric Romania, SRL Romania 100 100
Schneider Electric Systems LLC Russia 100 100
Schneider Electric LLC Novi Sad Serbia 100 100
Schneider Electric Srbija doo Beograd Serbia 100 100
Schneider Electric Slovakia, Spol SRO Slovakia 100 100
Schneider Electric Systems Slovakia S.R.O. Slovakia 100 100 EcoAct Iberica ES Spain 100 –
Manufacturas Electricas S.A.U. Spain 100 100
Proleit Iberia Slu Spain 100 100
RIB Spain Sa Spain 100 100
Schneider Electric Espana, S.A.U Spain 100 100
Schneider Electric IT Spain, S.L. Spain 100 100
Schneider Electric Solar Spain, S.A. Spain 100 100
Schneider Electric Systems Iberica S.L. Spain 100 100
Telemantenimiento De Alta Tension, S.L. Spain 100 100
AB Crahftere 1 Sweden 100 100
Elektriska Aktiebolaget Delta Sweden 100 100
Elko AB Sweden 100 100
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(in % of interest) Dec. 31, 2023 Dec. 31, 2022
Lexel AB Sweden 100 100
Schneider Electric Buildings AB Sweden 100 100
Schneider Sweden 100 100
Schneider Sweden 100 100
Feller AG Switzerland 83.7 83.7
Gutor Electronic GmbH Switzerland – 100
RIB Cosinus Ag Switzerland 100 100
Schneider Electric (Suisse) SA Switzerland 100 100
Proleit Automation Ukraine 100 100
Schneider Electric Ukraine 100 100
Ascot Acquisition United Kingdom 100 100
Aveva Group plc (sub-group) United Kingdom 100 59.2
BTR Industries Ltd United Kingdom 100 100
BTR Property Holdings Ltd United Kingdom 100 100
EcoAct UK Carbon Clear Ltd United Kingdom 100 –
Invensys Group Holdings Ltd United Kingdom 100 100
Invensys Group Ltd United Kingdom 100 100
Invensys Holdings Ltd United Kingdom 100 100
Invensys International Holdings Ltd United Kingdom 100 100 Invensys Ltd United Kingdom 100 100
M&C Energy Group Limited United Kingdom 100 100
RIB Solutions (Uk) Ltd United Kingdom 100 100
Samos Acquisition Company Limited United Kingdom 100 100 Schneider Electric (UK) Limited United Kingdom 100 100
Schneider Electric Buildings UK Limited United Kingdom 100 100 Schneider Electric Controls UK Limited United Kingdom 100 100 Schneider Electric Invensys (UK) Ltd United Kingdom 100 100 Schneider Electric IT UK Ltd United Kingdom 100 100
Schneider Electric Limited United Kingdom 100 100
Schneider Electric Systems UK Limited United Kingdom 100 100 Tac Products Limited United Kingdom 100 100
Yorkshire Switchgear Group Limited United Kingdom 100 100 Accounted for by equity method
Carros Sensors Topco Ltd United Kingdom – 30
Delta Dore Finance SA (sub-group) France 20 20
Planon Beheer BV Netherlands 25 25
Schneider Lucibel Managed Services SAS France 50 50
North America
Fully consolidated
Power Measurement Ltd Canada – 100
Schneider Electric Canada Inc. Canada 100 100
Schneider Electric Solar Inc. Canada 100 100
Schneider Electric Systems Canada Inc. Canada 100 100
Electronica Reynosa S. de R.L. de C.V. Mexico 100 100
Industrias Electronicas Pacifico, S.A. de C.V. Mexico 100 100 Proleit S. De R. L. Mexico 100 66.67
Schneider Electric Mexico S.A. de C.V. Mexico 100 100
Schneider Electric Systems Mexico, S.A. de C.V. Mexico 100 100 Schneider Industrial Tlaxcala S.A. de C.V. Mexico 100 100 Schneider Mexico S.A. de C.V. Mexico 100 100
Schneider R&D, S.A. de C.V. Mexico 100 100
Square D Company Mexico, S.A. de C.V. Mexico 100 100
Steck De Mexico S.A. De C.V. Mexico 100 100
Telvent Mexico, S.A. de C.V. Mexico 100 100
American Power Conversion Holdings Inc. United States 100 100 ASCO Power Services, Inc. United States 100 100
ASCO Power Technologies, L.P. United States 100 100
Autogrid Systems, Inc. United States 91.81 91.81
BTR, LLC United States 100 100
Charge Holdings, LLC United States 85.4 85.25
Echo HoldCo LLC United States 90.84 90.84
EcoAct Inc US United States 100 –
ETAP Automation Inc. (sub-group) United States 80 80
EV Connect, LLC United States 99.43 95.52
Foxboro Controles S.A. United States 100 100
GPI Interim Inc. United States 100 100
H.S. Investments, LLC United States 100 100
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(in % of interest) Dec. 31, 2023 Dec. 31, 2022
Integration Technologies Corp. United States 60 60
Invensys LLC United States 100 100
Osisoft, LLC United States 100 59.2
Pro-Face America, LLC United States – 100
Proleit Corp. United States 100 100
Ranco Incorporated of Delaware United States 100 100
RIB Software North America Inc. United States 100 100
RIB US Cost Inc. United States 100 100
RIB Usa Inc. United States 100 100
Schneider Electric Buildings Americas, Inc. United States 100 100 Schneider Electric Buildings Critical Systems, Inc. United States 100 100 Schneider Electric Digital, Inc. United States 100 100
Schneider Electric Engineering Services, LLC United States 100 100 Schneider Electric Foundries LLC United States 100 100
Schneider Electric Holdings, Inc. United States 100 100 Schneider Electric IT Corporation United States 100 100 Schneider Electric IT Mission Critical Services, Inc. United States 100 100 Schneider Electric Solar Inverters USA, Inc. United States 100 100 Schneider Electric Systems USA, Inc. United States 100 100 Schneider Electric USA, Inc. United States 100 100
SE Vermont Ltd United States 100 100
Siebe Inc. United States 100 100
SNA Holdings Inc. United States 100 100
Square D Investment Company United States 100 100
Stewart Warner Corp. United States 100 100
Summit Energy Services, Inc. United States 100 100
Veris Industries LLC United States 100 100
Accounted for by equity method
Uplight Inc. United States 30.36 29.4
Asia-Pacific
Fully consolidated
Citect Corporation Limited Australia – 100
Clipsal Technologies Australia Pty Ltd Australia 100 100 Futureworx Proprietary Limited Australia 100 100
Nu-Lec Industries Pty Ltd Australia – 100
RIB Holdings Pty Ltd Australia 100 100
RIB Technologies Pty Ltd Australia 100 100
Scada Group Pty Limited Australia 100 100
Schneider Electric (Australia) Pty Limited Australia 100 100 Schneider Electric Australia Holdings Pty Ltd Australia 100 100 Schneider Electric Buildings Australia Pty Ltd Australia 100 100 Schneider Electric IT Australia Pty Ltd Australia 100 100 Schneider Electric Solar Australia Pty Ltd Australia 100 100 Schneider Electric Sustainability Business Australia Pty Ltd Australia 100 100 Schneider Electric Systems Australia Pty Ltd Australia 100 100 Serck Controls Pty Limited Australia 100 100
Tamco Electrical Industries Australia Pty Limited Australia 65 65 Beijing Leader Harvest Electric Technologies Co., Ltd China 100 100 Beijing Leader Harvest Energy Efficiency Investment Co., Ltd China 100 100 FSL Electric (Dongguan) Limited China 54 54
Guangzhou RIB Software Co., Ltd China 100 100
Guangzhou Two Information Technology Co., Ltd China 100 100 Jingxin Hongde (Beijing) Technology Co., Ltd. China 51 12.34 Pro-Face China International Trading (Shanghai) Co., Ltd China 100 100 Proleit Automation Systems (Shanghai) Co., Ltd China 100 100 Schneider (Beijing) Low Voltage Co., Ltd. China 95 95
Schneider (Beijing) Medium Voltage Co. China 100 100
Schneider (Shaanxi) Baoguang Electrical Apparatus Co. China 70 70 Schneider (Suzhou) Transformers Co. China 100 100
Schneider (Wuxi) Drives Co., Ltd. China 90 90
Schneider Busway (Guangzhou) Limited China 95 95
Schneider Electric (China) Company Limited China 100 100 Schneider Electric (Xiamen) Switchgear Co., Ltd China 100 100 Schneider Electric (Xiamen) Switchgear Equipment Co., Ltd China 100 100 Schneider Electric Equipment and Engineering (Xi’An) Co., Ltd China 100 100 Schneider Electric IT (China) Co., Ltd China 100 100
Schneider Electric IT (Xiamen) Co., Ltd China 100 100
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(in % of interest) Dec. 31, 2023 Dec. 31, 2022
Schneider Electric Manufacturing (Chongqing) Co., Ltd China 100 100 Schneider Electric Manufacturing (Wuhan) Co., Ltd China 100 100 Schneider Great Wall Engineering (Beijing) Co., Ltd China 100 100 Schneider Merlin Gerin Low Voltage (Tianjin) Co.,Ltd. China 75 75 Schneider Shanghai Apparatus Parts Manufacturing Co., Ltd China 100 100 Schneider Shanghai Industrial Control Co., Ltd China 80 80 Schneider Shanghai Low Voltage Terminal Apparatus Co., Ltd China 75 75 Schneider Shanghai Power Distribution Electrical Apparatus Co., Ltd China 80 80 Schneider Smart Technology Co., Ltd. China 100 100
Schneider South China Smart Technology (Guangdong) Co. Ltd. China 100 100 Schneider Switchgear (Suzhou) Co., Ltd China 58 58
Schneider Wingoal (Tianjin) Electric Equipment Co., Ltd China 100 100 Shanghai ASCO Electric Technology Co., Ltd. China 100 100 Shanghai Foxboro Co., Ltd China 100 100
Shanghai Invensys Process System Co., Ltd China 100 100 Shanghai Schneider Electric Power Automation Co., Ltd China 100 100 Shanghai Tayee Electric Co., LTD China 67.05 67.05
Shenzhen Easydrive Electric Co., Ltd China 51 51
Tianjin Wingoal Electric Equipment Co., Ltd. China 100 100 Uniflair (Zhuhai) Electrical Appliance Manufacturing Co., Ltd China 100 100 Wuxi Pro-Face Co., Ltd China 100 100
Zircon Investment (Shanghai) Co., Ltd China 74.5 74.5
Clipsal Asia Holdings Limited Hong Kong 100 100
Construction Computer Software (Asia) Ltd Hong Kong 100 100 Fed-Supremetech Limited Hong Kong 54 54
Himel Hong Kong Limited Hong Kong 100 100
MTWO Ltd Hong Kong 100 100
RIB Creative Limited Hong Kong 100 100
RIB Limited Hong Kong 100 100
RIB Software International Ltd Hong Kong 100 100
RIB Solutions Ltd Hong Kong 100 100
Schneider Electric (Hong Kong) Limited Hong Kong 100 100 Schneider Electric Asia Pacific Limited Hong Kong 100 100 Schneider Electric IT Hong Kong Limited Hong Kong 100 100 Two Hong Kong Ltd Hong Kong 100 100
Luminous Power Technologies Private Limited India 100 100 RIB Itwo Software Private Limited India 100 100
Schneider Electric India Private Limited India 65 65
Schneider Electric Infrastructure Limited India 75 75
Schneider Electric IT Business India Private Limited India 100 100 Schneider Electric President Systems Limited India 75 79.47 Schneider Electric Private Limited India 100 100
Schneider Electric Solar India Pte Ltd India 100 100
Schneider Electric Systems India Private Limited India 100 100 Winjit Technologies Private Limited India 100 75.5
Zenatix Solutions Private Limited India 95 –
PT Schneider Electric Indonesia Indonesia 100 100
PT Schneider Electric IT Indonesia Indonesia 100 100
PT Schneider Electric Manufacturing Batam Indonesia 100 100 PT Schneider Electric Systems Indonesia Indonesia 95 95 PT Schneider Indonesia Indonesia 95 95
PT Tamco Indonesia Indonesia 65 65
RIB Indonesia Indonesia 100 100
Ranco Japan Ltd Japan 100 100
Schneider Electric Japan Holdings Inc Japan 100 100
Schneider Electric Japan, Inc. Japan 100 100
Schneider Electric Solar Japan Inc. Japan 100 100
Schneider Electric Systems Japan Inc. Japan 100 100
Toshiba Schneider Inverter Corporation Japan 60 60
Schneider Electric Korea Limited Korea 100 100
Schneider Electric Systems Korea Ltd Korea 100 100
Desea Sdn. Bhd. Malaysia 100 100
Gutor Electronic Asia Pacific Sdn. Bhd. Malaysia – 100
Henikwon Corporation Sdn. Bhd. Malaysia 65 65
RIB Malaysia Sdn Bhd Malaysia 100 100
Schneider Electric (Malaysia) Sdn. Bhd. Malaysia 30 30
Schneider Electric Industries (M) Sdn. Bhd. Malaysia 100 100 Schneider Electric IT Malaysia Sdn. Bhd. Malaysia 100 100 Schneider Electric Systems (Malaysia) Sdn. Bhd. Malaysia 100 100
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(in % of interest) Dec. 31, 2023 Dec. 31, 2022
Tamco Switchgear (Malaysia) Sdn. Bhd. Malaysia 65 65
RIB Pacific Ltd New Zealand 100 100
Schneider Electric (NZ) Limited New Zealand 100 100
Schneider Electric Systems New Zealand Limited New Zealand 100 100 RIB Itwo Software Inc. Philippines 100 100
Schneider Electric (Philippines), Inc. Philippines 100 100 Schneider Electric IT Philippines Inc. Philippines 100 100 RIB International Holding Pte. Limited Singapore 100 100 RIB Singapore Pte Ltd Singapore 100 100
Schneider Electric Asia Pte. Ltd. Singapore 100 100
Schneider Electric Export Services Pte Ltd Singapore – 100 Schneider Electric IT Logistics Asia Pacific Pte Ltd Singapore 100 100 Schneider Electric IT Singapore Pte Ltd Singapore 100 100 Schneider Electric JV Holdings 2 Pte. Ltd. Singapore 65 65 Schneider Electric Overseas Asia Pte Ltd Singapore 100 100 Schneider Electric Singapore Pte Ltd Singapore 100 100
Schneider Electric South East Asia (HQ) Pte Ltd Singapore 100 100 Schneider Electric Systems Singapore Pte. Ltd. Singapore 100 100 Schneider Electric Lanka (Private) Limited Sri Lanka 100 65 Schneider Electric Systems Taiwan Corp. Taiwan 100 100
Schneider Electric Taiwan Co., Ltd Taiwan 100 100
RIB Thailand Pending Thailand 100 100
Schneider (Thailand) Limited Thailand 100 100
Schneider Electric CPCS (Thailand) Co., Ltd Thailand 100 100 Schneider Electric Solar (Thailand) Co., Ltd Thailand 100 100 Schneider Electric Systems (Thailand) Co., Ltd Thailand 100 100 Clipsal Vietnam Co., Ltd Viet Nam 100 100
Invensys Vietnam Ltd Viet Nam 100 100
RIB Vietnam Software Company Limited Viet Nam 100 100
Schneider Electric IT Vietnam Limited Viet Nam 100 100
Schneider Electric Manufacturing Vietnam Company Limited Viet Nam 100 100 Schneider Electric Vietnam Limited Viet Nam 100 100
Accounted for by equity method
Delixi Electric Limited (sub-group) China 50 50
Sunten Electric Equipment Co., Ltd China 25 25
Fuji Electric FA Components & Systems Co., Ltd (sub-group) Japan 36.8 36.8 Foxboro (Malaysia) Sdn. Bhd. Malaysia 49 49
Rest of the World
Fully consolidated
Himel Algerie Algeria – 100
Schneider Electric Algerie Algeria 100 100
Schneider Electric Argentina S.A. Argentina 100 100
Steck Electric S.A. Argentina 100 100
Schneider Electric Systems Argentina S.A. Argentina 100 100 Proleit Automaçao Ltda Brazil 100 100
Schneider Electric Brasil Automação de Processos Ltda Brazil 100 100 Schneider Electric Brasil Ltda Brazil 100 100
Schneider Electric IT Brasil Industria E Comercio De Equipamentos Eletronicos Ltda Brazil – 100 Steck Da Amazonia Industria Elétrica Ltda Brazil 100 100 Steck Distribuidora Ltda Brazil 100 100
Steck Industria Eletrica Ltda Brazil 100 100
Telseb Serviços de Engenharia E Comércio de Equipamentos Eletrônicos e Telecomunicações Ltda Brazil 100 100
Marisio S.P.A Chile 100 100
Schneider Electric Chile S.P.A Chile 100 100
Schneider Electric Systems Chile Limitada Chile 100 100 Schneider Electric de Colombia S.A.S Colombia 100 100
Schneider Electric Systems Colombia Ltda Colombia 100 100 Steck Andina S.A.S. Colombia 100 100
Schneider Electric Centroamerica Limitada Costa Rica 100 100 Schneider Electric Ecuador Ecuador 100 100
Sociedad Anonima Invensys Engineering & Service S.A.E. Egypt 51 51 Schneider Electric Distribution Company Egypt 91.99 91.99 Schneider Electric Egypt S.A.E. Egypt 92 92
Schneider Electric Engineering And Services - Free Zone S.A.E Egypt 51 51 Schneider Electric Systems Egypt S.A.E Egypt 60 60
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(in % of interest) Dec. 31, 2023 Dec. 31, 2022
Schneider Electric LLP Kazakhstan 85 100
Schneider Electric (Kenya) Limited Kenya 100 100
Kana Controls General Trading & Contracting Company WLL Kuwait 31.9 31.9 Schneider Electric Services Kuweit Kuwait 49 49
Schneider Electric Israël Ltd Israel 100 100
Schneider Electric East Mediterranean SAL Lebanon 100 100 Schneider Electric CFC Morocco 100 100
Schneider Electric Maroc Morocco 100 100
Schneider Electric Free Zone Enterprise Nigeria 100 100 Schneider Electric Nigeria Limited Nigeria 100 100
Schneider Electric Systems Limited Nigeria 100 100
Schneider Electric O.M LLC Oman 100 100
Schneider Solutions And Services (Private) Limited Schneider Electric Peru S.A. Pakistan 100 100 Schneider Electric Systems Limited Peru 100 100
Schneider Electric Systems del Peru S.A. Peru 100 100
Schneider Electric Services LLC Qatar 49 49
Electrical & Automation Saudi Arabian Manufacturing Company (LLC) Saudi Arabia 65 65 Schneider Electric Saudi Arabia Limited Saudi Arabia 100 100 Schneider Electric Systems Saudi Arabia Co. LTD. Saudi Arabia 100 100 Ccs Mining & Industrial (Pty) Limited South Africa 100 100 Construction Computer Software (Pty) Limited South Africa 100 100 Invensys SA (Pty) Ltd South Africa 100 100
Schneider Electric South Africa (Pty) Ltd South Africa 74.9 74.9 Gunsan Elektrik Malzemelerï Sanayï Ve Ticaret Anonïm Sïrketi Turkey 100 100 Himel Elektrik Malzemeleri Ticaret Anonim Sirketi Turkey – 100 Schneider Elektrik Sanayi Ve Ticaret A.S. Turkey 100 100 Schneider Enerji Endüstrisi Sanayi Ve Ticaret Anonim Sirketi Turkey – 100 Cimac FZCO United Arab Emirates 100 100
Construction Computer Software (Gulf) Llc United Arab Emirates 100 100 L&T Electrical And Automation FZE United Arab Emirates 65 65 Levtech Consulting Dmcc United Arab Emirates 100 100
Schneider Electric DC MEA FZCO United Arab Emirates 100 100 Schneider Electric FZE United Arab Emirates 100 100
Schneider Electric Systems Middle East FZE United Arab Emirates 100 100 Schneider Electric Systems de Venezuela, C.A. Venezuela 100 100 Schneider Electric Venezuela S.A. Venezuela 93.56 93.56
5.5 Notes to the consolidated financial statements
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5.6 Statutory Auditors’ report on the
REPORTI N T E G R A T E D
consolidated financial statements
To the Annual General Meeting of Schneider Electric S.E., Opinion
In compliance with the engagement entrusted to us by your Annual General Meeting, we have audited the accompanying consolidated financial statements of Schneider Electric SE for the year ended December 31, 2023.
In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group at December 31, 2023 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
The audit opinion expressed above is consistent with our report to the Audit and Risks Committee.
Basis for opinion
Audit framework
We conducted our audit in accordance with professional standards applicable in France. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under these standards are further described in the “Responsibilities of the Statutory Auditors relating to the audit of the consolidated financial statements” section of our report.
Independence
We conducted our audit engagement in compliance with the independence rules provided for in the French Commercial Code (Code de commerce) and the French Code of Ethics (Code de déontologie) for Statutory Auditors for the period from January 1, 2023 to the date of our report, and, in particular, we did not provide any non-audit services prohibited by Article 5(1) of Regulation (EU) No. 537/2014.
Justification of assessments – Key audit matters
In accordance with the requirements of Articles L. 821-53 and R. 821-180 of the French Commercial Code relating to the justification of our assessments, we inform you of the key audit matters relating to the risks of material misstatement that, in our professional judgment, were the most significant in our audit of the consolidated financial statements, as well as how we addressed those risks.
These matters were addressed as part of our audit of the consolidated financial statements as a whole, and therefore contributed to the opinion we formed as expressed above. We do not provide a separate opinion on specific items of the consolidated financial statements. 240 of 1021
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5.6 Statutory Auditors’ report on the consolidated financial statements Measurement of goodwill and trademarks with indefinite useful lives Notes 1.3, 1.8, 1.11, 5 and 9 to the consolidated financial statements Description of risk As of December 31, 2023, the carrying amount of goodwill and trademarks with indefinite useful lives was €24,664 million and €2,297 million respectively, representing 46% of the Group’s total assets.
As described in Notes 1.8 “Intangible assets” and 1.11 “Impairment of assets” to the consolidated financial statements, trademarks with indefinite useful lives and Cash Generating Units (CGUs) to which goodwill has been allocated are tested for impairment at least once a year and whenever there is an indication of impairment.
In line with the Group’s strategy of sustainable development and digital transformation, the Group has redefined its CGU groups.
Goodwill is tested at CGU group level, as described in note 1.11 “Impairment of assets” to the consolidated financial statements: Low Voltage, Medium Voltage, Secure Power, Industrial Automation, Industrial Automation Software, Energy Management Software and Sustainability.
The recoverable amount of a CGU is defined as the higher between its value in use and its fair value less costs to sell. The value in use of a CGU is determined by discounting future cash flows that will be generated by its underlying assets and which are based on the Group management’s economic assumptions and operating forecasts.
The recoverable amount of trademarks with an indefinite useful life is measured using the royalty method.
An impairment loss is recognized whenever the recoverable amount of a CGU or a trademark is less than its carrying amount, to the extent that its carrying amount exceeds its recoverable amount. When the tested CGU comprises goodwill, the impairment loss is primarily deducted therefrom.
The valuation of goodwill and trademarks with indefinite useful lives is a key audit matter due to their significance in the Group’s consolidated balance sheet and the level of judgment required by management to:
• define the CGUs, as improper mapping could lead the Group to not recognize, or to underestimate, the impairment of goodwill;
• determine the assumptions used for the impairment tests of goodwill, particularly the discount rate, perpetuity growth rate and the expected margin rates, the consideration of climate risks and, for trademarks with indefinite useful lives, royalty rates.
How our audit
addressed this risk
Our audit work consisted in:
• reviewing the methods used to determine the level of goodwill impairment testing, particularly regarding changes made during the year;
• comparing the carrying amount of assets tested with the accounting data; • assessing the procedures implemented by the Group to evaluate the discounted future cash flows underlying the determination of the value in use of each CGU and checking their consistency with the business plans/cash flow projections approved by the Group’s Board of Directors; • assessing the procedures implemented by the Group to evaluate the impact of climate risks in determining the value in use of each group of CGUs;
• for the main trademarks with indefinite useful lives, assessing the procedures implemented to model the revenue projections attached to the trademarks;
• assessing the reasonableness of the business forecasts underlying the future cash flows, in particular with respect to past performance;
• with the assistance of our valuation experts, assessing the assumptions used such as the discount rate, perpetuity growth rate and expected margin rates, as well as the sensitivity of impairment test results to changes in these key assumptions;
• corroborate the royalty rates used with respect to (i) the theoretical royalty rates determined at the acquisition date of the trademark and (ii) the performance achieved; • reconciling the sensitivity analyses performed by the Group with our sensitivity calculations, and, to this end, verifying in particular that no impairment would have been recognized if the Group had maintained 2022’s organization;
• verifying the arithmetical accuracy of the impairment tests.
Lastly, we assessed the appropriateness of the disclosures provided in the notes to the consolidated financial statements.
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I N T E G R A T E D
Uncertain tax positions and recognition and recoverability of deferred tax assets recognized for tax loss carryforwards Notes 1.3, 1.16, 1.21 and 14 to the consolidated financial statements Description of risk The Group operates in several different tax jurisdictions around the world. As a result, the company and its subsidiaries may be subject to audits or questions from local tax authorities. Situations where cash outflows are considered probable give rise to liabilities, measured on the basis of the known facts in the jurisdiction concerned.
In accordance with IFRIC 23 – Uncertainty over Income Tax Treatments, provisions covering uncertainties over tax treatments are presented under “Accrued taxes and payroll costs”, as specified in Note 1.21 to the consolidated financial statements.
In addition, the Group recognizes deferred tax assets in several countries based on its ability to recover them in future years. As of December 31, 2023, deferred tax assets in respect of tax loss carryforwards recognized in the consolidated balance sheet amounted to €629 million, mainly in France for an amount of €420 million.
As described in Note 1.16 to the consolidated financial statements, the Group only recognizes future tax relief arising from the use of tax loss carryforwards when it can be reasonably anticipated that such relief will be granted, including when such amounts can be carried forward indefinitely.
The Group’s ability to recover deferred tax assets on tax loss carryforwards is assessed by management at the end of each reporting period. The recognition and correct valuation of these deferred tax assets are subject to the quality of the forecasts made by the Group.
The recognition and recoverability of deferred tax assets relating to tax loss carryforwards and the recognition of liabilities for uncertain tax positions are key audit matters, given the judgment required from the Group to (i) assess the recoverability of the deferred taxes and (ii) estimate the likely outflow of resources in a constantly changing international environment.
How our audit
addressed this risk
We held meetings with management, gained an understanding of the internal control procedures implemented by the Group to identify tax risks, and, where appropriate, to recognize any tax loss.
With the assistance of our tax specialists, we also assessed the judgments made by management as part of our estimate of the income tax likely to be payable and the amount of any potential exposure, and, by extension, the reasonableness of the estimates as regards tax liabilities.
With regard to the recognition and recoverability of deferred tax assets relating to tax loss carryforwards, our audit approach consisted in assessing the Group’s likelihood of benefiting from future tax relief arising from the use of tax loss carryforwards, in particular with regard to:
• plans for the consumption of the tax loss carryforwards of the subsidiaries or tax consolidation groups concerned;
• the main data and assumptions underlying the plans for the consumption of tax loss carryforwards underlying the recognition and measurement of the corresponding deferred tax assets by the Group.
We also verified the appropriateness of the disclosures provided in the notes to the consolidated financial statements.
Specific verifications
As required by legal and regulatory provisions and in accordance with professional standards applicable in France, we have also performed the specific verifications on the information pertaining to the Group presented in the Board of Directors’ management report.
We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements.
We attest that the information pertaining to the Group presented in the management report includes the consolidated non-financial performance statement required under Article L. 225-102-1 of the French Commercial Code. However, in accordance with Article L. 823-10 of the French Commercial Code, we have not verified the fair presentation and consistency with the consolidated financial statements of the information given in that statement, which will be the subject of a report by an independent third party.
Other verifications and information pursuant to legal and regulatory requirements Presentation of the consolidated financial statements to be included in the annual financial report In accordance with professional standards applicable to the Statutory Auditors’ procedures for annual and consolidated financial statements presented according to the single European electronic reporting format, we have verified that the presentation of the consolidated financial statements to be included in the annual financial report referred to in paragraph I of Article L. 451-1-2 of the French Monetary and Financial Code (Code monétaire et financier) and prepared under the Chief Executive Officer’s responsibility, complies with this format, as defined by European Delegated Regulation No. 2019/815 of December 17, 2018. As it relates to the consolidated financial statements, our work included verifying that the markups in the financial statements comply with the format defined by the aforementioned Regulation.
On the basis of our work, we conclude that the presentation of the consolidated financial statements to be included in the annual financial report complies, in all material respects, with the single European electronic reporting format. 242 of 1021
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5.6 Statutory Auditors’ report on the consolidated financial statements Due to the technical limitations inherent in the macro-tagging of the consolidated financial statements in accordance with the European single electronic reporting format, the content of certain tags in the notes to the financial statements may not be rendered identically to the consolidated financial statements attached to this report.
In addition, it is not our responsibility to ensure that the consolidated financial statements to be included by the Company in the annual financial report filed with the AMF correspond to those on which we carried out our work.
Appointment of the Statutory Auditors
We were appointed Statutory Auditors of Schneider Electric SE by the Annual General Meetings held on May 6, 2004 for Mazars and on May 5, 2022 for PricewaterhouseCoopers Audit.
As of December 31, 2023, Mazars was in the twentieth consecutive year of their engagement and PricewaterhouseCoopers in their second year.
Responsibilities of management and those charged with governance for the consolidated financial statements Management is responsible for preparing consolidated financial statements giving a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and for implementing the internal control procedures it deems necessary for the preparation of consolidated financial statements that are free of material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern, and using the going concern basis of accounting, unless it expects to liquidate the Company or to cease operations.
The Audit and Risks Committee is responsible for monitoring the financial reporting process and the effectiveness of internal control and risk management systems, as well as, where applicable, any internal audit systems, relating to accounting and financial reporting procedures.
The consolidated financial statements were approved by the Board of Directors.
Responsibilities of the Statutory Auditors relating to the audit of the consolidated financial statements Objective and audit approach
Our role is to issue a report on the consolidated financial statements. Our objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free of material misstatement. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with professional standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions taken by users on the basis of these consolidated financial statements.
As specified in Article L. 821-55 of the French Commercial Code, our audit does not include assurance on the viability or quality of the Company’s management.
As part of an audit conducted in accordance with professional standards applicable in France, the Statutory Auditors exercise professional judgment throughout the audit.
They also:
• identify and assess the risks of material misstatement in the consolidated financial statements, whether due to fraud or error, design and perform audit procedures in response to those risks, and obtain audit evidence considered to be sufficient and appropriate to provide a basis for their opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; • obtain an understanding of the internal control procedures relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control; • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management and the related disclosures in the notes to the consolidated financial statements; • assess the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. This assessment is based on the audit evidence obtained up to the date of the audit report. However, future events or conditions may cause the Company to cease to continue as a going concern. If the Statutory Auditors conclude that a material uncertainty exists, they are required to draw attention in the audit report to the related disclosures in the consolidated financial statements or, if such disclosures are not provided or are inadequate, to issue a qualified opinion or a disclaimer of opinion; • evaluate the overall presentation of the consolidated financial statements and assess whether these statements represent the underlying transactions and events in a manner that achieves fair presentation; • obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. The Statutory Auditors are responsible for the management, supervision and performance of the audit of the consolidated financial statements and for the opinion expressed thereon. 243 of 1021
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I N T E G R A T E D
Report to the Audit and Risks Committee
We submit a report to the Audit and Risks Committee which includes, in particular, a description of the scope of the audit and the audit program implemented, as well as the results of our audit. We also report any significant deficiencies in internal control that we have identified regarding the accounting and financial reporting procedures.
Our report to the Audit and Risks Committee includes the risks of material misstatement that, in our professional judgment, were the most significant for the audit of the consolidated financial statements and which constitute the key audit matters that we are required to describe in this report.
We also provide the Audit and Risks Committee with the declaration provided for in Article 6 of Regulation (EU) No. 537/2014, confirming our independence within the meaning of the rules applicable in France, as defined in particular in Articles L. 821-27 to L. 821-34 of the French Commercial Code and in the French Code of Ethics for Statutory Auditors. Where appropriate, we discuss any risks to our independence and the related safeguard measures with the Audit and Risks Committee.
The Statutory Auditors
Mazars
Paris La Défense on February 29, 2024
PricewaterhouseCoopers Audit
Neuilly-sur-Seine on February 29, 2024
Juliette Decoux Guillemot Mathieu Mougard Jean-Christophe Georghiou Séverine Scheer 244 of 1021
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5.7 Extract of the management report for
the year ended December 31, 2023
Consolidated financial statements
Business and Statement of Income highlights
Main acquisitions of the period
Transaction with AVEVA’s non-controlling interests
On September 21, 2022, the Group confirmed its firm intention to acquire the share capital of AVEVA that it did not already own.
On November 11, 2022, the Board of Schneider Electric and the AVEVA Independent Committee announced that they reached an agreement on the terms of a cash offer of 3,225 pence per AVEVA share. Such acquisition is to be effected by means of a Court approved scheme of arrangement (the Scheme), under Part 26 of the Companies Act 2006.
On November 25, 2022, the requisite majority of AVEVA’s shareholders approved the Scheme, and passed the Special Resolution to implement the Scheme during respectively the Court Meeting and the General Meeting. This led to the immediate recognition of a current financial liability in the Group’s financial statements of GBP 4,039 million (EUR 4,554 million) as of December 31, 2022). The recognition of this liability triggered an immediate reduction in non-controlling interests and in the group share of equity.
On January 18, 2023, following the deliverance of the UK Court Order to the Registrar of Companies, the Scheme (acquisition by the Group of the outstanding AVEVA shares not already owned) became effective. AVEVA shares were unlisted from the London Stock Exchange on January 19, 2023.
The financial liability was settled in cash on January 31, 2023 for GBP 4,055 million (EUR 4,610 million at the foreign exchange closing rate incurred on January 31, 2023) including stamp duties. The Group’s transaction cash out, including EUR 71 million legal fees paid, was presented under the financing section of the cash flow statement and amounted to EUR 4,681 million.
In the context of this transaction, the Group also incurred, through hedging schemes, a negative impact on cash for EUR 106 million.
EcoAct
On November 2, 2023, the Group acquired 100% of the capital of EcoAct SAS (“EcoAct”), an international leader in climate consulting and net zero solutions headquartered in Paris, France. EcoAct will be reported within the Energy management reporting segment.
The purchase accounting as per IFRS 3R is not completed as of December 31, 2023.
Main divestments of the period
Transformer plants in Poland and Türkiye
On January 6, 2023, the Group closed the transaction for the disposal of its Transformer plants in Poland and Türkiye to Cahors Group, an international company specializing in energy distribution, headquartered in France. The businesses had around 800 employees and were reported within the Energy management reporting segment up until disposal effective date.
As of December 31, 2022, net assets were already measured at fair value less costs to sell, leading to no impact from the divestment in the consolidated statement of income of the period.
VinZero
On May 31, 2023, the Group closed the transaction for the disposal of RIB Software’s VinZero business to a European corporate. VinZero is an IT infrastructure solutions group and software partner for architecture, engineering, construction, owner-operator, and manufacturing organizations providing value-add services and consulting. The business was reported within the Energy management reporting segment up until disposal effective date. The gain on disposal was recorded under “Other operating income and expenses”. 245 of 1021
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Gutor
REPORTI N T E G R A T E D
On August 2, 2023, the Group closed the transaction for the disposal of Gutor Electronics’ operations to Latour Capital, a French private equity investor. Gutor is a global leader in the manufacturing of industrial uninterruptible power supply (UPS) systems and the provision of related services. Gutor was reported within the Energy management reporting segment up until disposal effective date.
Telemecanique Sensors
On October 31, 2023, the Group closed the transaction for the disposal of its industrial sensors business, Telemecanique Sensors, to YAGEO. As part of the transaction, the Group granted YAGEO a license to use Telemecanique Sensors trademark. The all-cash transaction valued Telemecanique Sensors at EUR 723 million (Enterprise Value). Telemecanique Sensors was reported within the Industrial Automation reporting segment up until disposal effective date.
Follow-up on acquisitions and divestments transacted in 2022 with effect in 2023 EV Connect Inc.
On June 21, 2022, the Group completed the purchase of a 95.52% controlling stake in EV Connect Inc. and now reports within Energy Management reporting segment. The Group holds an agreement to acquire the remaining 4.48% of non-controlling interests in 2027. The related debt has been recognized in “Non-current purchase commitments over non-controlling interests”.
In November 2023, the Group purchased 3.88% of non-controlling interests which raised its stake in EV Connect Inc. at 99.4%.
The purchase accounting as per IFRS 3R is completed as of December 31, 2023. The net adjustment of the opening balance sheet, resulting mainly from the booking of identifiable intangible assets (technology, customer relationship and trademark), led to the recognition of a EUR 255 million goodwill at acquisition date.
IFRS 5 application – Non-current Assets Held for Sale and Discontinued Operations The following businesses have been reclassified as Held for Sale as of December 31, 2023:
Autogrid
On July 20, 2022, the Group completed the acquisition of Autogrid, raising its stake from 24.2% to 91.8% controlling stake. AutoGrid is a Virtual Power Plant (VPP) and Distributed Energy Resource Management System (DERMS) provider and is reported within Energy Management reporting segment. The Group held an agreement to acquire the remaining 8.2% of non-controlling interests in 2026. The related debt was recognized in “Non-current purchase commitments over non-controlling interests” as of December 2022.
On December 14, 2023, the Group entered into an agreement with Uplight Inc. for the sale of Autogrid. In accordance with IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations, the assets and liabilities have been classified as “Assets held for sale” and “Liabilities held for sale”, for EUR 209 million and EUR 40 million respectively. The assets are mainly intangible assets (including goodwill) for EUR 197 million. No impairment loss was recognized by the Group following the IFRS 5 classification.
This transaction represents a reorganization among Schneider Electric-owned or affiliated businesses aimed at Prosumers, to better align their capabilities. The transaction, which closed on February 8, 2024, has raised the controlling stake of the Group in Uplight Inc., which will remain consolidated as an equity investment.
Exchange rate changes
Fluctuations in the euro exchange rate had a negative impact in 2023, decreasing consolidated revenue by EUR 1,432 million due mainly to the evolution observed in US Dollar and in Chinese Yuan compared to the Euro and a negative impact decreasing adjusted EBITA by EUR 573 million.
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Results of Operations
The following table sets forth our results of operations for 2023 and 2022:
(in millions of euros except for earnings per share) Full Year 2023 Full Year 2022 Variance Revenue 35,902 34,176 5.1%
Cost of sales (20,890) (20,300) 2.9%
Gross profit 15,012 13,876 8.2%
% Gross profit 41.8% 40.6%
Research and development (1,168) (1,040) 12.3%
Selling, general and administrative expenses (7,432) (6,819) 9.0% Adjusted EBITA * 6,412 6,017 6.6%
% Adjusted EBITA 17.9% 17.6%
Other operating income and expenses 98 (433) (122.6)%
Restructuring costs (147) (227) (35.2)%
EBITA ** 6,363 5,357 18.8%
% EBITA 17.7% 15.7%
Amortization and impairment of purchase accounting intangibles (430) (424) 1.4% Operating income 5,933 4,933 20.3%
% Operating income 16.5% 14.4%
Interest income 79 24 229.2%
Interest expense (387) (130) 197.7%
Finance costs, net (308) (106) 190.6%
Other financial income and expense (222) (109) 103.7%
Net financial income/(loss) (530) (215) 146.5%
Profit from continuing operations before income tax 5,403 4,718 14.5% Income tax expense (1,285) (1,211) 6.1%
Share of profit/(loss) of associates 51 29 75.9%
PROFIT FOR THE YEAR 4,169 3,536 17.9%
attributable to owners of the parent 4,003 3,477 15.1%
attributable to non-controlling interests 166 59 181.4% Basic earnings (attributable to owners of the parent) per share (in euros per share) 7.15 6.23 14.8% Diluted earnings (attributable to owners of the parent) per share (in euros per share) 7.07 6.15 15.0% * Adjusted EBITA (Earnings Before Interest, Taxes, Amortization of Purchase Accounting Intangibles): Operating profit before amortization and impairment of purchase accounting intangible assets, before goodwill impairment, other operating income and expenses and restructuring costs. ** EBITA (Earnings Before Interest, Taxes and Amortization of Purchase Accounting Intangibles): Operating profit before amortization and impairment of purchase accounting intangible assets and before goodwill impairment.
Revenue
Consolidated revenue totaled EUR 35,902 million for the year ended December 31, 2023, up +12.7% organic and up +5.1% on a reported basis. The Group saw strong growth across end-markets supported by secular trends of electrification, automation, and digitization, while some areas such as residential buildings remained impacted by the effects of higher interest rates on consumer spending, though stabilizing by the end of the year. Discrete automation markets were down after high demand in the prior year associated with supply chain constraints in particular impacting sales in Western Europe, China and East Asia. The Group saw good volume expansion throughout the year, with product growth supported by backlog execution as supply chain pressures eased, while the carryover impact of price actions taken in 2022 faded across the year, as expected. FX impacts were (4.3)% driven by the weakening of the Chinese Yuan and U.S. Dollar against the Euro, combined with the significant devaluation of several other currencies including the Egyptian Pound, Turkish Lira and Argentinian Peso. There was a net negative impact of (2.5)% from acquisitions and disposals, primarily relating to the Group’s exit from Russia in 2022 along with the net impact of other transactions.
Evolution of revenue by reporting segment
The following table sets forth our revenue by business segment for years ended December 31, 2023 and 2022:
(in millions of euros)
Energy
Management
Industrial
Automation Total
Full Year 2023 28,241 7,661 35,902
Full Year 2022 26,442 7,734 34,176
Energy Management generated revenues of EUR 28,241 million, equivalent to 79% of the Group’s revenues and was up +14% organic.
North America grew +19% organic with strong growth across end-markets, including continued strong growth in Systems as a consequence of strong demand across Data Center and Infrastructure end-markets. Western Europe was up +12% organic with doubledigit growth in the U.K., Germany and Italy, while France and Spain grew high-single digit. There was continued good traction in Data Center and non-residential technical buildings, though residential markets, particularly in the north of the region, were impacted by pressures on consumer-spending. Asia-Pacific grew +8% organic, with China delivering mid-single digit growth for the year, with strong traction in transportation and renewable power, while softness in construction markets continued. India recorded double-digit growth, despite facing a high base of comparison, with continued strong demand across end-markets. There was good growth in Australia and across the rest of the region. Rest of the World was up +20% organic, benefitting from price actions taken in response to currency devaluation in Argentina, Egypt and Turkey and with strong demand for systems offers across the region.
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I N T E G R A T E D
Industrial Automation generated revenues of EUR 7,661 million, equivalent to 21% of the Group’s revenues and was up +7% organic. Growth was led by sales into Process automation markets while sales into Discrete automation markets also grew, though at a slower pace due to weakness in OEM demand, particularly in Western Europe, China and East Asia. The Group saw strong growth in its industrial software offers through AVEVA, despite headwinds from a transition from a perpetual license model to a subscription model. North America grew +7% organic led by growth in Discrete automation markets, supported by backlog execution, while growth in Process & Hybrid markets was good despite a high base of comparison from projects in Mexico. Western Europe was up +7% organic, with strong growth in both Process & Hybrid markets and industrial software at AVEVA, while Discrete automation markets were impacted by the demand weakness. Asia Pacific was up +1% organic, impacted by weaker Discrete automation growth in China with weakness in OEM demand, particularly among those tied to construction. There was strong growth in several countries across the rest of the region, notably India and Australia, while growth in Japan and South Korea was muted due to OEM weakness. Rest of the World was up +20% organic, benefitting from price actions taken in response to currency devaluation in Argentina, Egypt and Turkey, while outside of these countries there was strong growth in Discrete automation markets and good growth in Process & Hybrid markets.
Gross profit
Gross profit was up +18.1% organic with Gross margin up +200bps organic, reaching 41.8% in 2023. The organic increase in margin percentage was driven by a strong net price impact mainly related to carryover from price actions taken last year, an improvement of gross margin in systems business and improved industrial productivity, particularly in H2.
Support Function costs: Research and development and selling, general and administrative expenses Research and development expenses, net of capitalized development costs and excluding research and development costs booked in costs of sales, increased by 12.3% from EUR 1,040 million for 2022 to EUR 1,168 million for 2023. As a percentage of revenues, the net cost of research and development increased slightly from 3.0% in 2022 to 3.3% in 2023.
Total research and development expenditures, including capitalized development costs and development costs reported as cost of sales (see Note 4 to the Consolidated Financial Statements) increased by 9.3% from EUR 1,845 million for 2022 to EUR 2,016 million for 2023. As a percentage of revenues, total research and development expenses increased slightly to 5.6% for 2023 (5.4% for 2022).
In 2023, the net effect of capitalized development costs and amortization of capitalized development costs amounts to EUR 92 million on operating income (EUR 115 million in 2022).
Selling, general and administrative expenses increased by 9.0% to EUR 7,432 million for 2023 (EUR 6,819 million for 2022). As a percentage of revenues, selling, general and administrative expenses increased slightly to 20.7% for 2023 (20.0% for 2022).
Combined, total support function costs, that is, research and development expenses together with selling, general and administrative costs, totaled EUR 8,600 million for 2023 compared to EUR 7,859 million for 2022, an increase of 9.4%. Support functions costs to sales ratio increases from 23.0% in 2022, to 24.0% in 2023.
Other operating income and expenses
For 2023, other operating income and expenses amounted to a net income of EUR 98 million. The gains and losses on disposal of business for EUR 265 million are mainly due to the gains on disposal of Telemecanique Sensors, Gutor, VinZero and Transformer Plants in Türkiye.
The costs of acquisition and integration totaled EUR (111) million (EUR (180)million for 2022. The decrease is mainly due to costs incurred in 2022 to purchase AVEVA’s remaining non-controlling interests.
Restructuring costs
For2023, restructuring costs decreased to EUR 147 million in 2023 compared to 227 million in 2022, and are linked to the Group’s initiatives to decrease support function costs.
EBITA and Adjusted EBITA
EBITA is defined as earnings before interest, taxes and amortization of purchase accounting intangibles. EBITA comprises operating profit before amortization and impairment of purchase accounting intangible assets and before goodwill impairment. Adjusted EBITA is adjusted as EBITA before restructuring costs and before other operating income and expenses, which includes acquisition, integration and separation costs.
Adjusted EBITA amounted to EUR 6,412 million for 2023, compared to EUR 6,017 million for 2022, an organic increase of 24.5%. As a percentage of revenues, adjusted EBITA increased at 17.9% with margin improving 180 bps organically.
EBITA increased from EUR 5,357 million for 2022 to EUR 6,363 million in 2023. As a percentage of revenues, EBITA increases at 17.7% in 2023 (15.7% for 2022).
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Adjusted EBITA by business segment
The following table sets out EBITA and adjusted EBITA by business segment:
Full Year 2023
(in millions of euros)
Energy
Management
Industrial
Automation
Central functions
& digital costs Total
Backlog 15,414 3,748 – 19,162
Revenue 28,241 7,661 – 35,902
Adjusted EBITA 5,967 1,304 (859) 6,412
Adjusted EBITA (%) 21.1% 17.0% 17.9%
On December 31, 2023, the total backlog to be executed in more than a year amounts to EUR 4,287 million.
Full Year 2022
(in millions of euros)
Energy
Management
Industrial
Automation
Central functions
& digital costs Total
Backlog 13,156 3,334 – 16,490
Revenue 26,442 7,734 – 34,176
Adjusted EBITA 5,392 1,458 (833) 6,017
Adjusted EBITA (%) 20.4% 18.9% 17.6%
Energy Management reporting segment generated an adjusted EBITA of EUR 5,967 million, or 21.1% of revenues, up c. +220 bps organic (up +70 bps on a reported basis), due mainly to a combination of strong net price impact, good contribution from volumes and an improvement of gross margin in the systems business, more than offsetting investment in SFC and inflationary impacts.
Industrial Automation reporting segment generated an adjusted EBITA of EUR 1,304 million, or 17.0% of revenues, down c. -110 bps organic (down -190 bps on a reported basis), where strong net price contribution, improved productivity and improvement of gross margin in the systems business were more than offset by impacts from inflation and increased strategic investment within support function costs.
Central functions & digital costs in 2023 amounted to EUR 859 million (EUR 833 million in 2022) remaining stable at 2.4% of Group revenues.
Investment in the Group’s strategic priorities continued, while the Corporate cost element continued to be an area of focus and remained under tight control, remaining at around 0.7% of Group revenues in 2023.
Amortization and impairment of purchase accounting intangibles The amortization and impairment of purchase accounting intangibles linked to acquisitions amounted to EUR 430 million compared with EUR 424 million last year.
Operating income (EBIT)
Operating income or EBIT (Earnings Before Interest and Taxes), increased from EUR 4,933 million for 2022 to 5,933 million for 2023, an increase of 20.3%.
Net financial income/loss
Net financial loss amounted to EUR 530 million for 2023, compared to EUR 215 million for 2022, mainly due to the increase in cost of debt (from EUR 106 million in 2022 to EUR 308 million in 2023). This was mainly due to the increase in interest rates observed in 2023 and costs related to the term loan facility set up for AVEVA’s non-controlling interests acquisition. In addition, there was an increased negative impact from foreign exchange fluctuations (from EUR 21 million in 2022 to EUR 50 million in 2023).
Income tax expense
The effective tax rate was 23.8% for 2023, and 25.7% for 2022. In 2022, restating the EUR 195 million Russia and Belarus deconsolidation impact from the profit before tax (no tax impact attached), the effective tax rate would have been of 24.6%. The corresponding income tax expense increased from EUR 1,211 million for 2022 to EUR 1,285 million for 2023.
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Share of profit/ (loss) of associates
REPORTI N T E G R A T E D
The share of associates was a EUR 51 million profit for 2023, compared to EUR 29 million profit for 2022.
Non-controlling interests
Non-controlling interests in net income for 2023 totaled EUR 166 million, compared to EUR 59 million for 2022. This represents the share in net income attributable to the non-controlling interests, mainly coming from the Group Chinese and Indian subsidiaries.
Profit for the year (attributable to owners of the parent) Profit for the year attributable to the equity holders of our parent company amounted to EUR 4,003 million for 2023, compared to EUR 3,477 million profit for 2022.
Earnings per share
Basic Earnings per share amounted to EUR 7.15 per share for 2023 and EUR 6.23 per share for 2022.
Comments to the consolidated Cash-flow
The following table sets forth our cash-flow statement for 2023 and 2022:
(in millions of euros) Note Full Year 2023 Full Year 2022 Profit for the year 4,169 3,536
Share of (profit)/losses of associates (51) (29)
Income and expenses with no effect on cash flow:
Depreciation of property, plant and equipment 11 743 750 Amortization of intangible assets other than goodwill 10 717 732 Impairment losses on non-current assets 60 61
Increase/(decrease) in provisions 21 87 32
Losses/(gains) on disposals of business and assets (252) 70 Difference between tax paid and tax expense (164) 139
Other non-cash adjustments 220 102
Net cash provided by operating activities 5,529 5,393
Decrease/(increase) in accounts receivable 62 (305)
Decrease/(increase) in inventories and work in progress (382) (553) (Decrease)/increase in accounts payable 493 73
Decrease/(increase) in other current assets and liabilities 205 (254) Change in working capital requirement 378 (1,039)
TOTAL I - CASH FLOWS FROM / (USED IN) OPERATING ACTIVITIES 5,907 4,354 Purchases of property, plant and equipment 11 (914) (707) Proceeds from disposals of property, plant and equipment 52 69 Purchases of intangible assets 10 (451) (386)
Net cash used by investment in operating assets (1,313) (1,024) Acquisitions and disposals of businesses, net of cash acquired & disposed 2 611 (297) Other long-term investments (89) 40
Increase in long-term pension assets 20 (257) (130)
Sub-total 265 (387)
TOTAL II - CASH FLOWS FROM / (USED IN) INVESTING ACTIVITIES (1,048) (1,411) Issuance of bonds 22 3,509 1,092
Repayment of bonds 22 (1,299) (829)
Sale/(purchase) of treasury shares (703) (219)
Increase/(decrease) in other financial debt 939 143
Increase/(decrease) of share capital 19 284 208
Transaction with non-controlling interests* 2 (4,702) (73) Dividends paid to Schneider Electric’s shareholders 19 (1,767) (1,618) Dividends paid to non-controlling interests (84) (157)
TOTAL III - CASH FLOWS FROM / (USED IN) FINANCING ACTIVITIES (3,823) (1,453) TOTAL IV - NET FOREIGN EXCHANGE DIFFERENCE (240) (70)
TOTAL V - IMPACT OF RECLASSIFICATION OF ITEMS HELD FOR SALE (4) (20) INCREASE/(DECREASE) IN NET CASH AND CASH EQUIVALENTS: I + II + III + IV + V 792 1,400 Net cash and cash equivalents, beginning of the year 18 3,863 2,463 Increase/(decrease) in cash and cash equivalents 792 1,400 NET CASH AND CASH EQUIVALENTS, END OF THE YEAR 18 4,654 3,863 The accompanying notes are an integral part of the consolidated financial statements. * In 2023, transactions with non-controlling interests mainly relate to the purchase of AVEVA’s non-controlling interests. 250 of 1021
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Operating Activities
Net cash from operating activities before changes in working capital requirement reached EUR 5,529 million for 2023, increasing compared to EUR 5,393 million for 2022. It represented 15.4% of revenues for 2023 (15.8% of revenues from 2022).
Change in working capital requirement generated EUR 378 million in cash in 2023, compared to a consumption of EUR 1,039 million in 2022.
In all, net cash from operating activities increased from EUR 4,354 million in 2022 to EUR 5,907 million in 2023.
Investing Activities
Net capital expenditure, which includes capitalized development projects, increased, at EUR 1,313 million for 2023, compared to EUR 1,024 million for 2022, and representing 3.7% of sales in 2023 compared to 3.0% in 2022.
Free cash-flow (cash from operating activities net of net capital expenditure) amounted to EUR 4,594 million in 2023 versus EUR 3,330 million in 2022.
Cash conversion rate (free cash-flow over net income attributable to the equity holders of the parent company on continuing operations) was 115% in 2023 versus 96% in 2022.
The acquisitions net of disposals represented a cash in of EUR 611 million (net of acquired cash) for 2023, compared with a cash-out of EUR 297 million for 2022. Those amounts correspond mainly to the acquisitions and disposals described in Notes 2.1 and 2.2 of the Consolidated Financial Statements (Chapter 5).
Financing Activities
Net cash outflow from financing activities amounted to EUR 3,823 million during the year 2023, compared to cash outflow of EUR 1,453 million during the year 2022. The variance is mainly due to the purchase of AVEVA’s non-controlling interests for EUR 4.7 billion and bond issuances in 2023 for EUR 3.5 billion (EUR 1.1 billion issued in 2022).
The dividend paid by Schneider Electric was EUR 1,767 million in 2023, compared with EUR 1,618 million in 2022.
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I N T E G R A T E D
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6 Parent
company
financial
statements
6.1 Balance sheet 526
6.2 Statement of income 528
6.3 Notes to the financial
statements 529
6.3.1 Significant events of the financial year 529
6.3.2 Accounting principles 530
6.3.3 Notes 532
6.4 Statutory auditors’ report on
the annual financial statements 540
6.5 List of securities held at
December 31, 2023 543
6.6 Subsidiaries and affiliates 544
6.7 The company’s financial
results over the last 5 years 546
6.8 Extract of the management
report for the year ended
December 31, 2023 547 253 of 1021
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I N T E G R A T E D
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6.1 Balance Sheet
Assets
(in thousands of euros) Note 12/31/2023 Gross Amort./Dep./Prov. 12/31/2023 Net 12/31/2022 Net
NON-CURRENT ASSETS
Intangible assets 1.1
Intangible rights 27,429 (27,429) – –
Property, plant and equipment 1.2
Land 2,784 – 2,784 2,784
Buildings 48 (48) – –
Other 1,221 – 1,221 1,221
Total intangible assets and property, plant and
equipment 31,482 (27,477) 4,006 4,006
Financial investments
Shares in subsidiaries and affiliates 2.1 5,377,099 (19,468) 5,357,631 5,357,631 Other investment securities 2.2 1,375,376 – 1,375,376 763,201 Advances to subsidiaries and affiliates 2.3 2,532,111 – 2,532,111 2,513,350 Other (Loans/Deposits and guarantees) 80,010 – 80,010 81,172 Total financial investments 9,364,595 (19,468) 9,345,127 8,715,354 Total non-current assets 9,396,077 (46,945) 9,349,132 8,719,359
CURRENT ASSETS
Accounts receivable
Accounts receivable – trade 3 570,104 – 570,104 392,646 Other 3 323,972 – 323,972 232,756
Total accounts receivable 894,076 – 894,076 625,402
Marketable securities and cash
Marketable securities 4 279,624 – 279,624 734,726
Advances to the Group cash pool 5 12,286,738 – 12,286,738 8,175,864 Other 285 – 285 1,393
Total marketable securities and cash 12,566,647 – 12,566,647 8,911,984 Total current assets 13,460,723 – 13,460,723 9,537,386
PREPAYMENTS AND OTHER ASSETS
Prepaid expenses 6.1 3,278 – 3,278 574
Deferred expenses 6.2 22,865 – 22,865 15,883
Call premiums 6.3 33,786 – 33,786 20,153
Translation losses 9 – – – –
TOTAL ASSETS 22,916,729 (46,945) 22,869,784 18,292,355
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Equity and liabilities
REPORTI N T E G R A T E D
(in thousands of euros) Note 12/31/2023 12/31/2022
EQUITY 7
Share capital 7.1 2,291,344 2,284,372
Additional paid-in capital 7.2 2,827,850 2,616,090
Reserves
Legal reserve 243,027 243,027
Retained earnings 7.3 273,900 325,407
Net income for the financial year 2,560,475 1,744,408
Regulated provisions 2 2
Total equity 8,196,598 7,213,305
PROVISIONS FOR CONTINGENCIES 8
Provisions for contingencies and expenses 286,602 316,327 Total provisions for contingencies and expenses 286,602 316,327
LIABILITIES
Convertible bond 9 1,300,000 650,000
Bonds 9 9,773,502 8,094,325
Other borrowings 10 1,808,904 39,096
Debts related to investments 11 42,000 42,000
Borrowings and financial liabilities 12 1,018,000 1,491,000 Accounts payable – trade 109,162 79,789
Accrued taxes and payroll costs 296,565 237,057
Other 2,088 80,378
Total liabilities 14,350,221 10,713,646
Deferred revenue – –
Call premiums 6.3 28,987 40,199
Translation gains 7,376 9,877
TOTAL EQUITY AND LIABILITIES 22,869,784 18,293,355
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6.2 Statement of income
(in thousands of euros) Note 2023 2022
Sales of services and other 1 79
Reversals of provisions, depreciation and amortization and expense transfers – 11 Other operating revenue 15 486,927 412,303
Operating revenues 486,928 412,393
Purchase and external expenses 16 (122,475) (171,810)
Taxes other than on income (1,306) (5,114)
Payroll expenses (14,607) (2,367)
Depreciation and provision expense (1,071) (1,928)
Other operating expenses and joint-venture losses (2,382) (2,223) Operating expenses (141,841) (183,442)
Operating profit/(loss) 345,087 228,952
Dividend income 2,002,364 1,500,580
Interest income 536,573 89,438
Reversals of impairment provisions for long-term receivables and other – – Financial income 2,538,937 1,590,018
Interest expense (327,774) (111,111)
Provision expense (578) 1,396
Financial expenses (328,352) (109,716)
Net financial income/(loss) 17 2,210,585 1,480,303
Current result before tax 2,555,672 1,709,254
Proceeds from fixed asset disposals 39 312,074
Reinvoicing performance share 91,009 93,678
Provision reversals and expense transfers 138,116 145,098 Other – 1,034
Non-recurring income 229,164 551,884
Carrying amount of fixed asset disposals – (272,321)
Provisions, depreciation and amortization (105,761) (108,927) Other (161,507) (154,206)
Non-recurring expenses (267,268) (535,354)
Net non-recurring income/(loss) 18 (38,104) 16,531
Net income tax benefit 19 42,907 18,623
NET INCOME 2,560,475 1,744,408
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6.3 Notes to the financial statements
REPORTI N T E G R A T E D
(All amounts are in thousands of euros unless otherwise indicated)
6.3.1 Significant events of the financial year
• The tax authority informed us that it will perform an accounting verification of all tax declarations made during the period from 01/01/2020 to 12/31/2022 and of all taxable income for the period from 01/01/2018 to 12/31/2019. This audit is already under way as at December 31, 2023.
• In May 2023, the 2022 dividend was paid in the amount of EUR 1,767 million. • In January 2023, the Group withdrew EUR 1,700 million from its Term loan facility established to finance the acquisition of AVEVA’s minority interests. This loan will mature in October 2025. On December 31, 2023, the amount due was still EUR 1,700 million at Euribor plus a margin of 0.56%.
• In 2023, Schneider Electric SE carried out a second convertible bond (OCEANE) issue for EUR 650 million at a rate of 1.97%, maturing in November 2030. As at the end of December 2023, the debt component recognized at its net book value was EUR 650 million. The initial conversion and/or exchange ratio of the Bonds is one share per Bond with a nominal value set at EUR 426.66 with a nominal value of EUR 100,000, which corresponds to EUR 234.38 per share. • The company bought back 4.5 million of its own shares for EUR 703 million. • As of December 31, 2023, the company decided to fund some of its current action plans on existing shares and to re-invoice the related expense to the various Group companies. As a result of these movements, the provision for charges was adjusted to EUR 279 million. 258 of 1021
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6.3.2 Accounting principles
As in the prior financial year, the financial statements for the financial year ended December 31, 2023 have been prepared in accordance with French generally accepted accounting principles and with ANC regulation no. 2014-03.
Accounting principles for the preparation of the financial statements of the parent company were applied, in accordance with the principle of prudence and based on the following fundamental assumptions:
• going concern,
• consistency of accounting methods from one period to the next, • accrual basis.
Assets and liabilities are measured according to the historical cost convention.
Only significant information is disclosed.
Non-current assets
Non-current assets of all types are stated at their acquisition or transfer cost.
Acquisition costs include purchase price, including import duties and non-refundable taxes, as well as any expenses directly attributable to the preparation of the asset for use (registration fees, employee expenses related to establishment and preparation, installation and set-up costs, testing ,etc.).
The company uses the component approach as defined by CRC regulation no. 2002-10. The analysis and investigations carried out by the company and the Schneider Electric Group made it possible to ensure that the current split of non-current assets was in line with this principle: components with distinct useful lives are accounted for separately, according to their own depreciation plan.
Intangible assets
Intangible rights are amortized over a maximum of five years.
Property, plant and equipment
Amortizable items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives, ranging from 3 to 10 years. Land is not depreciated.
Financial investments
Shares in subsidiaries and affiliates are recorded at acquisition cost, plus directly attributable costs (including acquisition costs related to these transactions).
Provisions for impairment may be made if the book value is higher than the value in use estimated at the end of the financial year. This estimate is determined mainly by reference to the net book value of the investment.
Shares in subsidiaries and affiliates are valued at their value in use each year.
Own shares
Own shares are assessed by category (investment securities, marketable securities), according to the FIFO “first-in, first-out” method.
The accounting classification of own shares depends on the purpose for which they are held:
• own shares are classified as marketable securities if they are explicitly or implicitly allocated to cover performance share distribution plans or if they are purchased to regulate the share price of the Group. • own shares are classified as financial investments if they are not explicitly allocated to cover a share distribution plan or if they are purchased for use within the framework of a liquidity contract by an investment services provider, or for their subsequent cancellation as part of a capital reduction.
The accounting of an impairment of own shares depends on the purpose for which they are held:
• when own shares are allocated to cover performance share distribution plans, there is no reason to record a provision for impairment. • in other cases, it is necessary to book an impairment if the average stock market price of the month before the reporting date is lower than the weighted average cost.
• A provision for risks and charges is recognized when the own shares are explicitly or implicitly allocated to cover performance share distribution plans.
6.3 Notes to the financial statements
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Receivables and debts
REPORTI N T E G R A T E D
Receivables and debts are valued at their face value (historical cost). Receivables are, where applicable, depreciated by means of a provision to take account of the risk of non-recovery.
At the end of the period, receivables and debts in foreign currencies are revalued at the rate at the end of the period and this revaluation is recognized in the balance sheet as a translation gain or loss.
The foreign exchange risk borne by the company is managed centrally at the level of Boissière Finance SNC.
The Schneider Electric Group organizes a foreign exchange risk hedging policy (“Fair Value Natural Hedge,” hereinafter “FVNH”) aimed at comprehensively managing the monetary assets and liabilities in foreign currencies recorded on the balance sheets of the subsidiaries.
The monetary assets and liabilities included in the company’s FVNH position (customer invoices, supplier invoices, banks, current accounts) are consolidated and balanced on a daily basis through spot foreign exchange transactions carried out in current accounts with Boissière Finance SNC.
Provisions for depreciation of bad debts are recorded when it becomes probable that the debt will not be collected, and it is possible to reasonably estimate the amount of the loss. The identification of doubtful debts as well as the amount of the corresponding provisions are based on the historical experience of definitive losses on debts and the analysis by age of the specific accounts as well as the related credit risks. When it becomes certain that a bad debt will not be recovered, it, as well as its provision, is canceled on the income statement.
Other operating revenue
Royalties from the Schneider brand have been recognized in this item of the income statement Net non-recurring income/(loss)
Income and expenses for the financial year are classified in the income statement in such a way as to differentiate between the items of current income and the items of non-recurring income, including:
• those for which the achievement is not related to the day-to-day operation of the business; • which are not likely to be recurring;
• over which the company has only limited control.
Pension obligations
The present value of termination benefits is determined using the projected unit credit method. Provisions are funded for the supplementary pension benefits provided by the company on the basis of the contractual terms of top-hat agreements, granting a level of benefits exceeding the general schemes.
The company applies the corridor method to actuarial gains and losses arising from changes in estimates. Under this method, the portion of net cumulative actuarial gains and losses exceeding 10% of the projected benefit obligation is amortized over 10 years.
The actuarial assumptions used to determine the company’s commitment are as follows:
• Valuation date: 12/31/2023;
• Data date: 10/31/2023;
• Inflation rate: 2.10%;
• Discount rate: 4.10%;
• Rate of return on assets: 4.10%;
• Retirement age: Full rate age;
• Age at start of employment: 23 years old;
• Turnover rate: 0.00%;
• Mortality rate: TGH, TGF 05;
• Annuity growth rate: 1.65%.
Currency risk
When necessary, a contingency provision is put in place for unrealized exchange losses. However, when there are unrealized exchange gains and losses on back-to-back transactions in the same currency and with the same maturity, the amount of the provision is then limited to the net loss.
Bonds
Issuance costs are amortized over the life of the bonds and are booked under “deferred expenses.” Issuance premiums are booked under “Call premiums” and amortized over the duration of the bonds.
In the case of convertible bonds (OCEANE), at conversion, the bond will be reclassified as equity for its nominal conversion amount. 260 of 1021
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6.3.3 Notes
Note 1 Non-current assets
1.1 – Intangible assets
This item primarily consists of capital increase and merger expenses, which are fully amortized.
1.2 – Property, plant and equipment
(in thousands of euros)
Property, plant and equipment 12/31/2022 Additions Disposals 12/31/2023 Gross 4,054 – – 4,054
Depreciation (48) – – (48)
NET 4,006 – – 4,006
Property, plant and equipment are mainly comprised of undeveloped land.
Note 2 Financial investments
2.1 – Shares in subsidiaries and affiliates
(in thousands of euros)
Shares in subsidiaries and affiliates 12/31/2022 Increases Decreases 12/31/2023 Gross 5,377,099 – – 5,377,099
Provisions (19,468) – – (19,468)
NET 5,357,631 – – 5,357,631
The provision of Schneider Electric Japan Holding is for EUR (15,200)k and Muller SAS for EUR (4,268)k.
The main investments at December 31, 2023 were as follows:
Shares in subsidiaries and affiliates Carrying amount
Schneider Electric Industries SAS 5,343,544
Schneider Electric Japan Holding 6,049
Muller SAS 8,038
TOTAL 5,357,631
2.2 – Other investment securities
(in thousands of euros)
Other investment securities 12/31/2022 Increases Decreases 12/31/2023 Own shares 763,201 703,184 (91,061) 1,375,376
Other – – – –
Provisions for other shares and own shares – – – –
NET 763,201 703,184 (91,061) 1,375,376
Other investment securities primarily include Schneider Electric SE shares acquired for allocation of share distribution plans.
In compliance with the decision adopted by the Board of Directors dated February 15, 2023, the company bought back 4,493,173 of its own shares for a total of EUR 703 million.
In line with previous years, the Group decided to fund the performance shares of plans 41ter, 42, 42bis and 42ter with Schneider Electric treasury shares; 1,468,821 shares for a total amount of EUR 106 million have been classified as marketable securities and 207,073 shares for EUR 14.7 million were reclassified from marketable securities to “Other investment securities” following the departure of the beneficiaries.
2.3 – Advances to subsidiaries and affiliates
(in thousands of euros)
Advances to subsidiaries and affiliates 12/31/2022 Increases Decreases 12/31/2023 Gross 2,513,350 18,761 – 2,532,111
NET 2,513,350 18,761 – 2,532,111
At December 31, 2023, this item mainly consisted of a loan of EUR 2,500 million granted to Schneider Electric Industries SAS with a maturity date of 2024, and accrued interests for a total amount of EUR 32.1 million.
6.3 Notes to the financial statements
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Note 3 Receivables
REPORTI N T E G R A T E D
(in thousands of euros)
12/31/2023 12/31/2022
Trade receivables 570,104 392,646
Other receivables 323,972 232,756
NET 894,076 625,402
Trade receivables mainly include the reinvoicing of the bonus share plans to Schneider Electric Industries SAS. and re-invoicing related to brand royalties.
At December 31, 2023, the “Other receivables” are mainly composed of tax receivables for EUR 292 million and R&D tax credits for EUR 63 million euros.
Note 4 Marketable securities 12/31/2022 Acquisitions Disposals 12/31/2023 (in thousands of euros) Number of shares Value Value Value Value Number of
shares
OWN SHARES
Gross 4,849,753 311,979 91,061 (123,416) 279,624 4,159,845 Provisions – – – – – –
NET TOTAL 4,849,753 311,979 91,061 (123,416) 279,624 4,159,845 SICAV – 422,747 – (422,747) – –
TOTAL 4,849,753 734,726 91,061 (546,163) 279,624 4,159,845 Marketable securities primarily represent own shares held by the company for allocation to future performance share distribution plans.
In 2023, following the Group’s decision to fund the performance shares of plans 41ter, 42, 42bis and 42ter with Schneider Electric treasury shares, 1,468,821 shares for a total amount of EUR 106 million have been transferred into marketable securities. The company has distributed 1.9 million shares for a total amount of EUR 123 million in connection with performance share plans, which have been re-invoiced to the concerned Group entities. Following the loss of the rights of employees who left the Group, the company switched back 207,073 shares for a total amount of EUR 14.7 million to “Other investment securities.” Note 5 Group cash and cash equivalents
This item consists of interest-bearing advances by Schneider Electric SE to the Group cash pool (Boissière Finance) that are immediately recoverable on demand.
Note 6 Prepayment and other assets
6.1 – Prepaid expenses
The prepaid expenses relate mainly to interest on commercial paper of EUR 2.6 million and fees.
6.2 – Deferred expenses
(in thousands of euros)
Bond issue expenses 12/31/2022 Increases Decreases 12/31/2023 Mar. 11, 2015 over 10 years (EUR 750 million) 715 – (323) 392 Sep. 8, 2015 over 8 years (EUR 800 million) 289 – (289) – Oct. 13, 2015 over 10 years (EUR 100 million) 112 – (40) 72 Oct. 13, 2015 over 10 years (EUR 200 million) 277 – (98) 179 Sep. 9, 2016 over 8 years (EUR 800 million) 761 – (449) 312 Dec. 13, 2017 over 9 years (EUR 750 million) 1,170 – (296) 874 June. 21, 2018 over 9 years (EUR 750 million) 1,136 – (254) 882 Jan. 15, 2019 over 9 years (EUR 250 million) 451 – (89) 362 Jan. 15, 2019 over 9 years (EUR 500 million) 1,012 – (201) 811 Sept. 9, 2019 over 5 years (EUR 200 million) 231 – (136) 95 Mar. 11, 2020 over 9 years (EUR 800 million) 1,672 – (270) 1,402 Apr. 9, 2020 over 7 years (EUR 500 million) 945 – (221) 724 Jun. 12, 2020 over 3 years (EUR 500 million) 192 – (192) – Nov. 24, 2020 over 6 years (EUR 650 million) 3,659 – (1,313) 2,346 Nov. 9, 2022 over 5 years (EUR 500 million) 1,354 – (277) 1,077 Nov. 9, 2022 over 10 years (EUR 600 million) 1,905 – (196) 1,709 Jan. 13, 2023 over 6 years (EUR 600 million) – 1,963 (280) 1,683 Jan. 13, 2023 over 11 years (EUR 600 million) – 2,269 (194) 2,075 Apr. 6, 2023 over 2 years (EUR 750 million) – 2,081 (765) 1,316 June 12, 2023 over 5 years (EUR 500 million) – 1,260 (140) 1,120 June 12, 2023 over 10 years (EUR 500 million) – 1,260 (167) 1,093 Nov. 27, 2023 over 7 years (EUR 650 million) – 4,394 (53) 4,341 TOTAL 15,883 13,227 (6,243) 22,865
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6.3 – Issuance premiums
(in thousands of euros)
Issuance premiums 12/31/2022 Increases Decreases 12/31/2023 Mar. 11, 2015 over 10 years (EUR 750 million) 2,012 – (910) 1,102 Sep. 8, 2015 over 8 years (EUR 800 million) 403 – (403) – Oct. 13, 2015 over 10 years (EUR 100 million) (432) – 152 (280) Sep. 9, 2016 over 8 years (EUR 800 million) 1,726 – (911) 815 Dec. 13, 2017 over 9 years (EUR 750 million) 2,288 – (466) 1,822 June. 21, 2018 over 9 years (EUR 750 million) 3,614 – (700) 2,914 Jan. 15, 2019 over 9 years (EUR 500 million) 70 – (14) 56 Jan. 15, 2019 over 9 years (EUR 250 million) (7,452) – 1,416 (6,036) Sept. 9, 2019 over 5 years (EUR 200 million) (992) – 586 (406) Mar. 11, 2020 over 9 years (EUR 800 million) 3,848 – (513) 3,335 Apr. 9, 2020 over 7 years (EUR 500 million) 1,761 – (304) 1,457 Jun. 12, 2020 over 3 years (EUR 500 million) 177 – (177) – Nov. 9, 2022 over 5 years (EUR 500 million) 268 – (58) 210 Nov. 9, 2022 over 10 years (EUR 600 million) 3,986 – (294) 3,692 Nov. 24, 2020 over 6 years (EUR 650 million) (31,323) – 9,059 (22,264) Jan. 13, 2023 over 6 years (EUR 600 million) – 4,818 (580) 4,238 Jan. 13, 2023 over 11 years (EUR 600 million) – 7,956 (574) 7,382 Apr. 6, 2023 over 2 years (EUR 750 million) – 937 (345) 592 June 12, 2023 over 5 years (EUR 500 million) – 2,765 (198) 2,567 June 12, 2023 over 10 years (EUR 500 million) – 3,930 (326) 3,604 TOTAL (20,046) 20,406 4,440 4,800
Note 7 Shareholders’ equity and retained earnings
(in millions of euros)
Share capital
Additional paid-in
capital
Reserves and
retained earnings
Net income for the
financial year
Regulated
provisions Total
December 31, 2021 before allocation of
net income for the year 2,276 2,412 688 1,498 – 6,874
Change in share capital 8 204 – – – 212
Allocation of net income – – 1,498 (1,498) – –
2021 dividend – – (1,619) – – (1,619)
2022 net income – – – 1,744 – 1,744
December 31, 2022 before allocation of
net income for the year 2,284 2,616 567 1,744 – 7,211
Change in share capital 7 212 – – – 219
Allocation of net income – – 1,744 (1,744) – –
2022 dividend – – (1,767) – – (1,767)
Withholdings – – (29) – – (29)
2023 net income – – – 2,560 – 2,560
DECEMBER 31, 2023 BEFORE
ALLOCATION OF NET INCOME FOR
THE YEAR 2,291 2,828 516 2,560 – 8,196
WESOP: Issuance of shares reserved for group employees who are members of the company savings plan and the international shareholding plan and for entities set up for the benefit of group employees.
7.1 – Capital
Share capital
The company’s share capital at December 31, 2023 amounted to EUR 2,291,343,536 consisting of 572,835,884 shares with a par value of EUR 4, all fully paid up.
Changes in share capital
The increase in share capital of EUR 6,971,852 recorded over the year corresponding to a:
(i) EUR 1,874,116 capital increase through the issue of company shares reserved for employees participating in the PEG which correspond to 468,529 shares with a par value of EUR 4 bearing current dividend rights and which were subscribed at a price of EUR 126.20 by the FCPE Schneider Relais France 2023). Additional paid-in capital of EUR 57,254,244 was also recorded, due to the difference between the subscription price and the par value.
(ii) EUR 5,097,736 capital increase through the issue of shares reserved for Group employees based outside of France and for entities under shareholding or employee savings programs (i.e. 341,250 shares held by employees directly and 933,184 shares held by the FCPE Schneider Relais International 2023, at a subscription price of EUR 126.20 through the FCPE Schneider Relais International 2023).
Additional paid-in capital of EUR 155,735,835 was also recorded, due to the difference between the subscription price and the par value. The total additional paid-in capital associated with the capital increase is EUR 212,990,079.
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I N T E G R A T E D
Own shares
At the reporting date, the total number of own shares held, and not allocated to performance share distribution plans, is 10,357,749 for a total net value of EUR 1,375,176,658.
7.2 – Additional paid-in capital
Additional paid-in capital decreased by EUR 212 million over the financial year, coming from capital increases.
7.3 – Allocation of prior year net income
Pursuant to the 3rd resolution of the Ordinary and Extraordinary Shareholders’ Meeting of May 4, 2023, the 2022 gain of EUR 1,744 million was allocated to retained earnings. In addition, EUR 1,767 million was distributed in the form of dividends.
Note 8 Provisions for contingencies and expenses
(in thousands of euros)
Provisions for contignencies 12/31/2022 Increases Decreases 12/31/2023 Provision for fees on own shares distribution 312,009 105,761 (138,116) 279,654 Other 4,318 2,630 – 6,948
TOTAL 316,327 108,391 (138,116) 286,602
Management is confident that overall, the balance sheet provisions for disputes of which it is currently aware and in which the company is involved should be sufficient to ensure that these disputes do not have a material impact on its financial position or income.
A provision for risk of EUR 279 million was booked to cover the Group’s decision to fund bonus share plans with existing shares.
Note 9 Bonds
(in thousands of euros)
Share capital
12/31/2023 12/31/2022 Interest rate Maturity
Schneider Electric SE 2019 94,325 94,325 Euribor + 0.60% TV 07/23/2024 Schneider Electric SE 2022 – – 2.95% TF 09/27/2022
Schneider Electric SE 2025 750,000 750,000 0.875% TF 03/11/2025 Schneider Electric SE 2023 – 800,000 1.50% TF 09/08/2023 Schneider Electric SE 2025 200,000 200,000 1.841% TF 10/13/2025 Schneider Electric SE 2025 100,000 100,000 1.841% TF 10/13/2025 Schneider Electric SE 2024 800,000 800,000 0.25% TF 09/09/2024 Schneider Electric SE 2024 200,000 200,000 0.25% TF 09/09/2024 Schneider Electric SE 2026 750,000 750,000 0.875% TF 12/13/2026 Schneider Electric SE 2027 750,000 750,000 1.375% TF 06/21/2027 Schneider Electric SE 2028 500,000 500,000 1.5% TF 01/15/2028 Schneider Electric SE 2028 250,000 250,000 1.5% TF 01/15/2028 Schneider Electric SE 2029 800,000 800,000 0.25% TF 03/11/2029 Schneider Electric SE 2027 500,000 500,000 1% TF 04/09/2027 Schneider Electric SE 2023 – 500,000 0% TF 06/12/2023
Schneider Electric SE 2027 500,000 500,000 3.25% TF 11/09/2027 Schneider Electric SE 2032 600,000 600,000 3.5% TF 11/09/2032 Schneider Electric SE 2034 600,000 – 3.375% TF 04/13/2034 Schneider Electric SE 2025 750,000 – 3.375% TF 04/06/2025 Schneider Electric SE 2028 500,000 – 3.25% TF 06/12/2028 Schneider Electric SE 2033 500,000 – 3.5% TF 06/12/2033 Schneider Electric SE 2029 600,000 – 3.125% TF 10/13/2029 Schneider Electric SE 2024 29,177 – 0% TF 07/25/2024
TOTAL 9,773,502 8,094,235
TF: fixed rate.
TV: floating rate.
Convertible bonds (OCEANE)
(in thousands of euros)
Share capital
12/31/2023 12/31/2022 Interest rate Maturity
Schneider Electric SE 2026 650,000 650,000 0% 06/15/2026 Schneider Electric SE 2030 650,000 – 1.97% TF 11/27/2030 TOTAL 1,300,000 650,000
Schneider Electric SE has issued bonds during past years on different markets:
• as part of its Euro Medium-Term Notes (EMTN) program, for which bonds are traded on the Luxembourg stock exchange. 264 of 1021 536Schneider Electric Universal Registration Document 2023 | www.se.com Chapter 6 – Parent company financial statements
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In November 2020, Schneider Electric SE issued sustainable bonds that are convertible into or exchangeable for new or existing shares (OCEANEs), for a nominal value of around EUR 650 million at a rate of 0.00%, maturing in June 2026. It should be noted that a long-term performance bonus of 0.5% of the nominal unit value applies in the event that the average performance score has not been met as at 12/31/2025.
The initial conversion and/or exchange ratio of the Bonds is one share per Bond with a nominal value set at EUR 176. According to the Sustainability-Linked Financing Framework, if the average sustainability performance score (calculated as the arithmetic average of the scores of the three key performance indicators) does not reach a certain level by December 31, 2025, the Group will pay an amount equal to the nominal value.
The three key performance indicators from the 11 new Schneider Sustainability Impact (SSI) 2021-2025 indicators are the following:
• Climate: Deliver 800 million tonnes of saved and avoided CO2 emissions to our customers; • Equality: Increase gender diversity, from hiring to front-line managers and leadership teams (50/40/30); • Generation: Train 1 million underprivileged people in energy management.
The detailed rating methodology and approach are presented in the Group’s Sustainability-Linked Financing Framework.
For all those transactions, issue premiums and issue costs are amortized per the effective interest rate method In 2023, Schneider Electric SE also carried out a second convertible bond (OCEANE) issue for EUR 650 million at a rate of 1.97%, maturing in November 2030. As at the end of December 2023, the debt component recognized at its net book value was EUR 650 million.
The initial conversion and/or exchange ratio of the bonds is 426.66 shares per bond with a nominal value of EUR 100,000, which corresponds to EUR 234.38 per share.
At December 31, 2023, the other remaining bonds are as follows:
• EUR 800 million worth of 0.25% bonds issued in September 2016 and maturing on September 9, 2024; • EUR 100 million worth of 1.841% bonds issued in October 2015 and maturing on October 13, 2025; • EUR 200 million worth of 1.841% bonds issued in October 2015 and maturing on October 13, 2025; • EUR 750 million worth of 0.875% bonds issued in March 2015 and maturing on March 11, 2025; • EUR 750 million worth of 0.875% bonds issued in December 2017 and maturing on December 13, 2026; • EUR 650 million worth of 0% bonds issued in November 2020 and maturing on June 15, 2026; • EUR 750 million worth of 1.375% bonds issued in June 2018 and maturing on June 21, 2027; • EUR 200 million worth of 0.25% bonds issued in September 2018 and maturing on September 9, 2024; • EUR 500 million worth of 1.5% bonds issued in January 2019 and maturing on January 15, 2028; • EUR 800 million worth of 0.25% bonds issued in March 2020 and maturing on March 11, 2029; • EUR 500 million worth of 1% bonds issued in April 2020 and maturing on April 9, 2027; • EUR 94 million worth of Euribor 0.60% bonds renewed in April 2020 and maturing on July 23, 2024; • EUR 250 million worth of 1.5% bonds issued in January 2019 and maturing on January 15, 2028; • EUR 500 million worth of 3.25% bonds issued in November 2022 and maturing on November 9, 2027; • EUR 600 million worth of 3.5% bonds issued in November 2022 and maturing on November 9, 2032. • EUR 29 million worth of 0% bonds issued in May 2023 and maturing on July 25, 2024. • EUR 750 million worth of 3.38% bonds issued in April 2023 and maturing on April 6, 2025; • EUR 500 million worth of 3.25% bonds issued in June 2023 and maturing on June 12, 2028; • EUR 600 million worth of 3.13% bonds issued in January 2023 and maturing on October 13, 2029; • EUR 500 million worth of 3.50% bonds issued in June 2023 and maturing on June 12, 2033; • EUR 600 million worth of 3.38% bonds issued in January 2023 and maturing on April 13, 2034.
The issue premiums and issuance costs are amortized in line with the effective interest method.
Note 10 Other borrowings
At December 31, 2023, other borrowings included drawdowns on credit lines and accrued interest on bonds. In total, EUR 1,700 million was drawn on credit lines and the accrued interest amounted to EUR 109 million Note 11 Debts related to investments
Debts related to investments correspond to an intercompany loan of EUR 42 million with the Luxembourgish entity, Industrielle de Rassurance S.A
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Note 12 Borrowings and financial liabilities
REPORTI N T E G R A T E D
(in thousands of euros)
Borrowings and financial liabilities 12/31/2022 Increase Decrease 12/31/2023 Commercial Paper 1,491,000 – (473,000) 1,018,000
Borrowings – – – –
Overdrafts – – – –
Other – – – –
NET 1,491,000 – (473,000) 1,018,000
Note 13 Maturities of receivables and payables
(in thousands of euros) Total Due within 1 year Due in 1 to 5 years Due beyond 5
years
NON-CURRENT ASSETS
Advances to subsidiaries and affiliates 2,532,111 2,532,111 – –
CURRENT ASSETS
Accounts receivable – trade 570,104 570,104 – –
Other receivables 323,972 323,972 – –
Marketable securities 279,624 279,624 – –
Prepaid expenses 3,278 3,278 – –
DEBT
Bonds including convertible bonds 11,073,502 1,136,325 1,800,000 8,137,177 Other borrowings 1,808,904 1,808,904 – –
Commercial paper 1,018,000 1,018,000 – –
Accounts payable – trade 109,162 109,162 – –
Accrued taxes and payroll costs 296,565 296,565 – –
Other 2,088 2,088 – –
Deferred revenue – – – –
Invoices received and issued during the period have not been subject to late payment.
Note 14 Related-party transactions (minimum 10% stake)
(in thousands of euros) Gross Net
Shares in subsidiaries and affiliates 5,377,098 5,357,631 Advances to subsidiaries and affiliates 2,532,111 2,532,111 Accounts receivable 405,060 405,060
Cash and cash equivalents 11,268,738 11,268,738
Revenues:
• rebilled performance shares 91,009
• interest 2,532,461
It should be noted that Boissière Finance is included in this table concerning related companies although it is held through Schneider Electric Industries SAS and the stake is <10%.
Note 15 Other operating revenue
This item relates in its entirety to brand royalties billed to Group companies. Invoicing is carried out on the basis of a percentage of the turnover of each company, under the Schneider brand name or under associated brands.
Note 16 Other purchases and external expenses
This item mainly includes expenses inherent in the management of the Schneider Electric brand.
Note 17 Net financial income/(loss)
(in thousands of euros) 12/31/2023 12/31/2022
Dividends 2,002,364 1,500,580
Net interest income (expense) 208,799 (21,673)
Other (578) 1,396
NET FINANCIAL INCOME/(LOSS) 2,210,585 1,480,303
In 2023, the company received EUR 2,002 million in dividends from Schneider Electric Industries SAS. 266 of 1021
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Note 18 Net non-recurring income/(loss)
(in thousands of euros) 12/31//2023 12/31/2022
Net gains/(losses) on fixed asset disposals 39 39,753
Provisions net of reversals 32,355 36,271
Other non-recurring income/(expense) (70,498) (59,494)
NET NON-RECURRING INCOME/(LOSS) (38,104) 16,531
Non-recurring income/(loss) is mainly related to the income from the re-invoicing of performance shares and the non-recurring expenses associated with these performance shares.
Note 19 Net income tax benefit
The “Income tax expense” line item in the statement of income mainly consists of the Group tax relief recorded by the tax group headed by Schneider Electric SE, net of income tax due, for EUR 29 million.
Schneider Electric SE is the parent company of the tax group comprising all French subsidiaries that are over 95%-owned. Tax loss carry forwards available to the company in this capacity totaled EUR 1,627 million at December 31, 2023.
Note 20 Pension benefit commitment
The company had made commitments towards its executives, active managers and retirees. In 2015, the company closed the top-hat executive pension plans. Since the end of 2015, there have been no more active beneficiaries. The company has outsourced to AXA France VIE its commitments to the retired beneficiaries of top-hat executive pension plans.
Note 21 Off-balance sheet commitments
21.1 – Partnership obligations
The share of liabilities of “SC” non-trading companies attributable to Schneider Electric SE as partner is not material.
The share of liabilities of “SNC” flow-through entities attributable to Schneider Electric SE as partner is not material.
21.2 – Guarantees given and received
Commitments given
Counter-guarantees of bank guarantees: None
Other guarantees given: EUR 2,105 million, mainly to Group companies Bank guarantees: EUR 20 million
Commitments received
Bank counter-guarantees: None
Credit lines: EUR 2,950 million
21.3 – Financial instruments
Schneider Electric Group hedging transactions, exchange guarantees, and the establishment of financial instruments are carried out by the manager of the Group cash pool, Boissière Finance, a wholly-owned subsidiary of Schneider Electric Industries SAS, which in turn is wholly-owned by Schneider Electric SE.
During the 2023 financial year, Schneider Electric SE set up EUR 800 million in interest rate swaps as a derivative instrument to partially hedge its exposure to interest rates.
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Note 22 Contingencies
REPORTI N T E G R A T E D
As previously disclosed, investigations were conducted in September 2018 by the French judicial authority and French Competition Authority (Autorité de la concurrence) at Schneider Electric’s head office and other premises concerning the sale of electrical products through commercial distribution activities in France.
On July 4, 2022, Schneider Electric received a statement of objections (notification de griefs) from the French Competition Authority alleging that the pricing autonomy of some distributors in the French market would have been limited, in breach of competition rules. Schneider Electric strongly disagrees with the allegations of the statement of objections and has submitted its response to the French Competition Authority. The hearing in front of the French Competition Authority is not yet planned, the Group is expecting it to take place in 2024 and an enforceable decision may be issued late 2024 or 2025. Should the French Competition Authority deny Schneider Electric’s arguments and conclude that anti-competitive practices have been involved, it has broad discretion to determine on a case-by-case basis the financial fine it may impose in accordance with the principles of proportionality and individuality as described in its 2021 press release (https://www. autoritedelaconcurrence.fr/sites/default/files/Communique_sanction.pdf).
This potential fine could not exist and could not exceed a maximum amount of 10% of the total 2021 Group revenue according to article L. 464-2 of the French Commercial Code.
Concurrently on October 7, 2022, Schneider Electric was indicted by an investigating judge who required Schneider Electric to provide a bank guarantee of €20 million and a cash guarantee of €80 million. Schneider Electric officially contested the indictment decision and raised numerous arguments in law and fact. Procedure is ongoing.
Those actions do not mean that Schneider Electric will ultimately be found guilty of any wrongdoing. Schneider Electric firmly disagrees with all the allegations made by the French investigating judge and the French Competition Authority and intends to vigorously and fully defend itself.
Considering the difficulty in assessing the extent to which the French Competition Authority considers the arguments of Schneider Electric in its defense as well as the multiple factors contributing to the determination of a fine, it is not possible to reliably estimate the amount of any potential fine that might be incurred in the event of an adverse decision, even though it might have a significant impact on the Group. In this context, no statutory provision has been made at this stage of the case.
Schneider Electric has other contingent liabilities relating to legal, arbitration or regulatory proceedings arising in the normal course of its business. Known or ongoing claims and litigation involving the Group, or its subsidiaries were reviewed at the date on which the statutory financial statements were approved for issue. Based on the advice of legal counsel, all provisions deemed necessary have been made to cover the related risks.
Note 23 Other Information
23.1 – Workforce
The average number of employees over the financial year is four.
23.2 – Consolidated financial statements
Schneider Electric SE is the parent company of the Group and accordingly publishes the consolidated financial statements of the Schneider Electric Group.
23.3 – Subsequent events
On January 10, 2024 SESE carried out a bond issue in two tranches: EUR 600 million at a rate of 3% and maturing in January 2031 and EUR 700 million at a rate of 3.25% and maturing in October 2035. 268 of 1021
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6.4 Statutory auditors’ report on the
annual financial statements (For the year
ended December 31, 2023)
To the Annual General Meeting of Schneider Electric S.E., Opinion
In compliance with the engagement entrusted to us by your Annual General Meeting, we have audited the accompanying financial statements of Schneider Electric S.E. for the year ended December 31, 2023.
In our opinion, the financial statements give a true and fair view of the assets and liabilities and of the financial position of the Company at December 31, 2023 and of the results of its operations for the year then ended in accordance with French accounting principles.
The audit opinion expressed above is consistent with our report to the Audit and Risks Committee.
Basis for opinion
Audit framework
We conducted our audit in accordance with professional standards applicable in France. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under these standards are further described in the “Responsibilities of the Statutory Auditors relating to the audit of the financial statements” section of our report.
Independence
We conducted our audit engagement in compliance with the independence rules provided for in the French Commercial Code (Code de commerce) and the French Code of Ethics (Code de déontologie) for Statutory Auditors for the period from January 1, 2023 to the date of our report, and, in particular, we did not provide any non-audit services prohibited by Article 5(1) of Regulation (EU) No. 537/2014.
Justification of assessments – Key audit matters
In accordance with the requirements of Articles L. 821-53 and R. 821-180-7 of the French Commercial Code relating to the justification of our assessments, we inform you of the key audit matters relating to the risks of material misstatement that, in our professional judgment, were the most significant in our audit of the financial statements, as well as how we addressed those risks.
These matters were addressed as part of our audit of the financial statements as a whole, and therefore contributed to the opinion we formed as expressed above. We do not provide a separate opinion on specific items of the financial statements.
Measurement of investments in subsidiaries and affiliates and related loans and advances “Shares in subsidiaries and affiliates” paragraph of the “Accounting principles” section and Note 2 “Investments” to the financial statements Description of risk At December 31, 2023, shares in subsidiaries and affiliates and related loans and advances recorded in the Company’s balance sheet amounted to €5,358 million and €2,532 million respectively.
As described in the “Shares in subsidiaries and affiliates” paragraph in the “Accounting policies” section of the notes to the financial statements, shares in subsidiaries and affiliates are recorded at their acquisition cost and written down when their estimated value in use at the reporting date is less than their carrying amount. The estimated value in use of shares in subsidiaries and affiliates is determined primarily by reference to the accounting net assets of the investments and by taking into account the profitability of the investments and the outlook for the economic environment. For listed securities, the average share price for the last month of the financial year is taken into account.
Due to the judgment required from management in making these estimates, particularly when they are based on forward-looking information, we considered that the valuation of shares in subsidiaries and affiliates, and by extension the related loans and advances, is a key audit matter. 269 of 1021
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How our audit
REPORTI N T E G R A T E D
addressed this risk
We examined the methodology employed by the Company to estimate the value in use of shares in subsidiaries and affiliates. Our audit work consisted in:
• comparing the share in accounting net assets used to determine the value in use of shares in subsidiaries and affiliates with the financial statements of those subsidiaries and affiliates that have been audited or subject to analytical procedures;
• assessing, when values in use have been determined on the basis of forecasts, the appropriateness of the valuation method on which the estimation is based;
• assessing the main assumptions used in estimating values in use, in particular the long-term growth rate and the discount rate, with the help of our valuation experts, where appropriate; • verifying the arithmetical accuracy of the value in use calculations used by your Company; We also assessed the recoverability of the related receivables in light of the impairment tests performed on the shares in subsidiaries and affiliates.
Specific verifications
In accordance with professional standards applicable in France, we have also performed the specific verifications required by French legal and regulatory provisions.
Information given in the management report and in the other documents provided to the shareholders with respect to the Company’s financial position and the financial statements We have no matters to report as to the fair presentation and the consistency with the financial statements of the information given in the Board of Directors’ management report and in the other documents provided to the shareholders with respect to the Company’s financial position and the financial statements.
We attest to the fair presentation and the consistency with the financial statements of the information about the payment terms referred to in Article D. 441-6 of the French Commercial Code.
Report on corporate governance
We attest that the Board of Directors’ report on corporate governance sets out the information required by Articles L. 225-37-4, L. 22-10-10 and L. 22-10-9 of the French Commercial Code.
Concerning the information given in accordance with the requirements of Article L. 22-10-9 of the French Commercial Code relating to compensation and benefits paid or awarded to corporate officers and any other commitments made in their favor, we have verified its consistency with the financial statements or with the underlying information used to prepare these financial statements, and, where applicable, with the information obtained by the Company from controlled companies within its scope of consolidation. Based on this work, we attest to the accuracy and fair presentation of this information.
Concerning the information given in accordance with the requirements of Article L. 22-10-11 of the French Commercial Code relating to those items the Company has deemed liable to have an impact in the event of a takeover bid or exchange offer, we have verified its consistency with the underlying documents that were disclosed to us. Based on this work, we have no matters to report with regard to this information.
Other verifications and information pursuant to legal and regulatory requirements Format of presentation of the financial statements intended to be included37 in the annual financial report We have also verified, in accordance with the professional standard applicable in France relating to the procedures performed by the statutory auditor relating to the annual and consolidated financial statements presented in the European single electronic format, that the presentation of the financial statements intended to be included in the annual financial report mentioned in Article L.451-1-2, I of the French Monetary and Financial Code (code monétaire et financier), prepared under the responsibility of Chief Executive Officer, complies with the single electronic format defined in the European Delegated Regulation No 2019/815 of 17 December 2018.
Based on the work we have performed, we conclude that the presentation of the financial statements intended to be included in the annual financial report complies, in all material respects, with the European single electronic format.
We have no responsibility to verify that the financial statements that will ultimately be included by your company in the annual financial report filed with the AMF are in agreement with those on which we have performed our work.
Appointment of the Statutory Auditors
We were appointed Statutory Auditors of Schneider Electric S.E. by the Annual General Meetings held on May 6, 2004 for Mazars and on May 5, 2022 for PricewaterhouseCoopers Audit.
At December 31, 2023, Mazars was in the twentieth consecutive year of their engagement and PricewaterhouseCoopers in their second year.
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Responsibilities of management and those charged with governance for the financial statements Management is responsible for preparing financial statements giving a true and fair view in accordance with French accounting principles, and for implementing the internal control procedures it deems necessary for the preparation of financial statements that are free of material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern, and using the going concern basis of accounting, unless it expects to liquidate the Company or to cease operations.
The Audit and Risks Committee is responsible for monitoring the financial reporting process and the effectiveness of internal control and risk management systems, as well as, where applicable, any internal audit systems, relating to accounting and financial reporting procedures.
The financial statements were approved by the Board of Directors.
Responsibilities of the Statutory Auditors relating to the audit of the financial statements Objective and audit approach
Our role is to issue a report on the financial statements. Our objective is to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with professional standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions taken by users on the basis of these financial statements.
As specified in Article L. 821-55-10-1 of the French Commercial Code, our audit does not include assurance on the viability or quality of the Company’s management.
As part of an audit conducted in accordance with professional standards applicable in France, the Statutory Auditors exercise professional judgment throughout the audit. They also:
• identify and assess the risks of material misstatement in the financial statements, whether due to fraud or error, design and perform audit procedures in response to those risks, and obtain audit evidence considered to be sufficient and appropriate to provide a basis for their opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; • obtain an understanding of the internal control procedures relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control; • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management and the related disclosures in the notes to the financial statements; • assess the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. This assessment is based on the audit evidence obtained up to the date of the audit report. However, future events or conditions may cause the Company to cease to continue as a going concern. If the Statutory Auditors conclude that a material uncertainty exists, they are required to draw attention in the audit report to the related disclosures in the financial statements or, if such disclosures are not provided or are inadequate, to issue a qualified opinion or a disclaimer of opinion; • evaluate the overall presentation of the financial statements and assess whether these statements represent the underlying transactions and events in a manner that achieves fair presentation.
Report to the Audit and Risks Committee
We submit a report to the Audit and Risks Committee which includes, in particular, a description of the scope of the audit and the audit program implemented, as well as the results of our audit. We also report any significant deficiencies in internal control that we have identified regarding the accounting and financial reporting procedures.
Our report to the Audit and Risks Committee includes the risks of material misstatement that, in our professional judgment, were the most significant for the audit of the financial statements and which constitute the key audit matters that we are required to describe in this report.
We also provide the Audit and Risks Committee with the declaration provided for in Article 6 of Regulation (EU) No. 537/2014, confirming our independence within the meaning of the rules applicable in France, as defined in particular in Articles L. 821-27 to L. 821-34 of the French Commercial Code and in the French Code of Ethics for Statutory Auditors. Where appropriate, we discuss any risks to our independence and the related safeguard measures with the Audit and Risks Committee.
The Statutory Auditors
Mazars
Paris La Défense on February 29, 2024
PricewaterhouseCoopers Audit
Neuilly-sur-Seine on February 29, 2024
Juliette Decoux Guillemot Mathieu Mougard Jean-Christophe Georghiou Séverine Scheer
6.4 Statutory auditors’ report on the annual financial statements 271 of 1021
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Chapter 6 – Parent company financial statements
CH1 CH2 CH3 CH4 CH5 CH6 CH7 CH8 CH9
6.5 List of securities held at December 31,
REPORTI N T E G R A T E D
2023
Number of securities
(in thousands of euros) Company Carrying amount
A. MAJOR INVESTMENTS
(Carrying amounts over EUR 5 million)
58,018,657 Schneider Electric Industries SAS 5,343,544
2,497 Muller SAS 8,038
10,357,749 Schneider Electric SE own shares 1,375,177
6,726,759
B. OTHER INVESTMENTS –
(Carrying amounts under EUR 5 million)
C. INVESTMENTS IN REAL ESTATE COMPANIES –
D. INVESTMENTS IN FOREIGN COMPANIES 6,049
Total 6,732,807
MARKETABLE SECURITIES
4,159,845 Schneider Electric SE own shares 279,623
TOTAL 7,012,430
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FINANCIAL STATEMENTS
6.6 Subsidiaries and affiliates
Company
(in thousands of euros) Capital
Reserves and
retained earnings
prior to allocation of
net income*
I. DETAILED INFORMATION ON SUBSIDIARIES AND AFFILIATES WITH A CARRYING AMOUNT OF OVER 1% OF THE SHARE CAPITAL OF SCHNEIDER ELECTRIC SE
A. Subsidiaries (at least 50% owned)
Schneider Electric Industries SAS 35, rue Joseph-Monier 92500 Rueil-Malmaison 928,299 6,298,071 B. Affiliates (10 to 50%-owned)
II. GENERAL INFORMATION ON OTHER SUBSIDIARIES AND AFFILIATES A. Subsidiaries not included in section I: (+50%)
a) French subsidiaries (aggregate) 38 8,191
b) Foreign subsidiaries (aggregate) – –
B. Affiliates not included in section I: (0-50%)
a) French companies (aggregate) – –
b) Foreign companies (aggregate)* 640 180,302
* Including income or loss in prior financial years
* the amounts in foreign currency have been converted into euros at the rate of December 31, 2023. 273 of 1021
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CH1 CH2 CH3 CH4 CH5 CH6 CH7 CH8 CH9
REPORTI N T E G R A T E D
Share interest held
(%) Gross value Net value
Loans and advances
provided by the
company and still
outstanding
Amount of
guarantees given by
the company
2023 revenues
(ex VAT)
2023 Profit or Loss
(-)
Dividends received
by the company
during financial year
2023
100.00 5,343,544 5,343,544 2,532,111 – 4,486,895 2,068,597 1,999,903
99.84 12,306 8,038 – – – (215) –
– – – – – – – –
– – – – – – –
4.80 21,249 6,048 – – 137,481 56,924 2,460
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546Schneider Electric Universal Registration Document 2023 | www.se.com Chapter 6 – Parent company financial statements
FINANCIAL STATEMENTS
6.7 The company’s financial results over
the last 5 years
Description 2023 2022 2021 2020 2019
FINANCIAL POSITION AT DECEMBER 31
Share capital(in thousands of euros) 2,291,344 2,284,372 2,276,134 2,268,274 2,328,274 Number of shares in issue 572,835,884 571,092,921 569,033,442 567,068,555 582,068,555 Number of convertible bonds in issue 3,701,523 3,695,023 3,683,972 3,683,972 – Maximum number of shares to be created:
• through conversion of bonds – – – – –
• through exercise of rights – – – – –
RESULTS OF OPERATIONS
(in thousands of euros)
Sales (ex. VAT) 1 79 – 450 2,385
Investment revenue, interest income and other revenue 2,002,364 1,500,580 1,500,362 1,553 49,896 Earnings before tax, depreciation, amortization and
provisions 2,555,672 1,690,046 1,392,930 (201,902) (18,659) Income tax 42,907 18,623 52,342 32,287 71,684
Earnings after tax, depreciation, amortization and provisions 2,560,475 1,744,408 1,498,235 (31,273) 57,108 Dividends paid1
excluding tax credit and withholdings 2,002,3632 1,650,197 1,650,197 1,474,378 1,413,455
RESULTS OF OPERATIONS PER SHARE
(in euros)
Earnings before depreciation, amortization and provisions 4.42 2.99 2.54 (0.30) 0.09 Earnings after tax, depreciation, amortization and provisions 4.48 3.05 2.63 (0.06) 0.10 Net dividend per share 3.502 3.15 2.90 2.60 2.55
EMPLOYEES
Average number of employees during the financial year 4 2.5 1 1 1 Total payroll for the financial year (in thousands of euros) 13,505 1,496 1,130 1,961 3,693 Total of employee benefits paid over the financial year (Social security, other benefits, etc.)(in thousands of euros) 1,102 871 795 916 944 (1) For 2023, estimate based on existing shares at December 31, 2023, including treasury shares. (2) Pending approval by the Annual Shareholders’ Meeting of 2024. 275 of 1021
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6.8 Extract of the management report for
REPORTI N T E G R A T E D
the year ended December 31, 2023
In 2023, Schneider Electric SE’s operating profit stood at EUR 345 million, compared with EUR 229 million the previous year. Interest expense net of interest income amounted to ‑EUR 208 million compared with EUR 22 million the previous year.
Income from ordinary activities before tax stood at EUR 2,555 million in 2023 compared with EUR 1,709 million in 2022. This difference was mainly due to Schneider Electric brand royalties, which were up by more than EUR 74 million, financial income, which was up by EUR 948 million, and financial expenses, which were up by EUR 218 million.
Net income for 2023 stood at EUR 2,560 million, compared with EUR 1,744 million for 2022. Equity amounted to EUR 8,196 million at December 31, 2023, compared with EUR 7,213 million at the previous year-end, taking into account 2023 profit, and the impact of dividend payments amounting to EUR 1,767 million.
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Sample M&V ReportsAppendix B:
B
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Golden Valley USD
Periodic Savings Report
Prepared By Performance Assurance Support Services
August 20, 2024
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Cumulative Savings Performance
This graph represents total savings to date relative to total guarantee to date. Savings are reconciled on an annual basis indicated by the larger dots on the guarantee line. Reconciliation is based on cumulative savings relative to cumulative guarantee. The savings shown in this graph are based on rates as defined in the M&V plan.
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Annual Savings Performance
The graph above illustrates the month to month cost savings from previous project year to current project year for the entire project. The savings are based on rates as defined in the M&V plan. The black line represents the fixed guarantee while the solid areas are the monthly cost savings. The goal is for the monthly savings to exceed the monthly guarantee and to sustain or improve on the year to year performance. 08/20/2024 3
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94 Cars Removed
for 1 Year
128 Acres of
Trees Planted
414 Tons
Reduced
CO2 Emissions
kWh: 626,892
In two years and seven months, the Golden Valley USD project has saved...
Tons of CO2 are the equivalent emissions based on the reduction in consumption. Cars for a year is the equivalent number of cars removed from the road based on the reduction in consumption. Acres of trees is the equivalent quantity of trees required to absorb the CO2 that would have been emitted during the production of the energy that was saved.
Commercial buildings in the United States used an estimated 18 Quadrillion BTU’s in 2008. That’s equivalent to 5,983 Million tons of CO2 emissions. *Based on data from the US Energy Information Administration at http://www.eia.doe.gov . All data is based on industry averages.
Environmental Impact
*The numbers above reflect all applicable adjustments.
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In the last 12 months, you have saved ...
Projected Savings vs. Actual Savings (BTUs)
Acres of Trees 43 29
Cars for a Year 32 22
Tons of CO2 140 95
BTUs (billions) 0.72 0.49
Webster
Elementary
Liberty High
School
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Consistent communication and visibility to empower maximum performance Proactive system review to optimize operations and maintenance Partnership to achieve Energy Management goals
Client focused support to ensure sustained performance and comfort Verifiable and measurable savings performance
Trust in Performance Assurance Support Services
Please contact one of the following Schneider Electric representatives with any questions or comments:
In order to achieve sustained performance, it is critical that you and your staff have a path for quick resolution of issues and support. PASS has designated personnel experienced in highly responsive support of the operations and maintenance of the building automation systems. For critical after-hours issues, please leave a message and your phone call will be returned in less than 4 hours.
Performance Manager
Project Support
The Performance Manager is your energy management partner to ensure the projects success and to assist you with achieving your energy savings and performance objectives. They consistently evaluate the projects performance and communicate opportunities for improvement. This is your contact for questions or concerns related to the project’s performance or if you are interested in additional services Phone: +1 800 274 5551 x4 | Hours: Monday - Friday, 7 am - 6 pm Central Our Vision:
"A world where we can all achieve more
while using less of our common planet"
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Holyoke School District
Year 1 SAVINGS REPORT
10/5/2023
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Executive Summary
Holyoke School District entered an Energy Services Contract with Schneider Electric in October of 2020.
Schneider Electric originally guaranteed the Holyoke School District that a total of $1,664,567 in cost savings would be realized over a 15 year term. This equated to $83,130 in Year 1 and increasing each year thereafter by a rate of 4% per year. The original guarantee is detailed in Table 2A.
The Energy Services Contract was amended due to a BEST grant remodel that affected the originally proposed lighting scope and includes the addition of plug load control scope that occurred during the installation period. The impact of the amendment to the expected savings is detailed in the following sections of the report. The amendment guarantees Holyoke School District that a total of $1,634,719 in cost savings will be realized over the 15 year term. The new Year 1 savings equate to $81,640 and increases each year thereafter by a rate of 4% per year. Utility Cost Savings began during the installation period.
The project received final acceptance on April 30th 2022 and entered the performance assurance period May 1st 2022. The amended guarantee is detailed in Table 2B.
The original project scope includes lighting retrofits to decrease the lighting load, mechanical restoration to optimize mechanical equipment, building controls to manage setpoints and schedules, and telecom savings. Because of the BEST grant remodel completed at Holyoke High School, some of the lighting replacements at the High School were removed from the scope of this project and resulted in a decrease in the savings guarantee originally proposed. In addition to removing some of the lighting scope, the remodel resulted in a change in the configuration of the mechanical equipment that will be controlled.
There was also mechanical equipment removed and added as part of the BEST Grant remodel. No savings will be claimed for the mechanical scope of this project, but the remodel does impact the usage and was accounted for with an adjustment. The impact of a greenhouse addition that did not exist at the time of the final proposal was also accounted for with an adjustment. Additionally, there was a plumbing issue at the High School Gym due to exposed plumbing at the peak of the winter season that caused a major increase in energy consumption. A savings adjustment was implemented for this situation as well. See Table 4 for the total savings impacts.
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Schneider Electric informs the district that Year 1 unadjusted achieved savings are $9,156 below guarantee in year 1. The unadjusted achieved savings for Year 1 are $58,095 and are detailed in Table 3.
An adjustment of $14,389 detailed in Table 4 will bring the expected savings to $72,484. The savings guarantee was not achieved with year 1 savings alone, but was reached with installation savings accrued as substantial completion was achieved for each scope item during the installation period of the project.
Table 2A – Originally Proposed Annual Savings Overview
Utility Cost
Savings
Measure or
FIM
Total energy
savings
(MMBtu/yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricity
savings
(MMBtu/yr)
Natural gas
savings
(MMBtu/yr)
Water
savings
(gallons/
yr)
Other
energy
savings
(MMBtu
/yr)
Total
energy
and water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M
cost
savings,
Year 1
($/yr)
Total cost
savings,
Year 1
($/yr)
Controls 1,038 306,475 614 1,046 -8 0 0 $29,184 $6,500 $35,684 Lighting 769 274,211 1,329 936 -166 0 0 $37,646 $5,500 $43,146 Telecom 0 0 0 0 0 0 0 $0 $4,300 $4,300
Total savings 1,807 580,686 1,943 1,982 -175 0 0 $66,830 $16,300 $83,130 Original First year guaranteed savings: $83,130
Notes MMBtu=106 Btu.
*Annual electric demand savings (kW/yr) is the sum of the monthly demand savings.
Table 2B – Proposed Annual Savings Overview
Utility Cost
Savings
Measure or
FIM
Total energy
savings
(MMBtu/yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricity
savings
(MMBtu/yr)
Natural gas
savings
(MMBtu/yr)
Water
savings
(gallons/
yr)
Other
energy
savings
(MMBtu
/yr)
Total
energy
and water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M
cost
savings,
Year 1
($/yr)
Total cost
savings,
Year 1
($/yr)
Controls 1,038 306,475 614 1,046 -8 0 0 $29,184 $6,500 $35,684 Lighting 724 258,094 1,249 881 -157 0 0 $35,441 $5,500 $40,941 BERT Plugs 36 10,447 0 36 0 $714 $0 $714
Telecom 0 0 0 0 0 0 0 $0 $4,300 $4,300
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Utility Cost
Savings
Measure or
FIM
Total energy
savings
(MMBtu/yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricity
savings
(MMBtu/yr)
Natural gas
savings
(MMBtu/yr)
Water
savings
(gallons/
yr)
Other
energy
savings
(MMBtu
/yr)
Total
energy
and water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M
cost
savings,
Year 1
($/yr)
Total cost
savings,
Year 1
($/yr)
Total savings 1,797 575,016 1,863 1,963 -166 0 0 $65,340 $16,300 $81,640 Amended First year guaranteed savings: $81,640
Notes MMBtu=106 Btu.
*Annual electric demand savings (kW/yr) is the sum of the monthly demand savings.
Table 3 - Achieved Savings Overview for First Performance Year Utility Cost
Savings
Measure or
FIM
Total energy
savings
(MMBtu/yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricity
savings
(MMBtu/yr)
Natural gas
savings
(MMBtu/yr)
Water
savings
(gallons/
yr)
Other
energy
savings
(MMBtu
/yr)
Total
energy
and water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M
cost
savings,
Year 1
($/yr)
Total cost
savings,
Year 1
($/yr)
Controls 841 265,159 -11 905 -64 0 0 $18,727 $6,500 $25,227 Lighting 184 264,935 420 904 -720 0 0 $22,519 $5,500 $28,019 BERT Plugs 24 7,085 2 24 0 0 0 $549 $0 $549
Telecom 0 0 0 0 0 0 0 $0 $4,300 $4,300
Total savings 1,050 537,179 411 1,833 -784 0 0 $41,795 $16,300 $58,095 Notes MMBtu=106 Btu.
*Annual electric demand savings (kW/yr) is the sum of the monthly demand savings.
The achieved savings from the project scope are outlined in Table 3 above, but the negative impact to savings from the changes outlined in Table 4 resulted in adjustments that are equal to that calculated impact.
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Table 4. – Savings Impact of Adjustments Implemented
ECM
Total
energy
savings
(MMBtu)
Electric
energy
savings
(kWh)
Electric
demand
savings
(kW)
Electricity
savings
(MMBtu)
Natural
gas
savings
(MMBtu)
Water
savings
Other
energy
savings
Total
energy
& water
cost
savings
($)
Other
energyrelated
O&M
cost
savings
($)
Total
cost
savings
($)
Greenhouse
Addition 430 4,263 5 15 415 0 0 $2,921 $0 $2,921
BEST Remodel -
Mechanical -1 -326 25 -1 0 0 0 $395 $0 $395
Plumbing
Failure 609 80,152 192 274 335 0 0 $11,072 $0 $11,072
Total Impact 1,038 84,088 222 287 751 0 0 $14,389 $0 $14,389 Notes MMBtu=10⁶ Btu
*Annual electric demand savings (kW/yr) is the sum of the monthly demand savings.
Some factors that did not allow achieved savings to meet guarantee are misidentified lighting fixtures part of the Option A lighting scope that reduced our potential for savings as detailed in the Option A lighting section of this report. The reduced lighting load did not meet our projected savings. Also, building operation outside of the setpoints and schedules outlined in the Energy Performance Contract did not allow savings to reach their potential. See the negative savings impact operating outside of contract parameters detailed in the Option C section of this report. Additionally, demand performance overall has not met the anticipated savings targets for Year 1 and will be an area of improvement for Year 2.
The cumulative savings achieved through the installation period and Year 1 including adjustments implemented is $135,938. This is $54,298 over the Year 1 guarantee. See Table 5 for the adjusted savings for the performance period to date.
The baseline energy rates used are $0.06901/kwh, $15.74/kW, and $0.57520/therm for Option C and $0.57831/therm for Option A measured savings. Electric rates will be escalated from the baseline period to Year 1 by 5.455%. Gas rates will be escalated by 6.090% from the baseline period to year 1. After Year 1, all savings will be escalated at a rate of 4% each year. 288 of 1021
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Table. 5 – Adjusted Savings Achieved for Performance Period to Date Year
Total
energy
savings
(MMBtu/yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricity
savings
(MMBtu/yr)
Natural gas
savings
(MMBtu/yr)
Water
savings
Other
energy
savings
Total
energy &
water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M
cost
savings,
Year 1
($/yr)
Total
cost
savings,
Year 1
($/yr)
Installation 2,365 563,604 1,355 1,924 441 0 0 $63,455 $0 $63,455 Year 1 2,087 621,267 633 2,120 -33 0 0 $56,184 $16,300 $72,484 Total
savings 4,452 1,184,872 1,989 4,044 408 0 0 $119,638 $16,300 $135,938 Notes MMBtu=106 Btu.
*Electric demand savings (kW) is the sum of the monthly demand savings.
The following report sections provide a summary of the Energy Conservation Measures (ECMs) installed by savings methodology used and Non-Measured savings verification strategies utilized. 289 of 1021
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Current Rates
While contractual rates are used to calculate savings in comparison to the guarantee, current utility rates are also applied for informational purposes only. The current utility rates are not used to meet the savings guarantee. Year 1 savings with adjustments, when calculated using current utility rates, come out to $75,358 which is $2,875 higher than the contractual rate savings. This means that Holyoke School District’s utility rates increased more than expected, but also that they should be seeing savings slightly higher than what is held to the guarantee in this report. Current rate savings are detailed below.
Please note that the year 1 current rate savings are not used for comparison to the savings guarantee, but for informational purposes only. The year 1 savings also do not include any savings accumulated during the installation phase of the project.
Table 6. – Adjusted Year 1 Savings with Current Rates Applied Total
energy
savings
(MMBtu/
yr)
Electric
energy
savings
(kWh/yr
)
Electric
deman
d
savings
(kW/yr)
Electrici
ty
savings
(MMBt
u/yr)
Natural
gas
savings
(MMBtu/
yr)
Water
savings
Other
energy
savings
Total
energy
& water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M
cost
savings,
Year 1
($/yr)
Total
cost
savings,
Year 1
($/yr)
Total Y1
savings 18 621,267 633 2,120 -33 0 0 $59,058 $16,300 $75,358 290 of 1021
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Option A: Methodology and Savings Summary
The method of determining energy savings for the lighting scope at Holyoke Elementary School used “Option A – Retrofit Isolation – Key Parameter Measurement” as described in the International Performance Measurement and Verification Protocol (IPMVP). The Option A method requires the energy use of the equipment affected by an ECM to be separated from the energy use of the rest of the facility.
For the Option A portion of the project, the lighting fixture power consumption for the pre/post-retrofit fixture types was measured as stated in Schedule D of the Energy Performance contract. This savings methodology was used only for the lighting scope performed at the Holyoke Elementary School.
Measurements of the fixture types listed in Schedule D of the Energy Performance Contract were taken until the statistical thresholds were met. Measurements were taken once during the installation period and will not repeat through the lifetime of the project. Those measurements can be found in the Appendix.
The measurements were combined with the parameters that were estimated (rather than measured) to determine the amount of energy saved. The demand diversity, burn hours, heating and cooling efficiency conversion factors, and burnout rates were estimated for this project. The values used in the calculations can be found in Schedule D of the Energy Services Contract and in the tables below.
Space
Type
Consumption
HVAC Factor
(kWh/kWh)
Demand HVAC
Factor (kW/kW)
Heating Penalty
Factor
(therms/kWh)
Interior 0.132689 0.379111 -0.009835
Exterior 0.0 0.0 0.0
Space Type Burnout Demand Diversity
Interior 0.05 0.90
Exterior 0.05 0.00
The power measurements and other parameters were used to calculate the actual savings achieved from the retrofits performed, using the equations and methods described in Schedule D of the Energy Services Contract.
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Electric lighting consumption savings were determined by multiplying the power of the pre-retrofit fixtures by their annual burn hours and subtracting from that the product of the power of the post-retrofit fixtures and the post-retrofit annual burn hours.
Electric lighting demand savings were determined by multiplying the power of the pre-retrofit fixtures by the probability of being on during the peak demand and subtracting from that the product of the power of the post-retrofit fixtures and the post-retrofit probability of being on during the peak demand.
Heating penalty and cooling savings were determined by multiplying the electric consumption savings by an estimated conversion factor.
The table in the Appendix shows all the components and calculations used to compute the savings and the total calculated energy and cost savings per retrofit in the rightmost columns. 11 months of demand savings were used to calculate achieved savings.
There were some fixtures that upon measuring were different than what was noted in the IGA lighting audit. The 2 Lamp 32W T8 4ft BF=1.15 and 4 Lamp 32W T8 4ft BF=1.15 fixtures had ballasts with a ballast factor of 0.88 instead of 1.15 which consequently decreased the baseline usage and led to a lower wattage measurement than expected. Additionally, the 4 Lamp 32W T8 4ft BF=1.15 fixtures were actually two 2 Lamp 32W T8 4ft fixtures which would bring this fixture to the next class of measurement requirements that calls for 10 measurements to be taken because of the resulting larger quantity of the 2 Lamp 32W 4ft BF=0.88 fixture. It was not possible to take more measurements because the fixtures had already been replaced so only 4 measurements were taken of the 2 Lamp 32W T8 fixture type. The wattage calculated from these 4 measurements was used in the savings calculations for the 2 Lamp 32W T8 4ft BF=0.88, 2 Lamp 32W T8 4ft BF=1.15, and 4 Lamp 32W T8 4ft BF=1.15 because they are all the same 2 Lamp 32W T8 4ft BF=0.88 fixture with the same ballast factor.
Because the actual existing fixtures found during the retrofit were more efficient than what was originally accounted for in the initial lighting audit, the calculated savings fell below the expected savings for the Option A lighting scope. The power measurements for the rest of the fixture types measured were in line with what was expected. Find the exact readings in the Appendix. 292 of 1021
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The table below shows the saving impact misidentifying the ballast factors had on the total savings achieved.
Table 7. Negative Savings Impact of Misidentified Fixtures Total
energy
use
(MMBtu/
yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricit
y savings
(MMBtu/
yr)
Natural
gas
savings
(MMBtu/
yr)
Water
savings
(gallons/
yr)
Other
energy
savings
(MMBtu/
yr)
Total
energy
and
water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M
cost
savings,
Year 1
($/yr)
Total
cost
savings,
Year 1
($/yr)
Savings
Impact -53 -20,747 -119 -71 18 0 0 -$3,369 $0 -$3,369
Table 8 below compares the proposed Option A lighting savings with the achieved savings. The impact of the misidentified fixtures along with the variances in power measurements from what was expected resulted in savings that were $3,369 lower than what was proposed.
Table 8. Impact to energy and cost savings from changes between final proposal and as-built conditions for ECM
Total
energy
use
(MMBtu
/yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricity
savings
(MMBtu/yr)
Natural gas
savings
(MMBtu/yr)
Water
savings
(gallons/yr)
Other
energy
savings
(MMBtu
/yr)
Total
energy
and
water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M cost
savings,
Year 1
($/yr)
Total
cost
savings,
Year 1
($/yr)
Proposed 204 79,671 447 272 -68 0 0 $12,795 $0 $12,795
Achieved 153 59,467 325 203 -50 0 0 $9,422 $0 $9,422
Variance -51 -20,204 -122 -69 18 0 0 -$3,374 $0 -$3,374 Notes MMBtu=10 Btu.
*Annual electric demand savings (kW/yr) is the sum of the monthly demand savings.
During the site visit performed as part of the Energy Performances Contract lighting fixtures were found to be in good condition and no deficiencies were found.
The cost savings achieved were calculated using energy rates in the table below and can also be found listed in Schedule D under the Option A section of the Energy Services Contract. 293 of 1021
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Unit Charge
$/kWh $0.06901
$/kW $15.74
$/therm $0.57831
The table below shows a summary of the total fixture retrofit consumption and dollar savings in Year 1.
Table 9. Option A – Cost and Unit Savings
Total
energy
use
(MMBtu
/yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricity
savings
(MMBtu/yr)
Natural gas
savings
(MMBtu/yr)
Water
savings
(gallons/yr)
Other
energy
savings
(MMBtu
/yr)
Total
energy
and
water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M cost
savings,
Year 1
($/yr)
Total
cost
savings,
Year 1
($/yr)
Baseline Use 336 98,536 536 336 0 0 0 $16,072 $0 $16,072 PostInstallation
Use
183 39,068 211 133 50 0 0 $6,650 $0 $6,650
Savings 153 59,467 325 203 -50 0 0 $9,422 $0 $9,422
Notes MMBtu=10 Btu.
*Annual electric demand savings (kW/yr) is the sum of the monthly demand savings.
The electric annual savings value is escalated beginning in Year 1 at 5.455% and 4% thereafter. The gas annual savings value is escalated beginning in Year 1 at 6.090% and 4% thereafter. Installation savings totaling $9,032 accrued from the start of the substantial completion date of this scope item through the Guarantee Commencement date.
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Option C: Methodology and Savings Summary
The method of determining energy savings for the lighting and controls scope at the Holyoke High School uses “Option C – Whole Facility (Main Meter Measurement” as described in the International Performance Measurement and Verification Protocol (IPMVP). The Option C method measures savings by comparing the Performance Period’s total energy consumption and demand to the total energy consumption and demand for the same area in the base year period by utilizing energy meter data. Base year energy and demand are adjusted for differences in weather, facility operation and facility modifications to estimate how much energy would have been used in the Performance Period if the energy conservation measures had not been implemented. Energy savings are calculated as the difference between the adjusted base year energy usage and the Performance Period energy usage.
The baseline is the set of parameters that describes both the energy consumed in the base year and the conditions that caused that consumption to occur. These parameters include twelve (12) months of utility data, facility use information, weather data, and any additional information that may have impacted baseline energy usage. The baseline usage may be adjusted to account for changes in the facilities and their use during the base year and throughout the Performance Period. The purpose of the adjustments are to determine the magnitude of the achievable savings when the ECMs are used effectively under the baseline facility conditions (scheduling, setpoints, etc.) Savings for 2 Electrical meters and 1 Natural Gas meter at the Junior High/High School building are measured using this methodology. The specific meters along with the equations and parameters used to calculate savings are noted in the Option C section located in Schedule D of the Energy Performance Contract.
Daily high and low temperatures are collected from the Imperial Municipal Airport, NE (IML) weather station. This weather data along with the usage readings from the monthly utility bills as provided by Holyoke School District will continue to be collected throughout the Performance Period to calculate achieved savings because of the lighting and controls scope implemented.
Low demand values were noted in the spring and early summer of 2019 in the base year because the chiller was not fully operational during these months. Since the chillers will be fully operational during the 295 of 1021
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Performance Period, the baseline demand is modified for the Holyoke High School Chiller Electric meter as noted in the Option C section in Schedule D of the Energy Services contract. The chiller outage during this period was not considered when calculating the demand baseline regression.
An annual site visit was conducted to verify the scope installed. The site was assessed to determine current operating conditions and identify areas of improvement for each site. No major issues or deficiencies were found and ECMs implemented were found in good condition at the time of the Year 1 site visit. However, operational deficiencies with Building Automation System schedules and setpoints were noted and are detailed further into this report section.
Each scope item measured using the Option C savings methodology is detailed below. The performance of the ECMs outlined are evaluated together as it is difficult to isolate the actual savings attributed to each ECM using this methodology.
Existing Building Automation System Controls Replacement The previous Richards-Zeta Building Automation System (BAS) was replaced with a Schneider Electric BAS at Holyoke High School as part of the project scope implemented. The new system is programmed for temperature setup and setback to keep systems from cooling or heating the air during unoccupied times.
Optimized scheduling was also put in place to prevent unit operation during unoccupied times. These measures will minimize the operation of mechanical equipment and thus energy usage.
The schedules and setpoints recommended and used within savings calculations can be found in Schedule D of the Energy Services Contract and in the following tables.
Facility Space Day Type Daily Schedule
Holyoke High School
All other spaces Weekday 7:00am – 4:00pm
All Weekend/Holiday Unoccupied
Auditorium, old gym, new
gym, main office AHUs Summer Weekday
10:00am – 6:00pm as
needed for maintenance Junior High side AHUs Summer Weekday through end of June High School side AHUs
(including locker rooms)
Summer Weekday July through start
of school year
All other spaces/equipment Summer Weekday Unoccupied
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Heating Cooling
Occupied 69°F 75°F
Unoccupied 50°F 99°F
As part of the Performance Period Verification activities, a monthly review of the Building Automation System (BAS) was performed to verify the setpoints and schedules that were agreed upon in the Energy Services Contract and to note any equipment deficiencies that may impact energy usage. A monthly report was delivered to Holyoke School District reporting the findings.
Through the monthly review of the BAS it was found that throughout the Year 1 Performance Period the setpoints set were on average outside of the contract parameters. The average setpoints in place found from our monthly reviews are in the table below.
Avg. Heating Avg. Cooling
Occupied 68°F 73°F
Unoccupied 53°F 92°F
Additionally, it was found that schedules were operating outside of the contract parameters during projected system shutdowns, causing increased system runtime and thus an increase in energy usage from what was projected.
An estimate of the negative energy impact resulting from the setpoint changes and additional runtime was calculated using the average of the setpoints and schedules found in place throughout the performance year. These inputs were updated in the energy model used to calculate savings and the results were used to calculate the impact. The calculated dollar savings lost is found in Table 10 below.
The dollar value is only used to quantity the impact these changes had on savings and was not used as an adjustment to savings achieved at this time. Schneider Electric estimates that the district could save an $1,857 more by following contractual schedules and setpoints. 297 of 1021
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Table 10. Energy Impact of Change in Setpoints and Schedules Total
energy use
(MMBtu/yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricity
savings
(MMBtu/yr)
Natural gas
savings
(MMBtu/yr)
Water
savings
(gallons/yr)
Other
energy
savings
(MMBtu/yr)
Total
energy
and
water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M
cost
savings,
Year 1
($/yr)
Total
cost
savings,
Year 1
($/yr)
Savings
Impact -38 -11,114 -63 -38 0 0 0 -$1,857 $0 -$1,857
Notes MMBtu=10 Btu.
*Annual electric demand savings (kW/yr) is the sum of the monthly demand savings.
Interior/Exterior LED Lighting Upgrade
The existing lighting at the High School was replaced with more efficient LED fixtures. Savings are achieved by reducing the lighting load in the building. Only the lighting scope completed at the Holyoke High School is measured using the Option C savings methodology.
An annual site visit was conducted to verify the project scope implemented. The lighting retrofits were found in good condition and still in place at the time of the planned site visit for Year 1.
BERT Plug Savings
As part of the contract amendment signed, the installation of BERT Plugs were added to the project scope. Turning classroom equipment off at schedule times using the BERT plugs decreases consumption by the equipment and leads to energy savings. A portion of these plugs were installed at the Junior High/High School campus and are measured and verified through the electrical meter being tracked using the Option C methodology.
An annual site visit was conducted to verify the project scope implemented. The BERT plugs were found in good condition at the time of the planned site visit for Year 1.
Adjustments Implemented
Although the following changes are not directly related to the ECMs implemented as part of the project scope, they do have an impact on the energy usage of the meters tracked using the Option C savings 298 of 1021
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methodology outlined in this section. These changes are outside the scope of our project and were done independently by Holyoke School District. A baseline adjustment was implemented so that savings as a result from the ECMs implemented can be accurately accounted for.
Greenhouse Addition
Since the final proposal of savings presented, a greenhouse was constructed which is tied to the main High School electrical meter that is tracked through the Performance Period of the project. The greenhouse has exhaust fans and a unit heater. The additional energy usage that the greenhouse consumes was added as an adjustment to the baseline. This will remove the estimated energy the greenhouse uses from consideration when calculating savings achieved.
The adjustment to the baseline was calculated using the equipment specifications of the installed equipment as stated in the greenhouse as-built provided by the customer, the operating parameters of the equipment provided by the customer, and hourly temperature readings as collected from the Imperial FAA AP (725626) TMY3 weather station. The calculation can be found in the folder included with this report. The number of days and hours that the equipment was in operation was estimated based on the operating parameters of the greenhouse and the weather data collected. The equipment specifications were used to calculate the energy usage during the estimated time of operation. See the tables below for the total energy adjustment resulting from the greenhouse addition.
Table 11. Greenhouse Addition – Cost and Unit Savings Adjustment Greenhouse
Addition
Total
energy use
(MMBtu/yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricity
savings
(MMBtu/yr)
Natural gas
savings
(MMBtu/yr)
Water
savings
(gallons/yr)
Other
energy
savings
(MMBtu/yr)
Total
energy
and
water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M
cost
savings,
Year 1
($/yr)
Total
cost
savings,
Year 1
($/yr)
Savings
Impact 430 4,263 5 15 415 0 0 $2,921 $0 $2,921
Notes MMBtu=10 Btu.
*Annual electric demand savings (kW/yr) is the sum of the monthly demand savings.
The cost savings adjustment was calculated using the rates as listed in Schedule D of the contract.
BEST Grant Remodel - Mechanical
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In addition to the newly constructed greenhouse, the JR High School/High School underwent renovations that added and removed mechanical equipment during the installation of the scope of this project. A baseline adjustment was calculated by modeling the changes using the same parameters and assumptions used to establish the original baseline described under the Option C methodology. The removed equipment included 3 Air Handlers, 11 Fan Coil Units, and 1 unit ventilator. The added equipment consisted of 3 Cabinet Unit Heaters, 5 Exhaust Fans, 1 Fan Coil Unit, 1 Air Handler, and 4 Roof Top Units.
The energy and savings impact of these changes is found in the table below. The changes resulted in overall less efficiency.
Table 12. BEST Grant Remodel – Cost and Unit Savings Adjustment BEST Grant
Remodel
Total
energy use
(MMBtu/yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricity
savings
(MMBtu/yr)
Natural gas
savings
(MMBtu/yr)
Water
savings
(gallons/yr)
Other
energy
savings
(MMBtu/yr)
Total
energy
and
water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M
cost
savings,
Year 1
($/yr)
Total
cost
savings,
Year 1
($/yr)
Savings
Impact -1 -326 25 -1 0 0 0 $395 $0 $395
Notes MMBtu=10 Btu.
*Annual electric demand savings (kW/yr) is the sum of the monthly demand savings.
The cost savings adjustment was calculated using the rates as listed in Schedule D of the contract.
High School Gym Plumbing Failure
During the Year 1 Performance Period, there was an incident at one of the High School gyms where exposed plumbing burst during the months of January and February, the winter peak, causing major water damage to the gym wood floors. To fully dry out the floors, auxiliary heating equipment in addition to the building system was used to raise the space temperatures to a high temperature at a time of very low outdoor temperatures. The energy impact was significant and is difficult to quantify so to account for this event, savings were adjusted to our projected savings targets for the affected months. An adjustment equal to the difference between actual energy consumption and projected energy savings was implemented.
Table 13. Plumbing Failure – Cost and Unit Savings Adjustment 300 of 1021
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Plumbing
Failure
Total
energy use
(MMBtu/yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricity
savings
(MMBtu/yr)
Natural gas
savings
(MMBtu/yr)
Water
savings
(gallons/yr)
Other
energy
savings
(MMBtu/yr)
Total
energy
and
water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M
cost
savings,
Year 1
($/yr)
Total
cost
savings,
Year 1
($/yr)
Savings
Impact 609 80,152 192 274 335 0 0 $11,072 $0 $11,072
Notes MMBtu=10 Btu.
*Annual electric demand savings (kW/yr) is the sum of the monthly demand savings.
The achieved savings from the project scope are outlined in Table 14 below, but the positive adjustments to savings from the changes outlined in this section are not included. The total adjustment implemented is equal to the values found in Table 4 of the Executive Summary of this report. The adjustments total $14,389 in savings.
The Option C scope achieved $30,325 in savings for Year 1 as shown in Table 14 excluding adjustments to the baseline. With adjustments, option C savings total $44,714.
Table 14. Option C Cost and Unit Savings – No Adjustments Included Total
energy use
(MMBtu/yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricity
savings
(MMBtu/yr)
Natural gas
savings
(MMBtu/yr)
Water
savings
(gallons/yr)
Other
energy
savings
(MMBtu/yr)
Total
energy
and
water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M
cost
savings,
Year 1
($/yr)
Total
cost
savings,
Year 1
($/yr)
Baseline
Use 5774 1,127,672 3,921 3849 1925 0 0 $160,317 $0 $160,317 PostInstallation
use
4935 669,880 3,835 2286 2648 0 0 $129,991 $0 $129,991
Savings 839 457,792 86 1562 -723 0 0 $30,325 $0 $30,325 Notes MMBtu=10 Btu.
*Annual electric demand savings (kW/yr) is the sum of the monthly demand savings. 301 of 1021
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Non-Measured Savings
The project included Non-Measured lighting savings and BERT plug savings that will not be measured throughout the Performance Period. Savings has been agreed upon as outlined in the Non-Measured Savings in Schedule D of the Energy Services Contract. Table 15 shows the non-measured savings achieved.
Table 15. Non-Measured Cost and Unit Savings
Total
energy use
(MMBtu/yr)
Electric
energy
savings
(kWh/yr)
Electric
demand
savings
(kW/yr)
Electricity
savings
(MMBtu/yr)
Natural gas
savings
(MMBtu/yr)
Water
savings
(gallons/yr)
Other
energy
savings
(MMBtu/yr)
Total
energy
and
water
cost
savings,
Year 1
($/yr)
Other
energyrelated
O&M
cost
savings,
Year 1
($/yr)
Total
cost
savings,
Year 1
($/yr)
Baseline Use 677 32,207 8 110 567 0 0 $9,409 $0 $9,409
PostInstallation
Use
619 12,287 8 42 577 0 0 $7,362 $0 $7,362
Savings 57 19,919 0 68 -11 0 0 $2,048 $0 $2,048
Notes MMBtu=10 Btu.
*Annual electric demand savings (kW/yr) is the sum of the monthly demand savings.
The electric annual savings value is escalated beginning in Year 1 at 5.455% and 4% thereafter. The gas annual savings value is escalated beginning in Year 1 at 6.090% and 4% thereafter. Installation savings totaling $1,755 accrued from the start of the substantial completion date of this scope item through the Guarantee Commencement date.
In addition to the Non-Measured Utility Cost Savings, Operation and Maintenance savings are achieved each year of the Performance Period after the start of the Guarantee Commencement Date. The Operation and Maintenance savings are listed in the table below for Year 1. Savings will be escalated 4% annually moving forward.
Operations and Maintenance Savings Measure
Y1 Cost
Savings
Controls O&M $6,500
Lighting O&M $5,500
Total $12,000
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Savings are also be claimed for the Telecom scope implemented. The savings associated with this measure are listed in the table below. Savings will be escalated 4% annually.
Telecom Savings Measure Year 1 Cost Savings
Telecom Savings $4,300
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Appendix – Option A Lighting Calculations
SiteAreaPre-FixturePre-QtyPre-WattagePre-HrsPost-FixturePost-QtyPost-WattagePost-HrsBurn Out %Demand DivConsumption CoefficientDemand CoefficientHeating CoefficientkWh SavingskW SavingsTherms SavingsGas Penalty$ Savings Elementary
School
Room
169
8'-DID-4L-4'-F32T8-
Total155W
8 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
8 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1190.24
8 6.831
908
-10.3343 -$5.98 $183.70
Elementary
School
Room
167
8'-DID-4L-4'-F32T8-
Total155W
8 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
8 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1190.24
8 6.831
908
-10.3343 -$5.98 $183.70
Elementary
School
Room
168
8'-DID-4L-4'-F32T8-
Total155W
8 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
8 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1190.24
8 6.831
908
-10.3343 -$5.98 $183.70
Elementary
School
Room
166
8'-DID-4L-4'-F32T8-
Total155W
8 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
8 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1190.24
8 6.831
908
-10.3343 -$5.98 $183.70
Elementary
School
Ladies
Room
4'-W-2L-4'-F32T8-
Total60W
2 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
2 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 148.781 0.853
989
-1.29179 -$0.75 $22.96
Elementary
School
Men's
restroo
m
4'-W-2L-4'-F32T8-
Total60W
3 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
3 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 223.171
5 1.280
983
-1.93769 -$1.12 $34.44
Elementary
School
Storage
and
Electric
Room
A19-INC-60W 1 57.6 2100 LED10DA19/840 120 1 9.6 2100 0.05 0.9 0.1326 89 0.379
111
-
0.009
83 107.324
5 0.616
032
-0.93185 -$0.54 $16.56
Elementary
School
Room
163
8'-DID-4L-4'-F32T8-
Total155W
8 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
8 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1190.24
8 6.831
908
-10.3343 -$5.98 $183.70
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SiteAreaPre-FixturePre-QtyPre-WattagePre-HrsPost-FixturePost-QtyPost-WattagePost-HrsBurn Out %Demand DivConsumption CoefficientDemand CoefficientHeating CoefficientkWh SavingskW SavingsTherms SavingsGas Penalty$ Savings Elementary
School
Room
162
8'-DID-4L-4'-F32T8-
Total155W
8 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
8 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1190.24
8 6.831
908
-10.3343 -$5.98 $183.70
Elementary
School
Room
161
8'-DID-4L-4'-F32T8-
Total155W
8 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
8 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1190.24
8 6.831
908
-10.3343 -$5.98 $183.70
Elementary
School
Room
160
8'-DID-4L-4'-F32T8-
Total155W
8 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
8 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1190.24
8 6.831
908
-10.3343 -$5.98 $183.70
Elementary
School
Room
159
8'-DID-4L-4'-F32T8-
Total155W
8 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
8 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1190.24
8 6.831
908
-10.3343 -$5.98 $183.70
Elementary
School
Room
158
8'-DID-4L-4'-F32T8-
Total155W
8 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
8 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1190.24
8 6.831
908
-10.3343 -$5.98 $183.70
Elementary
School
Music 8'-DID-4L-4'-F32T8-
Total155W
2 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
2 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 297.562 1.707
977
-2.58359 -$1.49 $45.92
Elementary
School
Music 4'-DID-2L-4'-F32T8-
Total78W
2 7
56.39 4
2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
2 7
22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 2008.54
4 11.52
885
-17.4392 -
$10.0
9 $309.99
Elementary
School
Music -
Music
Storage
4'-W-2L-4'-F32T8-
Total60W
1 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 74.3905
1 0.426
994
-0.6459 -$0.37 $11.48
Elementary
School
Music -
Music
office
4'-W-2L-4'-F32T8-
Total60W
1 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 74.3905
1 0.426
994
-0.6459 -$0.37 $11.48
305 of 1021
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Internal
SiteAreaPre-FixturePre-QtyPre-WattagePre-HrsPost-FixturePost-QtyPost-WattagePost-HrsBurn Out %Demand DivConsumption CoefficientDemand CoefficientHeating CoefficientkWh SavingskW SavingsTherms SavingsGas Penalty$ Savings Elementary
School
Music -
Music
Office
#2
4'-W-2L-4'-F32T8-
Total60W
1 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 74.3905
1 0.426
994
-0.6459 -$0.37 $11.48
Elementary
School
Music -
Back
Hallwa
y
4'-W-2L-4'-F32T8-
Total60W
1 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 74.3905
1 0.426
994
-0.6459 -$0.37 $11.48
Elementary
School
Room
156
8'-DID-4L-4'-F32T8-
Total155W
8 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
8 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1190.24
8 6.831
908
-10.3343 -$5.98 $183.70
Elementary
School
Room
154
8'-DID-4L-4'-F32T8-
Total155W
4 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
4 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 595.124
1 3.415
954
-5.16717 -$2.99 $91.85
Elementary
School
Ladies
Room
V2x4T-3L-4'-F32T8-
Total128W
2 87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
2 28.7
4 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 259.448
5 1.489
209
-2.25267 -$1.30 $40.04
Elementary
School
Gentle
men
Room
4'-W-2L-4'-F32T8-
Total60W
2 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
2 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 148.781 0.853
989
-1.29179 -$0.75 $22.96
Elementary
School
Janitor A19-INC-60W 1 57.6 2100 LED10DA19/840 120 1 9.6 2100 0.05 0.9 0.1326 89 0.379
111
-
0.009
83 107.324
5 0.616
032
-0.93185 -$0.54 $16.56
Elementary
School
Gym 4'-LHB-6L-4'-F32T8-
Total233W
8 233 1890 (6) LEDT8/LC/4/840 (1)
LED/DR/D2L/HW 21W
(1) LED/DR/D4L/HW
21W
8 126 1890 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1632.98
9 10.41
466
-14.1784 -$8.20 $268.42
306 of 1021
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Internal
SiteAreaPre-FixturePre-QtyPre-WattagePre-HrsPost-FixturePost-QtyPost-WattagePost-HrsBurn Out %Demand DivConsumption CoefficientDemand CoefficientHeating CoefficientkWh SavingskW SavingsTherms SavingsGas Penalty$ Savings Elementary
School
Gym -
Stage
4'-S-2L-4'-F32T8-
Total78W
1 3
56.39 4
1890 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 3
22.3 1890 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 870.369 5.550
926
-7.55699 -$4.37 $143.07
Elementary
School
Gym -
Stage
4'-S-2L-4'-F34T12-
Total63W
1 63 1890 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 22.3 1890 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 80.3863
6 0.512
678
-0.69796 -$0.40 $13.21
Elementary
School
Gym -
Downst
airs
locker
Room
A19-INC-60W 1
2 57.6 1890 LED10DA19/840 120 1
2 9.6 1890 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1159.10
5 7.392
389
-10.0639 -$5.82 $190.53
Elementary
School
Gym -
Courty
ard
Entranc
e
A19-INC-100WJJ 2 100 2100 LED15DA21/850 120 2 15 2100 0.05 0.9 0.1326 89 0.379
111
-
0.009
83 380.583
5 2.184
512
-3.30442 -$1.91 $58.74
Elementary
School
Boiler
Room
4'-S-2L-4'-F32T8-
Total78W
4 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
4 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 297.562 1.707
977
-2.58359 -$1.49 $45.92
Elementary
School
Tech
Speciali
sts
4'-S-2L-4'-F32T8-
Total78W
2 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
2 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 148.781 0.853
989
-1.29179 -$0.75 $22.96
Elementary
School
Cafeter
ia
8'-DID-4L-4'-F32T8-
Total155W
1 8
112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
1 8
44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 2678.05
8 15.37
179
-23.2523 -
$13.4
5 $413.32
Elementary
School
Cafeter
ia -
Kitchen
4'-W-2L-4'-F32T8-
Total60W
2 4
56.39 4
2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
2 4
22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1785.37
2 10.24
786
-15.5015 -$8.96 $275.55
307 of 1021
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Internal
SiteAreaPre-FixturePre-QtyPre-WattagePre-HrsPost-FixturePost-QtyPost-WattagePost-HrsBurn Out %Demand DivConsumption CoefficientDemand CoefficientHeating CoefficientkWh SavingskW SavingsTherms SavingsGas Penalty$ Savings Elementary
School
Cafeter
ia -
Kitchen
Walk in
A19-INC-100WJJ 1 100 2100 LED15DA21/850 120 1 15 2100 0.05 0.9 0.1326 89 0.379
111
-
0.009
83 190.291
7 1.092
256
-1.65221 -$0.96 $29.37
Elementary
School
Cafeter
ia -
Kitchen
Elec
room
A19-INC-60W 1 57.6 2100 LED10DA19/840 120 1 9.6 2100 0.05 0.9 0.1326 89 0.379
111
-
0.009
83 107.324
5 0.616
032
-0.93185 -$0.54 $16.56
Elementary
School
Cafeter
ia -
Kitchen
Back
Hall
Stairwe
ll
4'-W-2L-4'-F32T8-
Total60W
2 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
2 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 148.781 0.853
989
-1.29179 -$0.75 $22.96
Elementary
School
Cafeter
ia -
Kitchen
Back
Hall
Stairwe
ll
2'-AW-2L-2'-F17T8-
Total32W
1 31 2100 (2) LED9BDT8/G2/840
With Fuse and Sockets
1 18 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 27.2355 0.156
329
-0.23647 -$0.14 $4.20
Elementary
School
Cafeter
ia -
Kitchen
Downst
airs
Storage
4'-W-2L-4'-F32T8-
Total60W
3 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
3 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 223.171
5 1.280
983
-1.93769 -$1.12 $34.44
308 of 1021
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Internal
SiteAreaPre-FixturePre-QtyPre-WattagePre-HrsPost-FixturePost-QtyPost-WattagePost-HrsBurn Out %Demand DivConsumption CoefficientDemand CoefficientHeating CoefficientkWh SavingskW SavingsTherms SavingsGas Penalty$ Savings Elementary
School
Cafeter
ia -
Kitchen
Downst
airs
Storage
A19-INC-60W 3 57.6 2100 LED10DA19/840 120 3 9.6 2100 0.05 0.9 0.1326 89 0.379
111
-
0.009
83 321.973
6 1.848
097
-2.79554 -$1.62 $49.69
Elementary
School
Cafeter
ia -
Kitchen
Restro
om
A19-INC-100WJJ 1 100 2100 LED15DA21/850 120 1 15 2100 0.05 0.9 0.1326 89 0.379
111
-
0.009
83 190.291
7 1.092
256
-1.65221 -$0.96 $29.37
Elementary
School
Main
Entranc
e
4'-DID-2L-4'-F32T8-
Total78W
6 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
6 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 446.343
1 2.561
966
-3.87538 -$2.24 $68.89
Elementary
School
Front
Office
4'-DID-2L-4'-F32T8-
Total78W
3 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
3 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 223.171
5 1.280
983
-1.93769 -$1.12 $34.44
Elementary
School
Counse
lor
V2x4T-3L-4'-F32T8-
Total128W
1 87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
1 28.7
4 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 129.724
3 0.744
605
-1.12633 -$0.65 $20.02
Elementary
School
Main
Office
8'-DID-4L-4'-F32T8-
Total155W
1 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
1 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 148.781 0.853
989
-1.29179 -$0.75 $22.96
Elementary
School
Teache
rs
Lounge
A19-INC-100WJJ 6 100 2100 LED15DA21/850 120 6 15 2100 0.05 0.9 0.1326 89 0.379
111
-
0.009
83 1141.75 6.553
536
-9.91326 -$5.73 $176.21
Elementary
School
Teache
rs
Lounge
A19-INC-100WJJ 3 100 2100 LED15DA21/850 120 3 15 2100 0.05 0.9 0.1326 89 0.379
111
-
0.009
83 570.875
2 3.276
768
-4.95663 -$2.87 $88.11
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Internal
SiteAreaPre-FixturePre-QtyPre-WattagePre-HrsPost-FixturePost-QtyPost-WattagePost-HrsBurn Out %Demand DivConsumption CoefficientDemand CoefficientHeating CoefficientkWh SavingskW SavingsTherms SavingsGas Penalty$ Savings -
Restro
om
Elementary
School
Teache
rs
Lounge
-
Restro
om
4'-W-2L-4'-F32T8-
Total60W
2 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
2 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 148.781 0.853
989
-1.29179 -$0.75 $22.96
Elementary
School
Empty
Office
V2x4T-3L-4'-F32T8-
Total128W
1 87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
1 28.7
4 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 129.724
3 0.744
605
-1.12633 -$0.65 $20.02
Elementary
School
Room
139
4'-DID-2L-4'-F32T8-
Total78W
1 5
56.39 4
2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 5
22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1115.85
8 6.404
914
-9.68845 -$5.60 $172.22
Elementary
School
Ladies
Room
4'-W-2L-4'-F32T8-
Total60W
2 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
2 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 148.781 0.853
989
-1.29179 -$0.75 $22.96
Elementary
School
Storage 4'-W-2L-4'-F32T8-
Total60W
1 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 74.3905
1 0.426
994
-0.6459 -$0.37 $11.48
Elementary
School
Boys
Restro
om
4'-W-2L-4'-F32T8-
Total60W
2 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
2 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 148.781 0.853
989
-1.29179 -$0.75 $22.96
Elementary
School
Room
138
4'-DID-2L-4'-F32T8-
Total78W
1 5
56.39 4
2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 5
22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1115.85
8 6.404
914
-9.68845 -$5.60 $172.22
310 of 1021
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Internal
SiteAreaPre-FixturePre-QtyPre-WattagePre-HrsPost-FixturePost-QtyPost-WattagePost-HrsBurn Out %Demand DivConsumption CoefficientDemand CoefficientHeating CoefficientkWh SavingskW SavingsTherms SavingsGas Penalty$ Savings Elementary
School
Room
137
4'-DID-2L-4'-F32T8-
Total78W
1 5
56.39 4
2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 5
22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1115.85
8 6.404
914
-9.68845 -$5.60 $172.22
Elementary
School
Room
122
8'-DID-4L-4'-F32T8-
Total155W
1 2
112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
1 2
44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1785.37
2 10.24
786
-15.5015 -$8.96 $275.55
Elementary
School
Room
122
V2x4T-3L-4'-F32T8-
Total128W
2 87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
2 28.7
4 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 259.448
5 1.489
209
-2.25267 -$1.30 $40.04
Elementary
School
Room
122 -
Restro
oms
DR-2L-12"-CircF32W-Total60W
2 60 2100 NLED LED12FMM138L840-NI2 18 2100 0.05 0.9 0.1326 89 0.379
111
-
0.009
83 185.534
4 1.064
95 -1.61091 -$0.93 $28.63
Elementary
School
Room
136
4'-DID-2L-4'-F32T8-
Total78W
1 5
56.39 4
2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 5
22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1115.85
8 6.404
914
-9.68845 -$5.60 $172.22
Elementary
School
Library 4'-DID-2L-4'-F32T8-
Total78W
1 0
56.39 4
2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 0
22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 743.905
1 4.269
943
-6.45897 -$3.74 $114.81
Elementary
School
Library V2x4T-3L-4'-F32T8-
Total128W
2 4
87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
2 4
28.7 4
2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 3113.38
2 17.87
051
-27.032 -
$15.6
3 $480.50
Elementary
School
Library
-
Readin
g Room
#1
V2x4T-3L-4'-F32T8-
Total128W
2 87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
2 28.7
4 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 259.448
5 1.489
209
-2.25267 -$1.30 $40.04
311 of 1021
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Internal
SiteAreaPre-FixturePre-QtyPre-WattagePre-HrsPost-FixturePost-QtyPost-WattagePost-HrsBurn Out %Demand DivConsumption CoefficientDemand CoefficientHeating CoefficientkWh SavingskW SavingsTherms SavingsGas Penalty$ Savings Elementary
School
Library
-
Readin
g Room
#2
V2x4T-3L-4'-F32T8-
Total128W
2 87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
2 28.7
4 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 259.448
5 1.489
209
-2.25267 -$1.30 $40.04
Elementary
School
Library
-
Storage
V2x4T-3L-4'-F32T8-
Total128W
1 87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
1 28.7
4 1785 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 139.978
6 0.744
605
-1.21537 -$0.70 $20.68
Elementary
School
Activity
Room
V2x4T-3L-4'-F32T8-
Total128W
1 3
87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
1 3
28.7 4
2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1686.41
5 9.679
859
-14.6423 -$8.47 $260.27
Elementary
School
Readin
g
Speciali
st
V2x4T-3L-4'-F32T8-
Total128W
4 87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
4 28.7
4 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 518.897 2.978
418
-4.50533 -$2.61 $80.08
Elementary
School
Room
116
4'-DID-2L-4'-F32T8-
Total78W
1 9
56.39 4
2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 9
22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1413.42 8.112
891
-12.272 -$7.10 $218.14
Elementary
School
Room
110
8'-DID-4L-4'-F32T8-
Total155W
8 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
8 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1190.24
8 6.831
908
-10.3343 -$5.98 $183.70
Elementary
School
Room
115
V2x4T-3L-4'-F32T8-
Total128W
2 87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
2 28.7
4 1785 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 279.957
2 1.489
209
-2.43073 -$1.41 $41.35
Elementary
School
Room
114
V2x4T-3L-4'-F32T8-
Total128W
1 87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
1 28.7
4 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 129.724
3 0.744
605
-1.12633 -$0.65 $20.02
312 of 1021
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Internal
SiteAreaPre-FixturePre-QtyPre-WattagePre-HrsPost-FixturePost-QtyPost-WattagePost-HrsBurn Out %Demand DivConsumption CoefficientDemand CoefficientHeating CoefficientkWh SavingskW SavingsTherms SavingsGas Penalty$ Savings Elementary
School
Room
109
8'-DID-4L-4'-F32T8-
Total155W
8 112.7
88 2100 (4) LED11BDT8/G4/840
With Fuse and Sockets
8 44.6 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1190.24
8 6.831
908
-10.3343 -$5.98 $183.70
Elementary
School
Room
104
V2x4T-3L-4'-F32T8-
Total128W
1 0
87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
1 0
28.7 4
2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1297.24
3 7.446
046
-11.2633 -$6.51 $200.21
Elementary
School
Room
101
V2x4T-3L-4'-F32T8-
Total128W
1 0
87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
1 0
28.7 4
2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1297.24
3 7.446
046
-11.2633 -$6.51 $200.21
Elementary
School
Room
101 -
Restro
om
A19-INC-60W 2 57.6 2100 LED10DA19/840 120 2 9.6 2100 0.05 0.9 0.1326 89 0.379
111
-
0.009
83 214.649
1 1.232
065
-1.86369 -$1.08 $33.13
Elementary
School
Room
101 -
Girls
Restro
om
V2x4T-3L-4'-F32T8-
Total128W
1 87.66 2100 (2) LED14BDT8/G4/840
With Fuse and Sockets
1 28.7
4 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 129.724
3 0.744
605
-1.12633 -$0.65 $20.02
Elementary
School
Room
101 -
Custodi
an
4'-S-2L-4'-F32T8-
Total78W
2 56.39
4 2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
2 22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 148.781 0.853
989
-1.29179 -$0.75 $22.96
Elementary
School
Room
101 -
Room
108
4'-DID-2L-4'-F32T8-
Total78W
1 9
56.39 4
2100 (2) LED11BDT8/G4/840
With Fuse and Sockets
1 9
22.3 2100 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 1413.42 8.112
891
-12.272 -$7.10 $218.14
Elementary
School
Hallwa
ys
V2x4T-3L-4'-F32T8-
Total128W
2 3
87.66 2940 (2) LED14BDT8/G4/840
With Fuse and Sockets
2 3
28.7 4
2940 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 4177.12
1 17.12
591
-36.2679 -
$20.9
7 $536.85
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10/5/2023 31
Internal
SiteAreaPre-FixturePre-QtyPre-WattagePre-HrsPost-FixturePost-QtyPost-WattagePost-HrsBurn Out %Demand DivConsumption CoefficientDemand CoefficientHeating CoefficientkWh SavingskW SavingsTherms SavingsGas Penalty$ Savings Elementary
School
Hallwa
ys
6"RC-1L-4pin-G24-
HPL-CFL-26WTotal25W
2 25 2940 LED-7320-40K-G3 2 10 2940 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 91.5779 0.375
463
-0.79513 -$0.46 $11.77
Elementary
School
Hallwa
ys
8'-DID-4L-4'-F32T8-
Total155W
2 112.7
88 2940 (4) LED11BDT8/G4/840
With Fuse and Sockets
2 44.6 2940 0.05 0.9 0.1326
89 0.379
111
-
0.009
83 416.586
9 1.707
977
-3.61702 -$2.09 $53.54
Elementary
School
Exterio
r
FC-WP-1L-HPL-CFL42W-Total39W
8 39 4380 LED-7320-40K-G3 8 10 4380 0.05 0 0 0 0 947.832 0 0 $0.00 $65.41 Elementary
School
Exterio
r
SQ-CA-2L-HPL-CFL13W-Total25W
3 25 4380 (2) LED 7320 40K G3 3 20 4380 0.05 0 0 0 0 49.275 0 0 $0.00 $3.40 Elementary
School
Exterio
r
SQ-CA-2L-HPL-CFL13W-Total25W
6 25 4380 NLED LED FX SCM 28
40K BK 28W
6 28 4380 0.05 0 0 0 0 -111.69 0 0 $0.00 -$7.71
Elementary
School
Exterio
r
SB-AR-1L-HID-HPS150W-Total174W
2 188 4380 ALED3T50/PCT 2 55.1
7 4380 0.05 0 0 0 0 1081.24
7 0 0 $0.00 $74.62
Elementary
School
Exterio
r
None 3 0 0 TRL-ACEM-BR 3 11 4380 0.05 0 0 0 0 -144.54 0 0 $0.00 -$9.97 314 of 1021
City of Cotati 1
City of Cotati
RESPONSE TO REQUEST FOR PROPOSAL
ENERGY/WATER RESOURCES AUDIT AND
IMPLEMENTATION OF ENERGY AND WATER
RESOURCES EFFICIENCY IMPROVEMENT PROJECTS
SUBMITTED AUGUST 22, 2024
333 S. Anita Drive, Suite 825
Orange, California 92868
POINT OF CONTACT
Brooklyn Stewart
Account Executive
[email protected]
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City of Cotati 1
TABLE OF CONTENTS
SECTION 1 – COMPANY OVERVIEW.............................................................................................................. 3 Centrica’s Unique Qualifications...............................................................................................................................................3 In-house Capabilities.................................................................................................................................................................................................. 3 Proven and Experienced Team .................................................................................................................................................................................. 3 History and Experience .............................................................................................................................................................5 Financial Strength...................................................................................................................................................................... 6 Audited Financial Report ........................................................................................................................................................................................... 6 Minimum Requirements...........................................................................................................................................................6 Accreditation by the National Association of Energy Services Companies (NAESCO).............................................................................................. 6 U.S. Department of Energy (DOE) Qualified List of Energy Service Companies ....................................................................................................... 6 California General Contractor’s License..................................................................................................................................................................... 6 Minimum Bonding Capacity ...................................................................................................................................................................................... 6 Implementation of Similar Projects........................................................................................................................................................................... 7 Experience in Retrofitting Public Agency Infrastructure to Reduce Energy and Water Consumption..................................................................... 7 California Licensed Team............................................................................................................................................................................................ 7 Measurement and Verification Protocol ................................................................................................................................................................... 7 Litigation..................................................................................................................................................................................................................... 7 SECTION 2 – PROJECT TEAM AND MANAGEMENT STRUCTURE ................................................................ 8 CBSS California-Based Project Team ........................................................................................................................................8 Organizational Chart and Reporting Structure........................................................................................................................9 Team Commitment..................................................................................................................................................................10 Key Team Member Biographies..............................................................................................................................................10 Trevor Nelson, PE, LEED AP, CEM, CCP, CMVP ......................................................................................................................................................... 10 Brooklyn Stewart, MBA, LC...................................................................................................................................................................................... 11 Jason Core ................................................................................................................................................................................................................ 11 Brett Watson ............................................................................................................................................................................................................ 11 Mike Kostrzewa, PE.................................................................................................................................................................................................. 11 Steve Cook................................................................................................................................................................................................................ 12 Trevor Jackson.......................................................................................................................................................................................................... 12 Michel Maxsom........................................................................................................................................................................................................ 12 Donna Krebs............................................................................................................................................................................................................. 12 SECTION 3 – EXPERIENCE............................................................................................................................. 13 Project 1: Department of Motor Vehicles..............................................................................................................................13 Project 2: City of Reedley........................................................................................................................................................14 Project 3: City of Cloverdale....................................................................................................................................................15 Project 4: Auburn Recreation District ....................................................................................................................................16 Project 5: Coast Unified School District .................................................................................................................................17 Project 6: Genentech, Inc........................................................................................................................................................18 SECTION 4 – PROJECT APPROACH............................................................................................................... 19 Project Approach.....................................................................................................................................................................19 Introduction to Our Overall Project Approach ........................................................................................................................................................ 19 316 of 1021
City of Cotati 2
Approach to Energy Audits at the City of Cotati...................................................................................................................................................... 20 Summary of Project Management Approach and Process..................................................................................................................................... 24 Communication and Collaboration with City Staff will be critical throughout the construction process.........................24 Competitive Methodology for Selecting Subcontractors.....................................................................................................25 Project Closeout and Commissioning ....................................................................................................................................25 Operations, Monitoring, and Maintenance (OM&M)..........................................................................................................26 SECTION 5 – PRICING AND SAVINGS........................................................................................................... 27 Attachment C – PE/IGA Pricing Proposal ...............................................................................................................................28 SECTION 6 – CONTRACTS............................................................................................................................. 29 Sample Performance Energy Contract...................................................................................................................................29 SECTION 7 – ACKNOWLEDGEMENT OF QUESTIONS ................................................................................. 30 Acknowledgement ..................................................................................................................................................................30 Appendices
Appendix A 2023 Audited Financial Report
Appendix B Sample Centrica M & V Report
Appendix C Sample Performance Energy Contract
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SECTION 1 – COMPANY OVERVIEW
Centrica’s Unique Qualifications
Centrica Business Solution Services (CBSS) is pleased to respond to the City of Cotati’s (City or Cotati) Request for Proposals for an Energy/Water Resources Audit and
Implementation of Energy and Water Resources Efficiency Improvement Projects (RFP). We recognize that the City has been very proactive in delivering to its climate initiatives and providing efficient and sustainable facilities and services for its staff and the public. Through an earlier performance contract and additional initiatives, the City has improved the energy efficiency of its buildings and spaces, including replacing inefficient lighting throughout its buildings and street-lighting, upgrading water meters to AMI technology, providing charging for electric vehicles, and promoting for further EV expansion.
In summary, the City has done a great job leading the charge in combatting climate change, and now is looking for more. It is looking for creative solutions, resiliency for grid failures, more control of facilities and energy use, and to continue to reduce grid reliance. Furthermore, the City is looking for a partner that can deliver on the City’s goals in a cost-efficient manner through a self-funding program.
We are the right partner to help Cotati with this next phase of city-wide improvements for the following reasons:
Capabilities
We have more in-house capabilities around the core measures of interest to the City that will drive better economics of this project than any other ESCO.
We will develop, design, and implement most of the City’s priority measures with our in-house teams. This results in a major cost reduction and allows Cotati to include more measures that may not otherwise have been included in a budget-neutral project because of traditionally longer paybacks. This approach sets us apart from what is typical in our industry, where each measure is sub-contracted, adding markup upon markup.
We have construction equipment like directional boring that decrease the cost of installing EV infrastructure and solar carports and ground mount systems.
Experience
We have teams of engineers specializing in solar, battery storage, and microgrids, as well as EV and electrification, which are experts in dealing with PG&E and Sonoma Clean Power. They are intimately familiar with interconnection processes, determining grid capacity, comparing tariffs and time-of-use plans, maximizing incentives, and modeling for the most efficient deployment of clean energy assets. We have experience installing complex microgrid projects.
CBSS Benefits to the City of Cotati
Collaborative Development Approach
Dedicated to uncovering and prioritizing Cotati’s goals Financial Confidence and Quality Assurance
Backing from parent company, Centrica plc
Industry-Leading Project Delivery
DOE qualified, NAESCO accredited, award-winning ESCO
Established Local Presence and Expertise
Diverse CA team, portfolio, and pool of subcontractors
In-house Implementation and Equipment
Self-install capabilities to minimize margin pancaking
Extensive EV, PV, BESS, and Microgrid Experience
178.1 MW solar and 102-MWh BESS installed in the US
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We have operational EV charging assets we have put in the ground. We have experience working with other CA City and Public Sector clients like Park and Recreation Districts implementing a variety of water related solutions including smart irrigation controls and more efficient plumbing systems and fixtures, including motion sensing systems that reduce spread of germs for a safer environment.
We have a controls team here in CA that with SCADA and BMS systems integration expertise that are very talented at evaluating existing controls and equipment, diagnosing problems and opportunities, and bringing different technologies into a single platform.
We are honored with the opportunity to be a partner in your efforts to expand EV charging capabilities, resiliency/power backup, on-site clean energy production, evaluation of energy and water use and arbitrage, expanding control and monitoring of energy and water use, and discovering other potential measures that can help the City more efficiently manage its resources and facilities, and achieve its climate goals, while improving occupant comfort.
“The Cotati City Council has declared climate change mitigation and adaptation as one of the main goals of the City and strives to implement greenhouse gas-reducing measures.” 319 of 1021
City of Cotati 5
History and Experience
Centrica, plc has dedicated its focus and resources on global energy services offering turnkey solutions for energy efficiency and infrastructure upgrade projects for over 200 years. In North America, CBSS, a wholly owned subsidiary of Centrica, plc,) has been a National Energy Services Provider Since 2002. In that time, CBSS has successfully developed and implemented over 2,500 water and energy projects worth over $450 Million, resulting in guaranteed savings of over $150 Million. Many of the projects implemented are similar projects to what the City is trying to accomplish: solar, EV charging, controls and monitoring, lighting, mechanical, and water efficiency.
Over the years, we have built a portfolio of distinct but complementary businesses that enable us to operate across the entire energy value chain to help our customerslive sustainably and affordably. In America, CBSS has grown both organically and through several acquisitions, including:
Figure 1: Centrica Family of Businesses-Recent Acquisitions Company Year Founded Year Acquired Technology Focus
Astrum Solar 2008 2014 Solar PV (East)
ENER-G Rudox 1949 2016 Cogeneration
Restore 2010 2017 Advanced optimization
SmartWatt Energy 2002 2019 Energy performance contracting Vista Solar 2008 2018 Solar PV (West)
CBSS operates as an independent business unit within the family of energy and energy-services businesses of Centrica plc. Previously known as SmartWatt Energy, our division was dedicated to energy performance contracting.
SmartWatt Energy operated as a private firm for 17 years before being acquired by CBSS in 2019.
In the United States, we are structured to serve the entire nation through geographically aligned business units. Each business unit is staffed with local professionals, engineers, and policy experts whose focus is aligning project strategies to overcome local/regional challenges and providing services and reporting that comply with federal, regional, and local standards, laws, and ordinances.
CBSS is fully qualified and more than meets the minimum requirements of the RFP. 320 of 1021
City of Cotati 6
Financial Strength
Our parent company, Centrica plc, a 200+ year-old Global 500 multinational energy and energy-services company with over $30 billion in annual revenue and 21,000 employees, backs CBSS’ performance. This financial strength allows CBSS to make the necessary investments to complete high-quality projects with guaranteed outcomes. Examples of these investments include:
Continual Investment in Personnel: CBSS has continuously invested in our professional staff's strength and expertise in hiring, training, and ongoing professional development.
100% Performance Assurance: CBSS has invested in the information technology systems, business management best practices, and project delivery workflow processes necessary for long-term system performance and persistent savings.
Audited Financial Report
Please refer to our 2023 Audited Financial Report under Appendix A.
Minimum Requirements
Accreditation by the National Association of Energy Services Companies (NAESCO) CBSS have been a long-standing member of NASECO, and in 2023, won the Historic Community Impact Award for a project completed in Coles County, Illinois. These prestigious certifications and accreditations highlight our unique abilities and processes as a company to deliver compliant and satisfactory projects. This also serves as a valuable tool to the City in knowing that we are heavily vetted with a vast number of related and referenceable energy and infrastructure projects, requirements needed to achieve the Accreditation.
U.S. Department of Energy (DOE) Qualified List of Energy Service Companies CBSS has been deemed a "Super ESCO" by the U.S. Department of Energy (DOE) and is on the DOE’s Qualified List of Energy Service Companies. Like the NAESCO Accreditation, this exclusive list requires a thorough evaluation of our experience and technical capabilities, energy savings calculation methodologies, organization and project management capabilities, financial condition, and resources. We take great pride in our place on this prestigious list, as it is a credential that enables us to build large Energy Savings Performance Contracts for the federal government and Department of Defense facilities worldwide.
California General Contractor’s License
CBSS confirms that we have had an active General Contractor’s license in the state of California for a minimum of 24 months.
Minimum Bonding Capacity
CBSS’ bonding capacity is over $50 million per project and $100 million aggregate. 321 of 1021
City of Cotati 7
Implementation of Similar Projects
Please refer to our References in Section 3 below which highlight our work with public entities. As detailed, we far exceed the minimum requirement for successful implementation of five similar projects in the past three years.
Experience in Retrofitting Public Agency Infrastructure to Reduce Energy and Water Consumption
As stated in our company’s history, CBSS has been a
trusted provider of turnkey solutions to reduce energy
and water consumption for over two decades. This
graphic demonstrates our local experience and impact in the state of California.
California Licensed Team
CBSS insists on stimulating the local economies where we do business, investing in brick- and-mortar locations with local staff and construction delivery resources in all states where we perform energy and utility savings contracts.
This includes our physical offices in Rocklin and Orange, California, and our remote Bay Area and Central Valley
employees. Your assigned team is properly licensed as
required by state and governmental agencies. Please
refer to Section 2 – Project Team and Management
Structure for additional information on specific team
members.
Measurement and Verification Protocol
The measurement and verification (M&V) of energy savings is a critical component of every guaranteed energy savings contract, as it serves as the basis for defining and confirming the budget-neutral aspect of the project. We hold ourselves accountable for delivering evidence of savings through a reliable, prescribed M&V process to ensure the project has the required savings for the City. We have experience utilizing all four IPMVP options, depending on the project type and need of the customer, including the City’s preferred “Option C.” One of our Certified Measurement and Verification Professionals (CMVP) will develop a site-specific M&V plan per the International Performance Measurement and Verification Protocol (IPMVP) guidelines. We will review this with City representatives during a workshop before final delivery of the IGA report. The M&V options presented will follow proven processes, which provide the City with transparency that the savings are achieved while at the same time maintaining an appropriate level of M&V fees.
We aim to deliver a plan to the City that provides a meaningful guarantee while balancing costs. We use an M&V Planning Flowchart (developed by the Federal Energy Management Program) to determine the appropriate M&V option. Please refer to the Sample Centrica M&V Report under Appendix B.
Litigation
CBSS has no pending or recent litigation regarding savings performance and/or measurement and verification of a guaranteed energy savings project.
Figure 2: CBSS has completed 532 projects in its
West Region alone, totaling $263M
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City of Cotati 8
SECTION 2 – PROJECT TEAM AND MANAGEMENT STRUCTURE
CBSS California-Based Project Team
To ensure seamless communication and coordination throughout the project, your Senior Account Executive, Brooklyn Stewart, will serve as the City’s primary point of contact. Brooklyn's expertise in project development, financing, and his ability to effectively communicate with stakeholders, is crucial in ensuring that every aspect of the project is executed seamlessly.
Brooklyn is supported by Project Director Brett Watson and Operations Manager Trevor Jackson, who are dedicated to ensuring that every project we develop is delivered on time, within budget, and to the highest standards. Our energy engineers, design engineers, project managers, commissioning engineers, and field technicians work tirelessly to ensure that each project meets the highest standards and is completed within the stipulated timelines.
The team is committed to delivering exceptional service that exceeds expectations.
Below is an Organizational Chart and rough breakout of the percentage of their time we anticipate being dedicated to the City of Cotati throughout this project:
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City of Cotati 9
Organizational Chart and Reporting Structure
Brooklyn Stewart
Sr. Account Executive
PRIMARY POINT OF CONTACT
Dan Mitchell
Sales Leader, West
Trevor Nelson, PE
General Manager, West
Centrica Business Solutions
Services, Inc.
Project Development Team Implementation Team Post-Implementation Team Trevor Jackson
Operations Manager
Michel Maxsom
Senior Project Manager
Donna Krebs
Assistant Project Manager
Site Superintendent and
Site Technicians TBD
Performance Assurance
Steve Rickels
M&V Manager
Service and Maintenance
Steve Hess
Asset Manager
Health and Safety
Bill Pollard
Safety Manager
Brett Watson
Regional Project Director
Jason Core
Project Director, Solar & Storage
Mike Kostrzewa
Engineering Team Lead
Steve Cook
Sr. Solar Developer
Ali Fathi
Solar Project Engineer
Centrica Subcontractors and Vendors
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City of Cotati 10
Team Commitment
CBSS is committing this team, at a minimum, to the development and construction of this project for the City of Cotati.
Figure 3: CBSS Team Member Percentage of Commitment to the City of Cotati Team Member Role Percentage of Commitment to Project
Brooklyn Stewart Senior Account Executive 30%
Project Development Team
Brett Watson Regional Project Director 20%
Jason Core Solar/Storage Project Director 20%
Mike Kostrzewa Engineering Team Lead 40%
Steve Cook Senior Solar Developer 30%
Ali Fathi Solar Project Engineer 30%
Implementation Team
Trevor Jackson Operations Manager 10%
Michael Maxsom Senior Project Manager 30%
Donna Krebs Assistant Project Manager 30%
Post-Implementation Team
Steve Rickels M&V Manager 20%
Steve Hess Asset Manager 20%
Bill Pollard Safety Manager 20%
Key Team Member Biographies
The team leading this project brings an impressive combined 100 years of experience in design‐build projects, with a particular focus on energy‐efficiency and infrastructure upgrade projects for municipal buildings. Our unwavering commitment to excellence and a balance sheet exceeding $33 billion is a testament to our proven record of delivering intricate solutions across diverse markets, including Federal, local government, industrial, and higher education.
CBSS understands the need to include experienced project team members – most notably, senior project leaders who are knowledgeable and fully understand the technical and design requirements and the human impacts our customers experience when we enter their space. The CBSS team and our partners will apply their vision, talent, and creativity to achieve the final design and suite of solutions to balance and meet your resiliency and sustainability goals.
Trevor Nelson, PE, LEED AP, CEM, CCP, CMVP
General Manager, West Business Unit
In his role as GM, Trevor will be responsible for contract negotiations, final review, and approval of scope and costing, and ensuring that all staff members have the tools and resources needed to deliver a safe, on‐time, and cost-effective project that we can all be proud of. Trevor has worked on the engineering and overseeing construction for similar multi‐measure energy projects for UC San Diego, UC Irvine, City of Reedley, Montefiore Hospital at the University of Pittsburgh Medical Center, and several facilities for the University of British Columbia.
Education: Bachelor of Science in Mechanical Engineering from California Polytechnic State University 325 of 1021
City of Cotati 11
Brooklyn Stewart, MBA, LC
Sr. Account Executive, West Business Unit
As the Senior Account Executive, Brooklyn will serve as Cotati’s primary contact during all project phases. He will play an instrumental role between the City and CBSS to ensure consistent communication plans are executed throughout the project. Additionally, he will lead efforts in scope and funding development and progress the community outreach plan. Over the past 15 years, he has worked closely with several large CA municipal, state, k12, higher education, and CA special district clients, assisting them in program development, funding, and implementation. His recent projects include working with the City of Cloverdale, UC Santa Cruz, UC Davis, CA DMV, Cambrian School District, and Auburn Rec & Park District.
Education: MBA from Keller Graduate School, and a Bachelor of Science in Telecommunications Management from DeVry University
Jason Core
Solar and Storage Project Director, West Business Unit
Jason leads our solar & storage project development team for the West Coast and will be overseeing the analysis, design, engineering, and estimating for this project. Utilizing his 25+ years of experience in engineering and construction management, along with his 9 years of experience managing solar projects in California, he will be able to develop the best possible solutions for the needs of the City. He has developed and managed over 100 commercial solar projects in similar facilities, such as the cities of Elk Grove and Cloverdale, Merced Community College District, and Contra Costa Community College District.
Education: NESCOT College, Epsom, UK, HNC, Building Services Engineering Brett Watson
Regional Project Director, West Business Unit
As the Regional Project Director, Brett will lead the project development and engineering teams during the project development phase. He uses his professional, technical, and construction experience to ensure accurate utility bill analysis, benchmarking, scope of work development, energy savings calculations, energy modeling, and utility rebates/incentive analysis. Brett has led teams to develop similar projects at the City of Lynwood, Orange Coast College, River Springs Charter School District, Valley Wide Rec & Park District, and Glendale Community College.
Education: Bachelor of Science in Mechanical Engineering from Sacramento State University Mike Kostrzewa, PE
Senior Energy Engineer
Mike is an expert in energy efficiency and sustainability with 40 years of experience. He is responsible for energy engineering from concept to construction. He applies his extensive experience when completing utility bill analysis, preliminary feasibility assessments, investment grade audits, energy savings calculations, incentive identification, cost analysis, and measurement and verification for comprehensive energy performance contract projects.
Education: Master of Science in Mechanical Engineering from Colorado State University, and a Bachelor of Science in Petroleum Engineering
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Steve Cook
Project Developer, Solar, Storage, and Resiliency, West Business Unit Steve Cook has extensive industry experience and currently serves as a project developer, executing creative solar design solutions for CBSS West Business Unit customers. In this role, he analyzes utility usage, reviews the terrain or building and roof structure, designs the solar system, estimates the cost, and prepares and presents utility and cost savings. Steve works closely with business development, leadership, engineering, project management, and construction staff to identify, assess, and structure technical and financial solutions for our customers' renewable and energy efficiency needs.
Education: A.S. in Construction Management from Ohlone College Trevor Jackson
Operations Manager, West Business Unit
Trevor manages all Operations and Project Managers in the West Business Unit and develops regional Project Management strategies. He collaborates with project development to outline the scope of each project, schedules, and manages resources to ensure project completion, communicates project progress with customers and internal staff, and reviews work quality to maintain CBSS' standards. With over 25 years of experience in electrical and communications wiring in California, Trevor has managed installations in various facility types, such as warehouse/distribution, healthcare, higher education, state, and federal government, and refrigerated and freezer warehouses. He has also worked on projects for several of CBSS' national accounts, in addition to his extensive design‐build construction and refrigeration experience in healthcare and K‐12 schools.
Michel Maxsom
Sr. Project Manager-Solar Implementation Subject Matter Expert Michel is our implementation subject matter expert with over 20 years of knowledge and firsthand experience in the renewables and energy efficiency sectors. Michel has spearheaded the development and construction of hundreds of projects globally and has been hand‐selected by our decision‐makers to lead Cotati’s construction initiatives. Recent similar projects include the City of Cloverdale, Marcum‐Illinois Union ESD, Nuestro Elementary SD, Winters Joint USD, East Nicolaus Joint Union High School District, Winship‐Robbins Elementary School District, Live Oak Unified School District, DMV Headquarters, the City of Elk Grove, and Auburn Recreation & Park District.
Education: Bachelor of Science in Business Administration, Management and Operations from The University of Phoenix
Donna Krebs
Administrative Manager
Donna is an expert administrator who conveys to your project over 15 years of energy project experience. She supports the West's design, construction, commissioning, and customer service teams, has extensive experience managing complex administrative and purchasing tasks, and is an asset on our large‐scale, multi-scoped regional projects. The City will benefit from her expertise in project documentation, processing purchase orders, initiating invoices, labor warranties, project closeout, and various reporting.
Education: Bachelor of Science in Business Administration from California Polytechnic State University 327 of 1021
City of Cotati 13
SECTION 3 – EXPERIENCE
Project 1: Department of Motor Vehicles
Location: Sacramento, California
Proximity to Cotati: 89 miles
Owner: The State of California
Project Dates: 2019-2022
Total Project Cost: $9,000,000
Key Staff: Brooklyn Stewart, Mike Kostrzewa, Michel Maxsom Annual Energy Savings: $607,858 (326,271 kWh)
Reference: Sjon Woodlyn, Facilities Operations Branch Chief Phone: 916-657-7581
Email: [email protected]
On Budget and On Schedule: All project phases were
implemented at the estimated costs and on schedule.
Services Designed and Implemented: Establish baseline
conditions, develop energy profile, determine optimal energy source, develop conceptual design, economic and financial analysis, permitting and regulatory review, production of the final report, project permitting, construction document design and oversight, performance validation. A mix of measures included lighting (interior, exterior), solar, mechanical, and controls.
Relevance to the City of Cotati: CBSS developed a project that increased maintenance control while using the energy savings from more favorable measures to offset the costs of measures that do not provide as beneficial of financial payback. CBSS is familiar with municipalities and has extensive experience working within the State of CA over the past 10+ years. Very similar scope, with significant lighting, mechanical, and solar.
Centrica was selected through a
competitive bid process through a
partnership with PG&E’s Sustainable
Solutions Turnkey group to provide a
design/build energy retrofit at the DMV
headquarters in downtown Sacramento.
CBSS audited the campus and worked with
the DMV to design and construct a
replacement of interior fluorescent and
exterior HID’s with new energy efficient
LEDs and Title 24 compliant controls, a
replacement of large fans at four air
handlers with fan walls, new HVAC controls,
retro-commissioning of all HVAC
equipment, and repairs of their existing
solar array. Like the City of Cotati, the DMV
needed multiple ECMs to be supported
within the project by the large savings
associated with the lighting and lighting
controls ECMs for a budget neutral project
with $0 in up-front cost.
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City of Cotati 14
Project 2: City of Reedley
Location: Reedley, California
Proximity to Cotati: 246 miles
Owner: The City of Reedley
Project Dates: 2020-2022
Total Project Cost: $2,100,000 (No up-front cost to the City as this was a Power Purchase Agreement)
Key Staff: Dan Mitchell, Jason Core, Michel Maxsom
Energy Savings: $17,000 in year 1 with no cost escalator to the City’s PPA rate, estimated savings of $2,800,000 over the 25-year term of the PPA.
Reference #1: Nicole Zieba, City Manager
Phone: 559-637-4200 x212
Email: [email protected]
Reference #2: Russ Robertson, Public Works Director
Phone: 559-637-4200 x213
Email: [email protected]
On Budget and On Schedule: While CBSS experienced
challenges with timelines on the required environmental studies (the ground mount solar was situated on undeveloped land), we were able to deliver on the completion date
promised to the City by the end of 2022. After contract signing and through the course of the project, CBSS worked with the City to obtain alternate financing that lowered the City’s PPA rate from the original agreement by 1.46 cents per kWh, with no other changes to the project other than the lower rate.
Services Designed and Implemented: Establish baseline
conditions, develop energy profile, determine optimal energy source, develop conceptual design, economic and financial analysis, permitting and regulatory review, production of the final report, project permitting, construction document design and oversight, performance validation. Installed 1,026 kW ground mount solar PV with NEXTracker system on an undeveloped plot of land.
Relevance to The City of Cotati: CBSS helped the City of Reedley achieve its goal of locking in a fixed PPA rate to lower utility costs versus paying higher costs to the utility (PGE).
The City of Reedley was seeking a qualified
energy services company to deliver proven
solutions to reduce their energy
consumption and costs. Centrica was
selected to deliver solar PV for multiple city
buildings and delivered the project under a
Power Purchase Agreement (PPA).
Centrica provided audit, design, and
construction services for the entire scope of
work, and secured financing for the Power
Purchase Agreement on behalf of the City.
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Project 3: City of Cloverdale
Location: Cloverdale, California
Proximity to Cotati: 39 miles
Owner: The City of Cloverdale
Project Dates: 2022-Present
Total Project Cost: $7,884,824
Key Staff: Brooklyn Stewart, Brett Watson, Michel Maxsom Annual Energy Savings: $540,448
Reference #1: David Kelly, City Manager
Phone: 707-894-1710
Email: [email protected]
On Budget and On Schedule: All project phases to date have met estimated cost on schedule. There are, however, some measures still in construction.
Services Designed and Implemented: Establish baseline
conditions, develop energy profile, determine optimal energy source, develop conceptual design, economic and financial analysis, permitting and regulatory review, production of the final report, project permitting, construction document design and oversight, performance validation. Mix of measures included lighting (interior, exterior), solar, mechanical, and replacement of city-wide water meters.
Relevance to Relevance to the City of Cotati: Like Cotati, Cloverdale is relatively remote, and had limited funds
available for infrastructure upgrades. Utilizing grant funding, utility rebates, and a tax-exempt municipal lease, we were able to combine measures to present a budget neutral project to Cloverdale with no up-front capital.
Centrica converted the interior and exterior
lighting from T8 to LED and upgraded HVAC
systems throughout the city. Pending
completion of PG&E service upgrade, an
approximately 900kw ground-mount solar
system will be installed at the Water
Treatment Facility. We are also converting
the water meters across the city to AMI
technology. Centrica provided audit, design,
and construction services for the entire
scope of work, encompassing almost all city
owned buildings.
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Project 4: Auburn Recreation District
Location: Auburn, California
Proximity to Cotati: 122 miles
Owner: Auburn Recreation and Parks District
Project Dates: 2021-2022
Total Project Cost: $2,100,000
Key Staff: Brooklyn Stewart, Brett Watson, Michel Maxsom Annual Energy Savings: $95,435 in year 1 electric and natural gas savings, $15,704 in year 1 water savings.
Reference: Kahl Muscott, City Administrator
Phone: 530-885-8461
Email:[email protected]
On Budget and On Schedule: All project phases were
implemented at the estimated costs and on schedule.
Services Designed and Implemented: Establish baseline
conditions, develop energy profile, determine optimal energy source, develop conceptual design, economic and financial analysis, permitting and regulatory review, production of the final report, project permitting, construction document design and oversight, performance validation. A mix of measures included lighting (interior, exterior), sports lighting, solar, mechanical, controls, hypochlorite generator, and installation of water efficient plumbing fixtures throughout the District.
Relevance to the City of Cotati: In this case multiple measures were implemented across several sites; this experience will translate well in our ability to identify and implement a variety of solutions across the various City locations. The project produced savings in electricity, gas, water, and pool chemicals, and was financed with tax exempt municipal lease financing for a budget neutral project with $0 up-front capital.
Centrica conducted a comprehensive Energy
Audit to evaluate energy use and document
potential energy savings and costs. The
Facility Improvement Measures were
evaluated in detail and selected by the
District for implementation based on total
value and budget neutrality. CBSS worked
with Auburn Area Recreation and Park
District to reduce energy costs for the
District’s facilities, maintain or improve
existing environment within each facility,
and provide and improve operational control
of the District’s equipment and systems.
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Project 5: Coast Unified School District
Location: Cambria, California
Proximity to Cotati: 276 miles
Owner: Coast Unified School District
Project Dates: 2019-2022
Total Project Cost: $2,300,000
Key Staff: Dan Mitchell, Brett Watson, Michel Maxsom
Annual Energy Savings: $480K energy savings/ $100K
maintenance cost savings
Reference #1: David Bidwell, Operations Coordinator
Phone: 805-459-1579
Email: [email protected]
Reference #2: Annie LaChance, Chief Building Official
Phone: 805-924-2926
Email: [email protected]
On Budget and On Schedule: All project phases were
implemented at the estimated costs and on schedule.
Services Designed and Implemented: Establish baseline
conditions, develop energy profile, determine optimal energy source, develop conceptual design, economic and financial analysis, permitting and regulatory review, production of the final report, project permitting, construction document design and oversight, performance validation. A mix of
measures included lighting (interior, exterior), solar, and controls.
Relevance to The City of Cotati: This was an example of working in a small community school district, installing a mix of measures that solved multiple issues for the customer while remaining budget neutral.
Centrica converted the interior and exterior
lighting from T8 to LED at the grammar
school, middle school, high school, and
District Office. In addition, we implemented
a retrofit to the football stadium high
intensity discharge lighting at the high
school with LED. We also installed new roofmounted solar arrays at the District Office and middle school, a carport array at the
grammar school, and a ground-mounted
array at the high school.
Centrica provided audit, design, and
construction services for the entire scope of
work, encompassing almost all the campus
and administration buildings and exterior
lighting.
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Project 6: Genentech, Inc.
Location: Hillsboro, Oregon
Proximity to Cotati: 643 miles
Owner: Roche Group
Project Dates: 2021-2023
Total Project Cost: $14,300,000
Key Staff: Trevor Nelson, John Ferguson, Geoff Frye
Annual Savings: Project has less than a 12-month payback Reference: David Cruz
Phone: 787-955-1055
Email: [email protected]
On Budget and On Schedule: All project phases were
implemented at the estimated costs and on schedule.
Relevance to the City of Cotati: The City of Cotati would like a microgrid to address critical loads for up to two days at City Hall complex, including the Police building. This project highlights our ability to design and develop a complex
microgrid solution, incorporating multiple assets, that meets the unique needs of the customer. CBSS will build on our Genetech and other battery microgrid experience to design the right solution to meet the resiliency requirements of the City.
Description of Services: Key aspects and
technical specifications include:
5MW/10.43MWh BESS system, entire backup facility for 2 hours at maximum facility demand, paired with a 1.28MWDC solar
system, EPC inverters, Custom Siemens MV
switchgear, Russ Electric Microgrid Controller,
Innova SDS static switch, and Capable of
switching speed ~40 milliseconds total. The
system design performs other functions like
demand response, frequency regulation, and
demand charge reduction. In this case, there
is a cap on the BESS system reservation
capacity to be ready to back up the facility for
up to 2 hrs. at full output.
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SECTION 4 – PROJECT APPROACH
Project Approach
Introduction to Our Overall Project Approach
We understand overall objectives of this project are:
To expand the City’s existing fleet electric vehicle charging infrastructure. Evaluate how and when existing and future electric vehicles are charged to maximize off-peak usage. Add resilience and microgrid capability to key City facilities. Identify load-shaving and load arbitrage, reduce grid reliance, and evaluate possibility of virtual net metering.
Increase control and monitoring of water systems.
Evaluate use of wells to maximize cost savings.
Complete objectives in an economically responsible, and most importantly a budget neutral manner.
With advancements in infrastructure technology and current incentives, achieving economic returns with lower energy and utility use is achievable. Certain energy measures like electrifying old, packaged gas/electric HVAC units to heat pump can be challenging when also trying to achieve attractive economic paybacks.
However, measures like purchasing streetlights from PG&E, solar photovoltaic, battery storage, and controls, offer a more attractive payback. Combining quicker and longer payback measures together can create an integrated project that helps achieve a balanced approach to solving infrastructure needs and financial goals, whether paid through financing mechanisms or capital expenditure.
The following is a high-level overview of our project approach which is discussed in more detail is subsequent sections.
Examine
Energy
Consumption
Identify
Optimization
and
Deferred
Maintenance
Opportunities
Collaborate
and
Design
Customized
Solution
Integrate
Financing
Options
Implement
Sustainable
Technologies
Ongoing
Monitoring
and
Maintenance
Services/ Training
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Approach to Energy Audits at the City of Cotati
Our approach mirrors the three-step approach outlined in this RFP. This directly coincides with our normal and day-to-day process when implementing 4,217 projects and energy performance contracts. Our team will thoroughly examine all relevant measures to renew your infrastructure, reduce carbon emissions, and prioritize climate resilience. We will collaborate fully with City stakeholders to support their sustainability goals while including critical deferred maintenance priorities in the project scope.
We also understand the pride the City has in its facilities and will work with the City staff to maintain the look and feel of your facilities while enhancing and upgrading systems. To achieve these goals, our IGA development team follows a tactical plan with four main steps described in detail below.
Our process begins with discussions with key stakeholders to understand goals and objectives and to develop a plan for auditing City buildings on an active campus while minimizing disruption to daily activities.
Tactical IGA Development Plan
Below is a summary of our audit process and the required involvement of the City. We include additional details about each step in this section. The following graphic highlights the four main phases of the IGA process.
Figure 4: CBSS IGA Process
Preliminary Feasibility
Study
• Identification of all
potential ECMs and
Renewables
• Preliminary Cost, Savings,
& Carbon Reduction
Numbers
• Identification of potential
incentives/grants/rebates
• Preliminary Cashflows
• Preliminary Good, Better,
Best Discussions
The City’s Role
• Availability of key
stakeholders for review
• ISDI toggling tool review
and scope discussions
• Decisions on scope for
final development
Investment Grade
Audit
• Schematic design drawings
• Walk sub-contractors
• Finalize savings
calculations
• Life-Cycle Cost Analysis
• Structural/geo-technical
reviews for renewables, if
applicable
• Detailed “Good, Better,
Best” discussions, and
decisions
• Final costing for each
proposed measure
• Proposed M&V protocol by
ECM
• Review of various
financing approaches
The City’s Role
• Access and escorts to walk
sub-contractors
• Availability of key
stakeholders for IGA and ISDI
Toolreview
• Decisions on final scope to
move to contract and
construction
-
IGA Delivery / Contract
Development
• IGA Finalized
• Detailed SOW
• M&V Plan
• O&M Plan
• Training Plan
• Financing Plan
The City’s Role
• Key stakeholders for IGA
review
• Support of City Staff
• Contract Review
• Final Sign-Off
Data
Collection
• 24-36 months of utility
bills and rates
• Building square footages
• Equipment lists
• Historical O&M costs
• Control system access
• Desired standards of
comfort
• Occupancy data
• Events and holiday
calendar
• Building/Structural
Drawings
• Source fuel mix for carbon
calculations
• Fire Escape Plan
The City’s Role
• Access to data, buildings,
and key personnel
• Review of utility baselines
and proposed utility
escalations
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Data Collection Our team initiates the process of collecting data by conducting interviews with key stakeholders. This includes but is not limited to facility and operations personnel, sustainability management, and City leadership. By doing this, we build a complete picture of the desired goals and outcomes for a successful and comprehensive program. Utility consumption data is a critical component for establishing the energy baseline and boundary for savings potential for the IGA. CBSS will collect data, which will be used to develop accurate baselines, help to focus time on-site and will act as the basis for assumptions in engineering calculations.
As the project develops, our engineers will confirm utility rates and identify potential escalators, which we will use in calculations and financial models. In recent years, energy rates have spiked in the California market. CBSS will collect up to three years of utility data to understand specific utility trends for the City, share all updated findings, and collectively decide what rate to utilize when finalizing the IGA. Typically, the most current 12 months of continuous, overlapping utility data will be used to develop an Energy Baseline.
Preliminary Feasibility Study As an initial step, it is essential to have preliminary audit data on all
potential Energy Conservation Measures (ECMs). This first pass allows us to identify additional data needs to assess scope expansions and renewable solutions. As much
information is yet to be obtained, upon award, our Project Development Team, led by Brett Watson, will expeditiously review what we have, collect, and analyze all available data from sites, interviews, existing building equipment audits, existing drawing reviews, and operating characteristics surveys to home in on a preliminary scope of work.
From the City’s project goals, several focus areas are key:
EV Infrastructure and Optimization, Microgrids and Onsite Generation for Resiliency and Demand Response, Water System Measurement and Monitoring, and Energy and Water Efficiency.
For EV Infrastructure and Optimization, CBSS will leverage its experience with multiple EV infrastructure projects across California to analyze the existing charging infrastructure, current EV fleet and future fleet needs, and the current charging models. Our in-house team of Electrical Systems Engineers will utilize industry-standard and accepted modeling tools such as Xendee and Energy Toolbase to build out the charging model further and optimize the needs of the charging infrastructure in consideration of the electric tariffs, normal and resiliency operations, and potential vehicle-to-grid (V2G) applications.
Using the EV charger model, we will further build out the modeling to size out solar PV and battery storage systems (BESS) across the various City facilities and optimize their operation in everyday operations and to the desired level of resiliency. Here too, our in-house Solar Design team uses industry standard tools such as Helioscope to build out the PV systems and performance features. We can then pull the EV, solar PV, and BESS systems and operation models into a larger microgrid model to build out the financial impacts of the microgrid system. The CBSS Solar Team also keeps up with the latest regulatory issues, such as the recent developments with the Net Energy Metering Aggregation (NEMA) regulations, which allows a customer to build a solar array interconnecting at a single meter and use energy generated from the system to offset energy usage for additional meters located on contiguous land. A bill in the California legislature is currently being considered to Integrated Solutions Digital Interface (ISDI) Tool: To
present the Good, Better, Best scenarios for our
customers, Centrica developed a project-specific
Integrated Solutions Digital Interface Tool. This highly customizable, Excel-based interface captures the costs, savings, payback, and, most importantly, the carbon
reduction, for each individual ECM or renewable
technology proposed. The tool allows the team to
“toggle” measures on and off to see how they affect the overall economics, carbon reduction, and cashflow of the project to help our customers make decisions on which
solutions to include in the final project scope as a whole or as part of a phased approach. This tool is used
throughout the Development Phase and refined through
the IGA process.
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reinstate the NEMA and Virtual Net Energy Metering (VNEM) programs that are critical for multi-meter customers such as the City.
For water system measurement and monitoring, we will evaluate the current water monitoring systems to understand the capabilities of the system, determine the best options to integrate overall water production/use/loss monitoring into the existing systems, and recommend options to expand the system capabilities. We work with some of the best water efficiency contractors in the U.S. and in California and can look to develop a state-of-the-art water measurement and monitoring system to meet the City’s needs. Our in-house Controls Team brings a wealth of expertise in integrating various systems and protocols such as Modbus, BACnet, etc. Our team can also explore upgrading water fixtures with more water efficient models for additional water savings.
Beyond microgrids and water measurement/monitoring, CBSS also has an in-house staff of Energy Engineers to evaluate the existing City buildings and develop ECMs to improve energy efficiency and reduce energy consumption. For municipal buildings, common ECMs to consider include (but are not limited to) building envelope measures such as building insulation and infiltration reduction, duct sealing, window upgrades and replacement, HVAC and lighting equipment efficiency upgrades (and end-of-life replacements for both), and decarbonization system upgrades. Our CBSS in-house Controls group will also evaluate the existing building energy management systems and controls strategies and develop systems and controls upgrades for improved performance and energy efficiency.
For determining energy, water, and cost savings, CBSS
uses in-house tools with industry-accepted calculation
methodologies, including TMY weather data. For
guaranteed energy savings, these calculations are usually sufficient to estimate savings and we commonly use
International Performance Measurement and Verification
Protocol (IPMVP) Option A for ECMs that can benefit from measurements of the most critical parameter – like fixture power for LED lighting upgrades. Examples of
Measurement and Verification (M&V) Reports are included in Appendix B.
CBSS has also used the Option C Measurement and Verification System software available from Abraxas Energy.
With this software, we can normalize energy usage for weather and other variables to more clearly track the true energy savings at the meter, building, or campus level. We can also use Option C for load factor analysis, rate analysis, and for regular progress tracking and reporting.
Our engineers develop a comprehensive list of ECMs with associated estimates of energy savings, project costs, applicable state and utility incentives, Federal Treasury credits, and potential grants. With the support of PG&E, we will explore additional mechanical rebates and renewable project incentives to add additional measures. The team will develop an ISDI Tool for your project, which will be reviewed internally and with the City, modified, and refined as we move through the IGA process.
45% IGA Workshop: CBSS will refine our IGA assessments based on discussions with you and will conduct a final IGA workshop with the City to formally review the result of the initial audits and potential scenarios for maximizing the project benefits. The goal of the workshop is to determine the right mix of measures to carry forward.
Meteorological Weather Data: Typical Meteorological
Year (TMY) data is an hourly data set compiled by the
National Renewable Energy Laboratory (NREL) from 30
years of collected weather data specific to locations
throughout the United States. Because HVAC measures
are highly dependent on outdoor air conditions, using
the TMY data in our savings calculations isolates
variations in weather conditions, minimizing over or
understatement of savings. The TMY data is the
standard for most energy modeling applications.
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Investment Grade Audit Once we finalize the mix of measures from the Preliminary Feasibility Study Workshop, the CBSS team will complete the designs and develop firm fixed pricing for each recommended measure. After this time, depending on the mix of measures, we introduce financing options to the City and discuss what fits best with its financial outlook and budgeting process. We explore both on and off-book financing options (for instance, energy-as-a-service) and leasing options, quantify and verify all available utility rebates, grants, and government incentives, and compete with potential financiers for competitive rates. As a PG&E Trade Pro Partner we have experience financing projects with On-Bill Financing as well as the California Energy Commission’s Energy Conservation Assistant Act (ECAA) low interest loans for municipalities and will seek to provide the City of Cotati the best financing options available.
CBSS understands the importance of using life cycle costing to make decisions on which ECMs should be included in the project portfolio. A life cycle costing analysis will be performed and presented during an ECM selection workshop for all ECMs evaluated during the IGA. The Life Cycle analysis will be set at a term represented by the longest payback ECM. The analysis will include the total costs to implement the project, the total utility cost savings, operation and maintenance savings, and any annual expenses to maintain the systems to be installed. CBSS has used BLCC program version 5.3-18 which is the digital version of the NIST Handbook 135, the standard for all government Life Cycle Costing. The output provides the actual life cycle costs of the project and allows a comparison of alternate mechanisms for ECM options and the baseline case.
IGA Delivery/Contract Development Throughout the above-shown development process of the IGA, we conduct several comprehensive reviews and engage in open discussions to ensure that the final scope of work, operations, maintenance (O&M), and monitoring plans meet the necessary standards, requirements, and objectives of the City. The reviews and discussions align the goals and objectives of the City. We assure the City that there are no surprises in the final IGA deliverable. Our team is committed to transparency and open communication, and we will keep the City informed every step of the way.
Once the plans are accepted, we will execute the agreement, secure financing, develop the contract scope of work, and begin the construction phase. Our team will work diligently to ensure the construction phase is executed to the highest standards and completed as efficiently as possible. We are committed to delivering a high-quality project that meets the expectations of the City and the community at large.
IGA Workshop: CBSS will conduct an IGA workshop with the City to review the result of the initial audits and potential scenarios for maximizing the project’s benefits for the City. The goal of the workshop is to determine the final mix of measures that will provide the highest value impact for the City to carry forward to final implementation.
M&V Workshop: The measurement and verification of energy savings is a critical component of every guaranteed energy savings contract, as it serves as the basis for defining and confirming the budget-neutral aspect of the project. We hold ourselves accountable for delivering evidence of savings through a reliable, prescribed M&V process to ensure the project has the required savings for the City. One of our Certified Measurement and Verification Professionals (CMVP) will develop a site-specific M&V plan per the International Performance Measurement and Verification Protocol (IPMVP) guidelines. We will review this with City Facilities staff during a workshop prior to final delivery of the IGA report. The M&V options presented will follow proven processes, which provide the City with transparency that the savings are achieved while at the same time maintaining an appropriate level of M&V fees. We aim to deliver a plan to the City that provides a meaningful guarantee while balancing costs. We use an M&V Planning Flowchart (developed by the Federal Energy Management Program) to determine the appropriate M&V option. 338 of 1021
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Summary of Project Management Approach and Process
Like our IGA process, CBSS will create a project management plan and approach that is tailored to the individual customer site. Our experience working with municipalities gives us a unique understanding of the challenges posed by implementation. We carefully consider the City’s needs, layout, activities, and safety precautions before we begin our construction plan. By understanding key aspects of how the City functions and discovering how the buildings are operated and occupied, we will develop an informed and realistic construction plan to avoid disruption and deliver the solution on schedule and within budget. For example, we may schedule the installation of lighting upgrades during off-hours to ensure that daily functions within City offices are not impacted. We have also seen challenges with general availability of parking near municipal buildings and will address that with City Facilities staff prior to work that requires our trucks to take up additional space or requiring blocked-off parking areas (i.e., for EV charger installations).
We start the process during the IGA, where our team will work with City staff to understand and proactively plan for priorities to inform the overall construction schedule. Contributing factors include but are not limited to:
Sensitivity around building
schedules and necessary quiet
hours
Awareness and coordination with
concurrent projects
Availability of parking, access,
material staging, and laydown areas
Existing infrastructure and other
unique site conditions in City
buildings and operations
Critical City operations within the
Police, Fire, and Emergency
Services Departments
Critical City events like the Cotati
Accordion Festival, the Cotati Music
Festival, Election Days, and
seasonal/holiday events
Communication and Collaboration with City Staff will be critical throughout the construction process.
We adhere to the critical path model of project management to plan and execute projects more efficiently and effectively. As shown in the project reference section of this response, our team has a proven track record of delivering projects on time and within budget. Our project management team uses MS Project or similar tools to build a detailed task and duration schedule for all ECMs and to establish critical path items, which often include design, permitting, and procurement tasks. During construction, the Project Manager will prepare weekly reports for the City and the entire project team, showing actual vs. planned progress. These reports highlight the reasons for any variance, whether we are ahead or behind schedule. If we are behind or anticipate a potential to fall behind, the weekly report will identify actions needed to prevent or remedy the delay.
In addition to weekly reports and tracking progress against the overall schedule, the Project Manager issues a Two-Week Look Ahead each week with detailed plans and tasks to facilitate coordination. When working in congested or mission-critical customer areas requiring close coordination, such as a municipal complex, this Look-Ahead progress planning can be iterated down to Day-Ahead or Intra-Day/Half-Day Look-Ahead Schedules.
This detailed planning and active communication promotes schedule adherence, eliminates unnecessary delays and, most importantly, minimizes disruptions to day-to-day City operations.
Like the auditing process, we have ideas for incorporating residents and learning opportunities into the construction process. Whether through communications support, site walks during construction, or Q&A sessions with our construction staff, we look forward to making our combined vision a reality. 339 of 1021
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Keeping the Community Informed: CBSS can provide newsletter and City website content – including project updates, milestones, anticipated disruptions, and project benefits – to be published via established channels familiar to City leadership, staff, and the community.
Competitive Methodology for Selecting Subcontractors
CBSS's preferred methodology for selecting subcontractors is through a competitive bidding process for measures that are not self-performed. For each measure, we use RFPs and invite at least three bidders for each activity including DBE and SBEs to maximize the economic impacts of the project. This allows us to compare and evaluate the strengths and weaknesses of each bidder based on their proposed solutions, expertise, experience, and pricing. Competition in price is a critical element of cost containment and providing the best value to the City. We ensure that detailed scopes of work and applicable drawings are provided to bidders to eliminate confusion. Our subcontractor selection process allows the City to provide input and final acceptance of any subcontractors invited to bid on projects. We ensure that any recommended subcontractor meets any City Safety pre-qualification criteria and CBSS's qualification standards and process.
Project Closeout and Commissioning
CBSS utilizes a technical
approach to project closeout
and commissioning, not just a
report process. We use a combination of
internal resources, our subcontractors, and
vendors to commission the installed
systems. CBSS will work with our
equipment manufacturers to operate their
installed equipment and perform factory
start-ups as required per the project
specifications. CBSS’ internal team will
collect information on lighting and solar
power measures. The project closeout and
commissioning effort is broken down into
four phases: Design, Construction,
Performance, and Post Occupancy.
Design
We thoroughly review engineering
design drawings and implement any
required modifications to guarantee
optimal performance of the ECM.
Construction
ECM installation is checked against
design drawings to ensure accurate
execution. Reports are provided after
field installation checks. CBSS will
monitor major equipment installation
and start-up.
Performance
CBSS tests and documents every ECM
to ensure they perform as expected.
BMS tests will confirm control system
graphics and calibrate every point.
We'll maintain a log of issues and
ECM status.
Post Occupancy
CBSS will update O&M manuals and
records for commissioned systems
with changes in the construction
phase. This includes commissioning
reports covering installation, testing,
performance, and current issues.
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Operations, Monitoring, and Maintenance (OM&M)
CBSS develops comprehensive strategies for operating, monitoring, and maintaining your energy systems. This starts during the IGA phase as the ECMs are being finalized where you help us understand the bandwidth and capabilities of your facilities staff.
We are happy to take on as much or as little of the ongoing services as you need. For example, some past customers have told us, “We (customer) will take care of everything. Just give us training on what you installed, and we’ll take it from there.” Others have said, “We want you (CBSS) to take on all the cost and risk for keeping these systems running. Our staff do not have any bandwidth to take on additional tasks.” And we have seen everything in between.
What we envision for this project is some combination of the following:
Training provided to your staff by CBSS and the material manufacturers for the systems installed. Monitoring platforms set up by CBSS that your staff can use to check performance. This can be actively monitored by either the City or CBSS. The graphic shown to the left is an actual screenshot of our internal monitoring platform showing systems in California that we are currently actively monitoring.
• We would like to set up an additional monitoring platform, either online or via a monitor in a prominent administrative or engineering lobby (or both) where residents and staff can see cost, energy, and CO2-e savings gained by the City in real time. Annual system checks for HVAC, EV, and solar installations may be performed by either City staff, contractors managed by the City, or fully managed by CBSS.
We understand it is the City’s goal to have granular access to information, not only to ensure systems are running at optimal levels, but to track results, report on successes, and identify where additional focus is needed. Whether the decision is made for CBSS to deliver an O&M plan for management of the system, or the City takes on that challenge internally, or a combination of the two, we have solutions that can provide the level of granularity you seek. This includes a member of CBSS’s own suite of products, PowerRadar, a unique sub-metering technology we can customize for tracking water, gas, and electrical usage at a per-building or facility level.
If it is in City’s interest to lean on external assistance in monitoring their systems, our internal Asset Management team has over three decades of combined experience in technical monitoring and customer service. We are dedicated to supporting customers like you in maintaining their building systems over the long term. All monitoring, reporting, and troubleshooting of systems under O&M and Warranty services, as well as energy analysis, remote monitoring platforms, machine language, contract evaluation, and communication, fall under the purview of the Asset.
Why CBSS + PowerRadar?
Cloud - based, secure
software
Manage your energy data securely
from anywhere via desktop or our
mobile app.
User- friendly, modern
desig n
An intuitive, well-designed user
interface enables clear visualization
of energy data.
Scalable
Continuous energy solution
integrations into PowerRadar
provide more control as your
strategy evolves.
Above, a visual representation
of CBSS monitored sites in
California
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SECTION 5 – PRICING AND SAVINGS
As you will notice on the following page in Attachment C, we offer to conduct the Preliminary Feasibility stage and IGA stage with no cost to the City. We anticipate the cost to CBSS will be approximately $30k, a cost we will recoup by rolling into the construction contract if the City proceeds with the project.
For the construction phase, our proposed markups on all material and subcontracted labor are as follows:
Overhead 15%
Profit 10%
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Attachment C – PE/IGA Pricing Proposal
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SECTION 6 – CONTRACTS
Sample Performance Energy Contract
Please refer to the Sample Performance Energy Contract under Appendix C. 344 of 1021
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SECTION 7 – ACKNOWLEDGEMENT OF QUESTIONS
Acknowledgement
CBSS acknowledges the receipt of all written responses to questions submitted for this request. 345 of 1021
Appendices
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Appendix A –
2003 Audited Financial
Statement
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INSIDE THIS REPORT
Governance
57 Directors’ and Corporate
Governance Report
59 Board of Directors
64 Corporate Governance Statement
72 – Audit and Risk Committee
79 – Nominations Committee
82 – Safety, Environment and Sustainability
Committee
84 – Remuneration Report
110 Other Statutory Information
Strategic Report
1 Group Highlights
2 Centrica At A Glance
4 Chair’s Statement
6 Group Chief Executive’s Statement
9 Our Purpose, Culture and Values
10 Business Model and Strategic Framework
12 Market Trends
13 Macro Trends
14 Our Stakeholders and s172 statement
18 Group Chief Financial Officer’s Report
22 Our View on Taxation
23 Business Review
26 Key Performance Indicators
28 Our Principal Risks and Uncertainties
35 Assessment of Viability
38 Group Chief People Officer’s Report
41 People and Planet
46 – Non-Financial and Sustainability
Information Statement
47 – Task Force on Climate-Related Financial
Disclosures
Financial Statements
114 Independent Auditor’s Report
127 Group Income Statement
128 Group Statement of Comprehensive
Income
129 Group Statement of Changes in Equity
130 Group Balance Sheet
131 Group Cash Flow Statement
132 Notes to the Financial Statements
229 Company Financial Statements
241 Gas and Liquids Reserves (Unaudited)
242 Five Year Summary (Unaudited)
Other Information
243 Shareholder Information
244 Additional Information
– Explanatory Notes (Unaudited)
249 People and Planet
– Performance Measures
252 Glossary
READ MORE ABOUT
OUR COMPANY OUR PROGRESS
IN 2023
OUR FINANCIAL
PERFORMANCE
OUR PEOPLE OUR GOVERNANCE
READ MORE ON
PAGES 4 to 5
READ MORE ON
PAGES 6 to 8
READ MORE ON
PAGES 18 to 21
READ MORE ON
PAGES 38 to 40
READ MORE ON
PAGES 57 to 58
Unless otherwise stated, all references to the Company shall mean Centrica plc (registered in England and Wales No. 3033654); and references to the Group shall mean Centrica plc and all of its subsidiary undertakings and equity-accounted associate/joint venture undertakings; and references to operating profit or loss, taxation, cash flow, earnings and earnings per share throughout the Strategic Report are adjusted figures, reconciled to their statutory equivalents in the Group Chief Financial Officer’s Report on pages 18 to 21. See also notes 2, 4 and 10 to the Financial Statements on pages 134 to 135, 143 to 149 and 160 for further details of these adjusted performance measures. In addition see pages 244 to 248 for an explanation and reconciliation of other adjusted performance measures used within the document. This Annual Report and Accounts does not offer investment advice, and does contain forward-looking statements. The Disclaimer relating to this Annual Report and Accounts is included on page 253.
WWW.CENTRICA.COM
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GROUP HIGHLIGHTS
Strategic report | Centrica plc Annual Report and Accounts 2023 1
GROUP OPERATIONAL METRICS
British Gas Services & Solutions – Services
Engineer Net Promoter Score (NPS)(1)
Total recordable injury frequency rate
(per 200,000 hours worked)
Colleague engagement(2)
Total greenhouse gas emissions (tCO2e)(3)
GROUP FINANCIAL METRICS (YEAR ENDED 31 DECEMBER 2023)
£6,512m £2,752m
Group statutory operating profit/(loss) Group adjusted operating profit
70.6p 33.4p
Group statutory basic EPS Group adjusted basic EPS
£2,752m £2,207m
Group statutory net cash flow from
operating activities
Group free cash flow from continuing
operations
£2,744m 4.0p
Adjusted net cash Full year dividend per share
† Included in DNV Business Assurance Services UK Limited (DNV)’s independent limited assurance engagement. See page 249 or centrica.com/assurance for more. (1) Measured independently, through individual questionnaires, the customer’s willingness to recommend British Gas following a gas engineer visit. (2) Colleague engagement methodology has changed from percentage favourable to an average score out of 10, measuring how colleagues feel about the Company. (3) Comprises scope 1 and 2 emissions as defined by the Greenhouse Gas Protocol. (4) Restated due to availability of improved data.
(5) 2022 comparator as reported. Excluding disposed Spirit Energy Norway assets 2022, adjusted operating profit was £2,823m and adjusted EPS was 34.2p. 2022
£(240)m
2022
£3,308m(5)
2022
(13.3)p
2022
34.9p(5)
2022
£1,314m
2022
£2,487m
2022
3.0p
+71
+64
2023
2022
0.84 1.12
2023
2022
7.7 7.4
2023
2022
1,681,475
2,009,885
2023
2022 (4)
We reported another strong financial result in 2023,
against a backdrop of continued elevated commodity
prices and volatility for much of the year. We’ve also
been focused on improving colleague engagement
and operational performance, resulting in improved
customer outcomes as we look to underpin customer
retention, growth and long-term profit sustainability.
†
2022
£1,199m
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CENTRICA AT A GLANCE
2 Governance | Centrica plc Annual Report and Accounts 2023
OUR PURPOSE,
CULTURE AND
VALUES
Our Purpose is – ‘energising
a greener, fairer future’. Our
culture and values remain
firmly embedded in who we
are and guide everything
we do.
READ MORE ON PAGE 9
OUR STRATEGY
AND BUSINESS
MODEL
RETAIL
Focused on providing
leading customer service
and experience, helping
customers to save money
and decarbonise through
innovative offerings.
OPTIMISATION
Supporting the responsible
buying and selling of
energy, managing risk
across our business and
accessing value from green
generation in our trading
business while continuing
to build out the flexibility
required for the future
energy system.
INFRASTRUCTURE
Investing to build a low
carbon, reliable energy
system including power
generating renewables,
flexible peaking generation
and energy storage
through batteries and
geological storage.
READ MORE ON PAGE 10
We are unique amongst energy companies in the
UK and Ireland, operating across the energy value
chain through our distinct, but complementary
businesses. Our Purpose is to energise a greener,
fairer future as we journey towards net zero for our
customers and Centrica.
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WHAT SETS CENTRICA APART AS AN
INVESTMENT OPPORTUNITY?
Centrica is a uniquely
integrated energy company
operating primarily in the UK
and Ireland. We aim to deliver
long-term value for investors
by driving and leading the
energy transition through our
distinct, but complementary
businesses.
21,000 7,000 7,200
Colleagues worldwide Engineers Volunteering days
Top 50 13.0GW
Ranked in The Times Top
50 Employers for Gender
Equality
Route to market for
renewables under our
management
Strategic report | Centrica plc Annual Report and Accounts 2023 3
OPTIMISATION INFRASTRUCTURE
A global energy trading
company which helps move
energy from source to use,
and managing energy
procurement & risk.
Centrica Energy
strengthened its portfolio
in 2023, delivering a 3%
increase in renewable assets
under management to
13.0GW.
Energy supply and low
carbon solutions for
businesses, building and
operating a portfolio of
flexible assets.
Centrica Business
Solutions is focused on
customer service and
delivering improved margins
in energy supply while
building out its asset
portfolio.
Oil and gas production from
existing UK assets fuelling
homes and business across
the UK and Europe.
Spirit Energy was awarded
a carbon storage licence for
Morecambe Bay, which has
the potential to be one of the
UK’s largest carbon storage
hubs.
A 20% interest in the UK’s
portfolio of existing nuclear
power stations.
In Centrica Nuclear,
we extended the lives of
existing nuclear power
stations in 2022 and
are exploring further
investment in Nuclear
generation.
The owner and operator of
Rough, the UK's largest gas
storage facility, helping
manage seasonal demand
and energy security.
Centrica Energy Storage+
has increased the capacity
at Rough to 54bcf and
continues to explore its role
in the future of hydrogen.
(1) Included within Retail and Infrastructure. Read more on page 10.
SUPPORTING COMMUNITIES, OUR PLANET AND EACH OTHER
Our People & Planet Plan aims to create a more inclusive and sustainable future – from being a net zero business by 2045 and helping our customers be net zero by 2050, to creating the diverse and inclusive team we need to get there and contributing to the communities we’re all part of.
READ MORE ABOUT OUR APPROACH AND OUR JOURNEY TO NET ZERO AT CENTRICA.COM/PEOPLEANDPLANET RETAIL
British Gas has been supplying energy to British
homes and businesses for over 200 years.
In British Gas Energy, we are strengthening our
operations to drive innovation, retention and better
customer outcomes, to underpin long-term profit
sustainability.
Energy supply, services and solutions for residential
and business customers in the Republic of Ireland.
Bord Gáis Energy is creating value from its
integrated model, investing in the future energy
system to help underpin energy security and
decarbonisation in Ireland.
Our team of around 7,000 engineers provide
customers with repairs, home improvements,
maintenance and heating installations.
British Gas Services & Solutions has
significantly improved operations in service and
repair, whilst driving growth in on-demand and
heating installs.
READ MORE ABOUT OUR PEOPLE & PLANET PLAN ON PAGE 41
(1)
(1)
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This instability in energy markets has largely
been caused by global conflicts, and these
conflicts look set to continue. Whilst we
cannot control this, we are acutely aware of
the impact that price fluctuations have on all
our customers.
While other suppliers in the UK have collapsed
due to the volatility and uncertainty in the
market, we have not only stepped in to
support their customers but actually improved
our resilience and business model to ensure
we can be there for all of our customers, old
and new. You can read more about this in the
‘Business Model’ section on page 10.
It is this resilience that means we can add
value across the entire energy value chain. We
are integrated in a way that differentiates us
from our competitors. This is important in
itself; our business model is built on each part
of Centrica supporting the others, but it has
also been important for ensuring we can
support those who are struggling most during
the crisis. I am very pleased with what we
have achieved in 2023.
OUR PERFORMANCE
When I became Chair of the Board in 2020
the business was in a very different position.
Over the last few years, we have been going
through a turnaround process and can now
say the vast majority of that is complete. We
can see the impact of the turnaround in the
strong performance of the business.
I believe people have started to appreciate the
quality of the Company we have here. We
have a resilient balance sheet, good or
improving returns across business units, and
we have a clear plan for the future. We have
shown that the way our business fits together
really compounds the overall value of it.
A strong Centrica is vital for the customers
who rely on us every day and is good for our
shareholders. Our performance has allowed
us to resume and grow our dividend, whilst
remaining prudent, and we have also returned
capital to shareholders through our share
repurchases. These actions reflect the Board’s
confidence in the strength of Centrica and its
ability to deliver.
OUR SUPPORT FOR CUSTOMERS
Our performance matters to our shareholders
– including those thousands of private retail
shareholders of whom many were the original
‘Sids’ who bought shares during the
privatisation of British Gas in the 1980s. It also
matters to our customers. It is only because
we are in such a strong, resilient position
that we can go above and beyond for our
customers.
In 2023 we brought our total commitment to
helping customers since the start of 2022 to
£140 million, we hired 700 more UK-based
colleagues to support customers over winter
and into the future, and net promoter scores in
our Retail businesses have been improving.
The way the price cap is structured means
that if customers don’t pay their bills, costs are
added to the bills of all other customers. We
will continue to strive to find the right balance
between supporting those in difficulty whilst
keeping bills as low as possible for all our
customers.
This work shows leadership and it is
something we can be proud of. Leadership
also means responding responsibly when
something goes wrong.
Early in 2023 it was brought to our attention
that the supplier we worked with to install
prepayment meters under warrant had, in
some instances, not been showing our
customers empathy and respect. This is a
complex area, and the business took swift
action to investigate and report publicly on the
findings.
Our in-depth investigation highlighted some
issues in the installation of prepayment
meters. However, whilst these were not
systemic, we take the view that even one
failure, is one too many. Chris O’Shea and his
team showed leadership and humility in
investigating the issues and putting them right.
Centrica takes pride in the fact that we do
more to support customers that are in financial
difficulties than anyone else in the markets we
serve and we will always strive to do the right
thing by our customers.
4 Strategic report | Centrica plc Annual Report and Accounts 2023 CHAIR’S STATEMENT
Centrica occupies a unique place in the energy
market. It is a place I am very proud that we
occupy. We are a lynchpin of stability in a market
that for the last few years has been in turmoil.
Scott Wheway | Chair
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OUR CONTRIBUTION TO ENERGY
SECURITY
Security of supply has climbed in importance
over the last two years and is likely to remain
important as long as global conflicts continue.
Our performance has meant we could take a
leading role in this area. I know the team at
Centrica are hugely proud of the contribution
we’ve made to energy security in the UK
and Ireland.
Over 2023 we’ve expanded the capacity of
the Rough storage field, improving the UK’s
gas storage levels. However, the capacity of
the storage field at Rough is unlikely to be
expanded further without the certainty of a
regulatory model that would underpin a very
significant investment for the future. Our
colleagues in Centrica Energy have also
played a pivotal role in securing Liquified
Natural Gas (LNG) through multi-billion-dollar
deals, including a new deal with Delfin
Midstream in the US that will enhance energy
security for the customers we serve.
OUR FUTURE
Alongside our Interim Results in July 2023,
Chris and the Centrica Leadership Team
presented our new, Green Focused
Investment Strategy. We announced that
Centrica intends to invest between £600m
and £800m a year over the next five years
primarily in security of supply and flexibility,
renewable generation, and our customers. We
also gave guidance on our expected range of
annual operating profit in our Retail and
Optimisation businesses and provided clarity
on a new financial framework, including our
progressive dividend policy.
Centrica’s direction was already clear to our
investors and our wider stakeholders, but the
July update provided a clear overview of the
approach Centrica will take in the future. I’m
glad the update was received positively by the
market.
I am excited to see what Centrica can
accomplish in the coming years and I want to
take this opportunity to assure our
shareholders that your Board will be prudent
custodians of your money.
OUR SUPPORT FOR NET ZERO
Our Green Focused Investment Strategy will
also mean that Centrica is playing its part to
underpin the energy transition.
We are unequivocal in our support for net
zero. We believe it is an opportunity for the UK
and Ireland and we will continue to feed into
live discussions with our valuable experience
of energy markets. Gas is likely to continue to
be a transition fuel for some time, and your
Board is acutely aware that we have a
responsibility to ensure that energy is
affordable for everyone through the transition.
Last year I said that to meet net zero a
combination of technologies will be required,
and that these technologies would create
opportunities for companies with strong
balance sheets, flexible business models and
detailed knowledge of markets. This year, it is
my belief that we have cemented our position
as one of those companies.
We are one of the largest heat pump installers
in the UK’s emerging heat pump market, we
are leading on hydrogen innovation across the
UK and Ireland, and our strategy shows the
scale of our ambitions in renewables. Our
commitment is not merely words, it can be
seen in our actions.
OUR COLLEAGUES
None of this would be possible without the
fantastic work of our colleagues. It is a great
source of pride for me that Centrica continues
to grow and that we continue to show
leadership in the areas people care about,
such as our Carers Leave Policy.
Over the course of 2023 we have seen the
engagement of our colleagues increase, no
doubt due to the supportive culture that Chris
and Centrica’s Leadership Team have
nurtured in the business. I was also very
happy to see the continuation of our Shadow
Board initiative. It is absolutely right that a
representative group of our colleagues should
have the opportunity to share their views on
the management decisions that impact them.
Of course, we have also welcomed new
employees to the business this year and I
welcome all of them, not least the 700
permanent employees that were hired in time
to support our customers over the winter. I am
also delighted to welcome Russell O’Brien to
Centrica on his appointment as Group Chief
Financial Officer and Executive Director in
March 2023, and Philippe Boisseau who was
appointed to the Board as a Non-Executive
Director in September 2023.
Towards the end of the year, we were also
very pleased to announce the appointments of
Jo Harlow and Sue Whalley as Non-Executive
Directors. They bring an exciting mix of
experience to our Board, and I know their
contribution to the Remuneration Committee
and Nominations Committee will be highly
valued.
Thank you to all colleagues across Centrica for
your contribution in 2023.
SUMMARY
This year Centrica has taken significant steps
forward on performance, on delivering the
things that people care about and on showing
where our future lies. We are never satisfied
and there is still work to do, but I hope our
stakeholders across society can see a
company that cares about what it does and
makes a significant contribution to the UK’s
energy system.
I am confident that our capabilities, our
resilience, and our determination will deliver
great things in 2024, and I look forward to
reporting on our progress next year.
Scott Wheway, Chair
14 February 2024
Strategic report | Centrica plc Annual Report and Accounts 2023 5 354 of 1021
Despite that pace of change, I stand by the
statement I made in last year’s report. I said:
“ My belief is that climate change is the
biggest single threat facing civilisation
today, and net zero is the biggest single
opportunity we have at Centrica.
Climate change is real, it’s here, and
it’s impacting lives across the planet.
Transforming how we generate, store
and use energy can make a huge
difference to reducing the warming of
our planet. Longer term, if the net zero
transition is thoughtful and targeted,
it can keep prices stable for customers
and drive economic growth, especially
for those companies and countries at
the forefront of the transition.”
As I write at the end of 2023, I am even more
convinced that this is the case. Your
Company is incredibly well placed to both
drive forward, and benefit from, the energy
transition. This will require a relentless focus on
performance and continuous improvement,
and disciplined but bold capital allocation to
ensure we have a portfolio of investments
across a mix of technologies. We have a lot to
play for.
I believe we get more right than we get wrong,
but the real test of character is how you
respond when things go wrong. It’s my view
that we need to put things right when this
happens, and we need to learn from our
experience.
Sadly, we saw an example of getting it wrong
early in 2023 when a report highlighted some
of our contractors were not treating our
customers with the respect they deserved
when installing prepayment meters under
warrant. We immediately apologised, we
suspended the installation of prepayment
meters under warrant, and we launched an
investigation overseen by an independent third
party. Whilst our investigation found no wideranging problems with our systems and processes, it did highlight some isolated
instances that fell short of the high standards
of behaviour that we expect when engaging
with customers. As a result, we have brought
all such activity ‘in house’ (as opposed to
using contractors) and have spent the past
year ensuring our policies, procedures and
practices are updated and that our colleagues
are fully trained in these areas. We also
contributed to the development of new
industry rules to protect vulnerable customers.
At the time of writing, we have not yet
restarted the installation of prepayment meters
under warrant. However, we may choose to
do so in the future, as, done properly, they are
an effective tool both in helping customers
manage their costs and in helping energy
companies manage bad debts, which is even
more important as people struggle with the
cost of living. This is important because under
the price cap, those who pay for their energy
ultimately end up paying for those who
choose not to pay, and we don’t think
that’s right.
However, we are not sitting on our hands
waiting for others to solve the problem of
people who can’t pay for their energy. We
have taken decisive steps to support
consumers who are facing hardship and
we’ve done more than any other UK energy
company. Since 2022, we have committed
£140 million to support customers struggling
with their energy bills in the UK and Ireland,
which is on top of around £400 million of
contributions we are required to make each
year. It is a huge amount of money but our
customers are at the heart of everything we
do, and we must support them when they’re
in need. Unfortunately it cannot address all of
the issues our customers face today because
these are not limited to energy costs – people
are struggling to pay their mortgage or rent,
their council tax, their food costs, and so
much more. This is a societal issue which
requires a societal response.
We have been vocal in our calls for regulatory
reform, both in terms of how energy
companies are made more robust to avoid
failures in the future, and in terms of how we
can have a system which is fairer for
consumers.
6 Strategic report | Centrica plc Annual Report and Accounts 2023 GROUP CHIEF EXECUTIVE’S
STATEMENT
I am increasingly coming to the conclusion that the
speed with which things seem to change is now
simply indicative of the world we live in. The news
cycle has shortened, the urgency with which things
need to happen has increased, and the pace at
which we are moving in our quest to make your
Company the best is as fast as I’ve seen it in my
five and a half years at Centrica.
Chris O’Shea | Group Chief Executive
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For consumers, we believe that the standing
charge for gas and electricity where people
pay a fixed fee to cover things like network
costs (roughly £300 each year) should be
eliminated. Those costs should be recovered
through the unit rate for gas and electricity so
that those who consume less pay less and
those who consume more pay more. We also
believe a social tariff should be introduced
where those who are the most vulnerable pay
less for energy. We believe that this, along
with all policy costs, should be funded from
general taxation but that is not something
which has universal support.
For energy companies, we believe that they
should be made to hold sufficient capital to
ensure that if more companies go bust, their
shareholders pick up the costs rather than the
unacceptable situation in recent years where
the costs were picked up by consumers. We
have seen some progress on this, with Ofgem
requiring energy companies to hold £115 of
capital for each customer by March 2025.
This is welcome but it is our view that this
does not go far enough, nor fast enough. We
believe that all companies should be required
to hold in the region of three times this
amount and that they should not be able
to take on additional customers until they
can demonstrate they are financially sound.
As of now, a number of energy companies
effectively have a free bet, using customer
deposits to fund their businesses. If their bet
comes good, their owners get all of the
rewards; and if it doesn’t, consumers bear all
of the cost. This cannot be right, and we urge
Ofgem to be more focused on establishing a
fairer market for consumers and to ensure
energy companies who are not yet financially
resilient enough are forced to meet proper
capital adequacy requirements.
2023 PROGRESS AND PERFORMANCE
We can support customers and credibly make
the case for market reform only because we
are a very resilient company. That resilience
comes from our uniquely integrated business
model and strong balance sheet.
We have a well-balanced portfolio with
market-leading positions across the entire
energy value chain. In our Retail business we
are the largest supplier of energy to residential
customers in the UK through British Gas
Energy and the second largest in Ireland
through Bord Gáis Energy, and we have a
strong and growing B2B energy supply
position. Our Infrastructure business brings
electricity and gas to the market every single
day. Then at the heart of these energy flows
sits the Optimisation business, the glue that
binds our group together.
As I look at our portfolio, I see a number of high
performing businesses. But the real value-add
that makes us unique at Centrica comes at the
portfolio level as we integrate our businesses
with each other. I believe this model means we
are well-positioned to adapt to any future
changes in the energy landscape.