EDF_REGISTRATION_DOCUMENT_2017

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

The Group’s acquisition and disposal transactions carry risks and may not always achieve the objectives pursued. As part of its development strategy, the Group is required to carry out transactions involving the acquisition of assets or equity interests, as well as the creation of joint ventures and, more generally, all types of external growth transactions (see sections 1.4 “Description of the Group’s activities” and 5.1.3.2 “Investments and partnerships”). External growth operations imply risks including the following: (i) the assumptions adopted by the Group in valuing an acquisition may not prove accurate, particularly concerning anticipated market prices, cost savings, gains, synergies and the profitability; (ii) difficulties relative to the quality and performance of the assets acquired or the liabilities of acquired companies may be undervalued; (iii) difficulties relating to the quality of the counterparty may occur in invoking guarantees of liabilities granted by the seller in the case of acquisition contracts, (iv) difficulties integrating the businesses or companies acquired may occur; (v) the Group may not be able to retain certain key employees, customers or suppliers of the acquired companies; (vi) the Group may be required or wish to terminate pre-existing contractual relationships on costly or unfavourable financial conditions; (vii) the Group may increase its debt to finance these acquisitions, thus limiting its financial flexibility and the opportunity to obtain additional loans in the future; and (viii) the Group may be required to make commitments to the antitrust authorities, which may be implemented on terms that are less favourable than anticipated by the Group. Consequently, the benefits expected from external growth operations may be lower or may not be obtained as quickly as expected, which could have an adverse impact on the Group’s financial position and outlook. The Group has also carried out and may carry out transactions involving the disposal of assets or equity investments, in particular as part of its plan for disposals announced on 22 April 2016 (see risk factor below, “The Group implements programmes aimed at improving its operational and financial performance and strengthening its financial flexibility. The objectives set for these programmes may not be achieved”). In connection with such disposals, the Group may provide guarantees concerning the assets sold and, consequently, may have to pay compensation or make price adjustments to the purchaser, which could have an adverse impact on the Group’s financial position and outlook. The Group may also decide to not carry out the external growth transactions and disposals it has planned, or to carry them out for a price other than the desired price, due inter alia to contractual, financial or regulatory limitations, or political intervention. This may have an adverse impact on the Group’s financial position and outlook. The Group may not hold a controlling majority or it may share control in certain of its subsidiaries and equity interests. Certain of the Group’s business activities are conducted, or may in the future be conducted, through entities in which the Group shares control or in which it is the minority shareholder. In such situations, the Group may experience a deadlock if the partners are unable to agree, or decisions may be taken that are contrary to its interests, which may limit the Group’s ability to implement the strategies it has adopted and have an adverse impact on its business activities, financial position and outlook. The price of EDF shares could be subject to significant fluctuations. In recent years, the stock markets have undergone considerable fluctuations which have not always been commensurate with the results of companies whose shares are traded. Such fluctuations in the French and international financial markets could significantly affect the market price of EDF shares. Changes in energy prices, significant regulatory constraints surrounding the energy and nuclear markets, and the increasing demands of nuclear safety authorities also contribute to the volatility of EDF actions. The EDF share price could also be significantly affected by many factors affecting the EDF group, its competitors, economic conditions in general or the energy sector in particular, for example as a result of political decisions on energy policy.

The Group must continually adapt its expertise in a rapidly changing environment and renew a significant share of its workforce, while ensuring experience and skills are transferred to new employees. In a changing environment, the human dimension is more than ever at the heart of EDF’s strategic project, a key factor in the Group’s performance. Anticipating requirements, taking into account changes to occupations and the necessary functional and geographic adaptation lead to the constant development and adaptation of skills. (see section 3.6 “Human resources”). In France, a large number of EDF employees leave the labour force each year, despite the impact of the reform of the special pension scheme for Electricity and Gas Industry employees on average retirement age. For example, within the scope of EDF, around 20% of the workforce could retire between 2015 and 2020 (see section 3.6.1 “Professional excellence: employment and skill development”). Although this situation is an opportunity to adapt the skills of EDF’s personnel to the new challenges of the Group, replacing these employees requires anticipating requirements and transferring knowledge and coping with the competition to recruit the most qualified individuals, while EDF’s attractiveness as an employer The EDF group considers matching skills to requirements as a major challenge and therefore uses the appropriate measures to be able to acquire, retain, redeploy, develop or renew the skills that it will need in a timely manner and under satisfactory conditions. However, it cannot guarantee that the measures adopted will always prove sufficient, which may have an impact on its activities and financial position. A share of the Group’s workforce is employed by organisations common to EDF and Engie. Therefore, the Group depends in part on management mechanisms set up within these joint structures. A share of the Group’s workforce is employed by organisations common to EDF and Engie (almost all of them by the joint department of Enedis and GRDF, the two distribution network managers). Therefore, certain decisions made within these joint organisations can have an impact on EDF, in particular on its costs and on the manner in which its resources are managed. Furthermore, EDF and Engie may have divergent interests or views concerning these joint structures, which may have an adverse impact on the Group’s labour relations, financial results and financial position (see section 1.4.4.2.3 “Service shared by Enedis and GRDF”). The Group may be required to meet significant commitments related to pensions and other employee benefits. The pension plans applicable in the various countries in which the Group operates involve long-term commitments to pay benefits to the Group’s employees (see note 31 to the consolidated financial statements for the financial year ended 31 December 2017). In France, in addition to these pension commitments, the Group also owes obligations for post-employment benefits and long-term benefits for employees currently in service. To cover these commitments, the Group has set up outsourced funds or pension funds. Depending on the case, at the end of 2017, these assets only partially covered these commitments, although, for the Group, the maturity dates of these obligations are relatively smoothed over time. At 31 December 2017, the average duration of employee benefits commitments was 19.7 years in France and 21.0 years in the United Kingdom. The amounts of these commitments, the provisions booked, the outsourced funds or pension funds set up and the additional contributions required to make up insufficient funding are calculated based on certain actuarial assumptions, including a discount rate subject to adjustment depending on market conditions and, in the event of any employee-related commitments in France, on the rules governing retirement benefits paid out by the general retirement scheme, and amounts owed by the Group. These assumptions and rules may be adjusted in the future, which could increase the Group’s current commitments for pensions and other employee benefits and, therefore, require a corresponding increase in provisions.

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EDF I Reference Document 2017