EDF_REGISTRATION_DOCUMENT_2017

6.

FINANCIAL STATEMENTS Balance Sheet

PROVISIONS FOR LAST CORES 28.4 These provisions cover the future expenses resulting from scrapping fuel that will only be partially irradiated when the reactor is shut down. They are 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 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). (2) Regulatory discount rate limit The discount rate applied must also comply with two regulatory limits. Under the amended decree of 23 February 2007 and the ministerial order of 21 March 2007, itself modified by the order of 29 December 2017, the discount rate must be lower than: a regulatory maximum, set until 31 December 2026 as the weighted average of ■ two terms, the first set at 4.3%, and the second corresponding to the arithmetic average over the 48 most recent months of the TEC 30-year rate plus 100 points. The weighting given to the first constant term of 4.3% reduces on a straight-line basis from 100% at 31 December 2016 to 0% at 31 December 2026; and the expected rate of return on assets covering the liability (dedicated assets). ■ The ceiling rate based on the TEC 30-year rate is 4.1% at 31 December 2017 (4.3% at 31 December 2016). The discount rate used at 31 December 2017 is 4.1%. to macro-economic assumptions Sensitivity to assumptions concerning costs, inflation rate, long-term discount rate, and disbursement schedules can be estimated through comparison of the gross amount estimated under year-end economic conditions with the present value of the amount. Analysis of sensitivity 28.5.2

28.5

DISCOUNTING OF PROVISIONS RELATED TO NUCLEAR GENERATION AND SENSITIVITY ANALYSES

Discount rate 28.5.1 (1) Calculation of the discount rate

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.

2017

2016

Amounts in provisions at present value

Amounts in provisions at present value

Costs based on year-end economic conditions

Costs based on year-end economic conditions

(in millions of euros)

Spent fuel management

19,058

10,786

18,460

10,658

Provisions for removal and conditioning of waste Long-term radioactive waste management BACK-END NUCLEAR CYCLE EXPENSES Decommissioning provisions for nuclear power plants in operation Decommissioning provisions for shut-down nuclear power plants

1,203

726

-

-

29,396 49,657

8,814

29,631 48,091

8,966

20,326

19,624

20,563

11,616

20,185

10,899

6,472 4,332 31,367

3,304 2,387 17,307

6,431 4,344 30,960

3,223 2,287 16,409

Provisions for last cores

DECOMMISSIONING AND LAST CORE EXPENSES

This approach can be complemented by estimating the impact of a change in the discount rate on the present value.

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EDF I Reference Document 2017