Valuation of provisions related to nuclear generation in France – back-end of the nuclear cycle, plant decommissioning and last cores – and dedicated assets
Notes 1.2.2, 1.7.2, 1.15.1, 3.1, 18, 28 and 38 to the financial statements
As at 31 December 2019, the provisions recorded to cover obligations relating to nuclear power plants for which EDF is the operator in France total €41,720 million, including €22,159 million with respect to the back-end of the nuclear cycle (management of spent fuel and radioactive waste) and €19,561 million with respect to the decommissioning of nuclear power plants and last cores.
The valuation of these provisions is described in note 1.15.1 and 28. It requires defining technical and financial assumptions and using complex calculation models and falls within the scope of the regulatory context described in note 3.1 and 28.
They are updated and the assumptions taken into consideration in the models are reviewed at least once a year. These assumptions reflect management’s best estimate at the reporting date of the impacts of the applicable regulation, the implementation of decommissioning and storage processes or changes in the main financial parameters.
Furthermore, the Company is required to allocate so-called “dedicated” assets to secure financing of certain categories of nuclear provisions in France. The realizable value of these assets should allow the Company’s commitments relating to the decommissioning of nuclear power plants and long-term storage of radioactive waste in France to be covered (note 38). The realizable value of these dedicated assets, for an amount of €31,624 million (or a net carrying amount of €28,445 million) as of 31 December 2019, was determined based on the fair value of diversified equity and bonds investments, and the equity value of non-listed assets portfolio managed by the Division EDF Invest.
We considered the valuation of nuclear provisions and dedicated assets to be a key audit matter due to:
the sensitivity of the assumptions on which the valuation of these provisions is based, notably in terms of cost, inflation and long-term discount rates, as well as the depreciation periods of nuclear power plants in operation, and forecast cash outflows; the modification of these parameters can lead to a material revision in the provisioned amounts; the negative impacts on the financial position of the Company (cash earmarked to increase the amount of dedicated assets) in the event of an increase in nuclear provisions in France, a change in the realisable values of dedicated assets or changes in the coverage rate of nuclear provisions for dedicated assets;
it being specified that the valuation of provisions covers and includes uncertainties related to the fact that certain scenarios and technical solutions have never been implemented.
We have analysed the measures for recognising provisions related to nuclear generation in France and gained an understanding of the industrial scenarios for decommissioning nuclear power plants and the solutions adopted in terms of management of spent fuel and radioactive waste. We have assessed the compliance of the provisions with regard to applicable accounting, legal and regulatory measures.
We have verified the calculation models used by the Company and assessed the sensitivity of the valuations to the assumptions adopted in terms of cost, forecast cash outflows and financial parameters (discount and inflation rates).
Our work also consisted in verifying the type of costs used to determine provisions, assessing the consistency of industrial scenarios adopted by the Company and verifying the reconciliation of forecast costs and forecast cash outflows with these scenarios as well as the available studies and quotes.
We have also assessed the reasonableness of:
Concerning the inflation and discount rates adopted by management, we have verified their compliance with applicable accounting standards and regulatory measures, notably the ministerial order of 21 March 2007, as amended. We have reconciled the data used for this purpose with market data and available historical information.
Concerning the securing of financing for certain of these provisions through dedicated assets, we have verified, by sampling, the portfolio movements and reconciled the realisable value of the dedicated assets in the portfolio at the reporting date with the available certificate of depository statements and available external data and valuations. We have also assessed the accounting treatment and their valuation, in particular, the compliance with the accounting standard of the impairment criteria described in note 1.7.2.
Finally, we have verified the appropriateness of the disclosures given for the provisions related to nuclear generation in France and the dedicated assets in the notes to the financial statements, notably regarding the sensitivity of the valuation of provisions to changes in macro-economic assumptions (note 28.5.2).
We have also performed, in accordance with professional standards applicable in France, the specific verifications required by laws and regulations.
Information given in the management report and in the other documents with respect to the financial position and the financial statements provided to the Shareholders
We have no matters to report as to the fair presentation and the consistency with the financial statements of the information given in the management report of the Board of Directors, and in the other documents with respect to the financial position and the financial statements provided to the Shareholders.
We attest the fair presentation and the consistency with the financial statements of the information relating to payment deadlines mentioned in Article D. 441-4 of the French Commercial Code (Code de commerce).
We attest that the section of the management report devoted to corporate governance sets out the information required by Articles L. 225-37-3 and L. 225-37-4 of the French Commercial Code (Code de commerce).
Concerning the information given in accordance with the requirements of Article L. 225-37-3 of the French Commercial Code (Code de commerce) relating to remunerations and benefits received by the directors and any other commitments made in their favour, we have verified its consistency with the financial statements, or with the underlying information used to prepare these financial statements and, where applicable, with the information obtained by your company from controlling and controlled companies. Based on these procedures, we attest the accuracy and fair presentation of this information.
With respect to the information relating to items that your company considered likely to have an impact in the event of a public takeover bid or exchange offer, provided pursuant to Article L. 225-37-5 of the French Commercial Code (Code de commerce), we have agreed this information to the source documents communicated to us. Based on these procedures, we have no observations to make on this information.
