EDF / 2018 Reference document

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FINANCIAL STATEMENTS Notes to the consolidated financial statements

the costs linked to the energy transition, which correspond to the subsidy ■ mechanisms for renewable energies, and the reimbursement of the past accumulated shortfall in compensation borne by EDF as measured at 31 December 2015, are registered in a special “energy transition” budget item created by the amended finance law for 2015. Law no. 2016-1917 of 29 December 2016 (the finance law for 2017) stipulated that the two sources of additional funding for this special budget item would be a portion of the domestic tax on coal, lignite and coke (TICC), and a portion of the domestic tax on energy products (TICPE). The finance law for 2019 replaces the percentages of the TICC and TICPE by a set amount, to avoid the uncertainties of forecast income from these taxes, and broadens the sources of funding for the “Energy transition” budget item by including the proceeds of auctions of Guarantees of Origin as allowed by Article L. 314-14-1 of the Energy Code; other public service charges – excluding costs associated with the subsidy ■ mechanisms for renewable energies (fuel poverty, tariff equalisation in zones that are not connected to France’s mainland network, cogeneration, the budget for the energy ombudsman, etc.) are registered directly in the general budget; income generated by the domestic tax on the final consumption of electricity, now ■ renamed the Contribution to Public Electricity Service (Contribution au Service Public de l'Electricité – CSPE) goes directly into the general budget. The CSPE tax is collected directly from final consumers of electricity in the form of an additional levy on the electricity sale price (and collected from electricity suppliers), or directly from electricity producers that produce electricity for their own uses; The level of the CSPE tax is the same in 2019 as in 2018 with the full rate set at €22.5/MWh, and eight reduced rates ranging from €12/MWh to €0.5/MWh depending on criteria of electro-intensiveness, business category and the risk of carbon leakage from installations (the risk of industries relocating to countries where greenhouse gas emissions are higher due to their electricity mix). The costs associated with conclusion and management of purchase obligation contracts will be eligible for compensation in 2019, as they have been since 2017. This concerns an annual amount of around €45 million. In addition to these measures, the amended French finance law for 2018 applied a downward adjustment to the amounts of compensation paid by the State for public service charges in 2018: these charges had decreased substantially due to a rise in 2018 electricity market prices between the initial forecast of July 2017 and the adjusted forecast of July 2018, and that decrease automatically narrowed the differential between the purchase obligation tariff payable to producers and the market price for electricity. For the same reason, in 2018 the State also lowered 2018 compensation for the difference between 2017 expenses as reforecast in July 2017 and actual 2017 expenses as determined in July 2018. Public service charges borne by EDF The amount of expenses (excluding the annual contribution to repayment and associated interest) to be compensated to EDF for 2018 is €6,554 million. The amounts received in the year 2018 (excluding the annual contribution to repayment and associated interest) totalled €6,919 million (including €4,610 million for the dedicated “energy transition” budget account and €2,309 million for the general budget). A repayment schedule for EDF’s receivable corresponding to the accumulated shortfall in compensation, which amounted to €5,780 million at 31 December 2015, was set out in the ministerial decision of 13 May 2016, amended on 2 December 2016. Under this schedule the receivable will be fully repaid by 2020. On 22 December 2016 EDF securitised a portion of this receivable (€1.5 billion) through a State-approved “Dailly law” assignment. Consequently, since 1 January 2017 EDF has received 73.6% of payments made by the State in reimbursement of the receivable as set out in the repayment schedule. The remainder is paid directly to the assignees. During 2018, the State paid EDF €1,217 million of the principal amount of the financial receivable, comprising €1,194 million relating to the 2018 repayment schedule and €23 million, paid on 2 January 2018, relating to the 2017 repayment schedule. The €1,194 million received corresponds to the amount due for 2018 under the repayment schedule. At 31 December 2018, EDF’s share of the outstanding financial receivable amounted to €2,014 million.

For remuneration of past customer management charges (prior to 1 January 2018), the CRE’s decision sets an amount it considers as a cap that can be passed on through the TURPE tariff. However, Law 2017-1839 of 30 December 2017 introduced a measure intended to rule out the possibility of suppliers receiving remuneration from network managers for past customer management services. On 23 December 2016, Engie brought an action against Enedis before the Paris Commercial Court claiming such remuneration. These legal proceedings are ongoing. Electricity Equalisation Fund On 22 March 2018, the CRE published its consultation on the levels of contribution due to the Electricity Equalisation Fund for EDF SEI and Électricité de Mayotte for the years 2018 to 2021. The annual average contribution to the Electricity Equalisation Fund for EDF SEI over this period, including the planned smart metering system, is €185 million. The amended decisions setting the level of contributions to the Electricity Equalisation Fund for the years 2012 to 2015 were cancelled by the Council of State on 9 March 2018. Discussions are in progress concerning the parameters of the coefficients used to calculate the respective contributions or income of Enedis and the various local distribution companies. The authorities have not yet adopted amended decisions for that period, nor for the period 2016 to 2018. The risk of a change to the contributions payable by Enedis and Electricité de Strasbourg for the period 2012-2018 has been taken into consideration in the financial statements at 31 December 2018, based on ongoing discussions with the authorities, without prejudice to the final level that will be set or the position the companies concerned will present to the authorities. Legal and regulatory framework The compensation mechanism for public energy service charges (compensation des Charges de Service Public de l’Energie) results from a reform introduced by France’s amended finance law for 2015, published in the Journal officiel on 30 December 2015. Under the legislative and regulatory framework, the public energy service charges (electricity and gas) were to be compensated via two State budget items included in France’s finance laws from 2016 onwards. The initial finance law for 2019 marks a continuation from 2018, defining the following charges for 2019: a special “Energy Transition” budget item of €7.3 billion, principally to compensate ■ for the additional costs associated with all contracts obliging the operators to purchase renewable energies and biogas and the annual contribution to repayment of the accumulated shortfall in compensation due to EDF; a “Public Energy Service” item of €3.3 billion in the general budget to cover ■ solidarity charges borne by gas and electricity suppliers, costs associated with purchase obligations excluding renewable energies (essentially cogeneration), and the cost of applying the standard national tariffs to zones that are not connected to France’s mainland network. The interest on the accumulated shortfall to be repaid to EDF is also funded through the general budget. Since 1 January 2018, the “basic necessity” (Tarif de première nécessité) rates for electricity and the “special solidarity” rates for gas have been replaced by an energy voucher system. The cost of this system is not borne by EDF, but has been budgeted by the State in the “Public Energy Service” programme. However, EDF will bear solidarity charges in 2019 for the national housing solidarity fund and services for vulnerable customers. In 2019, this mechanism of compensation for public service charges is funded as follows: COMPENSATION FOR PUBLIC 4.4 ENERGY SERVICE CHARGES (CSPE)

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