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Schneider Electric might not be a household name, but it will continue to benefit from demand for electricity

A solar roof, a backup battery pack in the garage, an electric vehicle or two in the driveway, heat pumps managing temperature, and multiple devices running cloud-based artificial-intelligence queries. That’s the future—and it’s a future that means more business for Schneider Electric.

A solar roof, a backup battery pack in the garage, an electric vehicle or two in the driveway, heat pumps managing temperature, and multiple devices running cloud-based artificial-intelligence queries. That’s the future—and it’s a future that means more business for Schneider Electric.

Schneider might not be a household name in the U.S., but there’s a good chance an investor has one of its “Square D” breaker boxes in their basement. Its business is much more than fuses and electrical outlets, though. Its 168,000-strong global workforce makes hardware and software enabling the electrification of just about everything.

U.S. investors can think of it as a combination of parts of Eaton and Honeywell International. It doesn’t take a back seat to either, though. Schneider’s market value, at almost $150 billion, tops both of those peers. Sales in 2024 are expected to come in at about $41 billion, up about 5% from the previous year, driven, in part, by insatiable electricity demand from power-hungry AI data centers. If all goes well, the stock can gain 25% in the coming year.

Schneider is in “the top-tier of global industrials offering a straightforwardly attractive investment case based on being the simplest, easiest, and most reliable way to play electrification,” writes J.P. Morgan analyst Andrew Wilson. “A simple play that ticks all the right boxes.”

Ticking all the right boxes doesn’t come cheap. The stock has gained about 75% over the past 12 months and trades for about 26 times estimated 2025 earnings per share, a premium to the market’s 21 price/earnings multiple. At first glance, the valuation looks like a risk, but Schneider’s valuation isn’t out of line with other high-quality U.S. industrial stocks. Many industrials in the S&P 500

index, including Trane Technologies and Amphenol, trade for north of 30 times estimated 2025 earnings. Eaton trades for almost 29 times. The valuation shouldn’t be a problem as long as earnings continue to grow.

CEO Peter Herweck expects that to be the case. “From the mini to the micro to the large grids to the equipment that goes into digitization…that’s at the center of what Schneider does,” he tells Barron’s. “Our market is going to grow at 6% to 7% [annually] in the next four years. That’s unprecedented.”

Wall Street sees earnings growing at about 13% a year on average for the coming two years, better than the 10% expected annual growth from the average industrial stock in the S&P 500. Herweck, however, wants to try to do better than that. He’s targeting top-line growth of 7% to 10%, which should, in turn, drive faster earnings growth.

Some of that growth will come from mergers and acquisitions. In early October, the company acquired a controlling stake in liquid cooling company Motivair. Today’s data centers can require advanced thermal management that goes far beyond fans blowing cool air over servers. The deal gives Schneider a leading cooling position in Europe, while demand for liquid cooling tech is expected to grow at 40% a year on average for the coming few years.

Schneider is paying about $850 million—a mid-single-digit multiple of Motivair’s sales. That shouldn’t stress Schneider’s balance sheet. The company is expected to generate about $4.4 billion of free cash flow in 2024. Its debt to estimated 2025 earnings before interest, taxes, depreciation, and amortization is about 1.2 times.

Among AI-related industrial stocks, Schneider is at the “top of the pack,” says Neuberger Berman portfolio manager Evelyn Chow. Its products not only help “power AI but are well represented within the four walls of the data center.”

Beyond AI, Schneider benefits from sustainability, a topic that doesn’t get talked about much anymore but is still a big opportunity. Companies building and operating AI data centers are eager to show that the electricity they consume isn’t producing excess carbon dioxide and heating up the planet. Amazon.com and Microsoft have both signed deals with power producers to procure nuclear-based electricity generating capacity this year.

For Herweck, capturing sustainability business doesn’t necessarily mean bolt-on M&A, but it does mean moving fast. Schneider organizes renewable purchase power agreements for smaller organizations looking to reduce their carbon footprint. It also started a business to transfer tax credits generated by renewable power projects, which effectively increases the capital available to build such projects. These relatively smaller initiatives serve Schneider’s existing businesses, which help companies cut carbon emissions and power usage.

Schneider-specific “digital technologies that are available today can achieve up to 84% carbon reduction emissions in an existing commercial building,” says Mike Kazmierczak, Schneider’s vice president of digital energy.

J.P. Morgan’s Wilson rates shares the equivalent of Buy and has a 270-euro ($291) price target for the stock—or just over $58 per U.S.-listed American depositary receipt—up about 13% from recent levels. Each ADR (ticker: SBGSY) represents one-fifth of a Schneider share, which trades under the symbol SU in France.

His target values Schneider stock at about 26 times consensus estimated 2026 earnings per share of about $11.40. With some benefit from M&A, Schneider’s EPS should approach $12 in 2026. At an Eaton-like multiple, that’s a $340 share price, up about 30% from recent levels.

Even if valuation multiples don’t expand, things should turn out just fine for Schneider. All of the trends in the markets it serves are friends.

Perplexity, the AI-powered search engine startup that is reportedly raising a new round at a valuation of at least $8 billion, was a hot acquisition target last year, The Information reported Friday. X, Notion, and OpenAI all approached Perplexity with acquisition offers of between $150 million and $200 million, while Microsoft also expressed interest.

Last year’s feeding frenzy showed that tech giants were bargain shopping, as Perplexity was valued at $150 million after a funding round in March that year. The suitors had reason to think Perplexity might look to exit, given the high computing costs associated with running the search engine. Neeva, a highly-touted AI search startup that failed to gain many subscribers, was acquired by Snowflake in May last year for around $180 million.

US firm faced government reluctance over private equity involvement in German naval vessel maker

US investor Carlyle pulled out of bidding for Thyssenkrupp’s naval unit after facing indecision and scepticism in Berlin about the involvement of the private equity group in a critical German defence player.

After more than 18 months of discussions, the Washington DC-based firm had hoped to finally secure a decision on its offer to buy a majority stake in Thyssenkrupp Marine Systems (TKMS) at a meeting with German ministers on October 8, according to people familiar with the negotiations.

The German government last year signalled that it was prepared to back a sale of the maker of submarines, frigates and naval electronic systems by taking a supporting stake.

But Carlyle’s lead negotiators were instead met by further indecision, according to two people briefed on the discussions. The economy ministry led by Green vice-chancellor Robert Habeck wanted more time to explore the option of creating an all-German naval giant at a time when Europe was striving to revitalise its defence industry.

One area of contention between the two sides was the timeline of ownership. The German government wanted the private equity group to commit to holding the company for around 10 years, rather than Carlyle’s preferred 3-5 year window before making an exit, according to two people familiar with the talks.

On Tuesday, the buyout group announced it was quitting the process. With due diligence expected to take months, Carlyle concluded it had run out of road to finalise the deal before the start of campaigning for Germany’s elections next year, at which point the chances of a tie-up were deemed minimal, one of the people added.

Thyssenkrupp was once a symbol of German industrial might, but its struggles to remain competitive over the past few years have become emblematic of the woes looming over Europe’s largest economy. The loss of a serious bidder delivers yet another blow to its long-running plans to split up the company and divest its naval and steel businesses.

The collapse of the talks reflects the deep resistance among some in German business and politics towards the private equity sector. While the nation has seen growing PE investment in recent years, health minister Karl Lauterbach in 2022 lashed out against “locust investors” buying up medical practices. Last year, the country’s top football clubs voted against selling a stake in the Bundesliga’s media and commercial rights to private equity firms. 

The need for a new solution at Thyssenkrupp presents a fresh challenge for chief executive Miguel Lopez, who joined the Essen-based company last year after his predecessor Martina Merz was pushed out by the board — partially due to her failure to spin off the subsidiaries. 

The former Siemens executive has successfully sold 20 per cent of Thyssenkrupp’s steel business to Czech billionaire Daniel Křetínský, but his reputation has been tarnished by tensions surrounding the disposal. In August, the conflicts spilled out into the public when the CEO of Germany’s largest steelmaker and the chair of its supervisory board resigned in protest over Lopez’s handling of the sale process.

At TKMS, which owns Germany’s largest shipyard in the Baltic port of Kiel, chief executive Oliver Burkhard had backed the plan to bring in Carlyle as a key step in a process of consolidation. The aim was to solve the problem of a fragmented warship industry and create a powerful “national champion” capable of competing against the likes of France’s Naval Group or Italy’s Fincantieri. 

He wrote on LinkedIn on Wednesday that company executives “very much regret” Carlyle’s decision to withdraw, adding that it had not been due to “business management [or] the financial performance of our company”. 

In 2021, the shipbuilder received the biggest order in its history — worth €5.5bn for six Type 212CD submarines for the German and Norwegian navies. It has a backlog of orders with a value of close to €13bn. 

The IG Metall union also lamented Carlyle’s exit, telling the regional newspaper Westfälische Rundschau on Friday that it would have supported a majority shareholding by Carlyle provided the federal government had held a blocking minority and if the buyout firm had made binding commitments towards the company’s roughly 8,000 workers.

The union said it had been holding talks with Carlyle on that issue as well as on future investments. “A solution was within reach, but has now apparently failed due to resistance from the federal ministry of economics,” it added.

Carlyle first expressed an interest in the business in March 2023. German defence minister Boris Pistorius later confirmed that Berlin would consider taking a stake in the submarine maker, most likely through state development bank KfW. State involvement was proposed as a way to ensure liquidity at a company where orders can amount to several billion euros and take years to complete, and where customers are offered multibillion-euro guarantees.

However, Habeck’s ministry was keen to consider homegrown options. Those included Lürssen Group, a family-owned builder of civilian and military vessels that is interested in merging its naval arm with TKMS and other shipbuilders, according to the people familiar with the talks.

Rheinmetall, the German tank and artillery maker, also expressed interest in taking a stake. It has no track record in the naval sector, but has seen a surge in munition orders as western nations race to rearm and to support Ukraine’s armed forces in their battle against the Russian military.

Ministers considered a German industrial solution to be “promising”, a person familiar with the government’s thinking said. 

Faced with the prospect of further waiting, and the political uncertainty around Germany’s looming elections, Carlyle felt it had little choice but to pull out.

Following the withdrawal, Thyssenkrupp said it would push ahead with plans to make its submarine business independent, which it said would unlock more funding and growth as well as providing a “good starting position for a possible national and European consolidation”.

“We will also continue unabatedly with our talks with the German government on a federal stake in the marine segment,” the company added. 

A spokesperson for the German economy ministry said that TKMS was “of great importance for the security and defence industry” and said that talks about its future continued. 

TKMS, Carlyle, Lürssen Group and Rheinmetall declined to comment.

Thyssenkrupp’s marine unit and its chief executive are now back to square one. “At this point the ball goes back to Burkhard,” said one person involved in talks on the future of the shipbuilder. “His original plan didn’t go anywhere. So what is his plan B?”

FT : Nuclear power and coral reefs: World Bank explores expanding its remit

NUCLEAR FINANCING

Proposal to adapt World Bank’s status quo on nuclear gains traction

Tech companies aren’t the only big energy consumers flirting with nuclear power. Developing countries are showing interest too as they hunt for stable, low-cost energy to fuel industrial growth. That has made nuclear one of the most controversial topics behind closed doors this week in Washington, where the World Bank is holding its annual meetings.

The World Bank’s last loan for a nuclear power project was made in 1959. The Bank’s latest energy strategy explicitly excludes financing the energy source, citing a lack of expertise on nuclear safety, and opposition from powerful shareholders — notably Germany — has made the issue a third rail in policy discussions. But with more demand coming from emerging markets such as Indonesia and the Philippines, pressure is building for a change in stance.

Not only does the World Bank ban nuclear energy finance, it also explicitly declines to advise client countries on their nuclear strategy.

Advisers within the office of World Bank President Ajay Banga are keen to find workarounds, multiple sources familiar with discussions told Moral Money. One proposal to develop staff expertise on the issue has gained traction, and if adopted, could be a strong signal that the Bank is likely to evolve its stance on the energy source.

“The Bank keeps saying they don’t have the expertise. That’s not a valid excuse. The bank does all sorts of financing where they don’t have expertise — they bring in consultants,” said DJ Nordquist, who represented the US on the World Bank’s board of directors during the Trump administration.

Nordquist supports a proposal for a “trust fund” at the World Bank that would develop internal staff capacity to evaluate nuclear energy as part of client countries’ power mix. It could also enable the Bank to co-ordinate on the issue with agencies such as the US Development Finance Corporation.

The trust fund was proposed by Todd Moss, who led Africa strategy at the US state department from 2007 to 2008 and now runs a think-tank promoting energy to support economic growth in developing nations.

Currently, the Bank is being uncharacteristically modest on its ability to offer advice, Moss told me. “The World Bank is in every nook and cranny of Ghana’s budget and infrastructure planning. But they have nothing to say about nuclear, and they can’t advise the Ghanaians on nuclear because they’ve decided to stick their head in the sand.”

Asked about its sustained opposition, a World Bank spokesperson said in a statement: “We hear the call from some stakeholders to explore nuclear power to decarbonise energy and improve energy supply reliability. In that context, we continue to have conversations with our board, management and external stakeholders to understand the facts.”

The appeal of nuclear

Small modular reactors — more compact power plants which aren’t yet widely sold but might soon be available for order by the six-pack — look particularly attractive to lower-income countries. That’s because their energy consumption may not yet be high enough to merit the buildout of a large-scale reactor, but reliable power is needed for industrial development.

In Ghana, for example, business leaders such as Charles Mensa, previously the chief executive of one of the largest aluminium smelters in sub-Saharan Africa, have become convinced that nuclear energy, and SMRs in particular, could boost economic growth.

“The old idea about nuclear was that it was very dangerous. The word ‘nuclear’ itself scared people,” Mensa, who now runs an Accra-based think-tank, told me. “But times have changed.”

Valco, Ghana’s state-owned aluminium company, has historically consumed a chunky share of the country’s electricity — and it would like to expand. But it has become harder to access financing for fossil fuels, and Ghana’s oil production has fallen from a 2019 peak.

Mensa argued that the US and other developed countries have unfairly denied developing countries crucial energy, even as they continue to rely on them at home. For example, he pointed out, the US refused to sign a pact to end coal use at a 2021 UN climate summit in Glasgow, even as the White House urged developing countries to end their use of the hydrocarbon, and as financing for coal has become harder for Ghana to access.

Now, he said, “the developed communities are building nuclear but they tell us that we cannot. Well, we need energy for our industrial development. Otherwise, we remain poor, and go to them to beg for aid.”

The proposal has attracted interest from within the Bank and in the US Congress. Currently, Russia is the world’s leading exporter of nuclear power, both in terms of reactors planned and under construction. Russia last year completed Turkey’s first nuclear power plant, and earlier this year inaugurated a plant in Egypt. According to the centre-left think-tank Third Way, Russia has “hard” agreements with 45 countries around the world to build nuclear energy.

The Republican chair of the House Financial Services committee, Representative Patrick McHenry, has introduced legislation requiring the US Treasury to push the World Bank to lift its ban on nuclear power. That bill hasn’t passed, but a senior staffer on the committee told me they are “cautiously optimistic” that the Bank’s stance could change soon.

“Nobody wants to wake up 10, 20 years from now, with Chinese and Russian reactors dominating emerging markets, while the Americans, the South Koreans, the Japanese are shut out,” the staffer said.

Mensa, of Ghana, added that “if the World Bank keeps holding the lid on financing from the western countries, it is very likely that the Russians or Chinese will make deals” with more African countries for nuclear power.

Asked if he was concerned about objections to those countries’ involvement in African energy supply, Mensa said that “the colour of the cat doesn’t matter so long as it catches the mouse”.