EDF / 2018 Reference document

6.

FINANCIAL STATEMENTS Notes to the financial statements

Energy savings certificates 1.19.2 The system currently in force is described in note 40.2. EDF accounts for energy savings certificates in compliance with Articles 616–1 to 616-25 of ANC regulation 2014-03 on the national chart of accounts. EDF holds energy savings certificates in order to meet the requirements of the regulations on energy savings. Consequently, EDF applies the “Energy Savings” model defined by the ANC regulation. Certificates obtained or receivable are recorded in inventories at production or acquisition cost, and are valued under the FIFO (first in first out) method. At the year-end, only the net position is presented in the financial statements: an asset is recognised (in inventories) if the energy savings achieved are greater ■ than the energy savings obligations. This inventory corresponds to the certificates purchased, obtained or receivable that cover future energy savings obligations. It is consumed as and when energy sales are completed that generate energy savings obligations; or a liability (provision) is recognised if the energy savings achieved are lower than ■ the energy savings obligations. The liability corresponds to the cost of action yet to be taken to cover the obligations associated with energy sales completed. It is subsequently extinguished by making energy savings expenditures that enable the company to obtain certificates, or by purchasing certificates.

Emission rights held to comply with regulatory requirements on greenhouse gas emissions (the “Generation” model) are included in inventories at acquisition cost, and the FIFO (first in first out) method is applied. A write-down is recorded when the generation cost of the electricity that includes the cost of the rights is higher than the present value of that electricity. At year-end, a “net presentation” principle is applied as follows: an asset is recognised (in inventories) if the quantities of greenhouse gas ■ emissions are lower than the number of emission rights held in the portfolio. This corresponds to the rights available to cover future greenhouse gas emissions; a liability (provision) is recorded in the opposite situation equivalent to the rights ■ still needed to cover emissions already produced, valued at contractualised acquisition price for forward purchases deliverable before surrender, and at market value for the balance. The net reporting principle assumes that the emission rights held in the portfolio will be the rights used to offset emissions produced. However, there is a limit to the fungibility of rights at EDF, as there are no transfers of rights between the island and mainland activities. This can lead to concurrent recognition of an asset and a liability.

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EDF I Reference Document 2018