EDF_REGISTRATION_DOCUMENT_2017

2.

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

Technological choices made by the Group may be outperformed by more efficient technologies, notably in matters of the digital transition. In order to anticipate technological and societal developments, the Group constantly monitors the identification and use of technological innovations and breakthroughs. However, the Group can not foresee with certainty how these developments could ultimately affect the Group’s activities or claim to identify these developments in a comprehensive manner. The Group’s business activities rely on a certain number of choices, which may be outperformed by other technologies that prove more efficient, more profitable, safer or more pertinent in light of possible future standardisation and standards than the technologies used by the Group. The use of new technologies by the Group’s competitors or the development by these competitors of new, more efficient and more competitive technologies, notably concerning the digital transition, could have the effect of reducing or eliminating the competitive advantage that the Group enjoys as a result of certain of its technologies and its experience. Similarly any delay or failure in the Group’s development of technologies, planning or the allocation of the Group’s technology development resources could have a similar effect on the Group’s competitive advantage and thus negatively impact its business, financial position, its attractiveness as an employer, its reputation and its prospects. For its business, the Group depends on information systems which may fail or be subject to malicious attacks. The Group operates multiple and very complex information systems (servers, networks, applications, databases, etc.) which are essential for the conduct of its commercial and industrial activities and which have to adapt to a rapidly changing environment. Indeed, the Group’s business depends heavily on the efficiency of its technology and its information systems. Furthermore, the Group is fully committed to the digital transition. The risk involved with operating such systems and technologies can take numerous forms, including disruption, malfunction or failure of any of these systems, computer viruses, piracy, identity theft, diversion of sensitive data, corruption of electronically stored data, violations of regulations, human errors and terrorist attacks. The increased frequency and sophistication of recent hacking incidents demonstrates the importance of these computer risks, as well as the financial and reputational damage that may result from such incidents. The Group has implemented procedures to test these systems in order to guarantee as far as possible that any new versions provide a level of functionality suited to the Group’s needs and has set out procedures for managing incidents and crises in order to be able to provide solutions in the event of one-off failures. These procedures also address potential malicious attacks (see section 2.2.2.2.4 “Security of information systems”). Despite the Group’s multiple security measures, none of these events may be completely excluded, which could have significant adverse consequences for the Group. The Group has also implemented a policy to strengthen and improve its back-up programmes and information systems, which are tested annually, and crisis management procedures have been set out which are regularly improved through feedback from incidents. However, the Group cannot guarantee that these programmes will not encounter technical difficulties during deployment or delays affecting their real-life implementation or that such programmes will make it possible to limit, in the event of a major disaster, the negative impact on the activity and the Group’s financial position. The Group operates facilities that may cause significant harm to the natural or human environment or for which accidents, or external damage of natural or malicious origin, could have serious consequences. The risks specific to nuclear facilities are the subject of an additional explanation in section 2.1.5 “Specific risks related to the Group’s nuclear activities”.

Furthermore, if the value of outsourced funds or pension funds proves insufficient to meet the corresponding commitments, in particular in the United Kingdom or France, primarily due to calculation assumptions or developments in the financial markets, (see risk factor above, “The Group is exposed to risks related to financial markets”), the Group may be obliged to make additional contributions to the relevant funds, which may have an adverse impact on its financial position.

2.1.4

RISKS RELATED TO THE

OPERATIONAL PERFORMANCE OF THE GROUP

The Group has set up programmes that aim to improve its operating and financial performance and increase its financial flexibility. The objectives set for these programmes may not be achieved. The Group has set up and may set up programmes that aim to improve its operating performance and increase its financial flexibility. The meeting of the Board of Directors on 22 April 2016 adopted a performance plan which includes a reduction in operating expenses, actions to optimise the working capital requirement, control of net investments (excluding Linky, excluding HPC and excluding new developments), and an asset disposal plan. By press release dated 13 November 2017, EDF announced that it was accelerating the deployment of this performance plan. The aim of reducing operating expenses in 2018 compared to 2015 was therefore increased to €800 million instead of €700 million and is set at €1.1 billion in 2019 compared to 2015. The disposal plan of €10 billion, which was to be completed by the end of 2020, should be almost finished by the end of 2018. Total net investments, excluding acquisitions and asset disposal plans 2015-2020, will be less than or equal to €15 billion in 2018. However, the Group cannot guarantee that the performance improvement programmes that it implements will have the anticipated results or that these results will be obtained according to the planned timetable, nor that they will be sufficient to cope with regulatory and economic developments. The Group’s activities require numerous administrative permits that may be difficult to obtain or that may be obtained only subject to conditions that may become significantly more stringent. Administrative appeals may also be filed against such permits, which may hurt the Group’s business. The operation and development of the industrial activities of the Group requires numerous administrative permits, both at the local and national levels, in France and abroad. The procedures for obtaining and renewing these permits can be drawn-out and complex. These permits are not obtained systematically and the requirements for obtaining them may change and are not always predictable. Even when these permits have been granted, stakeholders may file administrative appeals against them (see section 2.4 “Legal proceedings and arbitrations”). Accordingly, the Group may incur significant expenses in complying with the requirements for obtaining or renewing these permits (for example, costs of preparing permit applications, investments associated with installing equipment required before a permit will be issued, setoffs of environmental impacts of structures to be built). This may also handicap the Group’s industrial activities. Delays, overly high costs or the suspension of its industrial activities due to the inability to retain or renew permits may have an adverse impact on the Group’s activities and profitability. In addition, the Group may have also used resources without obtaining necessary permits and authorisations and therefore have to cancel or withdraw from a project, which may have an adverse impact on its business, expansion or financial position. The Group is exposed to risks related to the control of major projects. As part of its activity, the Group has to plan or carry out, as project manager or prime contractor, projects that are inherently complex and require significant investments. The completion of such projects may be subject to numerous technical, operational, economic, regulatory or environmental contingencies which might delay or prevent completion and thereby negatively impact the Group’s activities, its income, the value of its assets, its financial position and outlook. The risks associated with EPR projects are covered in section 2.1.5 “Specific risks related to the Group’s nuclear activities”.

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