EDF / 2018 Reference document

5.

THE GROUP’S PERFORMANCE IN 2018 AND FINANCIAL OUTLOOK Operating and financial review

The table below presents the impact on equity of a variation in exchange rates on the Group’s gross debt at 31 December 2018: EXCHANGE RATE SENSITIVITY OF THE GROUP’S GROSS DEBT 31 December 2018 (in millions of euros) Debt after hedging instruments converted into euros Impact of a 10% unfavourable variation in exchange rates

Debt after a 10% unfavourable variation in exchange rates

Borrowings in EUR Borrowings in USD Borrowings in GBP

48,221 2,982 6,836 1,149 59,188

-

48,221 3,280 7,520 1,264 60,285

298 684 115

Borrowings in other currencies

1,097

TOTAL DEBT

Due to the Group’s hedging policy for foreign exchange risk on the Group’s gross debt, the income statement for companies controlled by the Group is marginally exposed to foreign exchange rate risk.

The table below sets forth the foreign exchange position relating to net assets in foreign currencies of the Group’s subsidiaries.

ET ASSET POSITION 31 December 2018 (1) (in millions of euros)

Net assets after management

Net assets

Bonds 1,350

Derivatives

USD

4,937

1,480

2,107

CHF (Switzerland)

710

-

508

202

GBP (United Kingdom)

16,164 (6,663)

5,435

(356)

11,085 (6,663)

CLP (Chile) PLN (Poland) BRL (Brazil) CNY (China)

- - - -

-

307

153

154

1,164 9,932

- -

1,164

9,932 Net assets as stated at 31 December 2018; bonds and derivatives as stated at 31 December 2018. The net positions shown exclude certain non-significant (1) exposures.

The above table shows the assets of the Group’s foreign subsidiaries in foreign currencies, adjusted for changes in the fair value of cash flow hedges and of debt and equity instruments recorded in equity, and changes in the fair value of financial instruments recorded in income.

The following table sets forth the risk for equity of foreign exchange losses on net assets in foreign currencies of the Group’s principal subsidiaries at 31 December 2018, assuming unfavourable, uniform exchange rate variations of 10% against the Euro. Net assets are converted at the closing rate and impacts are reported in absolute value.

EXCHANGE RATE SENSITIVITY OF NET ASSETS

At 31 December 2018

At 31 December 2017

Impact on equity of a 10% variation in exchange rates

Impact on equity of a 10% variation in exchange rates

Net assets after management converted into euros

Net assets after management converted into euros

Net assets after management into currency

Net assets after management into currency

(in millions of currency units)

USD

2,107

1,840

184

2,606

2,173

217

CHF (Switzerland)

202

179

18

245

209

21

GBP (United Kingdom)

11,085 (6,663)

12,392

1,239

9,153 1,135

10,316

1,032

CLP (Chile) PLN (Poland) BRL (Brazil) CNY (China)

(8) 36

(1)

2 8

-

154

4

35

1

1,164 9,932

262

26

1,066

268

27

1,261

126

10,028

1,285

129

The foreign exchange risk on available-for-sale securities is mostly concentrated in EDF’s dedicated asset portfolio, which is discussed in section 5.1.6.1.6 “Management of financial risk on EDF SA’s dedicated asset portfolio”. The foreign exchange risk associated with short-term investments and operating liabilities in foreign currencies remains restricted for the Group at 31 December 2018. Management of interest rate risk 5.1.6.1.4 The exposure of the Group’s net indebtedness to interest rate fluctuations covers two types of risk: a risk of change in the net financial expenses on floating-rate

financial assets and liabilities, and a risk of change in the value of financial assets invested at fixed rates. These risks are managed by monitoring the floating-rate portion of net indebtedness, defined by reference to the risk/return for net financial expenses, taking into consideration expected movements in interest rates. Some of the debt is variabilised and the Group may use interest rate derivatives for hedging purposes. The distribution of exposure between fixed and floating rates is monitored. The Group’s debt after hedging instruments at 31 December 2018 comprised 57.2% at fixed rates and 42.8% at floating rates.

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EDF I Reference Document 2018