EDF / 2018 Reference document

PRESENTATION OF EDF GROUP Description of the Group's activities

and the contractual demand response capacities with the customers. If necessary, these certifications will be the subject to regular rebalancing, either upwards or downwards. Similarly, the DOAAT will proceed with the certification and the necessary rebalancing of the means of generation subject to purchase obligations (OA) and sale obligations on the market for associated capacity guarantees. As on the Energy market, the sales/purchases of capacity organised by EPEX Spot managed by the DOAAT on behalf of EDF, are carried out via EDF Trading.

November 2018, firstly, the capping will only apply to new requests for ARENH made during this application process and, secondly, subsidiaries controlled by EDF will be fully capped for volumes leading to this ceiling being crossed. Lastly, it provides that the said subsidiaries may enter into agreements with the parent company, replicating the ARENH mechanism and conditions of supply, in particular the capping rate of alternative suppliers. When implemented, this capping mechanism leads to an increase in the weight of market reference prices in the determination of regulated sales tariffs (TRV) and, all other things remaining equal, to an increase in the energy component. Since the request from suppliers during the application process of 21 November 2018, which stood at 132.98TWh excluding EDF subsidiaries, crossed the ceiling, EDF will deliver 100TWh of ARENH in 2019 to cover the needs of the ultimate customers of its competitors. Balance perimeter dedicated 1.4.3.4 to Purchase Obligations and selling on the wholesale market EDF is a mandatory purchaser of the electricity generated by the generation facilities the government wishes to support and develop (renewable energy sources and energy efficient cogeneration). By law (Article L. 121-7 of the French Energy Code), the additional costs stemming from this obligation are offset for EDF on the basis of an electricity market benchmark price (concept of “avoided cost”). From 1 January 2017, the costs of managing these contracts have also been offset. At its meeting of 9 October 2012 concerning the costs for 2011, the CRE indicated that: “In theory, the avoided cost should be reduced by the imbalance costs borne by EDF due to the unpredictable nature of a portion of the generation covered by the purchase obligation. Such imbalances, which were negligible in past years compared with consumption-related imbalances, are becoming more significant.” With the development of renewable energies, the cost generated by the difference between anticipated generation and actual generation has become significant. As a result, at its meeting of 16 December 2014, the CRE changed the formula for calculating EDF’s avoided costs to include such imbalance costs. In order to make objective and independently identify such imbalances, the CRE asked EDF to establish a dedicated balance group. A balance perimeter dedicated to the facilities subject to a Purchase Obligation contract was put in place on 1 July 2015. The DOAAT now organises the sale of the energy produced by the installations under Purchase Obligation contracts directly on the energy markets, which makes the management of this perimeter completely independent of that of the EDF portfolio. Thus, since 4 November 2015, electricity volumes under Purchase Obligations that can be forecast over the short-term (one day for the next, known as the “random component of the Purchase Obligations”) are sold on EPEX Spot. As for the volumes which are foreseeable over the long term (share of the Purchase Obligations referred to as “quasi certain”), since January 2016 they have been sold via transparent and non-discriminatory requests for bids. Capacity mechanism 1.4.3.5 Articles L. 335-1 et seq of the French Energy Code, originating from the NOME Law, institute the obligation for each electricity supplier to contribute in mainland France to the security of electricity supply, in compliance with a default criterion set by the government. For this purpose, each supplier must acquire capacity guarantees corresponding to its obligation, calculated by reference to the power and energy consumption of its customers during a peak period defined by RTE. To comply with this obligation, each supplier must therefore get capacity guarantees from producers, which must certify all their means of generation, or from demand response managers. Once up and running, a number of auctions to exchange capacity will be held beginning four years before the delivery year and ending three years thereafter. Over-the-counter transactions remain possible. Similarly, for integrated players such as EDF, which possess capacities as producers and have an obligation as vendors, internal capacity transfers are authorised in order to cover their obligations. They will be made at the market price. The DOAAT, in charge of the management of this new system, proceeded with the certification of all the EDF means of production in France for the next few years

1.

1.4.4

TRANSMISSION AND

DISTRIBUTION ACTIVITIES IN FRANCE

The transmission and distribution of electricity in mainland France are regulated activities. They are carried out by RTE and by Enedis, grid operators which are managed totally independently, within the meaning of the provisions of the French Energy Code. Transmission − Réseau de Transport 1.4.4.1 d’Électricité (RTE) Created on 1 July 2000 and a subsidiary since 1 September 2005, the Electricity Transmission Network (RTE) is the owner and operator of the French electricity transmission network, which it operates, maintains and develops. With over 100,000 kilometres of high and extra high voltage circuits and 50 cross-border lines, this is Europe’s largest network. Its geographical location places it at the core of the European electricity market. RTE guarantees the correct operation and safety of the electricity system, and provides free and fair access to all the network users. The company also pays special attention to supporting the development of renewable sources of energy in France and their integration into the electricity system, which requires the development of the transmission network and interconnections. RTE is indirectly owned (50.1%) by EDF (via CTE) at 31 December 2018. Due to its specific conditions of governance, RTE is not fully consolidated by the Group, but rather accounted for using the equity method. Governance of CTE and RTE 1.4.4.1.1 CTE CTE is a public limited company (société anonyme) with a Board of Directors, owned by EDF (50.1%), Caisse des Dépôts et Consignations (29.9%) and CNP Assurances (20%). CTE holds 100% of the share capital of RTE. In accordance with its articles of association, the sole purpose of CTE is the acquisition and holding of RTE shares, and more generally, all commercial, financial, intangible and tangible property transactions relating directly or indirectly to its corporate purpose or which might facilitate its achievement or stimulate business growth. The eight members of CTE's Board of Directors include four EDF representatives, two Caisse des Dépôts et Consignations representatives and two CNP Assurances representatives. They are appointed for six years. RTE's compliance auditor also attends meetings of CTE's Board of Directors. RTE RTE is a public limited company (société anonyme) with both an Executive Board and a Supervisory Board. RTE’s Supervisory Board is comprised of twelve members appointed for five years: eight members appointed by the Shareholders’ Meeting: ■ two State representatives, including the State as a legal entity, ■ represented by an individual, six representatives of the shareholder (three representatives of EDF, two ■ representatives of the Caisse des Dépôts et Consignations and one representative of CNP Assurances); four members elected by the staff. ■ A Government Commissioner was also appointed and attends Supervisory Board meetings in a consultative capacity.

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EDF I Reference Document 2018