Areva - Reference Document 2016

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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:

p financial ethics and compliance; p compliance with insider trading rules;

p 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.

corruption prevention;

p

p compliance with competition laws and regulations;

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. 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. 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. 4.3.2.3. 4.3.2.2. NON-RENEWAL OR TERMINATION OF CONCESSIONS RELATED TO THE GROUP’S MINING OPERATIONS

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.

GUARANTEES GIVEN BY AREVA IN CONNECTION WITH ASSET SALES IN PROGRESS

4.3.2.4.

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. 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. 4.3.2.5.

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2016 AREVA REFERENCE DOCUMENT