EDF_REGISTRATION_DOCUMENT_2017

Reference Document 2017 including the Annual Financial Report

In this Reference Document (the "Reference Document"), unless otherwise stated, the terms “Company” and “EDF” refer to Électricité de France SA, and the terms “EDF group” and “Group” refer to EDF and its subsidiaries and affiliates. In addition to the information contained in this Reference Document, investors should carefully consider the risk factors described in Chapter 2 ("Risk factors and control framework"). These risks, or one of these risks, could negatively impact the Group's business, position, financial results or outlook. Furthermore, other risks not yet identified or considered as material by the Group, could have the same negative impact, and investors could consequently lose all or part of their investment in the Company. This Reference Document also contains information relating to the markets in which the EDF group operates. This information has been taken from surveys carried out by external sources. Given the rapid changes affecting the energy sector in France and throughout the world, it is possible that this information could prove to be erroneous or no longer up-to-date on the filing date of this Reference Document or thereafter. The Group's activities may therefore evolve in a manner different to that described in this Reference Document, and the declarations or information presented in this document may prove to be erroneous.

Forward-looking statements in this Reference Document, specifically in section 1.3 ("Group Strategy"), could also be impacted by risks, uncertainties and other factors that may cause the future income, performance and achievements of the Group to differ significantly from the objectives expressed and suggested. These factors may include changes in the economic and commercial environment, in regulations, as well as factors set forth in Chapter 2 ("Risk factors and control framework"). Pursuant to French and European legislation, RTE and Enedis, regulated subsidiaries managed independently within the meaning of the French Energy Code, respectively responsible for the transmission and distribution of electricity within the EDF group, are not allowed to communicate certain information they gather while conducting their activities to other Group entities, including its Management. Similarly, certain data specific to generation and supply activities cannot be communicated to the entities responsible for transmission and distribution. This Reference Document has been prepared by the EDF group in compliance with these rules. For the sake of brevity, further references in this Reference Document made to RTE and Enedis will not always specify their independent nature as within the meaning of the French Energy Code. A glossary of the main technical terms is provided at the end of this Reference Document.

TABLE OF CONTENT Key figures

Compensation and benefits 4.6

2 4

254

Corporate Governance

Report by the Statutory Auditors, prepared in 4.7 accordance with Article L. 225-235 of the French Commercial Code, on the report of the Board of Directors on Corporate Governance

1.

PRESENTATION OF EDF GROUP

7 8

258

History and development of the Company 1.1

5.

Organisation of the Group 1.2.

10 12 16

THE GROUP'S PERFORMANCE IN 2017 AND FINANCIAL OUTLOOK

Group strategy 1.3

259 260 292

Description of the Group's activities 1.4 Legislative and regulatory environment 1.5 79 Research & development, patents and licences 1.6 95 Property, plant and equipment 1.7 102

Operating and financial review 5.1

Subsequent events 5.2

Changes in market prices in January 5.3 and February 2018

292 293

2.

Outlook 5.4

RISK FACTORS AND CONTROL FRAMEWORK Risks to which the Group is exposed 2.1 Control of Group risks and activities 2.2

6.

105 106 125 132 133 140

FINANCIAL STATEMENTS

295

Consolidated financial statements 6.1 at 31 December 2017 Notes to the consolidated financial statements Statutory Auditors' report on the 6.2 consolidated financial statements

296

Dependency factors 2.3

Legal proceedings and arbitration 2.4

304

Insurance 2.5

3.

409 413 417 465 468 469

ENVIRONMENTAL AND SOCIETAL INFORMATION − HUMAN RESOURCES 143 Defining and implementing corporate 3.1 responsibility 144 Offer sustainable, safe and efficient energy 3.2 160 Meeting the challenges of climate change 3.3 166 Optimising the use of natural resources and 3.4 preserving the environment 171 Act positively within communities and 3.5 strengthen dialogue 182 Pay close attention to our co-workers and 3.6 make our internal transformations a success 194 Reporting system and methodology 3.7 208 Non-financial rating 3.8 216 Assurance report of the Statutory Auditors 3.9 218

Financial statements 6.3

Notes to the financial statements

Statutory Auditors’ Report on the financial 6.4 statements

Results for the last five fiscal years 6.5

Dividend policy 6.6

Significant change in the issuer’s financial 6.7 or trading position 470 Information relating to the allocation of funds 6.8 raised through Green Bonds issued by EDF 470

7.

GENERAL INFORMATION ABOUT THE COMPANY AND ITS CAPITAL General information about the Company 7.1 Incorporation documents and articles of 7.2 association Information regarding capital and share 7.3 ownership

475 476

4.

476

CORPORATE GOVERNANCE Corporate Governance Code 4.1

223 224

479 485 486 489

Market for the Company’s shares 7.4

Members and functioning of the Board of 4.2 Directors Bodies created by Executive Management 4.3 250 Conflict of interest, absence of convictions of 4.4 the members of the administrative bodies and Executive Management, contracts for services 252 Shareholding by directors and trading in EDF 4.5 securities by corporate officers and executives 253 226

Related party transactions 7.5

Material contracts 7.6

8.

ADDITIONAL INFORMATION Person responsible for the Reference 8.1 Document and the Certification Auditors – Statutory Auditors 8.2 Documents available to the public 8.3 Financial communication calendar 8.4

491

492 493 493 493 494 499

Concordance tables 8.5

Glossary

REFERENCE DOCUMENT 2017

The present Reference Document contains all information required for the Annual Financial Report.

35.1 million customer accounts 580.8 TWh of electricity generated worldwide 87 % carbon-free generation

EDF group is the world’s leading electricity company and global leader

for low-carbon energy production. Particularly well established in Europe, especially France, the United Kingdom, Italy and Belgium, as well as North and South America, the Group covers all businesses spanning the electricity value chain – from generation to distribution and including energy transmission and trading activities – to continuously balance supply and demand. A marked increase in the use of renewables is bringing change to its electricity generation operations, which are underpinned by a diversified and complementary energy mix founded on nuclear power capacity. EDF offers products and advice to help residential customers manage their electricity consumption, to support the energy and financial performance of its business customers, and to help local authorities find sustainable solutions.

BECAUSE OUR FUTURE IS ELECTRIC AND IT’S ALREADY HERE.

This Reference Document was filed with the Autorité des Marchés Financiers (French Financial Markets Authority or AMF) on 15 March, 2018, in accordance with Article 212-13 of its General Regulations. It may be used in connection with a financial transaction if accompanied by an offering memorandum approved by the AMF. This document has been prepared by the issuer and its signatories are liable for its content. Pursuant to Article 28 of EC Regulation no. 809/2004 of the European Commission, the following information is included by reference in this Reference Document: • EDF group’s consolidated financial statements for fiscal year-ended 31 December 2016 (prepared in accordance with international accounting standards) and the related statutory auditors’ report, respectively presented in Chapters 6, sections 6.1 (pages 319 to 436) and 6.2 (pages 437 to 438) of the EDF group 2016 Reference Document; • EDF group’s consolidated financial statements for fiscal year-ended 31 December 2015 (prepared in accordance with international accounting standards) and the related statutory auditors’ report, respectively presented in Chapters 6, sections 6.1 (pages 306 to 412) and 6.2 (pages 413 to 414) of the EDF group 2015 Reference Document; • the EDF group’s operating and financial review for fiscal year-ended 31 December 2016, presented in Chapter 5 (pages 268 to 301) of the EDF group’s 2016 Reference Document; • the EDF group’s operating and financial review for fiscal year-ended 31 December 2015, presented in Chapter 5 (pages 262 to 301) of the EDF group’s 2015 Reference Document; Copies of this Reference Document are available free-of-charge at EDF’s registered office (22-30 avenue de Wagram – 75382 Paris Cedex 08) and on its website (http://www.edf.fr), as well as on the AMF website (http://www.amf-france.org).

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EDF I Reference Document 2017

2017 KEY FIGURES

Key figures

Sales In billions of euros

EBITDA In billions of euros

35.1 million customer accounts 80% Disposal plan delivered halway 7.8GW EDF EN net installed capacity

69.6 -1.0% (1)

80

20

71.2

70

16.4

13.7 -14.8% (1)

60

15

50

40

10

30

20

5

10

0

0

2017

2017

2016

2016

(1) Organic change at constant scope and exchange rates.

22.5GW EDF EN renewable project portfolio 30GW Solar Plan over 2020-2035

Net financial debt/EBITDA

Group CO 2

emissions

In g/KWh

580.8TWh of electricity generated €14bn Framatome order book

2.4x

2.5

100

2.3x

82

77

2.0

80

1.5

60

1.0

40

0.5

20

0.0

0

2017

2016

2016

2017

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EDF I Reference Document 2017

Net investments excluding 2015-2020 disposal plan

Breakdown of EBITDA

0.2 New developments in renewables and services

International

0.5 Services

3%

2% Dalkia

0.6 Linky

France – Regulated activities (1)

4% EDF Trading and others

0.9 Flamanville

36%

EDF EN

Grand Carénage

5%

Nuclear New Built

4.2

Italy

1.2

7%

Renewables

United Kingdom

€16.0bn

1.3

€13.7bn

8%

Framatome

1.9

Enedis. SEI and ÉS

3.2

France – Generation and supply activities

International and Others

35%

2.0

(1) Regulated activities: Enedis, ÉS and other activities. Enedis, an independent EDF subsidiary as defined in the French energy code.

Net electricity generation

Net installed capacity

1% Fuel oil 5.3TWh

Other renewables 15.7TWh

4% Coal 5.7GWe

Fuel oil 7.6GWe

Coal 21.7TWh

3%

6%

Other renewables 9.4GWe

4%

7% Hydropower (1) 40.3TWh Gas

7%

56% Nuclear 72.9GWe

50.1TWh

10% Gas 12.1GWe

8%

580.8TWh

129.3GWe

77% Nuclear 447.7TWh

Hydropower 21.5GWe

17%

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EDF I Reference Document 2017

CORPORATE GOVERNANCE

Corporate Governance

THE BOARD OF DIRECTORS

MEMBERS

11 directors appointed by the Shareholders' Meeting 18 directors 1 representative of the French State 6 directors elected by the employees

Chaired by Jean-Bernard Lévy, the Board of Directors comprises

11 DIRECTORS APPOINTED BY THE SHAREHOLDERS' MEETING Jean-Bernard LÉVY, Chairman and Chief Executive Officer of EDF Olivier APPERT, General representative of the National Academy of Technologies of France Philippe CROUZET, Chairman of the Management Board of Vallourec Maurice GOURDAULT-MONTAGNE, General Secretary at the Ministry for Foreign Affairs and International Development Bruno LAFONT, Director, Lead independent director of ArcelorMittal Bruno LÉCHEVIN, Deputy Chairman of Électriciens sans Frontières Marie-Christine LEPETIT, Head of the Inspectorate General of Finance Colette LEWINER, Professional Director Laurence PARISOT, Associate Director of the Gradiva consulting firm Claire PEDINI, Senior Vice-President in charge of Human Resources for the Saint Gobain Group

Michèle ROUSSEAU, Chair of the Bureau de Recherches Géologiques et Minières ONE REPRESENTATIVE OF THE FRENCH STATE Martin VIAL, Commissioner of the French State Shareholdings Agency

6 DIRECTORS ELECTED BY THE EMPLOYEES Christine CHABAUTY, sponsored by CGT Jacky CHORIN, sponsored by FO Christophe CUVILLIEZ, sponsored by CGT Marie-Hélène MEYLING, sponsored by CFDT Jean-Paul RIGNAC, sponsored by CGT Christian TAXIL, sponsored by CFE-CGC

41.7 % of women

90.9 % attendance rate 41.7 % of independent directors

Furthermore, the Government Commissioner and Head of the French State General Economic and Financial Supervisory Mission to the Company and the Secretary of the Central Works Council attend the meetings of the Board of Directors.

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EDF I Reference Document 2017

EXECUTIVE COMMITTEE

Jean-Bernard LÉVY Chairman and Chief Executive Officer

The Executive Committee is a decision-making body as well as a reflexion and consultation body on operational and strategic topics of the Group.

Marc BENAYOUN Group Senior Executive Vice President with responsibility for Gas and Italy. Chief Executive Officer of Edison.

Antoine CAHUZAC Group Senior Executive Vice President, Renewable Energies. Chairman and Chief Executive Officer of EDF Énergies Nouvelles.

Henri LAFONTAINE Group Senior Executive Vice President, Customers, Services and Regional Action.

Xavier GIRRE Group Senior Executive

Vice President, Group Finance.

Véronique LACOUR Group Senior Executive Vice President, Transformation and Operational Effectiveness.

Dominique MINIÈRE Group Senior Executive Vice President, Nuclear and Thermal.

Christophe CARVAL Group Senior Executive Vice President, Human Resources.

Simone ROSSI Group Senior Executive Vice President, Chief Executive Officer of EDF Energy.

Marianne LAIGNEAU Group Senior Executive Vice President, International Division.

Pierre TODOROV Group Senior Executive Vice President, Group General Secretary.

Cédric LEWANDOWSKI Group Senior Executive Vice President, Innovation, Strategy and Planning.

Xavier URSAT Group Senior Executive Vice President, New Nuclear Projects and Engineering.

Alexandre PERRA Executive coordinator to the Chairman and Chief Executive Officer, Government Relations. He is Secretary of the Executive Committee.

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EDF I Reference Document 2017

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EDF I Reference Document 2017

1.

PRESENTATION OF EDF GROUP

HISTORY AND

LEGISLATIVE AND REGULATORY

1.1

1.5

DEVELOPMENT OF THE COMPANY

ENVIRONMENT

79

8

EDF as a public undertaking 1.5.1 Public service in France 1.5.2 Electricity market legislation 1.5.3

79 79 81 86 87

ORGANISATION OF THE GROUP

1.2.

10

Gas market regulation 1.5.4

Public electricity distribution concessions 1.5.5 General regulations that are applicable 1.5.6 to the environment, nuclear power, health, hygiene and safety Regulations on wholesale energy markets 1.5.7

EDF organisational chart 1.2.1 Intra-Group contracts 1.2.2

10 12

87 95

GROUP STRATEGY

12

1.3

Environment and strategic 1.3.1 challenges

12 13 15

RESEARCH & DEVELOPMENT,

1.6

Priorities of the CAP 2030 strategy 1.3.2

PATENTS AND LICENCES

95

Investment policy 1.3.3

R&D Organisation and key figures 1.6.1

96 97

DESCRIPTION OF THE GROUP'S ACTIVITIES

R&D priorities 1.6.2

1.4

16

International relations and partnerships 1.6.3

101 102

Intellectual property policy 1.6.4

Electricity generation activity 1.4.1 Sales and supply activities 1.4.2 Optimisation and trading activities 1.4.3 Transmission and distribution 1.4.4 activities in France

16 42 46 47 55 74

PROPERTY, PLANT AND

1.7

EQUIPMENT

102

Service sector real estate assets - EDF 1.7.1 and Enedis in France Employer participation in the construction 1.7.2 effort Subsidised loans for home ownership 1.7.3

102

International activities 1.4.5

Energy services and other activities 1.4.6

103 103

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EDF I Reference Document 2017

1.

PRESENTATION OF EDF GROUP History and development of the company

1.1

HISTORY AND DEVELOPMENT OF THE COMPANY

In the context of nationalisation of gas and electricity sectors, the Act of 8 April 1946 created EDF as a State-owned industrial and commercial establishment (EPIC) and created a special status for the personnel of the electric and gas industries (IEG). The law nevertheless left in existence a certain number of non-nationalised distributors (DNN) and local distribution companies (ELD). The years 1946 to 2000 were marked by the development of the Group’s industrial base. Initially, there was a fleet of thermal generation facilities using coal and then fuel oil, as well as hydropower facilities, in particular with the construction of the dams at Tignes in 1952 and Serre-Ponçon in 1960. In 1963, EDF commissioned the first commercial-scale nuclear generation unit at Chinon (70MW), the first of a series of six generation units of the Uranium Natural Graphite Gas (UNGG) family, the construction of which continued until 1972. The oil crises of 1973 and 1979 led to accelerated replacement of thermal power with nuclear power. In 1969, the UNGG family was abandoned in favour of the Pressurised Water Reactor (PWR) family, which was used for new power plants. In the beginning of the 1990s, EDF embarked on a significant expansion abroad in particular with the acquisition of London Electricity (which was renamed EDF Energy on 30 June 2003) in December 1998. This policy was pursued in 2001 with the acquisition of 20% of EnBW (a stake that was successively raised to 45.01% by 2005) and with the acquisition of equity interests in the Italian company Edison by the IEB consortium (63.8%), in which EDF holds a stake of 18.03%, and in 2002, with the acquisition of EPN Distribution Plc. and Seeboard Plc., two England-based distribution companies. In France, the major development in recent years has been the liberalisation of the market pursuant to European regulations. In February 1999, sites where electricity consumption exceeded 100GWh per year, i.e. 20% of the market, became entitled to choose their supplier. The eligibility threshold was then progressively lowered, opening thus 30% of the market in May 2000, then 37% in February 2003, and 69% in July 2004, due to the liberalisation of all of the market for non-household customers. Since July 2007, the market has been fully liberalised, including for residential customers. At the same time, the structures necessary for a competitive market to function effectively were set up. The French Electricity Regulation Commission, which became the Energy Regulation Commission (Commission de régulation de l’énergie or CRE) was created in May 2000. That same year, in order to guarantee non-discriminatory access to all operators in the market, EDF created Réseau de Transport d'Électricité (which became a subsidiary (1) of EDF in 2005 under the name RTE EDF Transport, and which has been renamed RTE Réseau de Transport d’Électricité), responsible for managing the high voltage and very high voltage public electricity transmission network. In 2000, the Group formed the trading company, EDF Trading, with the trading specialist Louis Dreyfus. It became a wholly-owned subsidiary of EDF in 2003. In 2001, Euronext and various industrial and financial operators in the electricity market, including EDF, created Powernext, the French electricity exchange. In 2001, as a condition for authorising EDF’s acquisition of a stake in EnBW, the European Commission required EDF to set up a system of power supply capacity auctions (Virtual Power Plants or VPP) to facilitate access to the market for competitors. In 2003, the EDF group sold its stake in Compagnie Nationale du Rhône to Suez (now Engie). On 20 November 2004, pursuant to the Act of 9 August 2004, EDF became a French limited company (société anonyme) with a Board of Directors.

In 2005, EDF and A2A SA (formerly AEM SpA) entered into agreements for a joint takeover of Edison following the launch of a tender offer. The EDF group has pursued a strategy of refocusing on Europe and sold its controlling interest in its subsidiaries Edenor and Light and its assets in Mexico. EDF filed for an initial public offering in November 2005 through the issue of 196,371,090 new shares and the sale by the French State of over 34.5 million shares it held in the Company to employees and former employees of EDF and of certain EDF subsidiaries. Subsequently, on 3 December 2007, the French government sold an additional 45 million of its shares. In late 2006, EDF Énergies Nouvelles, an EDF group’s 50%-owned subsidiary, filed for an initial public offering. Since 1 January 2008, EDF’s distribution business has been conducted by Enedis (2) (previously ERDF), a subsidiary of EDF to which the distribution business was contributed pursuant to the Act of 7 December 2006 on the energy sector. In 2008-2009, the EDF group became a major player in the revival of nuclear power internationally, by creating a joint venture with the Chinese utility CGN, acquiring British Energy, one of the largest energy companies in the United Kingdom, and acquiring nearly half of the nuclear assets of US-based Constellation Energy. EDF also acquired a 51% stake in the Belgian company EDF Luminus, and subsequently raised its stake in EDF Luminus to 63.5% in 2010. EDF finalised in 2010 the sale of its British distribution networks to the Cheung Kong group of Hong Kong and, in 2011, it completed the sale of its interest in EnBW to the German state of Baden-Württemberg. In 2011, EDF confirmed its positioning as a key player in the field of power generation using renewable energies by increasing its stake in EDF Énergies Nouvelles to 100% by way of a simplified alternative cash or exchange tender offer, followed by a squeeze-out of minority shareholders. In 2012, after more than seven years of a strategic partnership with A2A, EDF took over Edison, one of the key players in the Italian electricity market, the fourth largest market in Europe. This transaction was carried out as part of the Group’s gas strategy, which relies on Edison’s expertise at all stages of the gas chain. In 2014, EDF has delegated to Exelon, the leading American nuclear operator, the operational management of the five nuclear reactors owned by CENG, held by EDF (49.99%) and Exelon (50.01%). Furthermore, EDF took over all of Dalkia’s lines of business in France, including the Citelum group, and Veolia took over the Dalkia group’s international business. Finally, F2i, Edison and EDF Énergies Nouvelles created the third largest Italian operator in the renewable energy sector, owned by F2i (70%) and a holding company (30%) owned by Edison and EDF Énergies Nouvelles. In 2015, EDF and China General Nuclear Power Corporation (CGN) entered into a non-binding strategic investment agreement relating to the construction and the operation of the Hinkley Point C nuclear power plant in Somerset. This partnership has been approved on 28 July 2016 by EDF’s Board of Directors. The contractual documentation was signed on 29 September 2016.

This entity is called indifferently "New NP" or "New AREVA NP " or Framatome in this Reference Document. (1) Enedis is an independently managed subsidiary within the meaning of the provisions of the Energy Code. For the sake of readability, reference will simply be made in the rest of (2) the document to Enedis, without systematically specifying that it is a fully independent subsidiary, within the meaning of the provisions of the Energy Code.

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EDF I Reference Document 2017

PRESENTATION OF EDF GROUP History and development of the company

In 2015 and 2016, EDF and AREVA SA signed two non-binding memoranda of companies relating to design (basic and detailed design) and construction (supply, understanding for the acquisition by EDF of the exclusive control of AREVA NP, as assembly and start-up) of the nuclear island and the instrumentation and control of well as an overall strategic and industrial partnership. In accordance with the terms new reactors in France and abroad.

1.

of these memoranda, a contract setting out the terms of the acquisition by EDF of the exclusive control over an entity (“New NP”), a fully owned subsidiary of AREVA NP, was signed on 15 November 2016. The transaction was completed on 31 December 2017; New NP, renamed Framatome, is now 75.5% owned by EDF, together with Mitsubishi Heavy Industries (19.5%) and Assystem (5%). Framatome comnines industrial, design and supply activities for nuclear reactors and equipment, fuel assemblies and installed base et services, and has around 14,000 employees. In addition, Edvance was created in June 2017, a dedicated company 80%-owned by EDF and 20% owned by Framatome, which combines the activities of the two

Furthermore, EDF signed an agreement on 31 March 2017 for the transfer of a 49.9% indirect equity interest in RTE to Caisse des Dépôts and CNP Assurances. On 30 March 2017, EDF completed a cash share issue with preferential subscription rights of a gross amount (including issue premium) of €4,018 million, i.e. the issue of 632,741,004 new shares with a par value of €6.35 each. The French State contributed €3 billion, i.e. 75% of the share issue. This share issue was a success, totalling around €4.9 billion. Market share was thus subscribed up to 185.9%.

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EDF I Reference Document 2017

1.

PRESENTATION OF EDF GROUP Organisation of the Group

1.2.

ORGANISATION OF THE GROUP

EDF ORGANISATIONAL CHART 1.2.1 A simplified organisational chart for the Group, as of 31 December 2017, is presented below. The percentages for each entity correspond to the ownership interest in capital. The companies or groups of companies within the Group’s scope of consolidation are indicated in Note 51 to the consolidated financial statements for the year ended 31 December 2017.

CTE*

EDF Énergies Nouvelles

100 %

50,1 %

100 %

Enedis

CHAM

100 %

EDEV

Citelum

100 %

100 %

Électricité de Strasbourg

88,6 %

SOCODEI

100 %

Domofinance

45 %

Dunkerque LNG

65 %

Sofinel

55 %

45 %

Framatome**

75,5 %

EDF International

100 %

Dalkia

Groupe Tiru

99,9 %

75 %

La Gérance Générale Foncière

EDF Immo

100 %

100 %

SOFILO

100 %

Océane Re

Société C3

100 %

99,98 %

Wagram Insurance Company

100 %

EDF Investissements Groupe

93,9 %

EDF Holding SAS

EDF Trading Group

EDF Inc.

100 %

100 %

17,5 %

* Coentreprise de Transport d’Électricité « CTE » (ex C25), company holding RTE shares. ** Acquisition at 31/12/2017.

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EDF I Reference Document 2017

PRESENTATION OF EDF GROUP Organisation of the Group

1.

EDF International

EDF Belgium

EDF Luminus

68,6 %

100 %

Constellation Energy Nuclear Group

EDF Inc. / United States

82,5 %

49,99 %

Unistar Nuclear Energy

100 %

EDF Trading North America

100 %

Companhia Electrica de Sinop (CES) / Brazil

EDF Norte Fluminense / Brazil

100 %

51 %

Shandong Zhonghua Power Company Ltd / China

19,6 %

Datang Sanmexia Power Company Ltd / China

35 %

Taishan Nuclear Power Joint Venture / China

25,6 %

4,4 %

Jiangxi Datang International Fuzhou Power Generation Company Ltd / China

EDF (China) Holding Ltd

49 %

100 %

Figlec / China

100 %

NTPC (Nam Theun) / Laos

40 %

EDF Energy Nuclear Generation Ltd.

Meco / Vietnam

56,3 %

99 %

Lake Acquisitions Ltd.

EDF Energy UK / United Kingdom

EDF Energy Holding Ltd

100 %

100 %

80 %

NNB Holding Company Ltd.

66,5 %

Groupe EDISON / Italy

EDF Fenice

TDE SpA

100 %

97,4 %

100 %

FS GmbH

EDF Gas Deutschland

100 %

50 %

ALPIQ

EDF - Alpes Investissements / Switzerland

100 %

25%

Sloe Centrale Holding BV / The Netherlands

50 %

EDF Development Company Ltd UK

100 %

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EDF I Reference Document 2017

1.

PRESENTATION OF EDF GROUP Group strategy

INTRA-GROUP CONTRACTS 1.2.2 The information on the regulated agreements and commitments referred to in Article L. 225-38 of the French Commercial Code is stated in the Statutory Auditors’ special report, which is reproduced in section 7.5.4 to this Reference Document. Financial flows between EDF and its subsidiaries In addition to the financial flows relating to the cash pooling agreements mentioned above, financial flows between EDF and its subsidiaries are also related to distributions of dividends within the Group. A substantial portion of the dividends is paid by EDF International. In 2017, EDF received a total of €1,763 million in dividends from its consolidated subsidiaries. Other financial flows between EDF and its subsidiaries correspond mainly to loans, asset transfers and guarantees made by the parent company of the Group for the benefit of certain subsidiaries. In the context of the Group’s financing centralisation policy, decided on in 2006, EDF centralises part of the financing of its foreign subsidiaries, through a subsidiary located in Belgium, EDF Investissements group, which aims to grant medium- and long-term intra-group financing. In addition, the nuclear fuel purchases are managed centrally by EDF SA, including the purchases intended to its subsidiary EDF Energy. With regard to financial flows related to fees paid by subsidiaries, contracts for the supply of intra-group services have been concluded with the main subsidiaries under The fight against climate change has entered a crucial phase with the objective of limiting global warming to +2 °C. Today, energy accounts for most CO 2 emissions worldwide: lowering energy consumption by developing energy efficiency solutions is crucial for decarbonisation. We must continue to step up the reduction of the carbon intensity of electricity generation and heating – which account for over 40% of CO 2 emissions worldwide, by driving the development of low carbon solutions: renewable, thermal, electric and nuclear energies. In this respect, France – which already has low carbon intensity facilities – is a step ahead of its major European neighbours. This low carbon and competitive mix must be preserved in the long term, drawing on the complementary relationship between renewable and nuclear energy. Electricity is a key factor for the direct reduction of CO 2 , as well as a substitute for fossil fuel in the mobility, building and industry sectors. In the forward-looking scenarios limiting global warming to +2°C, low carbon electricity should thus become the leading source of energy by 2040-2050: the use of electricity should therefore be stepped up and boost energy efficiency efforts, in order to bring down emissions to a quarter of current levels by 2050, and to aim at carbon neutrality. However, the current business models of electricity producers are under pressure due to the market and European regulatory context, although significant investments are still required to maintain existing assets, and in the longer term, to renew generation facilities: in 2017, fuel prices (oil, gas, coal) confirmed the recovery that began at the end ■ of 2016, but remained at levels much lower than those of the beginning of the decade, as a result of the abundance of resources, in particular shale gas; GROUP STRATEGY 1.3 ENVIRONMENT AND STRATEGIC 1.3.1 CHALLENGES

the scope of consolidation since 2012. EDF may also be required to provide specific services to certain subsidiaries or entities outside the Group. In addition, following EDF brand development work, the Company has set up licensing agreements with subsidiaries that use the EDF brand. Cash pooling agreements entered into between EDF and its subsidiaries The cash pooling system set up by EDF centralises all the cash positions of its subsidiaries and thus optimises the group’s liquidity. Cash pooling consists of grouping all the cash balances of subsidiaries at the level of the parent company. It includes certain French and international subsidiaries. It does not include RTE. The cash pooling system in place for companies of the EDF group is defined under cash agreements. Bilateral agreements between EDF and each subsidiary define the specific conditions for each arrangement (remuneration of balances, etc.). At international level, subsidiaries participating in the system enter into a framework agreement, whereby EDF serves as the Cash Centre. EDF also centralises all the currency flows from its French subsidiaries. Insurance EDF and its subsidiaries have entered into accession protocols in order for the latter to benefit from the insurance coverage provided for by the group’s insurance programs. the price of CO 2 ■ remains very low, which is at odds with the decarbonisation and energy transition targets in Europe; such a low CO 2 price de facto supports the economic viability of coal and lignite ■ generation means at a time when European electricity demand remains subdued (0.6% annual average increase between 2000 and 2016 (1) ) and when, nonetheless, significant subsidised energy capacity has been connected to the grid. Therefore, the over-capacity in the European generation sector, which could lead to additional massive decommissioning in Europe, explains the historically low electricity market prices: for instance, in France, whereas prices had settled at around €40/MWh in 2015, and below this level in 2016, France N+1 electricity market prices fluctuated between €33 and €44/MWh in 2017. These levels are lower than the development costs of new generation facilities, regardless of the sector. By way of contrast, electricity consumption is rising fast in emerging markets, especially in Asia, benefiting the electricity producers in these regions with forecasts (1) of around +173TWh p.y. in China between 2016 and 2040 (+2.2% p.y. on average) and +52TWh p.y. in Africa (+4.0% p.y.), versus +11TWh p.y. in the European Union (+0.3% p.y.). In Europe, France and the UK are developing low carbon energy independence policies, primarily built around a mix combining energy efficiency, renewable and nuclear energies. Thus, the UK, which must undertake a major renewal of its electricity generation facilities, has established a market model consistent with this policy (Carbon Price Floor, Contracts for Difference, capacity market, etc.). In France, electricity is also used as a driver towards low carbon, and the Law of 17 August 2015 on Energy Transition and Green Growth sets a ceiling of 63.2GW for the nuclear capacity installed in France, which given the evolution in demand and export capacities suits the development of renewable energies in the energy mix. Capacity markets are also being developed, in particular in France, the United Kingdom and Belgium. , despite a relative increase during the second half of 2017,

Source: AIE, World Energy Outlook, November 2017. (1)

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PRESENTATION OF EDF GROUP Group strategy

low carbon generation, with a balanced mix of nuclear and renewable energy; ■ international expansion. ■ More than 15 programmes have been launched since 2015, embodying each of these three strategic priorities. This goal will also be achieved through a transformation programme based on the following four main areas: simplification, innovation and digital technology, human ambition and skills, accountability and performance management. Proximity to customers and local 1.3.2.1 communities In order to support customers and local communities in their energy transition, the EDF group offers them competitive low carbon energy solutions and has acquired industrial expertise in smart grids. The EDF group’s strong position in energy services via Dalkia, Citelum and other subsidiaries (Sodetrel, Edelia, Netseenergy) allows it to support its customers in achieving energy efficiency and developing decentralised local systems. In 2017, EDF launched the “EDF Solutions énergétiques” brand to promote this product offering to all its customers. As for residential customers, the EDF group offers and continues to develop a range of digital energy services, marketed in France and in the “core European countries” (United Kingdom, Italy, Belgium). For example, the launch of Sowee in 2016 (a subsidiary offering innovative connected home products and solutions, that was further diversified in 2017) reflects the EDF group’s commitment to meeting the new expectations of its customers, especially with regard to sustainable wellbeing in the home. Existing offerings and customer relations will also continue to be enriched by new digital technologies and features, facilitated in particular by smart meter systems deployed in several countries. The EDF group is fully engaged in the energy transition: by proposing or developing energy efficiency solutions for its customers ■ (insulation, high efficiency solutions, deployment of innovative digital tools); by working to replace fossil fuels with new efficient uses of electricity, which ■ could represent dozens of additional TWh in France by 2030 (electric mobility, heat pumps, low carbon housing etc.); by developing carbon-free and decentralised electricity generation capacity such ■ as the self-consumption offering “Mon soleil et moi” ("My sun and me"); by developing and operating heating networks that use renewable and recovery ■ energies; by creating EDF Nouveaux Business, an incubator of in-house and external ■ projects aimed at testing and exploring new business sectors, creating new drivers of growth for the Group and bringing customers a new range of products and innovative services. Lastly, the development of renewable energies, the deployment of the Linky smart meters (1) and the emergence of metropolitan areas are putting the distribution networks on the front line of the transformation of the electricity system. The distributor thus plays a key role as facilitator of the energy transition. In this respect, Enedis and EDF have established with the national federation of licensing authorities (FNCCR) and the association France Urbaine, a new draft concession contract for the public distribution of electricity and the supply of electricity at regulated tariffs, in order to modernise relations with the concession contracting authorities. This contract integrates regional changes and the energy transition, while retaining the principles of the French concessionary model: public service, regional solidarity and nationwide optimisation. To support the energy transitions, the EDF group is intensifying research and development in storage, solar energy, electric mobility, smart electricity systems and sustainable local energy solutions (smart cities), like the signing of the Dijon Smart City contract, in consortium with the Bouygues group.

The agreement reached in Paris at the 21 st session of the Conference of Parties (COP 21) confirms the effort being made to combat climate change and the ramping up of energy transitions beyond Europe. This agreement, which was ratified by 168 countries as well as the European Union, came into force on 4 November 2016. COP 22 and COP 23, held in Morocco and Germany, reconfirmed the roadmap approved in Paris, despite the withdrawal of the United States from the agreement. The One Planet summit organised in Paris in December 2017 helped to mobilise funds and resulted in commitments in favour of the fight against global climate change. In France, the energy transition law for green growth adopted in August 2015 sets out several medium and long term objectives relating to greenhouse gas emissions, energy consumption and the energy mix in France. This law led to the drawing up of a national low carbon strategy and a multi-year energy programme (PPE) to manage these targets. The PPE defines the orientations and action priorities of public authorities for managing all the different energy forms for five-year periods. The current PPE covers the periods 2016-2018 and 2019-2023. In 2018, a new PPE will be drawn up for the periods 2019-2023 and 2024-2028 and will be subject to public debate. Customers are looking to increasingly take ownership of their consumption, and local communities of their energy policy. These new expectations are forcing energy producers to come up with new solutions and new, more decentralised models, facilitated by innovations in telecommunications and digital technologies and the emergence of new uses, including electric vehicles. The electricity sector is thus changing more than ever, at the centre of medium and long term societal and technological trends. Against this background and with this outlook, European electricity producers have scaled back their investments and focussed them on targeted segments, particularly renewable energy, low carbon solutions, international growth areas, networks, supply to customers and services. EDF is thus addressing specific strategic challenges: to play a responsible role in the fight against climate change: to contribute to the ■ achievement of the goals set out in the Energy Transition and Green Growth Law in France, in the Climate Change Act in the UK, and more broadly in the 2020 and 2030 Energy and Climate Change Packages in the European Union; to ensure the economic performance and safety of nuclear assets; ■ to innovate in order to set itself apart and to have the technological and ■ economic capabilities to renew and expand its generation and the services it offers to customers, in particular digital services, and thereby play a role in energy efficiency and supply security; to ensure that the EDF group is a consistently outstanding public service ■ operator, in particular in terms of solidarity and the fight against energy poverty, respect for others, and responsibility and ethics in the way it runs its business; to put itself on a sustainable value creation path for all stakeholders; ■ to create an environment that facilitates the involvement of all stakeholders in ■ the Group’s transformation. Therefore, in a particularly difficult market context, the EDF group is working hard to pursue its CAP 2030 strategy in order to be able to finance its priority developments. STRATEGY To be a responsible and efficient electricity producer that champions low carbon growth: this is the goal of the EDF group, driven by the CAP 2030 strategy. This goal can be split into three priorities, which combine the search for growth drivers with the optimisation of existing assets: proximity to customers and local communities; ■ PRIORITIES OF THE CAP 2030 1.3.2

1.

Linky is a project led by Enedis, the distribution network operator. For the sake of brevity, all further mentions of Linky in the rest of the document do not specify that it is a (1) project led by Enedis.

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PRESENTATION OF EDF GROUP Group strategy

It is also increasing its innovation efforts to meet the expectations of its customers and offer solutions and services adapted to the new consumption patterns and based on increasingly digital means of communication. Lastly, the EDF group, as a part of CAP 2030, has made a commitment to six corporate responsibility goals (see section 3.1.2 "Corporate social responsibility goals"). Very low carbon generation: 1.3.2.2 nuclear and renewable energies To remain the leader in very low carbon electricity generation, the EDF group is intensifying the development of renewable energies while ensuring the safety, performance and competitiveness of the existing nuclear facilities and new nuclear investments. In fact, EDF’s nuclear facilities are already giving France a major lead compared to its neighbours in terms of curbing greenhouse gas emissions, while still ensuring lower electricity costs. Achieving the very low carbon generation goal starts with the consolidation of the hydropower and nuclear asset base: EDF regularly invests in hydropower concessions in order to combine economic, ■ energy and environmental performance, and will propose solutions to strengthen hydropower generation; EDF is investing in order to obtain approval to extend, under the highest safety ■ conditions, the operating life of the French nuclear facilities beyond 40 years, now that its economic and carbon competitiveness has been demonstrated. In this context, EDF’s Board of Directors approved the principle of the “Grand Carénage” on 22 January 2015 (see section 1.4.1.1.2 “Operation and technical performance of the nuclear fleet” – “Investment programme for the existing nuclear installed base in France”). Furthermore, on 28 July 2016 the Board of Directors approved the extension to 50 years of the amortisation period of the PWR 900MW series (excluding Fessenheim) in France, without prejudice to the decisions authorising the continuation of the operation, which will be made on a unit-by-unit basis by the French Nuclear Safety Authority (ASN) after each ten-year inspection. These decisions are consistent with the multi-year energy plan; investments are also being made to extend the operating life of the entire UK nuclear fleet by an average of eight years compared with its initial service life; as a responsible electricity producer, the EDF group will also carry on investing in ■ the preparations for the decommissioning of the nuclear fleet and for the waste management in France and the United Kingdom. The EDF group will continue new developments, balanced between new nuclear projects and renewable energies. The main issues concerning new nuclear projects are: the commissioning of Flamanville 3 and Taishan; ■ the building and operation of two EPR reactors at Hinkley Point, for which the ■ final contracts were signed on 29 September 2016 by EDF, CGN and the British Government; the acquisition by EDF of the exclusive control of the activities of AREVA NP ■ corresponding to the design and supply of nuclear boilers and fuel assemblies performed by the company now named Framatome, 75.5% owned by EDF (see section 1.1 "History and development of the Company"); the preparation of the reactors of the future with the EPR 2 project (as a ■ follow-up of the New Model EPR project), conducted jointly with Framatome; the development of the activities of Edvance (see section 1.4.1.2.3.4 “Creation ■ of Edvance”); the development of the EPR for the export market (with, in particular, decisions ■ taken in India).

With regard to renewable energy, the new means developed will be essentially onshore and offshore wind power, solar energy and hydropower. In December 2017, EDF announced the Solar Plan: a development plan of solar energy, aimed at installing 30GW of solar power in France between 2020 and 2035. The development of these assets outside France is undertaken in line with the EDF group’s international strategy. In this respect, the Group strengthened in 2017 its integration in the renewable energy industry by developing new projects, not only in France, but also in the United States, the UK, Germany, Middle East, Brazil, Chile, India and China (see section 1.4.1.5.3 “EDF Énergies Nouvelles”). In line with the very low carbon generation priority, EDF supports the need to implement measures to increase the price of CO 2 in order to guarantee, if possible at the European level, a CO 2 price that is sufficient and consistent with the energy transition goals. The UK and the Netherlands have adopted these pricing measures and the French government supports the principle. EDF believes that such measures should be applied to all electricity generation sectors to be fully effective. They will constitute an incentive for economic and financial operators to invest in the cheapest ways to reduce carbon emissions and help give full value to non-polluting assets. International expansion 1.3.2.3 The EDF group wants to be a key player in the energy market in France and in its core countries in Europe (United Kingdom, Italy, Belgium) by playing a role in energy security, the enhancing of economic competitiveness and the European economy low carbon transition, in line with public policies. The Group is also expanding outside Europe, by pursuing three long-term objectives: to make some non-European countries core countries for the Group, to channel its investment choices to contribute to the global energy transition, and to triple (between 2015 and 2030) the share of the "Grand International" in the Group's business. EDF is thus deploying a targeted approach in geographic terms and is giving priority to low carbon hydraulic, wind and solar generation projects as well as energy services and engineering activities. Gas-to-power infrastructure projects are also being developed where they are a key component of the energy transition. With respect to new nuclear, EDF will draw on the breadth of its experience and the expertise of Framatome to develop new opportunities in the international market (India, South Africa, etc.). Transformation 1.3.2.4 Health and safety, digital and new work practices, responsibility and simplification, skills and the recognition model are the five major levers of the Group’s transformation. The Group adapts its managerial practices by streamlining its organisations and modus operandi. For example, in 2016, two labour agreements were signed by EDF SA concerning both the introduction of a fixed number of working days for managers and an “expertise” agreement aimed at boosting the careers of employees and promoting internal mobility and promotional training. The Group has streamlined and simplified its policies, bringing them down from 200 to 40 while making them simpler to apply. Moreover, the promotion of innovation, based on experiments (“labs” and co-construction platforms with customers) and on an open innovation programme will contribute to this transformation. The creation of EDF Nouveaux Business, a department in charge of “new businesses”, has complemented the skills EDF is gradually developing in order to meet the challenges in this field. It will use the levers of incubation, investment in external start-ups (through the Electranova funds) or technological partnerships (see section 1.4.6.1.3 “EDF Nouveaux Business”). The digital transformation involves employees and internal modus operandi, customer relations and the management and design of industrial assets. The creation at end 2016 of a Transformation and Operational Efficiency Department, which combines the Group’s activities relating to information systems, purchasing, real estate and shared services, reflects the Group’s desire to speed up in this field.

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