a. Settlement agreement signed on 4 April 2019 for the implementation of the sale agreement
Nature, purpose and terms & conditions: the settlement agreement dated 4 April 2019 for the implementation of the sale agreement was entered into to resolve certain disagreements between EDF, AREVA SA and AREVA NP with respect to the application of the share sale agreement entered into in 2017, in particular with respect to certain price adjustment or earn-out provisions. EDF and Framatome formalized a number of reciprocal and limited concessions on the methods used to calculate the price adjustment related to the working capital requirement and on an increase in provisions for end-of-cycle operations. Due to persistent disagreements on certain items, particularly the consequences on the final sale price of the level of capital expenditure over the 2015-2017 period, the parties also agreed to a partial payment of the net cash delivered on the transaction completion date, which will be deferred to a pending arbitration procedure.
The repayment of the Framatome cash due by EDF (difference between net cash and the price adjustment that was revised downwards and not challenged under the settlement agreement, multiplied by the percentage acquired) was set at a partial amount of €48.3 million. The additional tax price was set at €95 million, i.e. €71.7 million payable by EDF.
On 4 April 2019, your Board of Directors authorized the execution of the settlement agreement, considering that it was in EDF’s interest to enter into this agreement in order to facilitate the assessment of the final sale price for the Framatome shares.
Nature, purpose and terms & conditions: the side-letter of 16 May 2019 amended certain components of the procedure used to determine the conditional earn-out related to EBITDA, as initially provided for in the Framatome share sale agreement of 22 December 2017. Under the new provisions, an earn-out of €90 million, i.e. €67.9 million payable by EDF, was notified to AREVA SA and AREVA NP on 1 July 2019.
On 15 May 2019, your Board of Directors authorized the execution of the side-letter, considering that it was in EDF’s interest to enter into such side-letter in order to allow the determination of the EBITDA earn-out, in the absence of the Framatome consolidated financial statements for the years ended 31 December 2017 and 2018.
3. Protocol agreement relating to the French State’s compensation for the closure of the Fessenheim nuclear plant, signed on 27 September 2019
Persons concerned: the French State, represented by Mr Martin Vial on the Board of Directors, a shareholder owning more than 10% of the voting rights of EDF.
Nature, purpose and terms & conditions: the protocol agreement was entered into to determine the heads of damages and the terms and conditions for the calculation of compensation payable by the French State to EDF in connection with the early closure of the Fessenheim nuclear power plant.
The compensation breaks down as follows:
initial payments corresponding to the plant’s anticipated closure costs. The total payments will amount to between €370 million and €443 million depending on the schedule of payments decided by the French State;
further payments corresponding to lost profits that would have been generated by future production volumes, determined on the basis of the past production of the Fessenheim power plant, up to 2041, calculated ex post in accordance with the sales prices of nuclear production, and in particular observed market prices.
This agreement had no financial impact on pre-tax income for EDF in 2019.
On 4 April and 20 September 2019, your Board of Directors authorized the execution of the protocol agreement, considering that it was in EDF’s interest to sign the agreement to acknowledge the right to compensate EDF for the damage caused by the closure of the Fessenheim nuclear plant.
Pursuant to Article 225-30 of the French Commercial Code, we have been advised that the following agreements, previously approved by Shareholders’ Meetings of prior years, have remained in force during the year.
Persons concerned: the French State, represented by Mr Martin Vial on the Board of Directors, a shareholder owning more than 10% of the voting rights of EDF and AREVA SA, and Messrs. Maurice Gourdault-Montagne (until 28 June 2019) and François Delattre (as from 28 June 2019), Directors of EDF and AREVA SA.
In addition to the agreement signed by EDF, AREVA SA and AREVA NP for the acquisition of 75.5% of Framatome mentioned in the first part of this report, your Board of Directors authorized the following agreements on 23 June 2017 and 14 December 2017, which were approved by the Combined Shareholders’ Meeting of 15 May 2018 held to approve the financial statements for the year ended 31 December 2017.
Nature, purpose and terms & conditions: the final acquisition agreement was signed on 14 December 2017, concomitantly with the acquisition by EDF of 75.5% of the Framatome shares. It allows MHI to acquire 19.5% of Framatome from AREVA SA and AREVA NP, in the presence of EDF and under financial conditions similar to those of EDF.
The negotiations for setting the earn-outs were conducted by EDF on behalf of MHI in 2019. They led to the signing by EDF of the contract for the implementation of the sale agreement on 4 April 2019, and the amendment letter on 16 May 2019, mentioned in the first part of this report.
The negotiations regarding the valuation of certain items of the vendor warranties granted by AREVA NP and exercised by EDF and MHI are still ongoing between the parties.
