Universal Registration Document 2021

5.5 Outlook

The Ukrainian conflict and related geopolitical tensions could have all kinds of consequences that could impact the Group's outlook.

For 2022

EBITDA will be affected by the following items, compared to a 2021 EBITDA of €18 billion:

• price increase between 2021 and 2022: the Group’s hedging policy (see § 5.1.5.2.2), the price levels observed over the hedging periods, and the prices in December of the cropped ARENH volumes following the result of the ARENH auction of last November have a favourable estimated impact on the EBITDA, all other factors being equal, of around €6 billion.
• Exceptional regulatory measures designed to limit the rise in price for 2022 ⁽¹⁾:
• The texts (Decree and Orders) implementing these measures were published on 12 March. The Decree provides that eligible suppliers, in order to benefit from the additional ARENH volumes over the period from 1 April to 31 December 2022 at the price of €46.2/MWh, will have to sell EDF the same volume that will be transferred to them by EDF under this additional allocation, at a price equal to the average of the wholesale forward prices recorded between 2 and 23 December 2021, for electricity delivery in mainland France in 2022, i.e. €257/MWh. The CRE will distribute the additional ARENH volumes between the suppliers, in the same way as the one that was followed for the delivery period started on 1 January 2022. This decision sets the purchase price for EDF of the additional ARENH volumes of 20 TWh which will have to be made available to suppliers in 2022. This additional allocation of ARENH volumes is taken into account in setting the residential regulated tariff (TRV) and will have an impact on EDF's market offers.
• The margin in €/MWh on the residential regulated tariff (TRV) was fixed by CRE deliberation on 18 January 2022.
• Finally, in order to comply with the commitment to limit the tariff increase at 4% incl. VAT applying to the residential and "blue professional " regulated tariffs customers, as well as to all professional customers from non- interconnected zones, it is planned to postpone a portion of the 2022 tariff increase over a 12-month period starting from 1 February 2023, in accordance with the Finance Act 2021-1900 of 30 December 2021 for 2022.

The impact of these regulatory measures⁽¹⁾ on the Group's EBITDA for 2022 had been estimated, for illustrative purposes, at approximately -€8.4 billion⁽²⁾ based on market prices at 31 December 2021. On the basis of the terms and conditions defined in the Decree published on 12 March 2022, and given the information available to the Group, the estimated impact on the Group's EBITDA for 2022 has been re-evaluated at approximately -€10.2 billion⁽³⁾.

• The decrease in French nuclear output, given the outages or extended outages of reactors due to the detection of stress corrosion phenomena on portions of the pipes connected to the main primary circuit (including the safety injection system - SIS)⁽⁴⁾.

  The output would thus decrease from 360.7TWh in 2021 to a range between 295 and 315TWh⁽⁵⁾ in 2022, i.e. a lower output between 65.7TWh and 45.7TWh. Given the current Group's hedging policy, which consists of being fully hedged at the beginning of a given year, the Group will have to buy back significant volumes on the market and will thus be exposed to market prices. The assessment of the financial consequences is also sensitive to the outage schedule of the different power plants.

  The impact on the Group's 2022 EBITDA of the decrease in output compared to 2021 was estimated, at the time of the release of annual results and for illustrative purposes, at approximately -€11 billion on the basis of the 2022 forward price of 31 December 2021. Also by way of illustration, based on the information available to the Group and on forward prices for 2022 as of 11 March 2022, the estimated impact of the decrease in output on the Group's EBITDA for 2022 is reassessed at approximately -€16 billion.

  At the date of filing of this document, the Group is awaiting the position from the investigation carried out by the French Nuclear Safety Authority on the evidence of stress corrosion and the corrective measures considered.

• The 2022 EBITDA evolution of the Group’s other

Given the uncertainties linked to the evolution of prices and nuclear output, the Group has not given any financial guidance for 2022 on the release of the results on 18 February 2022. Since then, uncertainties have broadened, particularly as a result of the Ukrainian conflict (see section 2.2 "Risks to which the Group is exposed").

EDF presented an action plan to its Board of Directors, meeting on 17 February 2022, aimed at strengthening its balance sheet structure in the context of the events of early 2022⁽¹⁾.

EDF notified its intention to:

• submit as soon as possible to the Board of Directors, and subject to market conditions, a proposed rights issue with preferential subscription rights leading to the issuance of approximately 510 million new shares for an amount of approximately €2.5 billion, including issue premium⁽⁶⁾.
• propose an option to pay a scrip dividend for the fiscal years 2022 and 2023⁽⁷⁾ as well as for the 2021 fiscal year.

The French State, EDF's largest shareholder, has confirmed its full support for the Company’s action plan⁽⁸⁾. In particular, the State confirmed that it will subscribe, as a well-informed shareholder, to the announced capital increase with preferential subscription rights guaranteed up to its share of the capital. The State has also

indicated that it will extend its current commitment to receive a scrip 2021 dividend for the 2022 and 2023 fiscal years, as it will be proposed by the Company to its shareholders.

• carry out disposals of around €3 billion over the years 2022 - 2023 – 2024⁽⁹⁾.

For 2023

The Group’s financial targets for 2023 are:

Net financial debt / EBITDA: ~ 3x

Adjusted net debt / adjusted EBITDA ⁽¹⁰⁾: 4,5x to 5x.

These financial ambitions reflect the following structuring assumptions:

• a 2023 nuclear output between 300 and 330 TWh ⁽¹¹⁾. This estimate takes into account in particular:
• a heavy industrial programme⁽¹²⁾ with 44 reactor outages for maintenance and inspection, including six ten-yearly inspections, plus two scheduled outages starting in 2022 that will continue into 2023;
• the continuation of the control and repair programme on the pipes potentially affected by the stress corrosion phenomenon, which is still ongoing.

The output schedule has not been precisely revised.

(1) See press release of 13 January 2022 “Exceptional measures announced by the French government”.

(2) This amount includes an estimate of the impact of the tariff deferral on the 2022 cashflow amounting to approximately -€1.5 bn.

(3) This amount includes an estimate of the impact of the tariff deferral on the 2022 cashflow amounting to approximately -€0.9 bn.

(4) ASN information note of 24 February 2022 (https://www.asn.fr/l-asn-informe/actualites/phenomene-de-corrosion-sous-contrainte-l-asn-demande-a-edf-d-approfondir-ses-analyses).

(5) See press release of 7 February 2022 « EDF updates its 2022 French nuclear output estimate”.

(6) On the basis, for illustrative purposes, of a reference price of 8 euros per share and a discount in line with market practice.

(7) Target payout ratio of net income excluding non-recurring items (adjusted for the remuneration of hybrid bonds accounted for in equity) for 2022 and 2023 of 45-50%.

(8) See the press release of the Ministry of the Economy, Finance and Recovery of 18 February 2022 "The State fully supports EDF's financial securing action plan".

(9) Signed or completed disposals: impact on the adjusted net debt according to S&P definition.

(10) As per current S&P methodology.

(11) See press release of 11 February 2022 “EDF updates its 2023 French nuclear output estimate”.

(12) Based on EDF estimates and awaiting the position from the investigation carried out by the French Nuclear Safety Authority on the evidence of stress corrosion and the corrective measures considered.