EDF_REGISTRATION_DOCUMENT_2017

1.

PRESENTATION OF EDF GROUP Description of the Group's activities

Regulated Access to Historic Nuclear 1.4.3.3 Power (Accès Régulé à l’Énergie Nucléaire Historique, or ARENH) Operational since 1 July 2011, the ARENH mechanism entitles alternative suppliers to buy electricity from EDF to supply their customers, once they have signed a framework agreement, at a regulated price and at volumes determined by the Energy Regulation Commission (CRE). This mechanism can also be accessed by network operators for their losses. The CRE is responsible for managing the mechanism and for calculating entitlements of which it notifies the co-contracting parties. Thus, suppliers wishing to exercise their right to access the ARENH submit a request to the CRE, sending it forecasts of their customers’ consumption. The detailed forecasts, along with the entitlements calculated for each supplier, are only known to the CRE and the supplier. The payments are managed by the Caisse des Dépôts. The price of the ARENH, determined by the Minister of Energy and the Minister for the Economy, upon proposal by the Energy Regulation Commission (CRE), has been maintained at €42/MWh since 17 May 2011. It is deemed to include the capacity certificates introduced in 2017. The order of 14 November 2016 is amending the ARENH framework agreement, particularly in order to incorporate provisions related to the implementation of the capacity mechanism and to frame the conditions for early termination by suppliers. The revised framework agreement restricts the use of such unilateral termination faculty by making it applicable only in cases when the price of the ARENH is modified by more than 2%, when the framework-agreement is substantially modified or when changes in the regulations relating to the ARENH substantially and unfavourably affect the balance of the procurement terms for the Buyer. In addition, Decree No. 2017-369 of 21 March 2017 relating to regulated access to historic nuclear power amended some of the provisions of the regulatory section of the French Energy Code on ARENH, in order to define the terms and conditions for implementing the "monotony clause". It thus addresses cases not provided for in the earlier wording of the French Energy Code, namely situations where there is no framework agreement or request for ARENH in the period before the current period. The lack of subscription or agreement is now considered as a zero volume subscription. In 2017, EDF supplied around 82TWh to its competitors under the terms of the ARENH. Balance group dedicated to Purchase 1.4.3.4 Obligations and selling on the wholesale market EDF is a mandatory purchaser of the electricity generated by the generation facilities the government wishes to support and develop (renewable energy sources and energy efficient cogeneration). By law (Article L. 121-7 of the French Energy Code), the additional costs stemming from this obligation are offset for EDF on the basis of an electricity market benchmark price (concept of “avoided cost”). From 1 January 2017, the costs of managing these contracts have also been offset. At its meeting of 9 October 2012 concerning the costs for 2011, the CRE indicated that: “In theory, the avoided cost should be reduced by the imbalance costs borne by EDF due to the unpredictable nature of a portion of the generation covered by the purchase obligation. Such imbalances, which were negligible in past years compared with consumption-related imbalances, are becoming more significant.” With the development of renewable energies, the cost generated by the difference between anticipated generation and actual generation has become significant. As a result, at its meeting of 16 December 2014, the CRE changed the formula for calculating EDF’s avoided costs to include such imbalance costs. In order to make objective and independently identify such imbalances, the CRE asked EDF to establish a dedicated balance group. A balance perimeter dedicated to the facilities subject to a Purchase Obligation contract was put in place on 1 July 2015. The DOAAT now organises the sale of the energy produced by the installations under Purchase Obligation contracts directly on the energy markets, which makes the management of this perimeter completely independent of that of the EDF portfolio. Thus, since 4 November 2015, electricity volumes under Purchase Obligations that can be forecast over the short-term (one day for the next, known as the “random component of the Purchase Obligations”) are sold on EPEX Spot. As for the volumes which are foreseeable over the long term (share of the Purchase Obligations referred to as “quasi certain”), since

Work relating to drafting a new national concession agreement model carried out with the national representative organisations of the granting authorities continued and was finalized in 2017. On 21 December 2017 EDF, Enedis, the FNCCR (national federation of lincesing authorities) and France Urbaine agreed to the new concession agreement model. Business in 2018 will be marked by negotiations with France's regions to renew concession agreements in general and the 20 concessions expiring by the end of the year in particular. An organisation and tools have been put into place, particularly in order to renew the concession contracts, mobilise both national and regional competences, develop the expertise of EDF’s contacts in the contracting authorities, draw up each year the concession activity reports (CRAC) and respond to inspection requests from the granting authorities.

1.4.3

OPTIMISATION AND TRADING

ACTIVITIES

Role and activities of the 1.4.3.1

Upstream/Downstream Optimisation & Trading Division (DOAAT)

The DOAAT is responsible for managing the balance of EDF’s upstream/downstream electricity portfolio, optimising and securing the electricity gross margin created by this portfolio, as well as managing the associated physical and financial risks. Management of electricity supply/demand can be broken down to real-time, within the framework set by the policies of extreme risk (volume risks) and of price risks, developed pursuant to the directives of the Group Risk Control Department, and validated by its Executive Committee (see section 2.1.2 “Risks related to the competitive and general context”). Climate variations affect this management. Hence, a fall in temperature of 1°C in winter leads to a rise in electricity consumption in France of the order of 2,400MW (1) and EDF’s portfolio bears a large part of this thermosensitivity. In addition, depending on the run-off, the amplitude of hydraulic generation in the EDF scope, between one extreme year and another, can amount to around 20TW hours. The DOAAT ensures that it has, in all time-frames, sufficient power margins in order to enable it to meet its commitments in nearly all situations. To do this, it manages a set of leveraged actions: scheduling of maintenance operations of generation means (in particular nuclear), management of inventory (fossil fuels, hydro-electric reserves and customer load shedding), purchases and sales in wholesale markets via EDF Trading, which is in charge of market access on behalf of DOAAT (see section 1.4.6.3 “Optimisation and trading: EDF Trading”). DOAAT also manages the exposure of EDF’s upstream/downstream portfolio to price variations in the energy wholesale markets (electricity, gas, coal, petroleum products) and in the CO 2 emissions licensing market, with the assistance of EDF Trading. With respect to RTE, DOAAT plays the role of “balance responsible entity” on EDF’s perimeter in mainland France. In this regard, EDF is committed to financially compensate RTE in the case of a deviation onto its balance group. The optimisation consists of offering RTE an offer schedule that is balanced with the demand, which makes it possible to minimise the supply cost of EDF’s contractual commitments. Long-term electricity purchase and sales 1.4.3.2 contracts EDF maintains commercial relations through energy purchase or sales contracts with European operators. These contracts are of many types, and confer: rights to the energy generated by facilities, primarily nuclear, in which the ■ counterparties hold a participating interest over the duration of the exploitation of the facility (see section 1.4.1.1.1 “EDF’s nuclear fleet in France"); drawing rights for totally or partially guaranteed electrical power, for a duration ■ generally comprised between 15 and 25 years.

Source: RTE. (1)

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DF I Reference Document 2017