EDF / 2020 Universal Registration Document

5 THE GROUP’S FINANCIAL PERFORMANCE AND OUTLOOK Review of the financial situation and results 2020 with risk/return targets, and the hedging ratio varies depending on the currency, ranging from 46% to 67% for the principal exposures. If no hedging instruments are available, or if hedging costs are prohibitive, the foreign exchange positions remain open and the risk on such positions is monitored by sensitivity calculations; hedging of operating cash flows in foreign currencies: in general, the operating cash flows of EDF and its subsidiaries are in the relevant local currencies, with the exception of flows related to fuel purchases which are primarily in US dollars, and certain flows related to purchases of equipment, which concern lower amounts. Under the principles laid down in the Strategic financial management framework, EDF and the main subsidiaries concerned by foreign exchange risks (EDF Energy, EDF Trading, Edison, EDF Renewables) are required to hedge firm or highly probable commitments related to these future operating cash flows. As a result of the financing and foreign exchange risk hedging policy, the Group’s gross debt at 31 December 2020 breaks down as follows by currency after hedging:

Management of foreign exchange risk 5.1.6.1.3 Due to the diversification of its activities and geographical locations, the Group is exposed to the risk of exchange rate fluctuations, which may have an impact on the translation differences affecting balance sheet items, Group financial expenses, equity, net income and the IRR of projects. To limit exposure to foreign exchange risks, the Group has introduced the following management principles: local currency financing: to the extent possible given the local financial markets’ capacities, each entity finances its activities in its own functional currency. When financing is contracted in other currencies, derivatives may be used to limit foreign exchange risk; matching of assets and liabilities: the net assets of subsidiaries located outside the Euro zone expose the Group to a foreign exchange risk. The foreign exchange risk in the consolidated balance sheet is managed by market hedging involving use of financial derivatives. Hedging of net assets in foreign currencies complies

GROSS DEBT STRUCTURE BY CURRENCY BEFORE AND AFTER HEDGING

Impact of hedging instruments*

Initial debt structure

Debt structure after hedges

31 December 2020 (in millions of euros) Borrowings in EUR Borrowings in USD Borrowings in GBP

% of debt

36,241 16,735

11,798 (10,958)

48,039

73%

5,777

9%

9,996 2,619

537

10,533

16%

Borrowings in other currencies

(1,377)

1,242

2%

TOTAL DEBT

65,591

-

65,591

100%

Hedges of liabilities and net assets of foreign subsidiaries. *

The table below presents the impact on equity of a variation in exchange rates on the Group’s gross debt at 31 December 2020.

EXCHANGE RATE SENSITIVITY OF THE GROUP’S GROSS DEBT

Debt after hedging instruments converted into euros

Impact of a 10% unfavourable variation in exchange rates

Debt after a 10% unfavourable variation in exchange rates

31 December 2020 (in millions of euros) Borrowings in EUR Borrowings in USD Borrowings in GBP

48,039

-

48,039

5,777

578

6,355

10,533

1,053

11,586

Borrowings in other currencies

1,242

124

1,366

TOTAL DEBT

65,591

1,755

67,346

Due to the Group’s hedging policy for foreign exchange risk on the Group’s gross debt, the income statement for companies controlled by the Group is marginally exposed to foreign exchange rate risk. The table below sets forth the foreign exchange position relating to net assets in foreign currencies of the Group’s subsidiaries.

NET ASSET POSITION

Net assets after management

31 December 2020* (in millions of currency units)

Net assets

Bonds

Derivatives

USD

5,872

1,500

2,449

1,923

CHF (Switzerland)

30

28

2

PLN (Poland)

285

153

132

GBP (United Kingdom)

19,635

5,435

3,522

10,678

BRL (Brazil) CNY (China)

1,371

1,371

11,026 11,026 Net assets as at 31 December 2020; bonds and derivatives as at 31 December 2020. The net positions shown exclude certain non-significant exposures. *

The above table shows the assets of the Group’s foreign subsidiaries in foreign currencies, adjusted for changes in the fair value of cash flow hedges and of debt and equity instruments recorded in equity, and changes in the fair value of financial instruments recorded in income.

The following table sets forth the risk for equity of foreign exchange losses on net assets in foreign currencies of the Group’s principal subsidiaries at 31 December 2020, assuming unfavourable, uniform exchange rate variations of 10% against the Euro. Net assets are converted at the closing rate and impacts are reported in absolute value.

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EDF - UNIVERSAL REGISTRATION DOCUMENT 2020