Given the new cost to completion induced by these changes, the project’s financing requirement will exceed the contractual commitment of the shareholders, which could lead to financing difficulties in the event of a shift in the shareholders’ alignment. Due to its size and complexity, this project, like all similar projects, carries multiple risks of delays and additional costs.
The project’s IRR is sensitive to the exchange rate and could decrease in the event of a significant fall in the pound sterling against the euro, notably as a result of Brexit. The way in which Brexit is implemented may have a more general impact on the conditions under which the project is carried out, in particular on customs duties, the movement of persons and trade in goods and services. Finally, the governance of the project could also be affected in the event of misalignment between shareholders. Changes to these different factors could have a significative impact on the Group’s financial position.
EDF has also signed two other agreements with CGN relating to two nuclear construction projects in the United Kingdom: Sizewell C and Bradwell B (see section 1.4.5.1.2.4 “United Kingdom – Nuclear New Build Division”). EDF’s ability to make a final investment decision on Sizewell C and to participate in the financing of this project beyond the development phase could depend on the operational control of the Hinkley Point C project, on the existence of an appropriate regulatory and financing framework, and on the availability of sufficient investors and financiers; such criteria are not met to date. With regard to the Bradwell B project, the assessment by the Office for Nuclear Regulation of the generic design of the UK HPR1000 (UK Hualong) reactor model is underway and the development of this technology at the Bradwell B site in the UK may be impacted by this process. The new environment created by Brexit may lead to a change in the profitability conditions of projects and to reassessing or even discouraging investors associated with the Group’s future projects in the United Kingdom or Europe.
On 10 March 2018, the Chairman and Chief Executive Officer of EDF and the Chairman and Chief Executive Officer of NPCIL (Nuclear Power Corporation of India Limited), which already operates 22 reactors in India, signed an Industrial Way Forward Agreement for the construction of six EPR-type reactors at the Jaitapur site in India. Jaitapur is set to be the biggest nuclear project in the world, with a total power capacity of around 10GW. EDF submitted a non-binding offer on 14 December 2018. As part of this offer, EDF, in association with GE and its subsidiary Framatome, will be the engineering contractor for the entire project and supplier of the EPR technology. EDF will undertake all engineering studies and all component procurement activities for the first two reactors (see section 1.4.1.2.2 “Other New Nuclear projects” and section 1.4.5.3.6.2 “South-East and South Asia”). Discussions in view of the submission of a binding offer are being held with NPCIL on this basis.
A fundamental element for the success of an EPR project and for the operating safety of EPR reactors in which the Group is involved is accounting for the needs of the final operator, who is responsible for operating safety, from the beginning of the design phase and throughout the design and implementation of the EPR project.
Framatome is now a Group subsidiary and as such can expose the Group through its activities for other nuclear operators or customers in France and abroad. Exposure maybe financial or involve the Group’s reputation. Framatome’s industrial performance remains strategic for EDF Nuclear Operator in France and the United Kingdom. The successful completion of an EPR project depends on quality and compliance with contractual clauses in Framatome’s production of studies, components or services for each EPR Project.
The success and value creation resulting from Framatome’s integration into the EDF group implies a converging framework for nuclear projects, and the development of resulting synergies. Failure to achieve these objectives could jeopardise the competitiveness of the nuclear sector in France and that of the Group in its international development, and the success of all EPR Projects.
Other issues and risks specific to nuclear activities, whether in terms of nuclear safety, control of operation and maintenance operations, long-term commitments or the fuel cycle, are specified in section 2.2.5 “Risks specific to nuclear activities”.
The hydroelectric facilities operated by the Group present risks with potentially serious consequences for people, property and the environment that could have a financial and reputational impact on the Group.
Criticality in view of the control actions undertaken: Intermediate.
The Group’s hydraulic structures present specific risks with potentially very serious consequences: breakage, overflow during floods, operating manoeuvres. Hydropower safety comprises all the measures taken when designing and operating plants to reduce risks and hazards to people and property associated with water and the presence or operation of facilities. Hydropower safety is the major and permanent concern of the producer. It involves three main activities:
EDF regularly monitors and maintains its dams, including through continuous monitoring. The real-time readings and analysis, at each site, of multiple data (settlement, pressure, leakage measurements, combined with the visual inspection of the concrete and an inspection of the mechanical parts, etc.) enable EDF to conduct a regular assessment on the state of its dams. In Grenoble and Toulouse, EDF teams can analyse the largest dams or those dams that are the hardest to access, remotely and in real time, using a series of sensors.
Furthermore, a danger study including a complete technical examination is carried out for each of the large dams every ten years. This examination requires draining or an inspection of the submerged parts with sub-aquatic equipment. These operations are carried out under the supervision of public authorities (the DREAL office at the regional level as well as the Service technique de l’énergie électrique des grands barrages et de l’hydraulique – STEEGBH, the central French government agency specifically responsible for large dams and hydropower facilities).
At the organisational level, the Hydropower Safety Inspector prepares an annual report for the Chairman and CEO of EDF, to which he or she reports directly, as well as to those involved in hydropower safety (see section 1.4.1.5.1.2). Issued after analyses, inspections and assessments carried out by the Hydropower Safety Inspector, this report aims to give an opinion on the level of hydropower safety of the Group’s installations and provide a basis for reflection and progress to ensure its improvement and consolidation. This report is made public on the Group’s website.
The Group is exposed to health and safety risks in the workplace, both in terms of its employees and those of its service providers.
Criticality in view of the control actions undertaken: Intermediate..
Human resources and their related skills are a major challenge for the Group and its service providers. The industrial nature and diversity of the Group’s activities reinforce the crucial importance of complying with the rules and taking into account the various risks that may affect people working in the Group’s industrial facilities in order to protect health and safety in the workplace.
The risk of work-related accidents or occupational illnesses cannot be excluded in all of the Group’s areas of activity. The occurrence of such events may lead to lawsuits against the Group and may result in the payment of damages, which could be significant.
To address this risk, the Group has for many years taken the steps necessary to comply with the health and safety laws and regulations in the various countries in which it operates, and considers that it has taken the measures required to ensure the health and safety of its employees and that of its subcontractors’.
Each Group entity has action plans aimed at continuously improving health and safety at work. Actions are also carried out at the level of the Group as a whole: defining and promoting vital rules, the day-long shutdown on 3 October 2019 to jointly discuss the persistence of fatal accidents (see section 3.3.3 “EDF, a company with a responsible attitude with regard to its employees and service providers”).
