EDF_REGISTRATION_DOCUMENT_2017

6.

FINANCIAL STATEMENTS Notes to the consolidated financial statements

a “Public Energy Service” item of €3 billion in the general budget to cover ■ solidarity charges borne by gas and electricity suppliers, costs associated with purchase obligations excluding renewable energies (essentially cogeneration), and the cost of applying the standard national tariffs to zones that are not connected to France’s mainland network. The interest on the accumulated shortfall to be repaid to EDF is also funded through the general budget. From 2018, the “basic necessity” rates for electricity and the “special solidarity” rates for gas will gradually be phased out and replaced by an energy voucher system. The cost of this system will no longer be borne by EDF SA, although it has been budgeted by the State in the “Public Energy Service” programme. However, EDF will bear charges in 2018 due to the timing of invoicing for 2017 basic necessity rates. In 2018, this mechanism is funded as follows: the costs linked to the energy transition, which correspond to the subsidy ■ mechanisms for renewable energies, and the reimbursement of the past accumulated shortfall in compensation borne by EDF as measured at 31 December 2015, are registered in a special “energy transition” budget item created by the amended finance law for 2015. Law no. 2016-1917 of 29 December 2016 (the finance law for 2017) stipulated that the two sources of additional funding for this special budget item would be a portion of the domestic tax on coal, lignite and coke (TICC), and a portion of the domestic tax on energy products (TICPE). The finance law for 2018 replaces the percentages of the TICC and TICPE by a set amount, to avoid the uncertainties of forecast income from these taxes, and broadens the sources of funding for the “Energy transition” Budget item to include the proceeds of auctions of Guarantees of Origin as allowed by article L. 314-14-1 of the Energy Code; other public service charges – excluding costs associated with the subsidy ■ mechanisms for renewable energies (fuel poverty, tariff equalisation in zones that are not connected to France’s mainland network, cogeneration, the budget for the energy ombudsman, etc.) are registered directly in the general budget; income generated by the domestic tax on the final consumption of electricity, ■ now renamed the Contribution to Public Electricity Service (Contribution au Service Public de l’Electricité – CSPE) goes directly into the general budget. The CSPE is collected directly from final consumers of electricity in the form of an additional levy on the electricity sale price (and collected from electricity suppliers), or directly from electricity producers that produce electricity for their own uses. The level of the CSPE is set at the same level in 2018 as in 2017 with the full rate at €22.5/MWh, and seven reduced rates ranging from €7.5/MWh to €0.5/MWh depending on criteria of electro-intensiveness, business category and the risk of carbon leakage from installations (the risk of industries relocating to countries where greenhouse gas emissions are higher due to their electricity mix). The costs associated with conclusion and management of purchase obligation contracts are eligible for compensation in 2018, as they were in 2017. This concerns an annual amount of around €45 million. The amended French finance law for 2017 applied a downward adjustment to the amounts of compensation paid by the State for public service charges in 2017: these charges had decreased substantially due to a rise in electricity market prices between the July 2016 and July 2017 estimates for 2017, which automatically narrowed the differential between the purchase tariff and the market price for electricity. Public service charges borne by EDF The amount of expenses (excluding the annual contribution to repayment and associated interest) to be compensated to EDF for 2017 is €6,558 million, up slightly from 2016 due to higher wind and solar power output. The amounts received over 2017 (excluding the annual contribution to repayment and associated interest) totalled €7,065 million, higher than 2016, mainly as a result of the State’s decision to defer the €414 million compensation payment to EDF out of the “Energy Transition” budget item. The effects of this deferral on funding via

the “Energy Transition” budget item for 2017 were adjusted through a budget carryover decision of 28 March 2017. A repayment schedule for EDF’s receivable corresponding to the accumulated shortfall in compensation, which amounted to €5,780 million at 31 December 2015, was set out in the ministerial decision of 13 May 2016, amended on 2 December 2016. Under this schedule the receivable will be fully repaid by 2020. On 22 December 2016 EDF securitised a portion of this receivable (€1.5 billion) through a State-approved “Dailly law” assignment. Consequently, since 1 January 2017 EDF has received a 73.6% share of payments made by the State in reimbursement of the receivable as set out in the repayment schedule. The remainder is paid directly to the assignees. At 31 December 2017, the State had paid €881 million of the €904 million due for 2017. The outstanding €23 million were paid on 2 January 2018. Finally, in accordance with decree 2016-158 of 18 February 2016 concerning compensation for public energy service charges, on 13 July 2017 the CRE published a decision recording the public service charges for 2016 (€6,345 million) and providing a revised forecast of charges for 2017 (€6,698 million) and a forecast of charges for 2018 (€7,390 million). 4.4 On 13 November 2015, the European Commission opened an in-depth investigation into the proposed French capacity mechanism in order to decide whether it complied with EU state aid rules. On 8 November 2016, the European Commission authorised France’s proposals for its capacity mechanism. In the course of the investigation France had agreed to modify its mechanism in the following ways: introducing long-term (7-year) contracts for new capacities, admitting foreign capacities, and taking measures to prevent any market manipulation. Two auctions of capacity for 2017 were held on the European Power Exchange EPEX SPOT, on 15 December 2016 and 27 April 2017. The volumes traded and the prices between obligated capacity purchasers and operators selling capacity amounted to 22.6GW in December 2016 for the price of €10/kW (the market reference price for 2017) and 0.5GW in April 2017 for the price of €10.42/kW. The capacity price is passed on to customers through their contracts with EDF as supplier, or with other suppliers. This price is already included in bills for customers on market-price contracts. For customers on regulated sales tariffs, the cost of capacity was incorporated into the tariff change of 1 August 2017. Auctions for 2018 capacities took place in November 2017 (10.96GW were traded at the price of €9.31 /kW) and December 2017 (10.25GW were traded at the price of €9.38/kW), determining the market reference price for 2018 as €9.34/kW. The first capacity auction relating to 2019 was also held in December 2017, and concerned a volume of 1.22GW traded at the price of €13/kW. In 2018, additional auctions will take place concerning capacity for 2017 and 2018 (rebalancing between actors) and later years (2019 to 2022). IN FRANCE By a decision of 19 July 2017 the Council of State cancelled the decree of 16 May 2013 concerning regulated sales tariffs for natural gas, on the grounds that keeping tariffs at such levels is contrary to European Union law. These gas tariffs did not meet the requirements laid down by Directive 2009/73/EC, and in particular they did not pursue any objective in the general economic interest. However, while this decision cancelled the disputed decree, it did not cancel the regulatory provisions of the Energy Code concerning regulated gas sales tariffs, which took effect on 1 January 2016. FRENCH CAPACITY MECHANISM REGULATED GAS SALES TARIFFS 4.5

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EDF I Reference Document 2017