EDF / 2018 Reference document

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PRESENTATION OF EDF GROUP Legislative and regulatory environment

of combining concession contracts that form a “series of facilities that are ■ hydraulically linked”, by setting a new deadline for all the concession contracts concerned (Articles L. 521-16-1 and L. 521-16-2 of the French Energy Code); of creating semi-public hydroelectric companies (SEM) made up of private-sector ■ operators and a public Division (State, local authorities, etc.), each of which holds at least 34% of the shares (Articles L. 521-18 et seq. of the French Energy Code); of extending certain concession contracts in return for investments by operators ■ where these investments are necessary in order to reach national energy policy targets (Article L. 521-16-3 of the French Energy Code). The purpose of the Decree of 27 April 2016 on hydropower concession contracts is to implement the provisions of the aforementioned Law of 17 August 2015 and to modernise the regulatory framework for hydropower concession contracts (in particular by clarifying certain aspects of the procedure for awarding hydropower concession contracts by approving a new model for general terms and conditions). A collection of texts complete this framework and concern the execution of the hydropower energy concession agreement: one can quote, in particular, Order no. 2016-518 of 28 April 2016 making various modifications to Book V of the French Energy Code, which aims to strengthen the administrative control of hydroelectric installations and to clarify certain rules with regards to the renewal of their operating rights, the Decree of 27 May 2016 relating to the purchase obligation and additional remuneration, which may concern certain hydroelectric facilities, the Orders of 3 August 2016 relating to the environmental assessment of public information and participation projects and procedures, or the Law of 7 October 2016 for a digital republic. Annual concession fee In accordance with Article L. 523-2 of the French Energy Code, when a hydropower concession contract is renewed or extended under the conditions provided for by Articles L. 521-16-2 or L. 521-16-3 of the French Energy Code, an annual concession fee that is proportional to the revenues generated by the concession contract is levied, which is paid in part to the French State and in part to the French départements and municipalities through which the waterways used flow. A limit is set by the contracting authority on a case-by-case basis for each new or renewed concession contract. Article 69 of Law no. 2015-1785 of 29 December 2015 (the Budget Act for 2016) expressly confirmed that this type of concession fee excludes the application of the concession fees provided for by Article L. 523-1 of said Code, which apply to concession contracts that were renewed before 2006. Moreover, Law no. 2018-1317 of 28 December 2018 (the Budget Act for 2019) levies a fee on any “rolling delay” concession extended in accordance with Article L. 521-16 of the French Energy Code, starting on 1 January 2019. The amount of this concession fee will be set by decree by the Council of State in view of the nature of the concession. Safety and security of facilities Articles R. 214-112 et seq. of the French Environment Code contains provisions that are applicable to the safety and security of hydropower facilities that are authorised and operated under concession contracts. Dams are divided into three classes (A, B and C) according to their characteristics, in particular their height and the volume of the floodwaters. According to this classification and the legal rules applicable to the facility, the regulations require the operator or concession contract holder to fulfil a certain number of obligations in order to guarantee the safety and security thereof (in particular by carrying out and updating hazard studies – see section 1.4.1.5.1.2 “Hydropower safety”). The aforementioned Decree of 27 April 2016 on hydropower energy concession contracts contains provisions that are designed to unify the regulations, regardless of the legal rules that are applicable to the facility. The decree of 6 August 2018 setting the technical requirements for dam safety applicable to facilities approved for construction and to those in operation lays down basic safety requirements applicable to dams. The provisions will gradually come into force for existing dams between 31 December 2025 and 31 December 2035 depending on the type of dam.

Exemptions from obligations concerning emissions into the air were possible until 31 December 2015. As of that time, the ceilings and the exemptions originating from the IED Directive mentioned above will apply, with, in particular, specific issues concerning production facilities in the overseas departments and emergency systems, for which the pollution levels require negotiating adapted provisions. Fossil fuel-fired energy production is also subject to the provisions of the Seveso 3 Directive and to the obligation to lodge financial guarantees (see section 1.5.6.2.1 “Regulations applicable to facilities classified for the protection of the environment (ICPEs)”). Directive no. 2015/2193/EU of 25 November 2015 on the limitation of emissions of certain pollutants into the air from medium combustion plants that was to be transposed into French law by 19 December 2017 was transposed by Decree no. 2018-704 of 3 August 2018 amending the classification of categorised facilities and some provisions of the French Environment Code . The Directive lays down rules designed to limit the air pollution caused by sulphur dioxide (SO 2 ), nitrogen oxides (NO x ) and dust from medium combustion plants, and to reduce the airborne emissions and their potential risks for human and environmental health. The facilities concerned are combustion plants with a rated thermal input of 1MW or more and less than 50MW, regardless of the type of fuel they use. Five orders amending the regulations applicable to combustion facilities falling under environmental protection regulations governing categorised facilities in order to transpose Directive 2015/2193/EU were adopted on 3 August 2018. Regulations applicable to hydropower 1.5.6.2.4 facilities In France, hydropower facilities are subject to the provisions contained in Articles L. 511-1 et seq. of the French Energy Code. They require concession agreements granted by the State (for facilities generating over 4.5MW), or an authorisation from the Prefecture (for facilities under 4.5MW), (see section 1.4.1.5.1.4 “Hydropower generation issues”) concerning hydropower concessions. EDF’s hydropower generation business is subject to the substantive provisions of water regulations. Such regulations cover in particular control over variations in water levels and flow rates, the safety of areas in the vicinity and downstream of hydropower facilities and, in general, maintaining balanced management of water resources (see section 1.5.6.1 “General regulations that are applicable to the environment, health, hygiene and safety”). Competitive tendering for hydropower concession Contracts Until 1 April 2016, the competitive tendering procedure for hydropower concession contracts was still governed by Decree no. 94–894 of 13 October 1994, which has now been incorporated into Book V of the regulatory section of the French Energy Code (see Decree no. 2015-1823 of 30 December 2015 on the organisation of the regulatory section of the French Energy Code). This Decree, as amended by Decree no. 2008-1009 of 26 September 2008, places concessions within the legal framework for public service delegation contracts defined by Law no. 93–122 of 29 January 1993, known as the “Sapin Law”, it being specified that the former preferential right of the outgoing operator was eliminated by the Water Act (Law no. 2006-1772 of 30 December 2006) as it was incompatible with European law. For all procedures initiated as from 1 April 2016, the award of hydropower concession contracts is now governed by Order no. 2016-65 of 29 January 2016 and by its Application Decree no. 2016-86 of 1 February 2016 on concession contracts. This legislation has repealed the aforementioned provisions of the Sapin law, in order to modernise them and align them with European law (Directive no. 2014/23/EU of 26 February 2014 on the award of concession contracts). The Law of 17 August 2015 on Energy Transition for Green Growth has completed the legal framework for hydropower concession contracts by giving the State the possibility:

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EDF I Reference Document 2018