EDF_REGISTRATION_DOCUMENT_2017

6.

FINANCIAL STATEMENTS Notes to the financial statements

FRENCH CAPACITY MECHANISM 3.3 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 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 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. Therefore, as things currently stand the regulated sales tariffs for gas remain in force until the Prime Minister takes steps to have those provisions repealed. REGULATED GAS SALES TARIFFS 3.4

3.5

ENERGY SAVINGS CERTIFICATES:

FOURTH PERIOD (2018-2020) Decree 2017-690 of 2 May 2017 issued by the French Ministry for the Environment, Energy and the Sea, published in the Journal officiel on 3 May 2017, sets the obligation levels for the fourth period of energy savings obligations to run from 1 January 2018 to 31 December 2020. The overall level of obligations for this three-year period is substantially increased by the decree: 1,200TWhc for the “standard” obligations and 400TWhc for the obligations that are to benefit households in situations of energy poverty, compared to 700TWhc and 150TWhc respectively for the previous period. Energy sellers may fulfil their obligation in three ways: by supporting consumers in their energy efficiency operations, funding Ministry-approved energy savings certificate schemes, and purchasing certificates from eligible actors. Any surplus “stock” of certificates gained in the previous period also contributes to fulfilment of the obligation. If there is a shortfall at the end of the period, obligated actors must pay the Treasury the fine of €15 per MWhc of shortfall laid down in Article L. 221-4 of the Energy Code, approximately three times the current cost of the standard obligation. EDF will make every effort to gradually increase its number of certificates in order to meet the objectives set by the State. However, the significant increase in obligations combined with the current lack of depth in the energy savings certificates market, whose future liquidity is uncertain, expose EDF to the risk of a shortfall in certificates for the fourth period. 3.6 After the large number of ARENH applications in November/December 2016, confirmed in the May 2017 session, for a total delivery of some 82TWh in 2017, ARENH applications in November 2017 for 2018 deliveries totalled 94.6TWh. Applications due to network losses rose substantially (from 0.7TWh in 2017 to 9.2TWh in 2018) due to a recent change in the rules. The volume requested by alternative suppliers amounted to 85.4TWh, an increase of around 4TWh over 2017. This subscription volume results from the prices in force since the end of the third quarter of 2017 for 2018 deliveries, and is also attributable to the fact that ARENH includes delivery of a capacity guarantee. ARENH

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EDF I Reference Document 2017