1.3 Sales

Sales essentially comprise income from energy sales (to final customers and as part of trading activities), and sales of services. EDF’s energy sales revenues include delivery services through the energy distribution network purchased from the subsidiary Enedis and reinvoiced to end-customers.

Sales are recognised when delivery of goods has taken place or the service has been completed.

The quantities of energy delivered to EDF customers but not yet measured and billed at the end of the period are calculated based on the quantities used by the sites of the EDF balance-responsible entity less the quantities billed, after losses measured by a statistical method presented to the Commission de régulation de l’énergie (CRE), the French Energy Regulation Commission. These quantities a revalued using an average price determined by reference to energy invoiced in the previous month.

Sales of goods and services not completed at the balance sheet date are valued by reference to the stage of completion at that date.

Sales of energy to EDF Trading, the Group’s trading company, are recorded at their contractually stipulated amount.

1.3.1 Capacity mechanism

A capacity mechanism has been set up in France to ensure secure power supplies during peak periods.

French law 2010-1488 of 7 December 2010 on the new organisation of the electricity market introduced an obligation in France to contribute to power supply security from 1 January 2017.

Operators of electricity generation facilities and load-shedding operators must have their capacities certified by RTE, and commit to a forecast level of availability for a given year of delivery. In return, they are awarded capacity certificates. Meanwhile, electricity suppliers and purchasers of power to compensate for network losses (obligated actors) must have capacity certificates equivalent to consumption by their customers in peak periods. Suppliers pass on the cost of the capacity mechanism to final customers through their sale prices.

The system is completed by registers for trading of capacities between actors. Capacity auctions are held several times a year.

EDF is concerned by both aspects of this system, as an operator of electricity plants and as an electricity supplier.

The operations are recorded as follows:

• sales of certificates are recognised in income when the auctions or over-the-counter sales take place;
• the cost of the capacity mechanism passed on to final customers through regulated sales tariffs and market-price offers is recognised in sales revenues as and when the electricity is delivered. However, the ARENH price has included a capacity value since 2017 when the capacity mechanism took effect, as the terms of transfer for the capacity guarantees associated with the ARENH system were defined by the CRE;
• stocks of certificates are stated either at their certification value (i.e. cost of certification by RTE) or at their purchase value on the markets;
• decreases in the stock of certificates are valued at the weighted average unit cost. The timing of recognition depends on the actor:
  • operators of installations: when the auction sales take place,
  • obligated actors: spread on a straight-line basis over the 5-month peak period,
• for obligated actors, if there is a shortfall in the stocks of capacity certificates, a provision is recorded equivalent to the best estimate of the expense necessary to extinguish the obligation;
• at the closing date, if the realisable value of the stock of capacity certificates is lower than its net book value, impairment is recognised.
  
  

1.4 Intangible assets

1.4.1 Research and development expenses

Research expenses are recognised as expenses in the financial period incurred.

Development costs that meet the requirements for capitalisation laid down in Article 211-5 of the French national chart of accounts are included in intangible assets and amortised on a straight-line basis over their foreseeable useful life.

1.4.2 Other intangible assets

Other intangible assets mainly consist of software and storage capacity reservation costs.

They are amortised on a straight-line basis over their useful lives regardless of whether they are generated in-house or purchased.

1.5 Property, plant and equipment

EDF’s property, plant and equipment is reported under two balance sheet headings, as appropriate to the business and contractual circumstances of the assets’ use:

• property, plant and equipment owned by EDF, essentially nuclear generation facilities;
• property, plant and equipment operated under concessions.
  
  

1.5.1 Initial measurement

Property, plant and equipment is recorded at acquisition or production cost:

• the cost of facilities developed in-house includes all labour and materials costs, and all other production costs attributable to the construction of the asset;
• the cost of property, plant and equipment also includes the initial estimate of decommissioning costs. These assets are associated with the provisions recorded to cover decommissioning obligations. At the date of commissioning, property, plant and equipment is measured and recorded in the same way as the corresponding provision (see note 1.15);
• decommissioning costs for nuclear generation installations also include last core costs
  (see note 1.15).
  
  

When some of the decommissioning costs for a plant are to be borne by a partner, the expected reimbursement is recognised as accrued income in the assets. The difference between the provision and the accrued income is recorded in Property, plant and equipment, and subsequent payments by the partner are deducted from the accrued income.

The Group capitalises safety expenses incurred as a result of legal and regulatory obligations sanctioning non-compliance by an administrative ban from operation.

Strategic safety spare parts for generation facilities are treated as property, plant and equipment, and depreciated over the residual useful life of the installations.

The costs of operations that are necessary for generation assets to remain in service, and are undertaken at the time of scheduled shutdowns, particularly during major inspections, are capitalised and amortised over a period corresponding to the time elapsing between two inspections.

When a part of an asset has a different useful life from the overall asset’s useful life, it is identified as an asset component and depreciated over a specific period.

Borrowing costs attributable to the financing of an asset incurred during the construction period are recognised as expenses.