EDF_REGISTRATION_DOCUMENT_2017

FINANCIAL STATEMENTS Notes to the financial statements

1.14

SPECIAL CONCESSION LIABILITIES

the information system, assumptions adopted by the Company, and if necessary experience of similar transactions, or in some cases based on independent expert reports or contractor quotes. The various assumptions are reviewed for each closing of the accounts. The expected costs are estimated based on year-end economic conditions and spread over a forecast disbursement schedule. They are then adjusted to Euros of the year of payment through application of a forecast long-term inflation rate and discounted to present value using a nominal discount rate. The provisions are based on these discounted future cash flows. The rate of inflation and the discount rate are based on the economic and regulatory parameters of France, considering the long operating cycle of EDF’s assets and the maturities of commitments. The discount effect generated at each closing to reflect the passage of time is recorded in financial expenses. In extremely rare situations, a provision cannot be booked due to lack of a reliable estimate. In such cases, the obligation is mentioned in the notes as a contingent liability, unless there is little likelihood of an outflow of resources. back-end nuclear cycle expenses: provisions for spent fuel management, for ■ waste removal and conditioning and long-term radioactive waste management; costs for decommissioning power plants and losses relating to fuel in the reactor ■ when the reactor is shut down (provision for last cores). Last core expenses correspond to 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, and the cost of fuel processing, and removal and storage of the resulting waste. Changes in provisions resulting from a change in discount rates, a change in the disbursement schedule or a change in contractor quote are recorded: as an increase or decrease in the corresponding assets, up to the net book value, ■ if the provision was initially covered by balance sheet assets (decommissioning of plants still in operation, long-term management of the radioactive waste resulting from such decommissioning, and last cores); in the income statement in all other cases. ■ Detailed information on the principles for determining provisions related to nuclear generation is given in note 28. losses relating to multi-year agreements for the purchase and sale of energy: ■ losses on energy purchase agreements are measured by comparing the ■ acquisition cost under the contractual terms with the forecast market price, losses on energy sale agreements are measured by comparing the ■ estimated income under the contractual terms with the cost of the energy to be supplied; unrealised foreign exchange losses; ■ risks relating to subsidiaries and affiliates; ■ Provisions related to nuclear generation 1.15.1 These provisions mainly cover the following: Other provisions 1.15.2 These provisions mainly cover:

These liabilities relate mostly to public electricity distribution concessions for the Island Energy Systems (SEI), and hydropower concessions.

1.14.1

Special public electricity distribution

concession liabilities – SEI These liabilities represent the contractual obligations specific to the concession rules for public electricity distribution concessions, recognised in the liabilities as: rights in existing assets: these correspond to the grantor’s right to recover all ■ assets for nil consideration. This right comprises the value in kind of the facilities - the net book value of assets operated under concession - less any as yet unamortised financing provided by the operator; rights in assets to be replaced: these correspond to the operator’s obligation to ■ contribute to the financing of assets due for replacement. These non-financial liabilities comprise: depreciation recorded on the portion of assets financed by the grantor, ■ the provision for renewal, exclusively for assets due for renewal before the ■ end of the concession. This provision is included in provisions for expenses. When assets are replaced, the provision and amortisation of the grantor’s financing recorded in respect of the replaced item are eliminated and transferred to the rights in existing assets, since they are considered as the grantor’s financing for the new asset. Any excess provision is taken to income. During the concession, the grantor’s rights in assets to be replaced are thus transferred upon the asset’s renewal to become the grantor’s rights in existing assets, with no outflow of cash to the benefit of the grantor. 1.14.2 These liabilities comprise: the value of assets remitted for nil consideration and contributions ■ received; differences arising from revaluations in accordance with French legislation ■ for fixed assets commissioned before 1 January 1959 and before 1 January 1977; additional depreciation to industrial depreciation for facilities that are to be ■ returned for nil consideration at the end of the concession but whose useful life extends beyond the concession term. Following the changes made to the accounting treatment of hydropower concessions at 1 January 2009, the 1959 revaluation reserve is transferred to equity when the assets concerned are retired. The net revaluation reserve generated by the 1976 revaluation is taken to income over the residual useful life of the assets concerned. The value of assets remitted for nil consideration and contributions received are transferred to the income statement over their useful lives. Special hydropower concession liabilities EMPLOYEE BENEFIT PROVISIONS EDF recognises provisions when it has a present obligation (legal or constructive) arising from a past event, an outflow of resources will probably be required to settle the obligation, and the obligation amount can be estimated reliably. If it is anticipated that all or part of the expenses covered by a provision will be reimbursed, the reimbursement is recognised under receivables if and only if EDF is virtually certain of receiving it. Provisions are determined based on the Company’s expectation of the cost necessary to settle the obligation. Estimates are based on management data from PROVISIONS OTHER THAN 1.15

6.

tax risks; ■ litigation; ■ costs of decommissioning of fossil-fired and hydropower plants; ■

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EDF I Reference Document 2017