EDF / 2018 Reference document

RISK FACTORS AND CONTROL FRAMEWORK Risks to which the Group is exposed

Description 2E: The Group is exposed to an increase in the risk of malicious attacks, particularly on its information system. The facilities or assets operated by the Group or its employees may be the target of external attacks or malicious acts of any kind. An attack or malicious act committed on these facilities could have consequences such as injury to persons and damage to property, the Group being held liable on the grounds of measures judged to be inadequate and interruptions to operations. In addition, the Group cannot guarantee that laws and regulations regarding the protection of sensitive sites and critical infrastructure will not become more restrictive, which could generate additional investments or costs for the Group. The Group operates multiple, interconnected and highly complex information systems (databases, servers, networks, applications, etc.) that are essential to the conduct of its commercial and industrial activity, the preservation of its human, industrial and commercial assets, and the protection of personal data (of customers and employees alike), the control of its industrial processes, particularly hydropower and nuclear, which must adapt to a rapidly changing context (digital transition, development of teleworking, new ways to share work in extended companies with suppliers, changes in regulations, etc.). The frequency and sophistication of information system hacking and data corruption incidents are increasing worldwide. A malicious attack may have a negative impact on the Group's operational activity, its financial, legal or property position or its reputation. Description 2F: Repeated customer power supply interruptions, or a black out, or a widespread power grid incident, in a territory served by the Group could have consequences for the Group's activities, financial position and reputation, particularly if they were partly attributable to the Group. The Group may be faced with repeated power outages or even a black-out, a widespread network incident of considerable scale, or be involved in it, even if the triggering incident occurred on a network not operated by EDF or was attributable to another player. The causes of power outages can be diverse: local or regional imbalance between electricity generation and consumption, accidental power supply or transmission failure, cascade failures, interconnection problems, delays in investment and the necessary network conversions to meet the needs of energy and ecological transition, difficulty in coordinating players, particularly in a market with insufficient or evolving regulation. The initial impact of such power failures could be repair costs incurred to re-establish power or restore the network. Power failures may also generate capital expenditures if it were decided, for example, to install additional generation or network capacity. This could also cause a decline in the Group’s turnover. Finally, they could have a negative impact on the Group's financial position or reputation with its customers and all its stakeholders, particularly if the power outage were to be partly attributable to it. Description 2G: Any major event or crisis of unpredictable scale, whether involving the Group or outside the Group, could have a significant negative impact on the Group's financial position. As was the case with storms Klaus (2009) and Xynthia (2010) in France, and Irma (2017) in the Antilles, natural disasters (floods, landslides, earthquakes, etc.), other significant weather changes (droughts, etc.), or any other event on a scale that is difficult to predict (large-scale epidemics, a major industrial accident in the world, etc.) may affect the Group’s activities. The national and international feedback from each of these types of events may lead to provisions to strengthen the robustness of the Group's facilities, particularly industrial facilities, and to limit the impact and consequences of such major events. In the event of an exceptional incident, the measures adopted may generate costs beyond those of repairing the damage caused by the disaster and the loss of earnings from the interruption of the supply and services provided by the Group.

Energy market risks are managed in accordance with the “Energy market risks” policy adopted by the Group (see section 2.2.2.2.1 “Control of energy market risks”). The Group hedges its positions on these markets through derivatives, such as futures, forwards, swaps and options traded on organised markets or over the counter. However, the Group cannot guarantee that it is totally protected, in particular against liquidity risks and significant price fluctuations, which could have an adverse impact on its financial position and the valuation of its assets (see note 40 “Management of market and counterparty risks” in the notes to the consolidated financial statements for the year ended 31 December 2018). In addition, the context of wholesale energy market prices in Europe may impact the profitability of certain generating tools, particularly those that are potentially useful for food security, and this applies to all European producers. Capacity markets are currently being set up in several European countries, but with different approaches. In addition, the judgement handed down by the European Court of Justice on 15 November 2018 suspending the capacity market in place in Great Britain, poses a risk to its sustainability and the corresponding revenues for EDF Energy. The Group's exposure to these various evolving capacity markets may affect its financial position. Description 2C: The societal, technological and economic context may not be favourable to the Group's low-carbon solutions for the transition to address climate change challenges. The Group has made a commitment to significantly reduce its carbon dioxide emissions released directly into the atmosphere, with a target of 30 million tonnes in 2030 instead of 51 million tonnes in 2017. The achievement of this objective, which contributes directly to corporate responsibility goal no. 1 with regard to climate commitment (see CSRG 1 section 3), is primarily determined by the continued societal acceptance of nuclear energy, the successful closure or conversion of fossil fuel-fired power plants and the accelerated development of renewable means of generation in addition to nuclear and hydropower generation. The Group has been particularly active in the development of solar energy in France, electric storage and low-carbon electric mobility, which will make it possible to develop and promote the Group's low-carbon energy solutions, particularly for the transport sector, which still emits a very high level of carbon dioxide in France and Europe. The external, societal, competitive, social, economic or industrial context could constitute a barrier to these developments. New low-carbon energy solutions can lead to new societal questions (new intrusive technologies, land tenure, new usage conflicts in the use of scarce resources, etc.). Nuclear energy may not be recognised at the societal level as a key factor in enabling the low-carbon transition. The Group may encounter difficulties in achieving these transformations and may not achieve the desired objectives. It may also have to deal with the emergence of new technologies or disruptive solutions in response to the need for transition. These situations are likely to directly or indirectly affect the Group's business volumes, margins, the value of its assets, its financial position, its reputation or its outlook, and the achievement of the first corporate responsibility goal and compliance with its climate commitment (see section 3.2.1.1 "EDF group's ambition (CSRG no. 1)"). The time-frame of this risk factor is short/medium term. Description 2D: The Group is exposed to physical effects of climate change that could have consequences on its own industrial and tertiary facilities and more generally on the Group's financial position. The Group's industrial and tertiary facilities may not be designed to cope with extreme weather events caused by climate change in the context of their expected operating life, notably despite periodic reviews of nuclear and hydropower facilities. The EDF group's industrial, logistics and tertiary activities are likely to be significantly affected by the possible physical effects of climate change. These effects are difficult to predict and could have an adverse effect on the continued operation of the Group's activities, its operating results, cash flows and overall operating performance. New legislative or regulatory developments caused by climate change may also have a negative impact on EDF's activities. Such situations may jeopardise the Group's commitment to meeting the challenges of climate change as expressed in its Sustainable Development Policy and may have

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consequences on its financial position and reputation. The time-frame of this risk factor is medium/long term.

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I Reference Document 2018