EDF_REGISTRATION_DOCUMENT_2017

FINANCIAL STATEMENTS Income Statement

At the request of the ASN, an independent expert review was ordered in the first quarter of 2017 to analyse EDF’s chosen solutions for decommissioning of its 6 UNGG reactors. The conclusions did not challenge the main options chosen. A meeting took place with the ASN commissioners in June 2017 based on these conclusions and a justification file remitted by EDF in March. This led to a further presentation in 2018 after EDF remitted another file presenting a detailed schedule for operations to be undertaken in the next 15 years, and the findings of a large number of studies concerning the stability of reactor buildings in the long term. The strategy file and the safety option report concerning establishment of a secure configuration were sent to the ASN in late December 2017, together with the detailed timetable for operations over the period 2017-2032. Updating the industrial decommissioning scenario for first-generation power plants, particularly UNGGs, led to a €590 million increase in the provision at 31 December 2015. After the revision of the estimated cost in 2015, the decision was made that it should be reviewed annually. The 2016 review led to non-significant adjustments, apart from one increase of €125 million for a specific installation (the Irradiated Materials Workshop at Chinon). The 2017 review led to non-significant adjustments. Provisions for last cores 29.1.4 These provisions cover the future expenses resulting from scrapping fuel that will only be partially irradiated when the reactor is shut down. It is measured based on: the cost of the loss on fuel in the reactor that is not totally spent at the time of ■ final reactor shutdown and cannot be reused due to technical and regulatory constraints; the cost of fuel processing, and waste removal and storage operations. These ■ costs are valued in a similar way to provisions for spent fuel management and long-term radioactive waste management. These unavoidable costs are components of the cost of nuclear reactor shutdown and decommissioning. As such, they are fully covered by provision from the commissioning date and an asset associated with the provision is recognised. The discount rate is determined based on long-series data for a sample of bonds with maturities as close as possible to that of the liability. However, some expenses covered by these provisions will be disbursed over periods significantly longer than the duration of instruments generally traded on the financial markets. The benchmark used to determine the discount rate is the sliding 10-year average of the return on French OAT 2055 treasury bonds which have a similar duration to the obligations, plus the spread of corporate bonds rated A to AA, which include EDF. The methodology used to determine the discount rate, particularly the reference to sliding 10-year averages, is able to prioritise long-term trends in rates, in keeping with the long-term horizon for disbursements. The discount rate is therefore revised in response to structural developments in the economy leading to medium and long-term changes. The assumed inflation rate is determined in line with the forecasts provided by consensus and expected inflation based on the returns on inflation-linked bonds. The discount rate determined in this way is 4.1% at 31 December 2017, assuming inflation of 1.5% (4.2% and 1.5% respectively at 31 December 2016), giving a real discount rate of 2.6% at 31 December 2017 (2.7% at 31 December 2016). Discounting of provisions related to nuclear generation and sensitivity analyses 29.1.5 Discount rate 29.1.5.1 Calculation of the discount rate

Such series effects are comparable in nature to the effects observed during construction of the fleet, in terms of studies or component manufacturing plants. For example, for the 900MW fleet, a series effect of approximately 20% is expected between the first-of-kind reactor with 2 units and an average 2-units reactor. Series and mutualisation effects in particular explain why it is not appropriate simply to compare the average decommissioning cost per reactor between the French fleet and other countries’ nuclear fleets. The figures only marginally reflect changes in productivity and the learning effect. The external audit of the decommissioning cost for the fleet currently in operation, ordered by the DGEC, considered that the learning effect incorporated into the estimate was conservative. For reasons of prudence, the estimate also includes an assessment of risks, contingencies and uncertainties. The Group considers that the work done to revise the estimate answers the recommendations issued after the audit. The approach adopted and its results have been presented to the administrative authority and are currently the subject of further questions and discussion. EDF is also continuing to support its analyses through an international comparison, making it sure it takes into consideration a number of factors that could distort direct comparisons, for example differences in the scope concerned by costs estimate, or national and regulatory contexts. The results of this detailed approach led to limited changes overall in the cost estimate and the associated provisions at 31 December 2016, apart from the consequences of the change in the depreciation period for 900MW series plants (excluding Fessenheim) at 1 January 2016, and the effect of changes in discount rates at 31 December 2016, i.e.: an increase of €321 million in the estimated decommissioning costs and an ■ increase of €334 million in the estimated cost of long-term management of long-lived medium-level waste; a decrease of €(451) million in the provision for plant decommissioning, and an ■ increase of €162 million in the provision for long-term management of long-lived medium-level waste, with corresponding changes in the underlying assets. After its revision in 2016, it was decided that the estimate would be reviewed annually. The 2017 review led to non-significant adjustments. For permanently shut-down nuclear power plants Unlike the PWR fleet currently in operation, the first-generation reactors now shut down used a range of different technologies: a PWR reactor at Chooz A, UNGG (natural uranium graphite gas-cooled) reactors at Bugey, St-Laurent and Chinon, a heavy water reactor at Brennilis, and a sodium-cooled fast neutron reactor at Creys-Malville. The decommissioning costs are based on contractor quotes, which take account of accumulated industrial experience, unforeseen and regulatory developments, and the latest available figures. In 2015 the industrial decommissioning strategy for UNGG plants was totally revised. The previously selected strategy was based on a scenario involving “underwater” dismantling of caissons (UNGG reactor buildings) for four of the reactors, with direct graphite storage in a centre currently under examination by ANDRA (see Long-lived low-level waste, note 29.1.2). Several new technical developments showed that the alternative “in-air” dismantling solution for the caissons would improve industrial control of operations and was apparently more favourable in terms of safety, radioprotection and environmental impact. The Company therefore selected a new “in-air” dismantling scenario as the benchmark strategy for all six caissons. This scenario includes a consolidation phase, building on experience acquired from dismantling the first caisson before beginning work on the other five. The decommissioning phase will ultimately be longer than previously planned, leading to higher contractor quotes due to the induced operating costs. The amended industrial scenario was presented to the ASN’s commissioners on 29 March 2016.

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EDF I Reference Document 2017