Areva - Reference Document 2016

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RISK FACTORS

4.8 Other risk

THE GROUP CONDUCTS OPERATIONS ON INTERNATIONAL MARKETS CHARACTERIZED BY STRONG COMPETITIVE PRESSURES THAT COULD LEAD TO A CONSEQUENTIAL DROP IN DEMAND FOR THE GROUP’S PRODUCTS AND SERVICES. The group’s products and services are sold on international markets characterized by intense competition on price, financial terms, product/service quality and the capacity for innovation. In some of its businesses, the group has powerful competitors that are much larger than the group or have access to more resources. Moreover, these competitors may sometimes make decisions that are influenced by extraneous considerations other than profitability or have access to financing at advantageous terms. In addition, competitive pressures have increased as a result of the deregulation of the electricity market, which opened the door to new competitors for the group’s main customers and in particular resulted in increased price volatility. Deregulation may lead to changes in prices for electricity and for products and services related to the generation, transmission and distribution of electricity and/or to lower investment in the nuclear power sector. Nuclear power and renewable energies developed by the group are also competing with other sources of energy, in particular oil, natural gas, shale gas, coal and hydroelectricity. These other energy sources could become more attractive than the energy sources developed by the group. THE GROUP CANNOT ENSURE THAT ITS STRATEGIC ALLIANCES, RESTRUCTURING OR REORGANIZATION, MERGERS AND ACQUISITIONS, ASSET DISPOSALS AND CONSOLIDATION WILL BE PERFORMED AS INITIALLY CONTEMPLATED OR THAT THESE OPERATIONS WILL GENERATE THE ANTICIPATED SYNERGIES AND COST REDUCTIONS. The conclusion of certain asset disposal transactions may depend on conditions precedent over which in some cases AREVA has no control, such as approval by competition authorities in the relevant countries or opinions issued by certain bodies representing the group’s employees. A lack or delay of approval could result in the termination of these transactions and thus have a material impact on the group’s anticipated financial position and performance. The group is involved in a variety of acquisitions, strategic alliances and joint ventures with partner companies. Although the group believes that its acquisitions, strategic alliances and joint ventures will be beneficial, a certain level of risk is inherent in these transactions, particularly the risk of overvalued acquisitions; insufficient vendor warranties; underestimated operating costs and other costs; disagreements with partners (particularly in joint ventures); potential integration difficulties with personnel, operations, technologies or products; lack of performance on initial 4.8.2. RISKS RELATED TO THE GROUP’S STRUCTURE

Certain risks have been identified as being inherent to the Renewable Energies Business Group: p the risks associated with the order intake process and the confirmation of key sales opportunities; p the risks associated with the ramp-up of the supply chain and assembly lines, of internal / supplier quality control, and of the execution of first-of-a-kind projects from a technology standpoint in many countries; p the risks related to the ability of the technologies sold to achieve the level of performance required and the impact this may have on existing contracts and on the market, in particular with the lack of a representative installed base to support planning and the establishment of the necessary provisions for defects and malfunctions over the medium and long term; p the risks related to the safety of operations in new environments and with rising volumes; and Since 2010, the group has set up a certain number of risk mitigation action plans with the objective of securing project completion and the full operational cycle of the group’s products, ensuring the strength and quality of the group’s value chain, and implementing all of the group’s operational performance optimization processes. p the risks associated with the loss of key technical skills. objectives; or third-party challenges to these strategic alliances or mergers and acquisitions, based on their impact on those parties’ competitive positions. In addition, minority shareholders in certain AREVA subsidiaries, such as Eurodif (see Section 25.2.2. Main shareholders’ agreements concerning AREVA’s equity interests ), could restrict the group’s decision-making ability. Until it was amended on January 14, 2016, decree no. 83-1116 of December 21, 1983, as amended, relating to the Société des participations du CEA (AREVA) stipulated that the CEA was obliged to hold more than half of AREVA’s capital. Since January 14, 2016, that decree requires that the French State, or the Commissariat à l’énergie atomique et aux énergies alternatives, or the other public institutions of the State, or the companies in which they hold a majority share, directly or indirectly, singly or jointly, are required to hold more than half the capital of the company. At December 31, 2016, the CEA held 54.37% of AREVA’s capital, representing 57.02% of the voting rights. It has the power to make most of the decisions during General Meetings of shareholders, including those relating to the appointment of members of the Board of Directors and those relating to the distribution of dividends.

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2016 AREVA REFERENCE DOCUMENT