EDF / 2018 Reference document

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

alongside its Chinese partner CGN with 33.5% (see sections 1.4.1.2.2 "Other "New Nuclear projects""and section 1.4.5.1.2.4 "United Kingdom - Nuclear New Build Business"). The project's completion costs were estimated in July 2017 at £19.6 billion 2015 (2) . This estimate depends on the success of operational action plans, particularly those in partnership with the suppliers. In addition, the risk of a postponement of commercial commissioning is estimated at 15 months for unit 1 and nine months for unit 2. The additional cost of this potential deferral has been estimated at approximately £0.7 billion 2015 . The IRR for the project is sensitive to exchange rates and could be reduced if the pound sterling continues to drop in relation to the euro. Furthermore, the conditions for carrying out the project may be affected by the terms and conditions for deploying Brexit (see risk 2H described above), in particular on customs duties, the movement of persons and trade in products and services. Finally, the governance of the project could be affected in the event of misalignment between shareholders. Changes to these different factors could have an impact on the Group's financial position. EDF has also signed two other agreements with CGN relating to studies on two nuclear construction projects in the United Kingdom: Sizewell C and Bradwell B (see section 1.4.5.1.2.4 "United Kingdom - Nuclear New Build Business"). EDF's ability to make a final investment decision on Sizewell C and to finance this project beyond the development phase could depend on the control of the Hinkley Point C project, the existence of investors and financors and an appropriate regulatory and financing framework. On 10 March 2018, the Chairman and Chief Executive Officer of EDF and the Chairman and Chief Executive Officer of NPCIL (Nuclear Power Corporation of India Limited), which already operates 22 reactors in India, signed an Industrial Way Forward Agreement for the construction of six EPR-type reactors at the Jaitapur site in India. Jaitapur is set to be the biggest nuclear project in the world, with a total power capacity of around 10GW. EDF submitted a non-binding offer on 14 December 2018. As part of this offer, EDF, in association with GE and its subsidiary Framatome, will be the engineering contractor for the entire project and supplier of the EPR technology. EDF will undertake all engineering studies and all component procurement activities for the first two reactors. (See section 1.4.1.1.2.2 "Other New Nuclear projects - projects under development" and section 1.4.5.3.6.2 "South-East and South Asia"). A fundamental element for the success of an EPR project and for the operating safety of EPR reactors in which the Group is involved is accounting for the needs of the final operator, who is responsible for operating safety, from the beginning of the design phase and throughout the design and implementation of the EPR project. Framatome is now a Group subsidiary and as such can expose the Group through its activities for other nuclear operators or customers in France and abroad. Exposure may be financial or involve the Group's reputation. Framatome's industrial performance remains strategic for EDF Nuclear Operator in France and the United Kingdom. The successful completion of an EPR project depends on quality and compliance with contractual clauses in Framatome's production of studies, components or services for each EPR Project. The success and value creation resulting from Framatome's integration into the EDF Group implies a converging framework for nuclear projects, and the development of resulting synergies. Failure to achieve these objectives could jeopardise the competitiveness of the nuclear sector in France and that of the Group in its international development, and the success of all EPR Projects. These projects require obtaining administrative authorisations, licences, permits and, in certain cases, setting up additional partnerships, particularly for financing. These are large-scale and long-duration projects involving numerous industrial partners and significant investments, for which the financing and pricing conditions may still be subject to confirmation. Given the economic or institutional climate, obtaining such funding may be delayed.

Liabilities Fund. If the assets of this Fund prove insufficient, these costs will be borne by the UK Government (see section 1.4.5.1.2.1 “Nuclear Generation”). For nuclear power plants which EDF does not operate, but has financial interests in (China, United States, Belgium, Switzerland), the Group is exposed financially in proportion to its contribution to future decommissioning costs. Failure to control the costs, the time-frame for completion and the associated provisions with respect to the decommissioning of nuclear facilities for which the Group is liable would have a negative impact on the Group's financial position and reputation. Description 5D: in addition to the risk of controlling complex projects (risk factor 4A described above), the success of EPR projects depends on specific industrial, regulatory and financial factors. The success of EPR projects determines the performance and reputation of the nuclear industrial sector, and through it, those of the Group. The Flamanville 3 project is a major industrial, regulatory and financial challenge for the Group. On-time completion remains conditional, notably on the implementation of the action plan for the 53 welding operations to be carried out on the pipes of the main secondary circuit of the Flamanville EPR, on the success of the start-up tests still to be carried out, as well as on obtaining the various permits that have yet to be issued by the ASN. Within this framework, EDF has requested the amendment of the construction authorisation decree, as a precautionary measure, with the Ministry of Ecological and Solidarity Transition on 11 March 2019 with a view to extend the deadline for commissioning the reactor until 11 April 2023. The Group might have to cope with new uncertainties. It might not obtain the expected permits or they might be compromised by judicial decisions. Furthermore, EDF has proposed a specific process to the ASN justifying ten further welding operations to ensure the high level of safety of the facility throughout its operational lifespan. This number was reduced to eight as two of the welding operations initially concerned have since been found to be compliant. The ASN is expected to issue an opinion on EDF's strategy for the Flamanville 3 welding operations in May 2019. If the ASN's assessment of this strategy is negative, the completion schedule for delivering the work-site would not be met. Any delay in this schedule would result in an increase in the cost of construction beyond the current target (1) . Despite the mobilisation of the teams, the completion schedule remains tight (see section 1.4.1.2.1 "Flamanville 3 EPR Project"). Studies of the EPR 2 Project are continuing in order to establish a competitive reactor for the renewal of the existing nuclear fleet. Failure to meet the competitiveness target, the absence of an appropriate regulatory framework or the failure to obtain the necessary permits to continue the reactor's development could have an impact on the Group's financial position (see section 1.4.1.2 "New Nuclear projects" "EPR 2"). In China, the Group has a 30% stake in TNPJVC (Taishan Nuclear Power Joint Venture Company Limited) alongside its Chinese partner CGN. Taishan 1 was the first EPR reactor to be coupled to the grid on 29 June 2018. It was commissioned on 13 December 2018. The Taishan 2 reactor is continuing its start-up tests with a view to commissioning in 2019. CGN's work with the competent Chinese authorities to obtain a buyback tariff may fail to result in a buyback tariff that meets the expected profitability objectives (see sections 1.4.1.2.2 "Other "New Nuclear projects" - Taishan EPR" and 1.4.5.3.6.1 "Activities in China"). In the United Kingdom, control of the design and bringing the manufacturing and the major milestones of the construction site under control will determine the profitability of the Hinkley C project and the financing of any future projects in the United Kingdom. The Group has a 66.5% stake in the Hinkley Point C Project,

€10.9 billion in 2015, excluding interim interest. (1) Excluding interim interest and excluding exchange-rate effects in relation to a reference exchange rate for the project of £1 = €1.23. At 31 December 2018, the exchange rate (2) was €1.12=£1

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EDF I Reference Document 2018