Areva - Reference Document 2016

20

20.2 Notes to the consolidated financial statements for the year ended December 31, 2016 FINANCIAL INFORMATION CONCERNING ASSETS, FINANCIAL POSITION AND FINANCIAL PERFORMANCE

Principles for valuing costs for dismantling and for waste retrieval and packaging The valuation of facility dismantling costs is based onmethods that provide the best estimate of costs and schedules for design studies and operations: p for facilities in operation, this involves an upstream valuation based on a technical and economic model produced mainly with the ETE EVAL application used for the different types of facilities to be dismantled. It is based on an inventory of equipment and the latter’s estimated radiological condition, and on models with unit cost scenarios and ratios. These valuations are updated at least once every three years and when there is a change in applicable regulations or substantial technological developments may be expected. The valuation of the future dismantling of the UP2-800 / UP3 plant at la Hague was thus updated in 2016; p for facilities that are shut down and starting from the kick-off of the dismantling project, a series of studies and the condition of the facility are used to establish a cost, supplemented by a risk analysis. The estimated are updated every year; p the costs are revised to take inflation into account and to reflect economic conditions for the year. They are then allocated by year, adjusted for inflation and discounted to present value, as explained in note 1.3.17. A provision is then recognized based on the present value. The discounting reversal is recognized in “Net financial expense”. ASSUMPTIONS In general, provisions related to nuclear facility dismantling and waste retrieval and packaging are based on the following assumptions: p some waste from fuel treatment operations performed under older contracts could not be processed on site, as packaging facilities were not yet in service at that time. This waste will be retrieved and packaged following a scenario and using technical methods approved by the regulatory authority; p an inventory of costs to bring the site to the target decommissioning level will be established, with buildings generally decontaminated where they stand except for special circumstances, and with all nuclear waste areas decommissioned to conventional waste status. The final condition (buildings and soils) of the facilities to be dismantled serves as a base assumption for the dismantling scenario and cost estimates. For each facility, a dismantling plan is systematically prepared, either during the initial license application or during the safety review. Soil cleanup expenses, if applicable, are determined with the objective of returning the facility to a final state of decontamination consistent with current regulations. Naturally, this assumption reflects the future use intended by AREVA for the industrial site in question, beyond the timeframe planned for dismantling operations; p operations would start without any waiting period for radioactive decay after final shutdown of production; p expenses are valued based on anticipated costs, including subcontracting, personnel costs, radiation protection, consumables, equipment and the treatment of the resulting waste. The valuation also includes a share of technical support costs of the entities in charge of the dismantling operations and of the related sites, as well as taxes and insurance; p costs to ship radioactive waste and dispose of it at Andra facilities are estimated and include the valuation of waste processing and disposal methods that do not currently exist, such as:

○ estimates of future expenses for deep disposal of long-lived medium- and high-level waste, ○ the scope and terms for Andra’s future acceptance of waste at its long-lived low-level disposal site and deep geological repository (CIGEO). UNCERTAINTIES AND OPPORTUNITIES In addition to the caution of the above assumptions and in view of the duration of the end-of-lifecycle commitments, the uncertainties and opportunities cited as examples below are taken into account when they occur: Uncertainties: ○ revision of scenarios of certain waste retrieval and packaging projects at la Hague during the qualification of waste retrieval processes; ○ differences between the expected initial conditions of the legacy facilities and the actual initial conditions (presence of asbestos, for example); ○ uncertainties related to changes in the nuclear safety authority’s requirements (e.g. for final conditions and soil treatment) and to changes in generally applicable regulations; Opportunities: ○ gains generated by the learning curve and industrial standardization of operating procedures; ○ in-depth investigations on the condition of the facilities using new technologies in order to reduce the uncertainty related to initial facility conditions. CONSIDERATION OF IDENTIFIED RISKS AND UNFORESEEN EVENTS The technical cost of end-of-lifecycle operations is backed up by consideration of: p a prudent reference scenario that takes operating experience into account; p a margin for risks identified through risk analyses conducted in accordance with the AREVA standard and updated regularly as the projects advance; p a margin for unforeseen events designed to cover unidentified risks. DISCOUNT RATE The inflation rate is set in accordance with the long-term inflation projections for the Eurozone and taking into account the European Central Bank’s target rate. The discount rate is set: p pursuant to IAS 37, i.e. based on market conditions at year-end closing and the specific characteristics of the liability; and p to comply with the regulatory cap defined by the decree of February 23, 2007 and the order of March 23, 2015 amending the order of March 21, 2007. The rate thus results from implementation of the following approach: p an initial estimate is made based on the moving average yield of 30-year French OATs over a 10-year period, plus a spread applicable to prime corporate borrowers; p a rate curve is then constructed based on the rate curve of the French State (OAT rates) at the closing date, extended for non-liquid maturities using a long-term break-even rate, plus a spread applicable to prime corporate borrowers and a liquidity risk premium. Based on expected disbursements, a single equivalent rate is deducted from the rate curve constructed in this manner. For example, the discount rate is revised based on changes in national economic conditions, with a lasting medium- and long-term impact, in addition to the potential effects of regulatory caps. For facilities in France, AREVA adopted an inflation rate of 1.65%and a discount rate of 4.10%at December 31, 2016 (down 0.40%compared with December 31, 2015). p p

217

2016 AREVA REFERENCE DOCUMENT