EDF / 2018 Reference document

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FINANCIAL STATEMENTS Notes to the consolidated financial statements

Concession agreement models Enedis’ concession agreements correspond to different models depending on the date of signature. 1992 concession agreement model (updated in 2007) The 1992 concession specifications model (updated in 2007) was negotiated with the FNCCR (National federation of licensing authorities) and approved by the public authorities. This model places Enedis under an obligation to record industrial On 21 December 2017, a framework agreement for a new concession agreement model was signed with FNCCR and France Urbaine. This new model modernises the relationship between Enedis and concession grantors in the long term and reflects the parties’ attachment to the principles of French concessions for electricity distribution: public service, regional solidarity and national optimisation. The FNCCR and France Urbaine represent the grantors, particularly towns, syndicated municipalities, boroughs and major cities when they are the authorities with competence to grant public electricity distribution concessions. As of 2018, newly-signed concession agreements apply the concession agreement model validated on 21 December 2017. At the effective date of a new agreement, the existing special concession liabilities recorded in application of the previous concession agreement to represent the grantor’s rights in the concession assets remain in the accounts. Like earlier concession agreements signed since 2011, the contractual obligation to establish provisions for renewal no longer applies, and the governance of investments is different. To provide an effective public service, the distribution network operator and the concession grantor now agree to jointly set up a governance system to oversee investments in the public electricity distribution network over the area covered by the concession, including replacement of infrastructures. This system mainly takes the form of a master plan taking a long-term view of developments in the network over the concession area, and multi-year investment plans (PPIs) for 4 and 5-year periods that are medium-term applications of the master plan. PPIs contain detailed objectives for each investment purpose, concerning a selection of quantified, localised investments with financial valuations for the duration of the plan. If it is observed at the end of a PPI that some of the planned investments have not been made, the concession grantor would be entitled in certain circumstances to order Enedis to deposit a sum equal to 7% of the investments still to be made. This deposit would then be returned or retained after a two-year period, depending on the investments made by that time. Recognition of assets as property, plant and equipment operated under French public electricity distribution concessions All assets used by the EDF group in public electricity distribution concessions in France, whether they are owned by the grantor or the operator, are reported together on a specific line in the balance sheet assets at acquisition cost, or their estimated value at the transfer date when supplied by the grantor. Hydropower concessions 1.3.13.2.2 Hydropower concessions follow standard rules approved by decree. Hydropower concession assets consist solely of hydropower generation equipment (dams, pipes, turbines, etc) for initial concessions. In other concessions, they comprise hydropower generation equipment and switching facilities (alternators, etc). Assets used in these concessions, whether operated under the concession agreement or owned by the EDF group, are recorded under “Property, plant and equipment operated under concessions for other activities” at acquisition cost. Hydropower concessions have an initial term of 75 years pursuant to the French Law of 16 October 1919 relating to hydropower use. Most hydropower concessions that expired before 2012 were renewed for terms of 30 to 50 years. However, the French government has not yet renewed 12 concessions that have expired. Since their expiry these concessions have thus been in the “rolling extension” situation defined by the law, which stipulates that at the expiry date of a concession, if no new concession has been established “the concession is extended on the existing terms until such time as a new concession is granted”, so as to ensure continuity of operations in the meantime (Article L. 521-16 par. 3 of the French Energy Code). depreciation and establish provisions for renewal. 2017 concession agreement model

Public transmission concession 1.3.13.2.3 Under French law, assets assigned to the public transmission concession belong to Réseau de Transport d’Électricité (RTE). These assets are included in calculating the equity value of CTE in the consolidated balance sheet. Heat generation and distribution concessions 1.3.13.2.4 Heat generation and distribution concession agreements signed by Dalkia with public authorities confer the right to operate facilities remitted by or constructed at the request of those authorities for a limited period, under the grantor’s supervision. These agreements set the terms for remuneration and transfer of the facilities to the grantor or another operator succeeding the grantor at the end of the agreement. The assets are recorded as intangible assets, in accordance with IFRIC 12 “Service concession agreements”. Foreign concessions 1.3.13.3 Foreign concessions are governed by a range of contracts and national laws. Most assets operated under foreign concessions are recorded under “Property, plant and equipment operated under concessions for other activities”. Foreign concessions essentially concern Edison in Italy, which operates hydrocarbon generation sites, gas storage sites, local gas distribution networks and hydropower generating plants under concessions. Edison owns all the assets except for some items of property, plant and equipment on the hydropower generation sites, which will be returned to the grantor for nil consideration or with an indemnity when the concession ends. In compliance with IFRIC 12, certain concession agreements are recorded as intangible assets. Hydropower generation assets which will be returned for nil consideration at the end of the concession are depreciated over the duration of the concession. Hydrocarbon generation sites are recorded in compliance with the rules applicable to the sector (see note 1.3.11.2.3). 1.3.14 In the course of its business the Group uses assets made available to it, or makes assets available to lessees, under lease contracts. These contracts are analysed in the light of the situations described and indicators provided in IAS 17 in order to determine whether they are finance leases or operating leases. Finance leases 1.3.14.1 Contracts that effectively transfer substantially to the lessee all risks and benefits inherent to ownership of the leased item are classified as finance leases. The main criteria examined in determining whether substantially all the risks and benefits are transferred by an agreement are the following: the ratio of the duration of the lease to the leased asset’s economic life; ■ total discounted future payments as a ratio of the fair value of the financed asset; ■ whether ownership is transferred at the end of the lease; ■ Leases Assets used under finance leases are derecognised from the lessor’s balance sheet and included in the relevant category of property, plant and equipment in the lessee’s accounts. Such assets are depreciated over their useful life, or the term of the lease contract when this is shorter. A corresponding financial liability is booked by the lessee, and a financial asset by the lessor. If the Group performs a sale and leaseback operation resulting in a finance lease agreement, this is recognised in accordance with the principles described above. If the transfer price is higher than the asset’s book value, the surplus is deferred and recognised as income progressively over the term of the lease. whether the purchase option is attractive; ■ the features specific to the leased asset. ■

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I Reference Document 2018