Areva - Reference Document 2016

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RISK FACTORS

4.5 Operational risks

4.5.3. RISK ASSOCIATED WITH DEPENDENCY ON THE GROUP’S CUSTOMERS

The group’s loss of one of its main customers or a reduction in their purchases or an erosion of contract terms or conditions could have a significant negative impact on the group’s operations and financial position. AREVA has very substantial commercial relations with the EDF group. At December 31, 2016, EDF France represented about 30% of the group’s revenue. AREVA is the leading supplier to the EDF group in the nuclear field, providing products and services at every stage in the nuclear fuel cycle as well as for the construction, equipment and maintenance of the EDF group’s nuclear power stations. In the fuel cycle, the relationship between the EDF group and AREVA is governed by multiyear contracts. In its operating segments, these contracts give AREVA operating visibility beyond 2020, with the regular signature of contracts covering multiple years. In addition, the impacts of the law of August 17, 2015 on the energy transition in France (articles L. 311-5-5 and L. 100-4-5) on EDF’s operations were specified in the Multiyear Energy Programapproved by decree no. 2016-1442 of October 27, 2016.

The Multiyear Energy Program stipulates in particular that:

p the commissioning of the Flamanville EPR may not occur before the closure of the two Fessenheim reactors to comply with the ceiling of 63.2 gigawatts of installed nuclear power in France, in accordance with article L. 311-5-5 of the Energy Code introduced by the Energy Transition Law; p the closure of the two Fessenheim reactors will take place during the first phase of the Multiyear Energy Program, in compliance with the requirements decreed by the nuclear safety authority ASN; p concerning the lifecycle extension of the nuclear power plants, the Multiyear Energy Program indicates that ASN will take “a generic position at the end of 2018 on the conditions enabling authorization to extend the operation of French nuclear power plants in the 900 MW series beyond the fourth ten-year inspection, then decisions will be made reactor by reactor starting in 2019-2020, on the occasion of the fourth ten-year inspections.” The group’s 10 biggest customers, including the EDF group, represented about 64% of its revenue at the end of December 2016.

4.5.4. RISK RELATED TO THE INFORMATION SYSTEM

All industrial and commercial activities in the group rely on a mission-critical information system. The group deploys resources to ensure information system security and the fluidity of its business processes.

However, faced with constantly changing threats and the growing sophistication of the attacks, it cannot guarantee that they will remain without significant impact on its operations. Similarly, the group cannot guarantee that no technical malfunction will occur likely to cause significant disruptions.

4.5.5. UNSCHEDULED WORK IN THE PRODUCTION OF PRODUCTS AND SERVICES SOLD

The group provides services and designs, manufactures and sells several products with a high unit value used in major projects, in particular the design and construction of nuclear reactors and heavy equipment, work to extend the plant operating period, and reactor maintenance. Occasionally, final adjustments may be required, products may need to be modified after manufacturing has begun or after customers have placed them in service, or services to be provided may have to be adapted. These adjustments, modifications and additional services could trigger unexpected costs for the group. Though the group has set up a rigorous management control system and a system to control product and service quality and standards, these unanticipated expenses could have a significant negative impact on the group’s business or financial position.

When the group sells certain products, such as nuclear steam supply systems, or signs service contracts, customers sometimes demand schedule or performance warranties, or penalties for not meeting them. Pursuant to such commitments, the group may have to repair products delivered or correct services provided in the event of faulty design or performance. The risk is significantly increased if the repairs or services concern a standardized series of products.

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2016 AREVA REFERENCE DOCUMENT