Universal Registration Document 2020

The inflation assumption is based on an inflation curve constructed by reference to inflation-indexed market products and economic forecasts, in long-term coherence with the inflation assumption underlying the UFR (2%).

The discount rate determined is thus 3.3% at 31 December 2020, assuming inflation of 1.2% (3.7% and 1.4% respectively at 31 December 2019), giving a real discount rate of 2.1% at 31 December 2020 (2.3% at 31 December 2019).

Based on the calculation method used until 30 June 2020, the real discount ratewould also be 2.1%.

28.5.2 Regulatory discount rate limit

Following the letter dated 12 February 2020 from the Minister for the Ecological and Inclusive Transition and the Minister of the Economy and Finance informing EDF of their decisions to change certain regulations regarding secure financing of nuclear expenses (see note 28.5.1 to the financial statements at 31 December 2019), the following were published in the Journal officiel of 2 July 2020:

• the decree of 1 July 2020 on secure financing for nuclear expenses, codifying and updating the initial decree of 23 February 2017;
• the ministerial order of 1 July 2020 on secure financing for nuclear expenses, amending the initial ministerial order of 21 March 2007.

This decree and ministerial order require the discount rate to comply with two regulatory limits from 1 July 2020. It must be lower than:

• a regulatory maximum, now expressed in real value, i.e. net of inflation; this value is equal to the unrounded value representative of expectations concerning the real long-term interest rate, as used for the calculation of the Ultimate Forward Rate (UFR) applicable at the date concerned published by the European Insurance and Occupational Pensions Authority (EIOPA), plus 150bp. This maximum is applicable from 2024. Until 2024, the maximum is the weighted average of 2.3% and the above calculation. The weighting applied to the 2.3% rate is set at 50% for 2020, 25% for 2021, 12.5% for 2022 and 6.25% for 2023;
• and the expected rate of return on assets covering the liability (dedicated assets).

The maximum discount rate under the new ministerial order effective from 1 July 2020, calculated by reference to the UFR, is 2.7% (real rate of 2.66% rounded up to 2.7%) at 31 December 2020.

The real discount rate used in the financial statements at 31 December 2020, inapplication of the methodologies presented above, is 2.1%.

The maximum discount rate in nominal value, based on the regulation applicable before the ministerial order of 1 July 2020 and calculated by reference to TEC 30 rates, was 3.8% (3.75% rounded up to 3.8%) at 31 December 2019. The nominal discount rate used in the financial statements at 31 December 2019 was 3.7%.

The decree of 1 July 2020 also introduced the following additional changes:

• it removed the obligation to add to dedicated assets when the coverage rate of obligations is above 100%, and raised the threshold above which withdrawals can be made from dedicated assets from 110% to 120%;
• it extended the period for making additions to dedicated assets in the event of a shortfall in coverage, after approval by the administrative authority, to 5 years compared to 3 previously;
• it added requirements for internal control and risk analysis on nuclear provisions, which operators must implement by 31 December 2021.

28.5.3 Analyses of sensitivity to macro-economic assumptions

Sensitivity to assumptions concerning costs, inflation rate, discount rate, and disbursement schedules can be estimated through comparison of the gross amount estimated under year-end economic conditions with the present value of the amount.