EDF_REGISTRATION_DOCUMENT_2017

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

Due to the Group’s hedging policy for foreign exchange risk on the Group’s gross debt, the income statement for companies controlled by the Group is marginally exposed to foreign exchange rate risk.

The table below sets forth the foreign exchange position relating to net assets in foreign currencies of the Group’s subsidiaries.

NET ASSET POSITION 31 December 2017 (1) (in millions of currencies)

Net assets after management

Net assets

Bonds 3,200

Derivatives

USD

4,426

(1,380)

2,606

CHF (Switzerland)

713

-

468

245

GBP (United Kingdom)

14,411

5,435

(177)

9,153 1,135

CLP (Chile) PLN (Poland) BRL (Brazil) CNY (China)

1,135

- - - -

-

340

305

35

1,066

- -

1,066

10,028 10,028 Net assets as stated at 31 December 2017; bonds and derivatives as stated at 31 December 2017. The net positions shown exclude certain non-significant (1) exposures.

5.

The above table shows the assets of the Group’s foreign subsidiaries in foreign currencies, adjusted for changes in the fair value of cash flow hedges and available-for-sale financial assets recorded in equity, and changes in the fair value of financial instruments recorded in income.

The following table sets forth the risk for equity of foreign exchange losses on net assets in foreign currencies of the Group’s principal subsidiaries at 31 December 2017, assuming unfavourable, uniform exchange rate variations of 10% against the Euro. Net assets are converted at the closing rate and impacts are reported in absolute value.

EXCHANGE RATE SENSITIVITY OF NET ASSETS

At 31 December 2017

At 31 December 2016

Impact on equity of a 10% variation in exchange rates

Impact on equity of a 10% variation in exchange rates

Net assets after management, converted into euros

Net assets after management, converted into euros

Net assets after

Net assets after

management, into currency

management, into currency

(in millions of currencies)

USD

2,606

2,173

217

2,857

2,710

271

CHF (Switzerland)

245

209

21

169

157

16

GBP (United Kingdom)

9,153 1,135

10,316

1,032

8,058 2,607

9,412

941

CLP (Chile) PLN (Poland) BRL (Brazil) CNY (China)

2 8

-

4

-

35

1

164

37

4

1,066

268

27

1,377

401

40

10,028

1,285

129

10,141

1,385

139

The foreign exchange risk on available-for-sale securities is mostly concentrated in EDF’s dedicated asset portfolio, which is discussed in section 5.1.6.1.6 “Management of financial risk on EDF SA’s dedicated asset portfolio”. The foreign exchange risk associated with short-term investments and operating liabilities in foreign currencies remains restricted for the Group at 31 December 2017. Management of interest rate risk 5.1.6.1.4 The exposure of the Group’s net indebtedness to interest rate fluctuations covers two types of risk: a risk of change in the net financial expenses on floating-rate financial assets and liabilities, and a risk of change in the value of financial assets invested at fixed rates. These risks are managed by monitoring the floating-rate

portion of net indebtedness, defined by reference to the risk/return for net financial expenses, taking into consideration expected movements in interest rates. Some of the debt is variabilised and the Group may use interest rate derivatives for hedging purposes. The distribution of exposure between fixed and floating rates is monitored. The Group’s debt after hedging instruments at 31 December 2017 comprised 55.3% at fixed rates and 44.7% at floating rates. A 1% uniform annual rise in interest rates would generate an approximate €254 million increase in financial expenses at 31 December 2017, based on gross floating-rate debt after hedging. The average cost of Group debt (weighted interest rate on outstanding amounts) was 2.95% at the end of 2017.

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EDF I Reference Document 2017