EDF_REGISTRATION_DOCUMENT_2017

RISK FACTORS AND CONTROL FRAMEWORK Risks to which the Group is exposed

At the same time, the competent authorities or certain governments could, in order to maintain or enhance competition in certain energy markets, take decisions contrary to the Group’s economic or financial interests or that impact its model as an integrated operator (see in particular, section 1.5.3.1, “European legislation” and section 2.4.1 “Legal proceedings concerning EDF”). Although EDF complies, and will continue to comply, with the laws and regulations applicable in terms of competition and non-discrimination, competitors have initiated or may initiate litigation for non-compliance with these rules, which could be decided in a direction unfavourable to the interests of the Group. Changes to regulations concerning energy savings certificates (“ESC”) could impose additional obligations on EDF and generate costs in relation thereto. In France, the energy savings certificates (ESC) measure, which is set out in Article L. 221-1 et seq. of the French Energy Code, imposes energy savings obligations on energy sellers. It sets a three-year energy savings target in terms of volumes for those bound by the obligations and financial penalties in case of failure to meet the targets. The Energy Transition for Green Growth Act of 17 August 2015 amended the EEC scheme for the third period of the scheme by adding to the original obligation a supplementary scheme for energy savings for households in situations of fuel poverty. Decree no. 2017-690 of 2 May 2017 fixes, over the period 2018-2020, the overall level of obligations, with a doubling of objectives compared to the third period (see section 1.5.6.1 “General regulations that are applicable to the environment, health, hygiene and safety”). Regulated tariffs for the sale of electricity are increasing by an average of 0.8% on the first of February 2018, for residential customers and small professionals. This increase, decided by the French government, is compliant with the proposal from the Energy Regulation Commission (CRE) dated 11 January 2018, notably to take into account the increased obligation incumbent upon suppliers in matters of energy savings certificates. An increase in competition between energy suppliers, the economic crisis or a reduction in the main sources of energy savings could cause an additional difficulty in reaching this three-year objective. The Group cannot guarantee that the commercial costs incurred in meeting the three-year target will be fully passed on in energy prices, which would be detrimental to the Group’s financial position. Laws and regulations that require transmission and distribution activities to be managed independently limit control over these activities. In accordance with current laws and regulations, EDF manages its transmission network independently from its generation and marketing activities and has transferred its transmission activity to a subsidiary. Since the creation of the subsidiary on 1 September 2005, RTE has been the owner and manager of the French electricity transmission network, which it operates, maintains and develops. On 31 March 2017, EDF finalised the disposal of 49.9% of the share capital of the Company that had held all shares in RTE since December 2016. At the end of the transaction, EDF, the Caisse des Dépôts and CNP Assurances were co-shareholders of the Coentreprise de Transport d’Electricité holding all of the capital of RTE. As RTE is a regulated subsidiary, managed independently according to the provisions of the French Energy Code, EDF is likely to be affected by limits or loss of control over certain strategic and operational decisions, which may have an impact on the outlook for and profitability of its transmission activity in France (see section 1.5 “Legislative and regulatory environment”). At the same time, in accordance with the provisions of the French Energy Code, EDF will continue, in its capacity as shareholder, to bear certain risks related to the activity of RTE and will retain possible liabilities in relation to third parties and to elements that could affect the profitability of assets. In accordance with current laws and regulations, EDF manages its distribution network independently from its generation and marketing activities and has transferred its distribution activity to a subsidiary. Distribution is carried out by Enedis, whose main purpose is the operation and development of the public energy distribution network. Enedis has been operational since 1 January 2008. As Enedis is a regulated subsidiary, managed independently according to the provisions of the French Energy Code, EDF is likely to be affected by limits or loss of control over

certain strategic and operational decisions, which may have an impact on the outlook for and profitability of its distribution activity in France (see section 1.5 “Legislative and regulatory environment”). At the same time, in accordance with the provisions of the French Energy Code, EDF will continue, in its capacity as shareholder, to bear certain risks related to the activity of Enedis and will retain possible liabilities in relation to third parties and to elements that could affect the profitability of assets. The Group may face similar risks in countries or regions where it owns or manages transmission or distribution networks and where it is subject to similar regulatory restrictions. The development of an integrated European electricity market could be hampered by a delay in the necessary adaptations of the European electricity system. The development of an integrated European electricity market relies in particular on the adaptation of the European electricity system, in particular in terms of transport infrastructure and interconnections. This adaptation must take into consideration new data on local, national and European energy policies, energy demands and production offers, in particular the growing role of intermittent energies. To successfully carry out these adaptations, it may be necessary to mobilise time and significant financial resources. The length of this transitional period associated with the necessary adaptation of the European electricity system, which may extend from five to ten years with regard notably to investment programs in transport grids and interconnections in Europe for the next ten years, could lead to further difficulties for the Group’s developing new synergies between the different entities of the Group or proposing new competitive offers. EDF has certain obligations, in particular public service obligations, that are remunerated by mechanisms that may not provide complete compensation for additional costs incurred in connection with such obligations, or that are subject to change. The public service contract entered into by the French government and EDF on 24 October 2005 specifies the objectives and terms for performing the public service obligations that EDF is appointed to perform under law (in particular Articles L. 121-1 et seq. of the French Energy Code), and also sets out the mechanisms under which EDF is compensated for the performance of these obligations (see section 1.5.2 “Public service in France”). The development of renewable energies connected directly to the distribution network may, in certain regions, saturate the reception capacities of the source substations and networks. This situation may possibly generate local imbalances, or disputes if Enedis must disconnect certain producers or connect them with significant delays. New investments may be required in these regions, with the risk that the costs associated therewith may not be taken into account. EDF cannot be certain that the compensation mechanisms provided in the laws and regulations applicable to it for performing these public service obligations will fully compensate additional costs incurred to perform such obligations. Furthermore, EDF cannot guarantee that these compensation mechanisms will never be subject to change or that existing mechanisms will fully cover potential additional costs that may be incurred in relation with new duties imposed on EDF in connection with its public service obligations, in particular when a new public service contract is negotiated. The occurrence of any of these events may have an adverse impact on EDF’s activities and financial results and on the Group’s financial position. The provisional amount of expenses that can be attributed to public service energy missions and are to be compensated to EDF reaches €7,389.6 million in 2018, which represents an increase compared to previous years (decision of the French Energy Regulatory Commission (CRE) dated 13 July 2017 relating to the assessment of expenses that can be attributed to public service energy missions for 2018).

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EDF I Reference Document 2017