Summary : The Group carries out very large-scale projects. These projects represent a major risk for the Group in terms of the potential financial impact on its shareholders’ equity and implications for its development strategy. In particular, the success of EPR projects depends on specific industrial, regulatory and financial factors.
Criticality : ●●● Strong
As part of its activity and in its capacity as project owner or prime contractor, the Group is called upon to carry out projects, such as the EPR Project in Flamanville 3 and Hinckley Point C (HPC) in the United Kingdom, that are very complex, and require significant investments and lengthy procedures for construction and regulatory approvals.
The success of these projects will determine the future of the nuclear industry sector. These projects represent a major risk for the Group.
The Group’s other major projects underway are:
These projects are exposed to numerous technical and operational risks relating to their industrial implementation, which could result in start-up delays and an increase in associated costs or a possible reconsideration of certain technical choices. This could ultimately lead to a drop in expected profitability or even to asset write-downs. For example, EDF Energy’s goodwill in EDF’s financial statements is based mainly on the HPC project.
Given their scale, these projects could have a massive impact on the Group’s results and balance sheet, mainly on its equity and its financing capacity.
Other economic, regulatory, political, environmental and acceptability risks that could jeopardise project schedules, associated costs and/or profitability, exist.
The technical and operational risks associated with large and complex industrial projects expose the Group to major uncertainties in the implementation and operation of these projects. These risks may have a major impact on the Group’s business, results, asset value, financial position, reputation, organisation and outlook
By way of illustration:
In addition to or as a result of these uncertainties, the Group may be in breach of its contractual obligations.
The Group’s strategic goal is to become involved in the construction of new nuclear facilities in France and abroad. The risk with regard to these projects would be that investment decisions might not be made or might be made under poor technical, regulatory or financial conditions.
New reactor construction projects, particularly in France and the United Kingdom, require considerable investment, a regulatory framework, and adequate and stable financing and pricing conditions. Given the economic or institutional climate or depending on the appropriate progress of the pending projects, obtaining such funding may be delayed or compromised.
In France, the absence of an appropriate regulatory and financing framework, and/ or the failure to obtain or delays in obtaining the authorisations required to continue the development of the EPR2 reactor, could have an impact on the Group’s financial position, particularly because of the development costs upstream of the decision which might ultimately be borne by EDF. Any event that may delay the launch of the project could lead to disruptions to engineering activities, difficulties in maintaining skills and in mobilising the supply chain, which would be detrimental to the industrial control and performance of the programme.
In the United Kingdom, the new context created by the implementation of Brexit (see section 1.4.5.1.2.4 “Customer business”) may lead to changes in the conditions for the implementation and profitability of projects and may not allow sufficient conditions to be met so as to involve investors in the Group’s future projects in the United Kingdom. For example:
In addition, the classification as transitional energy under the Taxonomy Regulation (see risk 1A) could insufficiently recognise decarbonised nuclear electricity, with potential consequences for access to financing for new projects. The text does not include the fuel cycle or waste management. Finally, the conditions set out in the Delegated Act for the classification of nuclear energy as an aligned activity may not be fully met. These elements could influence the Group’s ability to finance future major nuclear projects (see risk 1A “Changes in public policies and in the regulatory framework in France and Europe”).
All these projects are large-scale and long-duration projects. They involve numerous industrial partners. There may also be difficulties in terms of relationships with the partners involved with EDF in these projects.
For example, trade tensions between the United States and China could have an impact on the conduct of some of these projects given the technologies and partnerships implemented (see risk 4B). In the United Kingdom, as EDF and CGN are partners in the HPC, Sizewell C and Bradwell projects, these projects could be impacted by worsening diplomatic relations between the United Kingdom, France, the United States and China.
These projects require, among other things, administrative authorisations, licences or permits which may be subject to disputes, withdrawals or delays in obtaining them.
