Areva - Reference Document 2016

RISK FACTORS

4.3 Legal risks

4.3.1.2.

RULES OF BUSINESS ETHICS

The group attaches special importance to adherence to strict ethical values in

connection with its operations.

The company’s code of ethics was revised in 2016 as part of a program for the

overall strengthening of compliance. In addition to nuclear safety, the group aims

to be exemplary in the fields of:

corruption prevention;

compliance with competition laws and regulations;

financial ethics and compliance;

compliance with insider trading rules;

compliance with regulations on the export of dual-usage items (export controls).

Occasional deviations from these standards by employees, officers or representatives

of the group could nonetheless occur which, depending on their severity, could

have potential repercussions on AREVA’s reputation and possibly financial costs if

for example violations have been committed.

4.3.2.

CONTRACTUAL AND COMMERCIAL RISKS

4.3.2.1.

BREACH OF CONTRACTUAL COMMITMENTS

The group is exposed to the risk of default by its customers for the payment of its

products and services and/or by its suppliers for the performance of certain services

or for the delivery of certain products.

Except when customers deposit funds to cover the group’s expenses during the

contract implementation phase, the group is exposed to the risk of a customer’s

inability to accept delivery or to the risk of default on payments during delivery. In

such instances, the group may not be able to recover expenses incurred for the

project or to reach the operating margins contemplated when the contract was

signed.

In connection with certain disputes set out in Section 20.8.

Legal and arbitration

proceedings

of the 2016 Reference Document, the group may also be exposed

to the risk of customer payment into a frozen account for part of its products

and services during the execution of certain contracts. In fact, depending on the

outcome of the disputes in question, the group could run the risk of having all or

part of the frozen payments withheld.

Though the group endeavors to control its exposure to contractual risk, it is not

possible to guarantee that all risks of non-payment or non-execution can be

eliminated.

4.3.2.2.

NON-RENEWAL OR TERMINATION

OF CONCESSIONS RELATED TO THE GROUP’S

MINING OPERATIONS

The group’smining operations involve concessions received or partnerships formed

under legal systems specific to each country. Despite the relatively long terms of

these partnerships or concessions, the group is exposed to the risk of non-renewal

or termination of its mining concessions.

4.3.2.3.

LONG-TERM CONTRACTS

The group enters into long-term contracts which could limit its opportunity to take

advantage of improving conditions in certain markets or result in lower profitability

than anticipated.

In these long-term contracts, prices are adjusted based on general indices rather

than current market prices for certain rawmaterials or services. This type of contract

could prevent the group from taking advantage of price increases for those products

or services. This is the case for certain natural uranium sales contracts, in particular,

or for conversion or enrichment services.

In addition, the profitability of certain long-termcontracts in which the group commits

to providing deliverables at a fixed price, adjusted based only on general indices,

could be affected by certain excess costs that cannot be charged to customers,

including unanticipated increases for certain types of costs, technical difficulties,

subcontractor default or a suboptimal group organization. The performance of this

type of contract could therefore reduce the group’s anticipated profitability, or even

cause an operating loss.

4.3.2.4.

GUARANTEES GIVEN BY AREVA IN CONNECTION

WITH ASSET SALES IN PROGRESS

In connection with the sale of the exclusive control of New NP to EDF, and beyond

the price adjustment clauses in the share purchase agreement (upwards or

downwards), AREVA had to give EDF a capped general guarantee as well as several

specific guarantees, some of which are not capped.

Similarly, in connection with the sale of Adwen and the sale of AREVA TA, AREVA

had to grant capped general guarantees of liabilities as well as specific guarantees.

The application of those guarantees (in an amount which could prove to be

significant, particularly as concerns uncapped guarantees) could have significant

unfavorable consequences for the group’s operations and financial position.

4.3.2.5.

WARRANTIES

In accordance with the group’s practices and policies, the warranties provided in

the group’s contracts or financing are limited in duration and capped in value, and

exclude consequential or indirect damages. However, the group could under certain

circumstances give warranties exceeding those limits, particularly in competitive

markets.

Pursuant to the memorandum of understanding signed on July 28, 2016, EDF

and AREVA signed a share purchase agreement on November 15, 2016 which

sets the terms for the sale of an interest giving EDF exclusive control of an entity

(“New NP”) which is a wholly owned subsidiary of AREVA NP, and which will

combine the industrial operations involving the design and supply of nuclear

reactors and equipment, fuel assemblies and services to the installed base of the

AREVA group. The OL3 contract and themeans needed for its completion together

with the Component contracts affected by serious anomalies which might have

been identified as part of the quality audit in progress are not included in this

sale. In connection with that transaction, and in addition to the price adjustment

clauses provided in the contract (upwards or downwards), the warranties which

the group had to give could have significant consequences for the group’s future

financial position.

2016 AREVA

REFERENCE DOCUMENT