EDF_REGISTRATION_DOCUMENT_2017

5.

THE GROUP'S PERFORMANCE IN 2017 AND FINANCIAL OUTLOOK Operating and financial review

In Belgium , spot prices were up by €8/MWh compared to 2016, with an average price of €44.6/MWh. This rise was boosted by first-quarter and second quarter prices which showed year-on-year increases of €23.3/MWh (+81.8%) and €8.6/MWh (+31.7%) respectively, while third-quarter and fourth-quarter prices were generally stable (+€1.6/MWh and -€1.3/MWh respectively).

output is high, consumption relatively low and export channels saturated. Since some generation facilities have little room for manoeuvre to adjust output levels, some operators prefer to pay rather than shut their plants down. The average France-Germany spread was €10.8/MWh, up by €3.0/MWh from 2016. The greater spread is essentially due to high prices in January and the final quarter, notably due to the wave of cold weather in January, and lower nuclear output towards the end of the year.

Forward electricity prices in Europe (1) 5.1.2.1.2

United Kingdom Italy Germany Belgium

France

Average forward baseload price under the 2018 annual contract for 2017 (€/MWh) Variation in average forward baseload price under the annual contracts, 2017/2016 Forward baseload price under the 2018 annual contract at 27 December 2017 (€/MWh) Average forward peakload price under the 2018 annual contract for 2017 (€/MWh) Variation in average forward peakload price under the annual contracts, 2017/2016 Forward peakload price under the 2018 annual contract at 27 December 2017 (€/MWh)

38.2

49.8 46.6

32.4

37.2

14.6% 3.9% 13.2% 21.7% 11.6%

43.9 50.0

52.9 54.2 55.6 52.8

37.7 40.5

44.3 47.9

11.8% 1.1% 12.1% 20.7% 10.1%

55.3

57.8 61.4

46.9

55.3

Average annual contract prices for baseload and peakload electricity in Europe were higher in 2017 than 2016. The increase was mainly attributable to the rise in coal and CO 2 prices. After a dip in the first half-year, prices recovered in the second half-year, with particularly marked movements in the autumn. In France , the average annual year-ahead contract baseload price was €38.2/MWh, up by 14.6% from 2016, principally due to the rise in commodity prices. Prices remained higher than in 2016 overall except in November, due to the sudden price leap of November 2016. 2018 annual contract prices were fairly steady until mid-August, then saw a steep rise due to the ASN's announcements about the French nuclear fleet and the increase in commodity prices, mainly concerning coal and CO 2 . As the November round of ARENH applications approached, prices settled at around €42/MWh. The annual contract price for delivery in 2018 ended the year 2017 at €43.9/MWh (baseload), €6.4/MWh higher than at the start of the year. To guarantee secure electricity supply, a capacity mechanism was set up from 1 January 2017. This system remunerates producers and demand response managers for availability in periods of particular demand. Suppliers must acquire capacities to cover their customers' needs at such peak demand periods. After the 2016 auction for 2017 deliveries, which provided the market reference price of €10/kW, a second auction took place in April for 2017 deliveries, resulting in a price of €10.42/kW. The first EPEX auctions of capacities for 2018 took place on 9 November and 14 December 2017, leading to a market reference price of €9.34/kW for capacity for 2018. The first capacity certificates for 2019 were traded at the December auction at the price of €13/kW. In the United Kingdom , the April Ahead contract baseload price in Euros for 1 April Y+1 to 31 March Y+2 was an average 3.9% higher than in 2016. Prices reflected the fluctuations in natural gas prices, as gas-fired facilities make a

significant contribution to the formation of British electricity prices. This increase was accentuated by the pound sterling's decline of almost 4% against the euro in the context of Brexit negotiations, which had an impact of close to €2/MWh on the UK's annual contract. In late June, the operator Centrica announced the permanent closure of the Rough storage site, the largest in the United Kingdom, after several technical problems. The site had already been declared unavailable for injections for a one-year period from April 2017. The annual contract price ended the year at €52.9/MWh, down by €1.2/MWh from 2016 when tensions over supply temporarily pushed prices up. In Germany , the average annual contract baseload price registered rise of 21.7%, rising from €30.1/MWh at the start of the year to €37.7/MWh at the end of the year. German prices generally followed the same pattern as French prices over the year, but were more affected by the higher commodity prices, particularly the significant increase late in the year in coal prices, which play a large role in the German energy mix, and CO 2 prices. The German “calendar” became uncoupled from the French “calendar” during tensions concerning the French nuclear fleet, but the France-Germany spread then narrowed. The renewable energy capacities in Germany (wind power and photovoltaic power) expanded further to reach almost 98GW. In Italy , the average annual contract baseload price rose by 13.2% to €46.6/MWh in 2017, ending the year at €54.3/MWh, up by €10.2/MWh from the start of the year. This increase is explained by the rise in gas prices, which are a major factor in electricity prices in Italy. In Belgium , the average annual contract baseload price was 11.6% higher than in 2016, following the same trend as commodity prices to reach €37.2/MWh, despite the resumption of operations by the Doel 1, Doel 3 and Tihange 1 nuclear reactors in Belgium, which were taken offline during the first half of 2016.

France and Germany : average year-ahead EEX price; (1) Belgium and Italy : average year-ahead EDF Trading price; United Kingdom : average ICE annual contract prices, April 2016 then April 2017 (in the UK, annual contract deliveries take place from 1 April to 31 March).

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EDF I Reference Document 2017