EDF’s financial statements are prepared in accordance with the accounting principles and methods defined in regulation 2014-03 of 5 June 2014 issued by the ANC (Autorité des normes comptables, France’s Accounting Standards Authority) concerning the current national chart of accounts.
They also comply with the “Recommendations and observations for taking the consequences of the Covid-19 event into account in financial statements and positions established from 1 January 2020”, published on 18 May 2020 by the ANC and last updated on 9 July 2021, and the update to ANC Recommendation 2013-02 of 7 November 2013 regarding measurement and recognition rules for retirement commitments and benefits.
The accounting and valuation methods applied are identical to those used in the financial statements for the year ended 31 December 2020 and incorporate the following two developments.
This reform has been applicable since 1 January 2021. The principal interest rates concerned that are used by EDF are the Eonia, the Libor USD and the Libor GBP.
The modification of effective interest rates resulting from the reform is applied prospectively. There is no significant impact on profit and loss and the hedging relationships for the instruments concerned are continued.
This reform has no significant impact on EDF’s net income for 2021, and its effects are mainly operational (renegotiation of contracts, fallback provisions, information system upgrades).
Due to its long-term fixed-rate borrowing position (see note 33.1), EDF’s exposure is essentially concentrated in interest rate derivatives that are used to swap fixed rate debt to floating rates. On these instruments, the reference rate curves for collateral agreements have been modified, replacing the Eonia by the Ester. This led to receipt of €22 million cash compensation, recognised in financial result.
Intragroup cash management, cash pooling and liquidity investment agreements were amended in 2021, replacing the Eonia by the Ester, and the Libor GBP by the Sonia.
Also, EDF adhered to the ISDA Fallback protocol in November 2021, and the Libor GBP was replaced by the Sonia for all the derivatives concerned from 1 January 2022.
For the USD Libor, the transition operations will take place in line with the end date for its publication i.e. by 30 June 2023.
At its meeting of 5 November 2021, the ANC’s Committee updated its Recommendation 2013-02 of 7 November 2013 on measurement and recognition rules for commitments concerning retirement and similar benefits, introducing a choice regarding the spreading of rights earned under defined-benefit plans.
As a result, EDF has made a slight adjustment to its benefit attribution method for commitments for retirement gratuities. Under the chosen approach, rights earned are now allocated on a straight-line basis over the period prior to reaching retirement age. This change of method has a limited impact on provisions for the year (see note 24 (2)).
The preparation of the financial statements requires the use of judgments, best estimates and assumptions in determining the value of assets and liabilities, income and expenses recorded for the period, considering positive and negative contingencies existing at year-end. The figures in EDF’s future financial statements could differ significantly from current estimates due to changes in these assumptions or economic conditions.
In a context characterised by volatility on the financial and energy markets, the parameters used to prepare estimates are based on macro-economic assumptions appropriate to the very long-term cycle of EDF’s assets.
The principal operations for which EDF uses estimates and judgments are the following:
In the specific case of the depreciation period of its French nuclear power plants, EDF’s industrial strategy is to continue operation beyond 40 years, in optimum conditions as regards safety and efficiency.
EDF has therefore been making preparations for several years to extend the operation period, and making the necessary investments under its Grand Carénage industrial refurbishment programme which was approved in principle by the Board of Directors in January 2015.
The depreciation period of 900MW series power plants was extended from 40 years to 50 years in 2016 (except for Fessenheim where both reactors were permanently shut down in the first half of 2020) since all the technical, economic and governance conditions were fulfilled.
On 23 February 2021, the Nuclear Safety Authority (Autorité de sûreté nucléaire (ASN)) issued a resolution on the conditions for continued operation of EDF’s 900MW reactors beyond their fourth 10-year inspection. The ASN considered that “the measures planned by EDF combined with those prescribed by ASN open the prospect of continued operation of these reactors for a further ten years following their fourth periodic safety review”. This resolution ends the “generic” phase of the review, which concerns the studies and modifications of facilities common to all the 900MW reactors, which all have a similar design model.
After the pilot reactor Tricastin 1 in December 2019, Bugey 2, Bugey 4 and Tricastin 2 reached the milestone of 40 years of operation, and were restarted after a successful fourth 10-year inspection during 2021. Three other 10-year inspections were in progress at 31 December 2021 (Dampierre 1, Bugey 5 and Gravelines 1). The fourth 10-year inspection of Dampierre 1 was completed on 5 February 2022.
The depreciation period of other series (1,300MW and 1,450MW), which are more recent, remained at 40 years until 31 December 2020.
In 2021, the technical, economic and governance conditions for extending the depreciation period of 1,300MW-series plants were fulfilled, and consequently EDF proceeded to the corresponding change of estimate at 1 January 2021 for all its 1,300MW power plants (see note 2.1.1, Extension to 50 years of the depreciation period of the 1,300MW PWR series in France).
The depreciation period of the 1,450MW series (the four reactors at Chooz and Civaux), which are much more recent, currently remains at 40 years as the conditions for extension are not yet fulfilled.
These depreciation periods take into account the date of recoupling with the network after the most recent 10-year inspection.
The measurement of provisions for the back-end of the nuclear cycle, decommissioning and last cores is sensitive to assumptions concerning technical processes, costs, inflation rates, long-term discount rates, the depreciation period of plants currently in operation and disbursement schedules.
These parameters are therefore re-estimated at each closing date to ensure that the amounts accrued correspond to the best estimate of the costs eventually to be borne by EDF.
EDF considers that the assumptions used at 31 December 2021 are appropriate and justified. However, any future change in assumptions could have a significant impact on EDF’s financial statements (see note 28).
The main assumptions and sensitivity analyses relating to nuclear provisions are presented in note 28.5.
