EDF / 2020 Universal Registration Document

6 FINANCIAL STATEMENTS

Notes to the consolidated financial statements

31/12/2020

31/12/2019

Costs based on year-end economic conditions

Costs based on year-end economic conditions

Amounts in provisions at present value

Amounts in provisions at present value

(in millions of euros)

Spent fuel management

2,318 1,875 3,724 7,917

1,286

2,655 1,979 3,886 8,520

1,503

Waste removal and conditioning

546

532

Long-term radioactive waste management BACK-END NUCLEAR CYCLE EXPENSES

1,106 2,938

1,053 3,088

15.2.3

Provisions for nuclear plant

€1.9 billion increase in the provision at 31 December 2019, notably reflecting i) the extension of the defueling period following risk and contingency modelling, ii) better definition of the costs covered, and iii) an updated estimate of the costs of preparing and removing fuel, following a review of the industrial scenario. The NDA’s response to the DPS 20 is expected as part of the conclusion in the discussions with the UK government. The second phase of the DPS 20 should take place late 2021, and will involve updates of all the other decommissioning activities for the AGR plants and decommissioning of Sizewell. At the same time, there will also be an update to the uncontracted liability discharge plan. During 2020, EDF Energy announced the closure of Hunterston and Hinkley Point B AGR stations, to take place no later than 7 January 2022 and 15 July 2022 respectively. The impact of this assumption update is immaterial in the context of the decommissioning liability.

decommissioning

Provisions for decommissioning of nuclear plants result from the Group management’s best estimates. They cover the full cost of decommissioning and are measured on the basis of existing techniques and methods that are most likely to be used for application of current regulations. As explained above, EDF Energy has been in discussions since 2019 with the UK government to agree changes and clarifications to the Restructuring Agreements, to provide for efficient recovery of qualifying costs and clarity that once the AGR stations have finished defueling, they will transfer to the Nuclear Decommissioning Authority (NDA) for subsequent decommissioning activities. In early 2020, EDF Energy submitted phase 1 of the decommissioning plan submission (DPS 20) which was an update to the defueling liability. This led to a

31/12/2020

31/12/2019

Costs based on year-end economic conditions

Amounts in provisions at present value

Costs based on year-end economic conditions

Amounts in provisions at present value

(in millions of euros)

PLANT DECOMMISSIONING EXPENSES

18,175

10,069

19,278

10,187

The decrease in the costs based on year-end economic conditions is mainly explained by the effect of translation adjustments.

15.3

Nuclear provisions in belgium

15.2.4

Discounting of EDF Energy’s provisions

related to nuclear generation

In Belgium, the Belgian law of 11 April 2003 assigned management of provisions concerning the Belgian nuclear plants, and the funds that cover them, to Synatom (a subsidiary of the ENGIE group). Luminus contributes via Synatom to these funds, to cover its share of plant decommissioning and back-end nuclear fuel expenses as a co-owner of 4 nuclear plants. These funding mechanisms are reflected through the following items in the consolidated financial statements: obligations presented in the liabilities in the form of provisions, amounting to ● €265 million at 31 December 2020 (€259 million at 31 December 2019); a receivable representing the advance payments made to Synatom, recognised in ● the consolidated balance sheet assets as financial assets carried at fair value (see note 18.1.3) at the value of €263 million at 31 December 2020 (€230 million at 31 December 2019). This receivable, which corresponds to the fair value of the share of funds held by Synatom on behalf of Luminus, is discounted by applying the same real discount rate used to determine the obligations they will cover. Other provisions related to nuclear generation in Belgium correspond to liabilities covered by provisions that are not part of the mechanisms described above.

Until 30 June 2020, the discount rate was calculated using an average series of data for a sample of UK Government gilts over the longest available durations plus the spread of UK Corporate bonds rated A to AA, again over the longest-term duration. The implicit inflation rate used in determining a discount rate is based on a long-term forecast of adjusted retail prices (the UK’s CPIH index). As of 31 December 2020, the method used to determine the discount rate changed as follows: like the discount rate for nuclear provisions in France, the discount rate for EDF ● Energy’s provisions is now based on an interest rate curve, which comprises a sovereign yield curve constructed on year-end market data for liquid horizons (UK gilt 0-20 year yield) and then converging, using an interpolation curve, towards the very long-term rate UFR (Ultimate Forward Rate) plus a curve of the spread of corporate bonds rated A to BBB. Based on expected disbursements corresponding to nuclear obligations, a single equivalent discount rate is deduced from the curve constructed in this way. This single discount rate is then applied to the forecast disbursement schedules for the costs of the obligations, to determine the provisions; the inflation assumption is based on an inflation curve constructed by reference to ● economic forecasts and inflation-indexed market products, in long-term coherence with the inflation assumption underlying the UFR (2%). The real discount rate determined in this way and applied by EDF Energy at 31 December 2020 for calculation of its nuclear obligations is 1.8% (2.0% at 31 December 2019).

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EDF - UNIVERSAL REGISTRATION DOCUMENT 2020