Universal Registration Document 2020

Due to Covid-19, some works carried out by Bradwell B have been delayed, such as site feasibility studies. As a consequence, and considering the uncertainties, Bradwell announced in the beginning of 2021 that it will be prioritising technical aspects and that aspects of the project it is not yet ready to progress will be paused.

In so far as the projects Sizewell and Bradwell involve EDF and CGN, they are likely to be impacted by changes in diplomatic relations between the United Kingdom and China (see section 2.2.4 – risk 4A).

1.4.5.1.3 Brexit

The UK voted to leave the membership of the European Union (EU) on 23 June 2016(also see section 2.2.1 “Market regulation, political and legal risks”) and officially left the EU on 31 January 2020. Thereafter, it entered into a Transition Period (TP) that ended on 31 December 2020.

During the TP, for most EU and UK businesses including EDF Energy, transactions were mostly unchanged particularly with respect to trade, access to labour/services and the business rules & regulations that govern business operations.

During the TP, the EU and UK negotiated a Free Trade Agreement (FTA) that was eventually agreed on 24 December 2020. The negotiations throughout 2020 were relatively slow and difficult, being hampered of course by the Covid-19 pandemic that impacted progress and the breadth and depth of the final agreement in some key areas, including energy trading and carbon pricing.

The FTA sets the basis for the EU-UK relationship since 1st January 2021, together with a separate Nuclear Cooperation Agreement (NCA) that sets the basis for the specific future civil nuclear relationship.

Given the relatively limited FTA deal that has been agreed in a number of important areas, it is recognised that further work is required and will take place in 2021 and beyond to finalise some important details and this will deliver the more substantial and stronger trading relationship for the longer term.

Because of uncertainty and the delay in finally agreeing a FTA until very late in the year, EDF Energy worked very closely with EDF group, to prepare for a “no-deal”EU-UK outcome at the end of 2020. The relatively thin/limited nature of the FTA in key areas, combined with some companies (particularly small and medium sized) not being fully prepared for the new EU-UK trading arrangements from 1st January means that the scenario facing EDF Energy, during the early months of 2021, will feel similar to a “no-deal” situation.

This will probably impact both:

• the smooth operation of EU and UK customs processes, creating some difficulties/disruption for both prepared and unprepared organisations; and
• directly and indirectly the efficient operations of some EU and UK businesses.

EDF Energy’s assessment is that specific EDF business sector risks around energy trading, carbon pricing and nuclear, are likely lower and more manageable.

All EDF business units (BUs) are therefore exposed to business disruption risks (negative impacts) associated with the UK exit from the EU from 1 January 2021, but are prepared. A co-ordinated effort over the last 3 years has meant BUs have worked closely together within EDF Energy and with EDF group colleagues (where appropriate), UK Government and trade associations to limit potential risk exposure and the scale of any potential business impact. The comprehensive company-wide impact risk assessment exercise has led to the development and implementation of a number of mitigation actions required to address the key risks. However, inevitably some issues will arise that had not been foreseen. EDF Energy will continue to monitor the situation and adapt and respond as necessary, liaising with and seeking support from UK Government as appropriate.

1.4.5.2 Italy

1.4.5.2.1 EDF group market and footprint in Italy

Italy is one of EDF’s four key markets in Europe alongside France, the UK and Belgium.

The Group is mainly present in Italy through its 97.446% shareholding in Edison⁽¹⁾, which is a major player in the Italian electricity and gas markets and a well-known Italian brand.

In line with Edison’s strategic goal of becoming a key player on the Italian renewable energy market as part of energy transition, in 2019 Edison bought out EDF Renewables’ 100% stake in EDF EN Italia Spa (EDF EN Italia) which owns a portfolio of wind farms totalling 216MW and 77MW⁽²⁾ of solar power installations. The transaction simplified EDF’s activities on the Italian market, a process begun with the contribution of Fenice to Edison in 2016.

The EDF group is also present in Italy via Citelum (see section 1.4.6.1.2 Citelum).

1.4.5.2.2 Edison strategy

Like the majority of European energy systems, the Italian market is currently facing a certain number of challenges. Thanks to its current position and integrated presence in the sustainable gas and electric power value chain, Edison is well-placed to seize opportunities created by market changes, while pursuing efficiency and profitability, in line with the CAP 2030 priorities and international and Italian energy policies.

During 2020, Edison pursued the implementation its transformation strategy, designed to pursue its repositioning as a responsible leader in the context of energy transition. The company concentrated on streamlining and extending renewable generation with low CO₂ emissions, the construction of two latest generation gas-fired power plants, and the development of energy services.

At the same time, the disposal of most of the oil and gas Exploration & Production (E&P) activities (excluding Algeria and Norway) to Energean and the upcoming disposal of E&P activities in Norway to Sval Energi⁽³⁾ will enable it to refocus on its strategic activities, in line with the priorities of the Italian National Plan for Energy and Climate (Piano Nazionale Integrato Per l’Energia e il Clima 2030).

In mid-February 2021, Edison announced the conclusion of the purchase of the 70%stake not yet held in E2i Energie Speciali’s wind power business with the FondiItaliani per le Infrastrutture (F2i). Edison is also to sell Infrastrutture Distribuzione Gasto 2i Rete Gas. The two agreements signed with F2i and 2i Rete Gas fall withinEdison’s strategy aimed at increasing renewable energy production to 40% of the production mix by 2030, whilst at the same time withdrawing from non-strategic activities⁽⁴⁾.

Going forward, the main avenues of development are as follows:

• power generation: Edison aims to increase its renewable energy generation by promoting specific capital investments in hydro power, wind power and solar power projects to optimise its electricity generation portfolio in Italy and to reduce its carbon emissions. Another of its goals is to enhance its high-performance, low-emission thermal production assets, developing new gas power plants to supplement renewable production resources.Against this backdrop, in 2020 Edison pursued the construction of two new-generation CCGT plants in Marghera Levante and Presenzano, which given the planned commissioning dates would benefit from the contribution of the capacity market. In the field of renewables, the company has begun the construction of around 90MW⁽⁵⁾ of wind power and solar installations and started reorganising its activities in order to set up an integrated platform on which to base its future growth;