Universal Registration Document 2021

*Other changes principally concern foreign exchange effects resulting from the rise of the pound sterling against the euro.

Provision for onerous contracts

Provisions for onerous contracts primarily relate to multi-year agreements for the purchase or sale of energy and services:

• losses on energy purchase agreements are measured by comparing the acquisition cost under the contractual terms with the forecast market price;
• losses on energy sale agreements are measured by comparing the estimated income under the contractual terms with the cost of the energy to be supplied;
• losses on gas-related service agreements are measured by comparing the costs of fulfilling a contract with the resulting economic benefits, based on market and sales

Provisions for onerous contracts are mainly attributable to the Group’s LNG activities (long-term LNG purchase contracts and a long-term regasification contract with Dunkerque LNG).

The revenues and margin on Framatome’s long-term contracts are recorded under the percentage-of-completion method. When the estimated result upon completion is negative, the loss is immediately recorded in profit and loss, after deducting the loss already recognised under the percentage-of-completion method, and a provision is booked.

Provisions related to environmental schemes

Provisions related to environmental schemes include provisions to cover shortfalls in greenhouse gas emission rights, renewable energy certificates and energy savings certificates, based on the assigned obligations (see notes 5.4.3, 10.2, 20.1 and 20.2.1).

Through the renewable energy certificates scheme, the EDF group has an obligation to surrender renewable energy certificates, particularly in the United Kingdom and Belgium.

At 31 December 2021, a provision of €1,156 million was booked in connection with the obligation to surrender renewable energy certificates at that date, essentially concerning EDF Energy (United Kingdom) and Luminus (Belgium). A large portion of these obligations is covered by purchases of certificates included in intangible assets (see note 10.2).

One of the main features of the fourth period (2021-2030) of the European Union greenhouse gas emission quota system (SEQE-EU or EU-ETS) is to achieve the emission reduction targets set in the 2030 Climate and Energy framework, and the EU’s contribution to the Paris Climate Agreement adopted in 2015. One key step was accelerating annual quota reductions to 43 million tonnes per year.

In the EDF group, the entities concerned by this European system are EDF, Edison, Dalkia, PEI and Luminus. Free emissions quota allocations for the Group stopped in 2020.

The volume of emissions at 31 December 2021 stood at 17 million tonnes (19 million tonnes for 2020, including EDF Energy).

Actual greenhouse gas emissions amounted to €380 million at 31 December 2021 (€260 million at 31 December 2021, including EDF Energy) and are included in provisions in the balance sheet.

In 2021, the Group surrendered 16 million tonnes in respect of emissions generated in 2020 under the EU ETS (in 2020 it surrendered 21 million tonnes in respect of emissions generated in 2019, including EDF Energy).

Now that Brexit has taken place, the United Kingdom is no longer a member of the European system (EU ETS) and has set up its own system (UK ETS – Emissions Trading Scheme). The UK ETS, which uses a bidding system, covers the same sectors as the EU ETS and operates under generally similar rules, with comparable accounting treatment.

The volume of EDF Energy’s emissions at 31 December 2021 stood at 2 million tonnes (3 million tonnes for 2020). Actual greenhouse gas emissions amounted to €36 million at 31 December 2021 (€83 million at 31 December 2021) and are included in provisions in the balance sheet.

In 2021, EDF Energy surrendered 3 million tonnes in respect of emissions generated in 2020 under the UK ETS (in 2020 it surrendered 5 million tonnes in respect of emissions generated in 2019).

Other provisions for contingencies and losses

These provisions cover various contingencies and expenses related to operations (employers’ matching contributions to employee profit sharing, restructuring operations, contractual maintenance obligations, etc.). No individual provision is significant.

In extremely rare cases, specific litigation covered by a provision may be unmentioned in the notes to the financial statements if such disclosure could cause serious prejudice to the Group.