387 Life Is On | Schneider Electric www.se.com Financial Statements 5. Chapter 5 – Consolidated financial statements at December 31, 2021 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. The Group did not use any derivative instrument to hedge its exposure to interest rates during the fiscal year 2021. (in millions of euros) Dec. 31, 2021 Dec. 31, 2020 Fixed Rates Floating rates Total Fixed Rates Floating rates Total Total current and non-current financial liabilities 8,234 1,515 9,749 8,773 1,683 10,456 Cash and cash equivalent – (2,622) (2,622) – (6,895) (6,895) NET DEBT BEFORE HEDGING 8,234 (1,107 ) 7,127 8,773 (5,212) 3,561 Impact of Hedges – – – – – – NET DEBT AFTER HEDGING 8,234 (1,107 ) 7,127 8,773 (5,212) 3,561 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, 2021 Dec. 31, 2020 Carrying amount 7 23 Nominal amount (400) (249) 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. (in millions of euros) Dec. 31, 2021 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 48 – 48 17 31 Financial liabilities 104 – 104 17 87 (in millions of euros) Dec. 31, 2020 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 107 – 107 15 92 Financial liabilities 19 – 19 15 4 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.