EDF / 2018 Reference document

FINANCIAL STATEMENTS Balance sheet

The results of this detailed approach led to limited changes overall in the cost estimate and the associated provisions at 31 December 2016, apart from the consequences of the change in the depreciation period for 900MW series plants (excluding Fessenheim) at 1 January 2016, and the effect of changes in discount rates at 31 December 2016, i.e.: an increase of €321 million in the estimated decommissioning costs and an ■ increase of €334 million in the estimated cost of long-term management of long-lived medium-level waste; a decrease of €(451) million in the provision for plant decommissioning, and an ■ increase of €162 million in the provision for long-term management of long-lived medium-level waste, with corresponding changes in the underlying assets. After its revision in 2016, it was decided that the estimate would be reviewed annually. The 2017 and 2018 reviews led to non-significant adjustments. For permanently shut-down nuclear power plants Unlike the PWR fleet currently in operation, the first-generation reactors now shut down used a range of different technologies: a PWR reactor at Chooz A, UNGG (natural uranium graphite gas-cooled) reactors at Bugey, St-Laurent and Chinon, a heavy water reactor at Brennilis, and a sodium-cooled fast neutron reactor at Creys-Malville. The decommissioning costs are based on contractor quotes, which take account of accumulated industrial experience, unforeseen and regulatory developments, and the latest available figures. In 2015 the industrial decommissioning strategy for UNGG plants was totally revised. The previously selected strategy was based on a scenario involving “underwater” dismantling of caissons (UNGG reactor buildings) for four of the reactors, with direct graphite storage in a centre currently under examination by ANDRA (see long-lived low-level waste, note 28.2). Several new technical developments showed that the alternative “in-air” dismantling solution for the caissons would improve industrial control of operations and was apparently more favourable in terms of safety, radioprotection and environmental impact. The Company therefore selected a new “in-air” dismantling scenario as the benchmark strategy for all six caissons. This scenario includes a consolidation phase, building on experience acquired from dismantling the first caisson before beginning work on the other five. The decommissioning phase will ultimately be longer than previously planned, leading to higher contractor quotes due to the induced operating costs. Updating the industrial decommissioning scenario for first-generation power plants, particularly UNGG plants, led to a €590 million increase in the provision at 31 December 2015. The amended industrial scenario was presented to the ASN’s commissioners on 29 March 2016. At the request of the ASN, an independent expert review was ordered in the first quarter of 2017 to analyse EDF’s chosen solutions for decommissioning of its six UNGG reactors. The conclusions supported the main options chosen. A meeting took place with the ASN commissioners in June 2017 based on these conclusions and a justification file remitted by EDF the previous March. The strategy file, the safety option report concerning establishment of a secure configuration, and the detailed timetable for operations over the period 2017-2032 were sent to the ASN in late December 2017. In 2018 the ASN issued its main questions and conclusions about the UNGG strategy file. “In-air” dismantling for all reactors, the usefulness of an industrial demonstrator, and the timetable for dismantling the first-of-a-kind reactor (Chinon A2) appear to be settled, but discussions are continuing regarding the dismantling timetable for the other 5 reactors. EDF’s proposed schedule allows for significant experience-based adjustments (after dismantling the first reactor) before beginning the larger-scale phases. While acknowledging the need to incorporate experience from the first-of-a-kind reactor, the ASN has so far not expressed an opinion on the timetable as a whole. At a meeting on 12 February 2019 EDF presented all the information

justifying its proposed timetable to the ASN’s panel of commissioners. The ASN is expected to issue draft decisions in 2019 that will be submitted for public consultation. Due to uncertainties over the complex operations to be undertaken (particularly development of new methods and technologies), the provisions are very sensitive to the sequencing of operations, and the overall timetable for dismantling all six reactors. If EDF were ultimately to amend the timetable of decommissioning operations (shortening the sequence), that would entail an increase in provisions. After the revision of the estimated cost in 2015, the decision was made that it should be reviewed annually. The 2016 review led to non-significant adjustments, apart from one increase of €125 million for a specific installation (the Irradiated Materials Workshop at Chinon). The 2017 and 2018 reviews led to non-significant adjustments. 28.4 These provisions cover the future expenses resulting from scrapping fuel that will only be partially irradiated when the reactor is shut down. They are measured based on: the cost of the loss on fuel in the reactor that is not totally spent at the time of ■ final reactor shutdown and cannot be reused due to technical and regulatory constraints; the cost of fuel processing, and waste removal and storage operations. These ■ costs are valued in a similar way to provisions for spent fuel management and long-term radioactive waste management. These unavoidable costs are components of the cost of nuclear reactor shutdown and decommissioning. As such, they are fully covered by provision from the commissioning date and an asset associated with the provision is recognised. PROVISIONS FOR LAST CORES

6.

28.5

DISCOUNTING OF PROVISIONS RELATED TO NUCLEAR GENERATION AND SENSITIVITY ANALYSES

28.5.1 Discount rate Calculation of the discount rate

The discount rate is determined based on long-series data for a sample of bonds with maturities as close as possible to that of the liability. However, some expenses covered by these provisions will be disbursed over periods significantly longer than the duration of instruments generally traded on the financial markets. The benchmark used to determine the discount rate is the sliding 10-year average of the return on French OAT 2055 treasury bonds, which have a similar duration to the obligations, plus the spread of corporate bonds rated A to AA, which include EDF. The methodology used to determine the discount rate, particularly the reference to sliding 10-year averages, is able to prioritise long-term trends in rates, in keeping with the long-term horizon for disbursements. The discount rate is therefore revised in response to structural developments in the economy leading to medium and long-term changes. The assumed inflation rate is determined in line with the forecasts provided by consensus and expected inflation based on the returns on inflation-linked bonds. The discount rate determined in this way is 3.9% at 31 December 2018, assuming inflation of 1.5% (4.1% and 1.5% respectively at 31 December 2017), giving a real discount rate of 2.4% at 31 December 2018 (2.6% at 31 December 2017).

473

EDF I Reference Document 2018