EDF_REGISTRATION_DOCUMENT_2017

2.

RISK FACTORS AND CONTROL FRAMEWORK Legal proceedings and arbitration

EDEMSA arbitration EDF International initiated CIRDI arbitration in 2003 against the Argentine State for non-performance of contractual commitments taken under the concession agreement for electricity distribution in the province of Mendoza. An arbitration decision was given in favour of EDF International by the arbitration tribunal on 11 June 2012. The Argentine State then brought action for nullification of the arbitration decision before the ad hoc Committee of the CIRDI in 2012. On 5 February 2016, the ad hoc Committee of the CIRDI confirmed the arbitration decision in favour of EDF International. On 5 December 2017, EDF International signed a settlement agreement with the Argentine authorities concerning the payment of damages that were granted to it by the arbitration decision of 11 June 2012. This payment was made in the form of Argentinian Treasury bonds, which EDF International sold on 12 December 2017. EDF Énergies Nouvelles Silpro Silpro (Silicium de Provence) went into court-ordered liquidation on 4 August 2009. EDF ENR group held a 30% minority shareholding in this company along with the main shareholder, the German company Sol Holding. On 30 May 2011, the liquidator brought action against the shareholders and executives of Silpro, with joint and several liability, to make up for the shortfall in assets resulting from Silpro’s liquidation, amounting to €101 million. In a judgement issued on 17 December 2013, the Commercial Court in Manosque ordered, without joint and several liability, the EDF ENR Group to contribute €120,000 to Silpro’s shortfall in assets and €200,000 to Sol Holding’s shortfall in assets. The EDF ENR group appealed this decision. In a judgement issued on 19 March 2015, the Court of Appeal in Aix-en-Provence invalidated this judgement and dismissed all of the liquidator’s claims. The liquidator has lodged an appeal with the Court of Cassation challenging the appeal decision issued on 19 March 2015. The Court of Cassation, by a ruling of 20 April 2017, rejected the part of the decision of the Court of Appeal invalidating the judgement sentencing Sol Holding to pay €200,000 to the liquidator due to the shortfall in assets. The dispute is now closed. SOCODEI The low-activity waste processing and packaging centre (Centraco) operated by SOCODEI, a subsidiary wholly owned by EDF, is used to process weakly radioactive waste either by smelting or by incineration. On 12 September 2011, the explosion of a waste smelter caused a fire, killing one and injuring four. The accident did not cause any chemical or radioactive discharge. The ASN rated the accident as an INES level-1 accident and decided, on 27 September 2011, to only permit the smelters and incinerators stopped shortly after the accident to be re-started with prior authorisation. On 29 June 2012, ASN authorised SOCODEI to restart the incinerator subject to prior filing with ASN of the full report on the checking operations relating to the compliance of the facilities necessary for the furnace to be safe. Following the accident, several investigations were opened. On 16 September 2011, the Public Prosecutor’s Department in Nîmes opened an inquiry against X for homicide and involuntary injuries and the inquiry is ongoing. The results of the investigations by the Labour Inspectorate and ASN were sent to the Public Prosecutor’s Department and a court expert was appointed. Once the court-ordered expert assessment operations had been completed, the examining magistrate authorised the removal of the seals on the smelter, which meant that the repairs could commence. Pursuant to its decision adopted on 14 January 2014 setting new technical requirements to be met before resuming operations, ASN authorised the restarting of the smelters in a decision issued on 2 April 2015. Following a summons served on its representative to appear before the examining magistrate on 16 September 2015, SOCODEI was placed under investigation for manslaughter. On 13 July 2016, the Public Prosecutor’s Department in Nîmes drew up a brief to the examining magistrate asking for SOCODEI to be committed for trial before the Criminal Court in Nîmes. An initial hearing was set for 17 November and later postponed to 23 February 2017. At the end of the hearing, the Public Prosecutor's department requested a fine of €300 thousand be imposed on SOCODEI for homicide and involuntary injuries. The judgement has been adjourned until 16 March.

Enedis solicited the benefit of its Civil Liability insurance policy. Insurers refused to apply their guarantee. The Court of Cassation ruled in a decision dated 9 June 2015, (Green Yellow) that Enedis’ liability was to be covered by its insurers and that Enedis was liable. However, insurers keep refusing their guarantee for other pending cases. In December 2015, the Court of Appeal in Versailles decided to submit a reference for a preliminary ruling to the Court of Justice of the European Union (CJEU) on the compliance of the 2006 and 2010 pricing orders with European State aid laws. The CJEU dismissed this reference for a preliminary ruling for procedural reasons. On 20 September 2016, the Court of Appeal in Versailles submitted a new reference for a preliminary ruling to the CJEU relating to the compliance of the 2006 and 2010 pricing orders with European state aid laws and stayed the proceedings. Since this decision, Enedis or the insurer routinely applies for a stay of proceedings pending the CJEU’s decision. Various lower and appeal courts have upheld this application. By order dated 15 March 2017, the European Court of Justice confirmed that the orders of 10 July 2006 and 12 January 2010 fixing the purchase prices of electricity of photovoltaic origin constituted “intervention by the State or through the resources of the State”, one of the four criteria for qualifying as state aid. It reiterated that such aid measures implemented without having been previously notified to the Commission are illegal. It is now for the national jurisdictions to implement the consequences of this, particularly by ruling out the application of these illegal orders. The commercial courts and courts of appeal will have to give a ruling in the forthcoming months. ENGIE On 23 December 2016, ENGIE issued proceedings against Enedis with the Commercial Court in Paris in relation to supplier remuneration for management costs for customers holding a single contract (see section 1.4.2.1.4 “Electricity supply contracts”). These proceedings are pending. Quadlogic Corporation Controls On 24 February 2016, Enedis received a claim form issued by an American company, Quadlogic Corporation Controls (“QCC”), before the Regional Court in Paris, in relation to an alleged infringement of a European patent held by QCC. Enedis strongly contests both QCC’s inventive input and the alleged infringement. In November 2017, the Paris Regional Court gave a decision favourable to Enedis and cancelled, for France, the European patent of QCC. TURPE 5 On 2 February 2017, Enedis filed a claim with the Council of State for the rescission of CRE’s decisions regarding TURPE 5 Distribution dated 17 November 2016 and 19 January 2017, published in the Journal Officiel on 28 January 2017. This dispute relates to the level of remuneration of the network operator, the pricing method, the tariff structure and the incentive regulations put in place. On 3 February 2017, EDF, acting as a shareholder of Enedis, also filed a request for annulment with the French Council of State against the same deliberations by the Energy Regulation Commission (CRE). Subsequently (10 March 2017), the Minister of the Environment, Energy and the Sea also brought action for nullification, as did CFE-CGC Energie (April 2017). These proceedings gave rise to statements of defence from the CRE (July and October 2017), and an intervention statement by the association UFC – Que Choisir (August 2017). By a judgment dated 9 March 2018, the French Council annulled the TURPE 5 deliberations in so far as they did not apply the"risk-free rate" to the corresponding assets in determining the cost of capital invested, to works for which provisions for renewal have been allocated during the tariff period covered by the so-called"TURPE 2" tariffs (for their as yet unamortized fraction), and to works handed over by the licensing authorities to the grid operator during the same tariff period (for the same fraction). Such annulment shall not take effect until 1 August 2018. The CRE shall resume a TURPE deliberation taking effect on that date. EDF International Tax disputes The tax inspections of EDF International for fiscal years 2009 to 2014 resulted in a challenge to the valuation of the convertible bonds put in place to refinance the acquisition of British Energy for a total amount of around €345 million. EDF International disputed these grounds for adjustment, against which it considers its chances of success to be likely in litigation.

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EDF I Reference Document 2017