Areva - Reference Document 2016

20.2 Notes to the consolidated financial statements for the year ended December 31, 2016

FINANCIAL INFORMATION CONCERNING ASSETS,

FINANCIAL POSITION AND FINANCIAL PERFORMANCE

NOTE 30.

GREENHOUSE GAS EMISSIONS ALLOWANCES

(in thousands of metric tons of CO

)

2016

2015

Allowances received by AREVA

Actual emissions

Excess of allowances over emissions

Allowances sold on the Powernext market

NOTE 31.

MANAGEMENT OF MARKET RISKS

GENERAL OBJECTIVES

The group has a dedicated organization which draws on financial riskmanagement

policies approved by the Executive Committee, enabling centralized management

of the group’s exposure to foreign exchange, commodity, rate and liquidity risks

for the continuing operations, to which AREVA NP, which is covered by AREVA

SA, is exposed. Similarly, New AREVA Holding centralizes the management of

these risks for NewCo.

In the Finance Department, the Department of Financial Operations and Treasury

Management (DOFT) makes transactions on financial markets and acts as a

central desk that provides services and manages the group’s financial exposure.

The organization of this department ensures the separation of functions and the

necessary human, technical, and information system resources. Transactions

handled by DOFT cover foreign exchange and commodities trading, interest rates,

centralized cash management, internal and external financing, borrowings and

investments, and asset management.

To report on the financial risks and related position limits and on the counterparty

risk, DOFT produces a monthly report on all positions and their market values for

the group’s Chief Financial Officer.

FOREIGN EXCHANGE RISK

The change in the exchange rate of the US dollar against the euro may affect the

group’s income in the medium term.

In view of the geographic diversity of its locations and operations, the group is

exposed to fluctuations in exchange rates, particularly the dollar-euro exchange

rate. The volatility of exchange rates may impact the group’s currency translation

adjustments, equity and income.

Currency translation risk:

The group is exposed to the risk of translation into

euros of financial statements of subsidiaries using a local currency. Only dividends

expected from subsidiaries for the following year are hedged as soon as the amount

is known.

Balance sheet risk:

The group finances its subsidiaries in their functional

currencies tominimize the balance sheet foreign exchange risk fromfinancial assets

and liabilities. Loans and advances granted to subsidiaries by the Department

of Treasury Management, which centralizes financing, are then systematically

converted into euros through foreign exchange swaps or cross currency swaps.

To limit the currency risk for long-term investments generating future cash flows in

foreign currencies, the group uses a liability in the same currency to offset the asset.

Trade exposure:

The principal foreign exchange exposure concerns fluctuations

in the euro/US dollar exchange rate. The group’s policy, which was approved by

the Executive Committee, is thus to systematically hedge foreign exchange risk

generated by sales transactions; it recommends hedging potential risks during the

proposal phase, to the extent possible, to minimize the impact of exchange rate

fluctuations on consolidated net income.

The AREVA group acquires derivatives (principally currency futures) or special

insurance contracts issued by Coface to hedge foreign exchange exposure from

trade, including accounts receivable and payable, confirmed off-balance sheet

commitments (orders received from customers or placed with suppliers), highly

probable future cash flows (budgeted sales or purchases, anticipated profits on

contracts) and proposals made in foreign currencies. These hedges are backed

by underlying transactions for identical amounts and maturities and, generally, are

documented and eligible for hedge accounting (except for hedges of proposals

submitted in foreign currencies).

As provided by group policies, each operating entity responsible for identifying

foreign exchange risk must hedge exposure to currencies other than its own

accounting currency by initiating a transaction exclusively with the group’s trading

desk, except as otherwise required by specific circumstances or regulations.

The Financial Operations and Treasury Management Department centralizes

the exposure of all entities and hedges the net position directly with banking

counterparties. A system of strict limits, particularly concerning results, marked

to market, and foreign exchange positions that may be taken by the trading desk,

is monitored by specialized teams that are also charged with valuation of the

transactions. In addition, analyses of sensitivity to changes in exchange rates are

periodically performed.

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2016 AREVA

REFERENCE DOCUMENT