Concerning financial assets, the table below presents the interest rate risk on the floating-rate notes (FRN) held by EDF, and their sensitivity to interest rate risks (impact on net income).
|
31 December 2021 (in millions of euros) |
Value |
Impact on income of a 1% variation of interest rates |
Value after a 1% variation in interest rates |
|---|---|---|---|
| FLOATING-RATE INSTRUMENTS |
FLOATING-RATE INSTRUMENTS
Value 370 |
FLOATING-RATE INSTRUMENTS
Impact on income of a 1% variation of interest rates (4) |
FLOATING-RATE INSTRUMENTS
Value after a 1% variation in interest rates 366 |
The Group’s interest rate risk notably relates to the value of the Group’s long-term nuclear obligations (see note 15 to the 2021 consolidated financial statements) and its pension and other specific employee benefit obligations (see note 16 to the 2021 consolidated financial statements), which are adjusted to present value using discount rates that depend on interest rates for various time horizons, and debt securities held for management of the dedicated assets set aside to cover these obligations (see section 8.1.6).
Analysis of the equity risk is presented in section 5.1.5.1.6.
Assets covering EDF’s employee benefit liabilities are partly invested on the international and European equities markets. Market trends therefore affect the value of these assets, and a downturn in equity prices would lead to a rise in balance sheet provisions.
32.3% of the assets covering EDF SA’s employee benefit obligations were invested in equities at 31 December 2021, representing an amount of €4.2 billion of equities.
At 31 December 2021, the two pension funds sponsored by EDF Energy (EDF Energy Pension Scheme and EDF Energy Group Electricity Supply Pension Scheme) were merged into the British Energy pension fund (British Energy Generation Group) which was renamed EDF group (EDFG). This fund is invested to the extent of 10.1% in equities and equity funds (excluding diversified growth funds), representing an amount of £1,114 million of equities.
Dedicated assets have been built up progressively by EDF since 1999 for secure financing of its long-term nuclear obligations. The Law of 28 June 2006, codified in France’s Environment code (Articles L. 5 94-1 to 14) and its implementing regulations defined the provisions that are not related to the operating cycle, and must therefore be covered by dedicated assets. They are listed in note 15.1.2 to the 2021 consolidated financial statements, “EDF’s dedicated assets”.
The dedicated asset portfolio is managed under the supervision of the Board of Directors and its advisory committees (Nuclear Commitments Monitoring Committee (CSEN), Audit Committee).
A Nuclear Commitments Financial Expertise Committee (CEFEN) exists to assist the company and its governance bodies on questions of matching assets and liabilities and asset management. The members of this Committee are independent of EDF.
The governance principles setting forth the structure of dedicated assets, and the relevant decision-making and control processes for their management, are validated by EDF’s Board of Directors under a policy for ensuring secure financing of nuclear expenses, in compliance with the regulations. These principles also lay down rules for the asset portfolio’s structure, selection of financial managers, and the legal, accounting and tax structure of the funds.
Strategic asset allocation is based on asset/liability reviews carried out to define the most appropriate target portfolio for financing long-term nuclear expenses. Strategic allocation is validated by EDF’s Board of Directors and reviewed every three years unless circumstances require otherwise. A new strategic allocation was validated in 2021 to reflect changes in fixed income markets. The target allocation consists of a yield portfolio, a growth portfolio and a fixed-income portfolio, respectively accounting for 30%, 40% and 30% of the total portfolio. The yield portfolio consists of real estate assets and infrastructure assets; the growth portfolio consists of equities and equity funds (both listed and unlisted); the fixed-income portfolio consists of bonds, debt funds (both listed and unlisted), and cash. These portfolios are managed by EDF Gestion (formerly the Listed Asset Management Division) and by EDF Invest.
The allocation policy between growth assets and fixed-income assets was developed by the Operational Management Committee (1) on the basis of the economic and financial outlook for each market and geographical area, a review of market appreciation in different markets and market segments, and risk analyses produced by the Financial Risks Control department.
At 31 December 2021, the total value of the portfolio was €37,454 million compared to €33,848 million in 2020. Changes in dedicated assets in 2021 are described in note 15.1.2.1 to the 2021 consolidated financial statements, and details of their realisable value and book value are also presented in note 15.1.2.2.
| 31/12/2021 | 31/12/2020 | |||||
|---|---|---|---|---|---|---|
| (in millions of euros) | Share of portfolio |
Stock market or realisable value |
Performance for 2021 |
Share of portfolio | Stock market or realisable value | Performance for 2020 |
| Yield assets | 21.1% | 7,908 | 17.1% | 19.0% | 6,420 | 2.3% |
| Growth assets | 40.9% | 15,320 | 22.6% | 40.5% | 13,692 | 10.3% |
| Fixed-income assets | 38.0% | 14,226 | - 0.7% | 40.5% | 13,736 | 4.1% |
| TOTAL DEDICATED ASSETS | 100 % | 37,454 | 11,9 % | 100 % | 33,848 | 5.9% |
(1) Internal Committee and permanent body for evaluation, consultation and operational decision-making for dedicated asset management.
