EDF_REGISTRATION_DOCUMENT_2017

PRESENTATION OF EDF GROUP Description of the Group's activities

return (IRR) is now estimated at approximately 8.5% (1) , compared to about 9% (1) initially; the risk of deferral of delivery (COD) is estimated at 15 months for tranche 1 and ■ 9 months for tranche 2. This risk would entail an additional potential cost of around £0.7 billion in 2015 sterling. Under this assumption, the IRR for EDF would be around 8.2% (1) . Regarding the overall schedule, the project teams are fully mobilised and are implementing action plans to ensure that the objective set to deliver tranche 1 by the end of 2025 is fulfilled. The agreements between EDF and CGN include a capped compensation mechanism in case of cost overruns or delays; these agreements are subject to a confidentiality clause. Progress of the project The project achieved the following objectives in 2017: the first nuclear safety concrete in the galleries (these are a network of connected ■ tunnels that will house the wiring and are the first permanent structures on the site); start of construction work on accommodation on the site campus; ■ delivery of design studies for the positioning of the prestressing (PSG) for the ■ gallery at the Delivery Control Centre by the Engineering Control Centre (the PSG is a circular structure in the form of a tunnel located below the containment chamber in the reactor building); this "stress" exerted by the tendons enables the reactor building to withstand high internal pressures should an incident occur; the first safety concrete in the gallery and the delivery of the design studies for ■ the foundations of the pumping station at the Delivery Control Centre; the pumping station acts as an interface between the reactor and the saltwater used for cooling via a water intake tunnel and a channel (an artificial basin opposite a larger body of water to avoid sediment infiltrating the water intake tunnel); the start of work to install the cooling water pipes, also known as CRF pipes. ■ At end 2017, the expenditure to date on the project stood at £4.6 billion, excluding interim interest. Exchanges with the UK office for nuclear safety and regulation (ONR) Recently, the ONR has for the first time conducted an inspection in order to verify the quality assurance arrangements for the supply chain. This inspection ensured that the measures taken were appropriate and that the lessons learned from the incidents related to the AREVA Creusot Forge and the first safety concrete had been implemented throughout the supply chain. Overall, the ONR stated that it was satisfied by the findings of the inspection and acknowledged the considerable efforts made during the project. Manufacturing of equipment Manufacturing at the Framatome Creusot Forge factory is currently being resumed. Furthermore, the project team is also busy monitoring a plan to improve safety and quality at Framatome, by means of a Steering Committee chaired by the HPC Project team. Contract for Difference (2) Regarding the risk identified in the report (15 months for tranche 1 and 9 months for tranche 2), these are below the deadlines set out in the signed contract. The HPC project company, NNB Generation company (HPC) Limited and the Department of Energy and Climate Change (DECC) have agreed, on October 2015, on the full terms of the CfD for HPC, which was approved by European Commission in October 2014. The CfD was signed on 29 September 2016 alongside all the other contracts with the UK Government and it is a contract to provide security in respect of revenues generated from electricity produced and sold by HPC through compensation based on the difference between the Strike Price and the market price, for a period of 35 years from commissioning.

From the plant’s start date, if the reference price at which the generator sells electricity on the market is lower than the strike price set under the terms of the contract, the generator will receive an additional payment. If the reference price is higher than the strike price, the generator will be liable for the difference. The key elements of the CfD are: the strike price for HPC is set at £ 2012 92.50/MWh or £ 2012 89.50/MWh if the ■ Sizewell C project is launched (i.e. if a final investment decision is taken), in order to reflect the fact that the first of a kind costs of EPR reactors are shared across the HPC and Sizewell C sites; the strike price is fully indexed to UK inflation through the Consumer Price Index ■ (CPI); the lifespan of the contract is 35 years; any delay on Tranche 2 of more than 8 ■ years after the date of the contractually stipulated date of commercial commissioning may result in a change to the CfD profits. The adjustement is partial if one of the two reactors is commissioned within its specific window; the project is protected against certain unfavourable regulatory and legislative ■ changes; provision has also been made to review the costs (up or down depending on the assumptions used) in the fifteenth and twenty fifth years, and to review certain conditions for the costs corresponding to decommissioning and waste management operations (Funding Decommissioning Programme); should there be savings from the construction of the HPC project, these will be ■ shared with consumers through a lower electricity price. There is no explicit volume guarantee in the CfD, nor is there a ceiling; however, the contract is protected against the risk of erasure in case of changes to regulartions or the market. Principal project risks These risks are detailed in section 2.1.5 “Specific risks related to the Group’s nuclear activities”. As with any project of this scope, and even though the CfD has a protective role, the project has risks in terms of timing and budget overruns, which were assessed during the detailed review performed by EDF following the Final Investment Decision. Brexit The UK voted to leave the membership of the European Union on 23 June 2016. It is important to note that c.1/3 of the projectcosts are in EUR. Thisexposes the ■ project and the EDF group to the GBP/EUR exchange rate. With the pound down against the euro: the cost of the project in pounds increases; the project’s IRR in pounds is ■ not protected, the Group’s debt decreases; ■ given the long-term investment horizon, EDP is implementing a gradual strategy ■ to cover its investment in pounds; the HPC project is protected against the power market price changes during the ■ CfD period. Euratom Treaty The Group has been reviewing the impact of the UK’s exit on the Euratom Treaty and the impact the exit may have on its business, and the actions required to mitigate any risk. The UK Government introduced the Nuclear Safeguards Bill in October 2017. The Bill has been considered in a Public Bill Committee and has been validated without amendment in November 2017. The next stage is known as the Report Stage and will be followed by the final reading of the bill in the House of Commons, before its review before the House of Lords. No slot has yet been announced for this final reading.

1.

IRR calculated at the July 2017 exchange rate (£1 = €1.16). Any changes to the exchange rate could affect the IRR. (1) Terms of the contract are available on the UK government website: https://www.gov.uk/government/publications/hinkley-point-c-documents. (2)

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DF I Reference Document 2017