EDF_REGISTRATION_DOCUMENT_2017

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RISK FACTORS AND CONTROL FRAMEWORK Risks to which the Group is exposed

The Group has basic nuclear fuel cycle facilities and has had new activities in research, equipment manufacture and the supply of services to other nuclear operators, since the integration of the subsidiary New NP, which became Framatome, within the scope of the Group. In addition, the Group holds minority stakes in nuclear power plants in operation in the United States (through CENG), Belgium and Switzerland, which it does not operate. The Group is investing in new reactor projects in France, the United Kingdom and China and carries out its nuclear industrial activity in other countries. The share of nuclear energy, as a low-carbon form of energy and a part of the Group’s electricity mix, thus represents a significant industrial asset for the competitiveness of the Group. The nuclear activities of EDF are associated with the following issues: as with any nuclear operator, the latter’s obligations means giving ongoing ■ priority to nuclear safety, based on technical and organisational provisions in order to guard against a nuclear accident and, in the hypothetical event of an accident occurring, to limit the consequences of such an accident. The nuclear business is carried out under the control of nuclear safety authorities in countries where the Group exercises nuclear operator responsibility. although the nuclear business can contribute effectively to the security of energy ■ supply and to combating the greenhouse effect, it must also demonstrate its competitiveness and its acceptance over the different time scales in which it operates. As the nuclear business inherently requires substantial and long-term investments, special care must be taken with regard to the long-term soundness and efficiency of the maintenance and upgrading programmes for the fleet in operation, new reactor projects and compliance with very long-term commitments. The nuclear business is an industrial activity that brings together a large number of industrial partners in France, Europe and throughout the world. In France, EDF was assigned, by the public authorities, the role of lead company in the nuclear sector, with the integration of the New NP subsidiary, which became Framatome, which involves specific risks associated with the exercise of this responsibility and the activities of Framatome; in light of the fact that EDF is the world’s largest nuclear operator, exploiting ■ global feedback and making comparisons with best practices internationally (1) represents an ongoing challenge to ensure that the EDF group is best situated to be able to sustainably manage the risks and opportunities associated with being world leader; the nuclear business requires that the EDF group be able to control large complex ■ projects which might continue over a number of years. Such projects in turn require the acquisition and mastery of innovative technologies, notably at the digital level. A decision by the French public authorities or the French Nuclear Safety Authority (ASN) to halt one or more nuclear power generation units could have material adverse consequences for the Group. The Act no. 2015-992 of 17 August 2015 on the Energy Transition for Green Growth calls for the nuclear component in electricity generation to be reduced by 50% before 2025. It also caps at current levels (63.2GW) the total authorised capacity of nuclear electricity generation. In practical terms, this provision forces EDF, in order to obtain permission for the commissioning of any new nuclear generating capacity (such as permission from the Flamanville EPR), to shut down any equivalent capacity. Accordingly, the early closure of one or more reactors in the EDF fleet might be decided upon, not because of an industrial choice but rather because of a legal decision. Such decisions must lead to EDF being compensated for the harm suffered, as reiterated by the French Constitutional Council in a decision of 13 August 2015. In this regard, concerning the nuclear power plant at Fessenheim, discussions with the State have led to a draft procedure, approved by the European Commission, defining the principles for compensation and which is described in section 1.4.1.1.6 “Decommissioning of nuclear power plants”. This protocol, authorised by EDF’s Board of Directors, provides for a compensation scheme based on an initial fixed part estimated to date at approximately €490 million with a payment forecast of 20% in 2019 and 80% in 2021 and an additional variable part which may, as the case may be, result in further payments, as a consequence of the loss of earnings incurred for

EDF until 2041. The 2016 amended Finance Law no. 2016-1918 dated 29 December 2016 opened a specific account in order to finance the compensation procedure between the State and EDF relative to the early closure of the nuclear power plant at Fessenheim. Lastly, it may be decided that new nuclear construction projects, in which the Group has already invested considerable sums, should be halted. This issue potentially concerns all the Group’s nuclear assets. Such events would have material adverse consequences on the outlook, financial position, results and image of the Group, which would lead the latter to request compensation that it is not certain to obtain. The Group’s nuclear business is subject to particularly detailed and demanding regulations that may become more stringent. The Group’s nuclear business is subject to detailed and demanding regulations with, particularly in France, a system in place that monitors and periodically re-examines basic nuclear facilities, which focuses, firstly on nuclear safety, protection of the environment and public health, but also on security considerations regarding malicious acts (terrorist threats, in particular). These regulations may be significantly tightened by national or European authorities (see section 1.5.6.2.2 “Specific regulations applicable to basic nuclear facilities”). Furthermore, stricter regulations or possible non-compliance with current or future regulations could result in the temporary or permanent shutdown of one or more of the Group’s plants or financial penalties as stated in Article L. 596-4 of the French Environment Code. Cases of non-compliance with regulations are also likely to be used by third parties against EDF and brought before the courts. Increased number of requests emanating from the French Nuclear Safety Authority and enhanced controls may increase EDF’s compliance costs and risks. Such events may result in a significant increase in the costs of the Group’s nuclear assets, which may have an adverse impact on its financial position. The nuclear power plants that the Group operates may require significant or costly repairs or modifications. The Group of nuclear facilities that the Group currently operates in France is highly standardised (see section 1.4.1.1.1 “EDF’s nuclear fleet”). This enables the Group, in particular, to achieve economies of scale in equipment purchases and engineering, to apply improvements made to its newest power plants to all plants and, in the event of a malfunction in a facility, to anticipate the measures to be taken in other plants. However, such standardisation carries the risk of a malfunction that is common to several power plants or series of power plants (see section 1.4.1.1.2 “Operation and technical performance of the nuclear fleet”). The Group cannot guarantee that it will not be required to make significant or costly repairs or modifications to all or some of its plants, or that events will not occur that may have an impact on the operation of its plants or their output or cause a temporary or permanent shutdown of all or some of its plants. Thus, at the time of the periodic reviews conducted during the ten-year inspections and following the Fukushima accident, the Group was led, both on its own and as a result of the requirements of the French Nuclear Safety Agency, to draw up a substantial work programme. This programme, called the “Grand Carénage” is intended to renovate existing plants, increase the safety level of reactors and, if the conditions are met, extend their operating life. This programme, which was approved in principal by the Board of Directors, involved additional investments as from 2015 and the upcoming years and bringing forward certain expenditures that were already planned before the Fukushima accident (see section 1.4.1.1.2 “Operation and technical performance of the nuclear fleet” and section 1.4.1.1.5 “Preparing for the future of the nuclear fleet in France”). Industrial implementation of these works in power generation facilities will involve increased costs and a greater use of internal resources and the industrial fabric, and may also result in a loss of availability in future years. Implementation-related uncertainties affecting the Grand Carénage programme include possible delays in the examination of the authorisations required to initiate operations, in particular as regards the authorisations to be granted by the French Nuclear Safety Agency. Such uncertainties may also concern the manufacture and delivery on site of new equipment or work carried out on-site in a situation where a large number of industrial operations are being carried out at the same time.

Exploitation of standards and feedback from the International Atomic Energy Agency and the World Association of Nuclear Operators (WANO). (1)

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EDF I Reference Document 2017