EDF / 2018 Reference document

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RISK FACTORS AND CONTROL FRAMEWORK Legal proceedings and arbitration

Xélan On 17 October 2016, Xélan brought a claim before the French Competition authority (Autorité de la concurrence) alleging mainly that EDF’s refusal to share the consumption data of clients at regulated selling prices prevented Xélan from designing its own electricity supply offers based on energy consumption management. Following the filing of this claim, the Competition authority carried out on 22 and 23 November 2016 search and seizure operations at the premises of EDF and several of its affiliates. These operations do not in any way, however, prejudge the question as to whether there exists a violation that could be attributed to the EDF group. EDF and its subsidiaries filed appeals with the Court of Appeal of Versailles to challenge these search and seizure operations. By order of 12 April 2018, the President of the Versailles Court of Appeal dismissed the appeals relating to the order authorising access and seizure operations and stayed the appeal proceedings against the conduct of the operations. By order of 10 January 2019, the President of the Court of Appeal of Versailles dismissed the appeal against the conduct of the operations. CSPE ceiling investigation On 27 March 2014, the European Commission opened an in-depth investigation into the reductions on the Contribution to the Public Electricity Service (CSPE) granted to large energy consumers and self-generators based on State aid rules. As an interested third party, EDF submitted its comments on the decision to the European Commission, following its publication in the Official Journal of the European Union on 3 October 2014. By decision dated 31 July 2018, the EC considered that the exemptions from CSPE granted for self-consumption for electricity generation, of which EDF is one of the beneficiaries under its STEP, do not constitute State aid. Other CSPE capping mechanisms, on the other hand, have been qualified as State aid incompatible with the internal market, but this has no impact on EDF, which is not a beneficiary. Labour litigation EDF is a party to a number of labour lawsuits relating in particular to working time. EDF does not consider that any of these lawsuits, taken individually, is likely to have a significant impact on its financial results or its financial position. However, as these disputes relate to situations that could involve a significant number of EDF’s employees in France, if they were to multiply, they could then potentially have a significant negative impact on the Group’s financial position, even though this risk is mitigated by the signature in 2016 of the agreement on the annualised calculation of working time by days. Environmental litigation Due to its industrial activities, the Group is a party to various environmental lawsuits, in particular, regarding ground decontamination. As of the date of the filing of this Reference Document, the Group does not believe that any of these lawsuits, individually, is likely, in the event of an unfavourable outcome, to have a material negative impact on the Group’s financial position. Tax disputes For the period 2008 to 2015, EDF received proposals for adjustments related notably to the tax deductibility of certain long-term liabilities. This adjustment, reiterated each year, represented a combined corporate tax financial risk of around €563 million at the end of 2018. By two judgements in September 2017, the Administrative Court of Montreuil recognised that these liabilities were tax-deductible and validated the position adopted by the Company. For fiscal years 2012 to 2015, the tax authorities notified the Company of certain recurrent adjustments concerning the contribution on value added by companies and challenged the deductibility of certain long-term provisions.

Vent de Colère Following the appeal lodged by the non-profit Vent de Colère against the order issued on 17 November 2008 setting the price at which wind-generated electricity is purchased, the Council of State stayed the proceedings and submitted a reference for a preliminary ruling to the Court of Justice of the European Union (CJEU) on whether the mechanism for financing the obligation to purchase electricity based on CSPE (Contribution au service public de l’électricité – Contribution to the Public Electricity Service) is to be regarded as an intervention by the State or through State resources within the meaning of, and for the application of, the provisions of the TEU relating to State aid. On 19 December 2013, the Court issued its decision and confirmed that “the new mechanism for offsetting in full the additional costs imposed on undertakings because of an obligation to purchase wind-generated electricity at a price higher than the market price that is financed by all final consumers of electricity (…) constitutes an intervention through State resources”. In a judgement issued on 28 May 2014, the Council of State set aside the order issued on 17 November 2008 on the grounds that the prices it sets constitute State aid that had not been notified to the European Commission prior to its implementation. As an alternative, on 17 June 2014, the Ministry of the Environment, Energy and the Sea signed an order setting the conditions for the purchase of wind-generated electricity produced on land. This new legislation restates the conditions for the purchase of wind-generated electricity stated in the 2008 order and the impact on the CSPE remains the same. The order of 17 June 2014 was appealed before the Council of State, which dismissed the appeal in a judgement handed down on 9 March 2016, in which the court held that this new order did not need to be notified to the European Commission, and also dismissed the claim that the rate of return awarded to wind-power producers for their locked-in capital was too high. In an opinion issued in the Praxair case on 22 July 2015, the Council of State ruled that the income from the CSPE does not have a direct impact on the amount of the aid granted to producers using renewable energy. It inferred that the CSPE could not be treated as an integral part of the mechanism used to support the wind-power sector that was held to be unlawful in the Vent de Colère judgment issued on 28 May 2014 or any other mechanism used to support renewable energy. In a judgement issued on 23 February 2016, the Administrative Court of Appeal of Paris, applying the opinion issued by the Council of State, dismissed the CSPE repayment claims filed by Praxair. The company Messer France, representing the interests of Praxair, appealed this decision. By decision dated 22 February 2017, the Council of State decided to stay proceedings until the CJEU has given its opinion on the questions referred to it for a preliminary ruling on the compatibility of the CSPE with the directives laying down the general excise duty regime (92/12/EEC of 25 February 1992 and 2008/118/EC of 16 December 2008) and the framework for the taxation of energy products and electricity (2003/96/EC of 27 October 2003). In a ruling dated 25 July 2018, the CJEU held that the CSPE could be qualified as a direct tax for specific purposes compatible with EU law, solely for the percentage of its income intended to finance electricity generation from renewable energy. Applying the solution adopted by the CJEU, the Council of State, in a decision dated 3 December 2018, considered that the revenues of CSPEs whose reimbursement Messer claimed had been allocated as a matter of priority renewable energy support and co-generation in mainland France and in non-interconnected zones and estimated that only the fraction of CSPEs that had not been allocated to that specific purpose could be returned to the applicant (i.e. in this case, 7.42% of the contribution paid in respect of 2009). In addition, in a decision issued on 15 April 2016, the Council of State ordered the State to pay a €10,000 penalty for non-compliance per day late, if it failed to prove, within six months, that it had done everything necessary to enforce the decision issued on 28 May 2014 by sending an invoice to each producer that had received support between the date of the order (17 November 2008) and the date of the decision issued by the Commission (27 March 2014) for the interest calculated on the state aid paid during this period. The collection notes have been received by the relevant project owner within the remit of EDF EN and on 15 December 2016, €4.5 million (for EDF EN’s fraction) was paid as interest on the sums held to constitute State aid.

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I Reference Document 2018