EDF / 2018 Reference document

6.

FINANCIAL STATEMENTS Notes to the consolidated financial statements

3.8.2

A new partner for EDF Renewables

Equipment manufacturing and quality At 31 December 2018, almost all the equipment for the nuclear section and the conventional island, had been delivered and assembled on site. The situation as regards the quality of equipment manufactured by Framatome for the primary system is described in the following paragraphs. Vessel The issue of the higher-than expected carbon content in the vessel head and bottom was examined by the French Nuclear Safety Authority ASN (Agence de Sécurité Nucléaire) during the first half of 2017 on the basis of documentation submitted by Framatome under the supervision of EDF. Based on the opinion of a group of ASN-appointed experts, the ASN issued an opinion on 11 October 2017 concluding that the mechanical properties of the vessel head and bottom head were adequate for their uses, including in the event of an accident. On 9 October 2018, the ASN authorised: the commissioning of the vessel bottom, subject to functional checks; ■ the commissioning of the vessel head, for a limited operating life until 2024 ■ unless the technical feasibility of checks comparable to the vessel bottom checks can be demonstrated. EDF is currently working on development of in-service vessel head checks, in order to go back to the ASN later in 2019 for permission to retain the current vessel head if such checks are industrially feasible. If permission is not given, EDF could remain liable for some or all of the costs incurred to manufacture a replacement vessel head. These costs are not included in the target construction cost, since if they arise they would do so after the plant’s commissioning. EDF SA has initiated arbitration proceedings against AREVA SA on this matter. Break preclusion and quality deviations in the welds of the main secondary system On 30 November 2017, EDF declared a significant event to the ASN regarding the detection of a quality deviation in the welding of the secondary system that conducts the steam from the steam generators to the turbine of the Flamanville 3 EPR. This system (main steam lines) was designed and manufactured according to the “break preclusion” concept, with stricter requirements for design, manufacture and in-service monitoring. These stricter requirements, requested by EDF, are backed up by a “high quality” requirement for the building of these systems. Although these requirements were applied during the design phase, they were not properly incorporated into the welding work. Failure to meet these requirements does not necessarily entail non-compliance with the nuclear pressure equipment regulations. From 21 March 2018, during an initial comprehensive inspection, EDF detected other quality deviations in welds on the pipes in the main secondary system of the Flamanville 3 EPR. The initial comprehensive inspection is a mandatory by law before commissioning plant, and mainly involves examination of the welds on the primary and secondary systems. It gives rise to an initial benchmark report on the state of plant before it begins operation. In accordance with industrial procedures, the welds had been checked by the consortium of contractors in charge of manufacturing the system and each one had been declared compliant as the work was done. On 10 April 2018 (see EDF’s press release of the same date), EDF notified the ASN of a significant event relating to the detection of deviations in the performance checks on these welds (part of the main secondary system was already concerned by the insufficient application of the “break preclusion” requirements). EDF therefore began a further inspection during the second quarter of 2018 of all 150 welds concerned in the main secondary system.

in twenty-four UK wind farms On 29 June 2018, EDF Renewables sold a 49% minority stake in twenty-four of its UK wind farms (around 550MW), for the price of £701 million. The new partnership with Dalmore Capital Limited and Pensions Infrastructure Platform, with investments from large UK local authority pension schemes, will enable EDF Renewables to continue to expand the renewable energy business. EDF Renewables retained a 51% share in this portfolio of wind farms. It will also continue to run the sites and to provide operations and maintenance and asset management services. EDF Energy will also continue to purchase all of the electricity and ROCs (Renewables Obligation Certificates) generated by the wind farms, on market-standard terms. The sale of this investment, which was considered as a transaction between shareholders with no change of control, is recognised in equity and has no impact on the Group’s income statement (see the statement of Change in consolidated equity).

3.9

CONFIRMATION OF THE EUROPEAN COMMISSION DECISION ON THE TAX TREATMENT OF PROVISIONS ESTABLISHED BETWEEN 1987 AND 1996 FOR RENEWAL OF GENERAL NETWORK FACILITIES

On 16 January 2018, the General Court of the European Union rejected EDF’s appeal against the European Commission’s decision of 22 July 2015 classifying the tax treatment of provisions established between 1987 and 1996 for renewal of General Network facilities as state aid, and ordering that it be recovered by the French State. Following that decision by the Commission, on 13 October 2015 EDF had repaid €1.383 billion, corresponding to the amount of state aid including interest. Enedis and RTE contributed their respective shares. In its ruling, the General Court upheld the European Commission’s decision of 22 July 2015. In view of the repayment made on 13 October 2015, the execution of this ruling did not entail any additional payment. On 27 March 2018, EDF submitted an appeal to the Court of Justice of the European Union against the General Court’s ruling of 16 January 2018. On 13 December 2018 the Court rejected this appeal, confirming the European Commission’s decision. This litigation is now definitively closed. Major milestones were reached during 2018: completion of cold functional testing, consisting of a large number of test ■ operations including the leak performance test on the primary system at a pressure greater than 240 bar – higher than the pressure of this system once in operation; successful testing of the reactor containment building in April 2018. This is an ■ in-air test that checks the concrete structure’s mechanical behaviour and airtightness by raising pressure inside the building to six times the outside air pressure; integration of an instrumentation and control (I&C) configuration involving ■ around 250 modifications, completed in early September 2018, so that hot functional testing can take place in a stable, coherent I&C configuration. FLAMANVILLE 3 EPR PROJECT 3.10

344

I Reference Document 2018