Areva - Reference Document 2016

RISK FACTORS

4.7 Liquidity and market risks

The group’s liquidity for 2016 was ensured by draws on January 4 and 5, 2016 on

available lines of credit in the amount of approximately 2 billion euros.

At December 31, 2016, the short-termborrowings of AREVA’s continuing operations

amounted to 831million euros, consistingmainly of bilateral lines of credit maturing

over the course of 2017. In addition, AREVA guarantees NewCo’s borrowings (bond

debt and financing of the Georges Besse II industrial asset in the total amount of

5.5 billion euros) until the execution of the NewCo capital increase, also planned

in 2017.

Beyond 2017, the last significant maturity of AREVA’s debt consists of the

redemption of the syndicated line of credit of 1.25 billion euros in January 2018.

As mentioned previously, on January 10, 2017, the European Commission

authorized rescue aid in the form of two advances from the shareholder current

account of the French State, one for AREVA in the amount of 2 billion euros and

the other for NewCo in the amount of 1.3 billion euros.

In addition, in early February 2017, AREVA SA secured and accepted a commitment

from its banking partners for “senior secured” interim financing of 300million euros,

expected to be signed in the near future and to have a maturity date of January 8,

2018. Draws on this financing will be conditioned on the French State’s subscription

to the AREVA SA and New AREVA Holding capital increases.

Furthermore, AREVA SA secured the necessary consent from the lenders of the

syndicated credit of 1.250 billion euros maturing on January 16, 2018 to proceed

with the NewCo capital increase and authorize de facto the loss of control. In

return for this consent, the lenders of that facility receive better terms, including

an additional security and early redemption clauses, in particular as regards the

income from the sale of AREVA NP.

4.7.2.

FOREIGN EXCHANGE RISK

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

exposed to fluctuations in exchange rates, particularly the euro/U.S. dollar exchange

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

adjustments, equity and income. The value of the euro in relation to the US dollar

has fallen approximately 1%between December 31, 2015 and December 31, 2016.

The principal factors which may influence the group’s exposure to currency risk,

by business unit, are as follows:

Mining Business Unit and Chemistry – Enrichment Business Unit: due to their

geographically diversified locations (local currencies: euro/FCFA, Canadian

dollar, tenge) and to their operations denominated primarily in US dollars, which

is the world reference currency for natural uraniumprices and for conversion and

enrichment services, these business units have significant exposure to the risk

of the US dollar’s depreciation against the euro. The foreign exchange risk to be

hedged is managed globally by business unit and is net (some requirements in

different directions of the same currency are offset, providing a natural hedge).

For medium/long-term exposure, the amount of the hedge is set up according to

a gradual scale for a duration based on the highly probable nature of exposure,

generally not to exceed five years;

Components Business Unit: specific insurance policies are usually acquired or

forward currency transactions are concluded to hedge the risk associated with

the sale of heavy components (steam generators, reactor vessel closure heads)

which may be billed in US dollars while production costs are incurred in euros;

Recycling Business Unit: this business unit’s exposure to foreign exchange risk

is minimal, since most foreign sales outside the Eurozone are billed in euros and

more of the business unit’s costs are incurred in euros.

As provided in the group’s policies, operating entities responsible for identifying

foreign exchange risk must initiate hedges for currencies other than their own

accounting currency exclusively with the group’s Treasury Department, except as

otherwise required by specific circumstances or regulations. DOFT thus centralizes

the currency risk for all entities and hedges its position directly with banking

counterparties. A system of strict limits, particularly concerning authorized foreign

exchange positions and results, marked tomarket, is monitored daily by specialized

teams which are also in charge of valuation of the transactions. In addition, analyses

of sensitivity to changes in exchange rates are periodically performed.

For more information, see Section 20.2.

Notes to the consolidated financial

statements

, note 31.

Market risk management

4.7.3.

INTEREST RATE RISK

The group’s exposure to fluctuations of interest rates encompasses two types of risk:

a risk of change in the value of fixed-rate financial assets and liabilities; and

a risk of change in cash flows related to floating-rate financial assets and liabilities.

The group uses several types of derivatives, depending on market conditions, to

allocate its borrowings and investments between fixed rates and floating rates,

with the goal being mainly to reduce its borrowing costs while optimizing the

management of its cash surpluses. The group’s rate risk management policy,

approved by Executive Management, is supplemented by a system of specific

limits for asset management and the management of rate risk on borrowings. In

particular, the system defines authorized limits for portfolio sensitivity, authorized

derivatives for managing financial risk, and subsequent positions that may be taken.

For more information, see Section 20.2.

Notes to the consolidated financial

statements

, note 31.

Market risk management

2016 AREVA

REFERENCE DOCUMENT