EDF_REGISTRATION_DOCUMENT_2017

6.

FINANCIAL STATEMENTS Income Statement

France – Generation and supply The integrated management and interdependence of the different generation facilities that make up the French fleet (nuclear, thermal and hydropower plants), independently of their maximum technical capacities, have led the Group to consider the entire fleet as a single CGU. This CGU does not include any goodwill. Even when there is no indication of any loss of value, an impairment test is performed due to the highly significant value of this CGU in the Group’s financial statements and its substantial exposure to market prices since discontinuation of the “yellow” and “green” regulated tariffs on 1 January 2016. The recoverable value of the generation fleet is estimated by discounting future cash flows under the Group’s usual methodology, described in note 1.3.15, over the assets’ useful life, using an after-tax WACC of 5.2%. For nuclear assets, the Group’s basic valuation assumes that the useful life will be extended to 50 years, in line with its industrial strategy. The nuclear capacity remains subject to a ceiling of 63.2GW under France’s Energy Transition Law. The assumption of stable returns on capacity of €10/kW (in 2016 prices) is adopted in keeping with the price set for the latest French capacity mechanism auction, which was held on the EPEX Spot market. The impairment test led to recognition of a significant positive difference between the recoverable value and the book value of the generation fleet in France, supported by the slight rise in electricity prices on the market horizon and implementation of savings plans. The key assumptions used in the test are the useful life of nuclear assets, the medium and long-term price scenario, the discount rate, developments in costs and investments, and the assumed capacity premium. Each of these assumptions has been subjected to a sensitivity analysis, which does not call into question the existence of a positive difference between the recoverable value and book value. France – Impairment of specific assets The Group also recognised impairment of €(73) million on specific assets, notably relating to certain real estate assets and hydropower projects. Finally, impairment of €(618) million was booked in respect of associates at 31 December 2017. Details are given in note 23.

In 2015, €(1,419) million of impairment was recorded on Edison’s electricity generation assets (thermal and renewable energy plants) and exploration and production assets. Additional risks amounting to €(160) million were identified in 2016 in relation to exploration and production assets and hydropower assets. At 31 December 2017, the recoverable value of most assets was stable or showing a small improvement in a slightly more favourable short-term market environment, and also thanks to controlled cost and investment trajectories. However, additional risks amounting to €(150) million were identified in 2017 concerning (i) certain exploration-production fields adversely affected by a deterioration in macro-economic parameters (the Euro-dollar exchange rate, the country risk premium). For information, a 1% variation in the Euro/dollar exchange rate would have an impact of approximately €10 million on the recoverable value, expressed in euros, of exploration and production assets the generate cash flows in dollars. Sensitivity analyses conducted as part of the impairment tests produced the following information: for electricity generation assets, a 10% decrease in electricity prices or a 50 ■ base point increase in the WACC would cause a maximum risk of around €(30) million, or less than 2% of the book value of these assets; for exploration and production assets, a 5% decrease in commodity prices ■ would generate an additional risk of some €(30) million.

Other activities EDF Énergies Nouvelles

In 2017, impairment of €(29) million was recorded in respect of the various CGUs of EDF Énergies Nouvelles (this mainly concerned a US company specialising in

batteries). Dalkia

Dalkia’s goodwill amounted to €536 million at 31 December 2017, and mainly resulted from acquisition of the Dalkia group in France under the agreement of 25 March 2014 with Veolia Environnement. The recoverable value of the Dalkia group is based on future cash flows projected over a medium-term horizon, and a terminal value that represents cash flow projections to infinity. Using updated assumptions for 2017, the recoverable value remains higher than the book value. The key parameters of the test are the calculation method for the terminal value, and the discount rate: both were subjected to sensitivity analyses and the results did not affect the positive difference between the recoverable value and the book value. The Dalkia brand, recognised as an asset when the Group took control of Dalkia in 2014 at the value of €130 million, is estimated by the royalties relief method. An updated test at 31 December 2017 showed that this book value is justified.

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EDF I Reference Document 2017