(Bloomberg) -- French power-equipment maker Schneider Electric SE leapfrogged the country’s largest oil and gas producer TotalEnergies SE in market capitalization, a sign of the accelerating shift from fossil fuels toward electrification.
Schneider’s shares have risen 35% this year, boosting its market capitalization to about €142 billion ($158 billion) in Paris and making it the fourth-largest company company on France’s CAC40 stock index. The value of the maker of everything from switchgears to software that manages grids and factories is now only surpassed in France by luxury fashion groups and cosmetics giants LVMH Moët Hennessy Louis Vuitton SE, Hermes International SCA, and L’Oreal SA.
Over the same period, TotalEnergies’s value has slipped 5% to about €140 billion, reflecting lower global energy prices amid doubts about the strength of demand.
“It’s the energy of the future versus the energy of the past,” said Gilles Guibout, head of European equities at Axa Investment Managers in Paris. “We’re electrifying the world and Schneider is at the heart of that structural trend.”
The rise of Schneider is a reminder that the fight against climate change and the boom in artificial intelligence requires massive investments in renewables, more sophisticated power grids, and data centers.
Governments in Europe, the US and China are helping manufacturers, businesses and households reduce their emissions with cleaner heating systems, electrical processes that replace fossil fuels, and electric vehicles. That’s boosting demand for transformers, inverters, sensors, meters, software and systems — all of which are manufactured by Schneider and its peers.
The company, which two decades ago focused mostly on circuit breakers, switches and fuses, reported a record net income of €4 billion last year and a 38% jump in free cash flow to €4.6 billion. It proposed an increased dividend for a 14th consecutive year. The company expects revenue to grow at a annual rate of 7% to 10% through 2027.
In comparison, TotalEnergies’s net income amounted to $21.4 billion last year, and it spent 46% of its cash flow from operations to pay $7.5 billion in dividends and buy back $9 billion of its shares.
Total also intends to play a major role in the transition to clean energy, making renewables its second growth pillar alongside oil and gas. It’s reducing the sale of petroleum products and directing €5 billion a year — about a third of its annual investments — into clean power and sustainable fuels.
Still, its earnings remain largely tied to the extraction, shipping, processing and distribution of crude oil and natural gas. Its hefty cash flows, which have been supporting dividend growth and share buybacks, may come under pressure as oil prices weaken, something that has been reflected in its share price.
European regulations have also pushed the region’s asset managers to reduce their exposure to oil and gas stocks. That prompted TotalEnergies Chief Executive Officer Patrick Pouyanne to consider listing the company’s shares in the US, where investors have a greater appetite for Big Oil.
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