EDF_REGISTRATION_DOCUMENT_2017

5.

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

Net indebtedness 5.1.5.2 Net indebtedness comprises total loans and financial liabilities, less cash and cash equivalents and liquid assets. Liquid assets are financial assets consisting of funds or securities with initial maturity of over three months that are readily convertible into cash and are managed according to a liquidity-oriented policy.

The Group’s net indebtedness stood at €33,015 million at 31 December 2017 compared to €37,425 million at 31 December 2016.

Variation (%)

2017

2016 Variation

(in millions of euros)

Operating profit before depreciation and amortisation (EBITDA)

13,742 (1,796) (1,209)

16,414 (1,703) (1,137)

(2,672)

-16.3

Cancellation of non-monetary items included in EBITDA

Net financial expenses disbursed

Income taxes paid

(771)

(838)

Other items including dividends received from associates and joint ventures

221

323

10,187

13,059 (1,935) (11,663)

(2,872)

-22.0

Operating cash flow (1) Change in working capital

1,476

Net investments (2)

(9,810)

Cash flow after net investments

1,853

(539)

Dedicated assets

(1,171)

10

Cash flow before dividends (3)

682

(529)

Dividends paid in cash

(891) (209) 3,855

(1,036) (1,565)

Group cash flow

Other monetary changes

549

(Increase)/decrease in net indebtedness, excluding the impact of changes in exchange rate

3,646

(1,016)

Effect of change in exchange rates Effect of other non-monetary changes (Increase)/decrease in net indebtedness Net indebtedness at beginning of period NET INDEBTEDNESS AT END OF PERIOD

701

1,107 (121)

63

4,410

(30)

37,425 33,015

37,395

37,425 Operating cash flow is not an aggregate defined by IFRS as a measure of financial performance, and is not directly comparable with indicators of the same name (1) reported by other companies. This indicator, also known as Funds From Operations (“FFO”), is equivalent to net cash flow from operating activities excluding changes in working capital after adjustment where relevant for the impact of non-recurring effects, less net financial expenses disbursed and income taxes paid. Net investments are operating investments and financial investments for growth, net of disposals. They also include net debts acquired or transferred in (2) acquisitions or disposals of securities, investment subsidies received, non-Group partner investments, Linky, new developments and 2015-2020 assets disposal plan. Cash flow before dividends is not an aggregate defined by IFRS as a measure of financial performance, and is not comparable with indicators of the same name (3) reported by other companies. It is equal to the operating cash flow defined in note (1) after the change in working capital, net investments defined in note (2), and net allocations to dedicated assets.

Operating cash flow 5.1.5.2.1 The operating cash flow amounted to €10,187 million in 2017 compared to €13,059 million in 2016, a decrease of €2,872 million (-22.0%). This change mainly reflects: the lower EBITDA (-€2,672 million); ■ an increase in net financial expenses disbursed (-€1,209 million in 2017 against ■ -€1,137 million in 2016), essentially explained by the full-year effect in 2017 of the bond issues made in October 2016, and the bond issues of early 2017; a decrease in income taxes paid (-€771 million in 2017 versus -€838 million ■ in 2016), mainly due to lower taxable income in the United Kingdom; a decrease in “Other items including dividends received from associates and ■ joint ventures” (€221 million in 2017 against €323 million in 2016), principally due to the lower level of dividends received after the sale of 49.9% of CTE in March 2017.

Change in working capital 5.1.5.2.2 Working capital improved by €1,476 million in 2017. This change is mainly explained by:

receipts of +€814 million for adjustment of 2014 French regulated sales tariff; ■ gains resulting from the working capital improvement plan, essentially on ■ inventories and trade receivables (approximately +€422 million); favourable weather effects in France (+€228 million). ■ The difference between the 2016 and 2017 change in working capital (+€3,411 million) is explained by the effect of the 2014 French regulated sales tariff adjustment (+€1,753 million) and a favourable weather effect in France (+€963 million). It also reflects a reduction in inventories of the optimisation and trading activity in 2017 (+€460 million) due to the disposal of the coal trading activity (EDF Trading) and the sale of EDF Polska’s assets to PGE.

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EDF I Reference Document 2017