Universal Registration Document 2021

1.14.2 Special hydropower concession liabilities

These liabilities comprise:

• the value of assets remitted for nil consideration and contributions received;
• differences arising from revaluations in accordance with French legislation for fixed assets commissioned before 1 January 1959 and before 1 January 1977;
• additional depreciation to industrial depreciation for facilities that are to be returned for nil consideration at the end of the concession but whose useful life extends beyond the concession term.

Following the changes made to the accounting treatment of hydropower concessions at 1 January 2009, the 1959 revaluation reserve is transferred to equity when the assets concerned are retired.

The net revaluation reserve generated by the 1976 revaluation is taken to income over the residual useful life of the assets concerned.

The value of assets remitted for nil consideration and contributions received is transferred to the income statement over the assets’ useful lives.

1.15 Provisions other than employee benefit provisions

EDF recognises provisions when it has a present obligation (legal or constructive) arising from a past event, an outflow of resources will probably be required to settle the obligation, and the obligation amount can be estimated reliably.

If it is anticipated that all or part of the expenses covered by a provision will be reimbursed, the reimbursement is recognised under receivables if and only if EDF is virtually certain of receiving it.

Provisions are determined based on the Company’s expectation of the cost necessary to settle the obligation. Estimates are based on management data from the information system, assumptions adopted by the Company, and if necessary experience of similar transactions or operations, or based on independent expert reports or contractor quotes. The various assumptions are reviewed for each closing of the accounts.

1.15.1 Provisions related to nuclear generation

Decommissioning provisions for power plants in operation are associated with fixed assets.

The discount effect generated at each closing to reflect the passage of time is recorded in financial expenses.

Changes in provisions resulting from a change in discount rates, a change in the disbursement schedule or a change in cost estimate are recorded:

• as an increase or decrease in the corresponding assets, up to the net book value, if the provision was initially covered by balance sheet assets;
• in the income statement in all other cases.

Provisions related to nuclear generation mainly cover the following:

• back-end nuclear cycle expenses: provisions for spent fuel management, for waste removal and conditioning (where relevant) and for long-term radioactive waste management are established in accordance with the obligations and final contributions specific to France;
• costs for decommissioning power plants;
• costs relating to fuel in the reactor when the reactor is shut down (provisions for last cores). These correspond to the cost of the fuel stock in the reactor that is not totally spent at the time of the final reactor shutdown and cannot be reused due to technical and regulatory constraints, the cost of processing for that fuel, and the cost of removal and storage of the resulting waste.

Obligations can vary noticeably depending on each country’s legislation and regulations, and the technologies and industrial scenarios involved.

Detailed information on the principles for determining provisions related to nuclear generation is given in note 28.

1.15.2 Other provisions

These provisions mainly cover:

• losses relating to multi-year agreements for the purchase or sale of energy:
• 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 contracts with the resulting economic benefits, based on market and sales assumptions;
• unrealised foreign exchange losses;
• risks relating to subsidiaries and affiliates;
• tax risks;
• litigation;
• decommissioning costs for fossil-fired and hydropower plants;
• costs of replacing assets operated under public electricity distribution concessions;
• provisions related to environmental schemes (see note 19).

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 Company.

1.16 Employee benefits

In accordance with the statutory regulations for companies in France’s electricity and gas sector (IEG), EDF’s employees are entitled to post-employment benefits (pension plans, retirement indemnities, etc.) and other long-term benefits (e.g. long-service awards).

1.16.1 Calculation and recognition of employee benefits

EDF recognises post-employment benefits granted to personnel as provisions.

Obligations under defined-benefit plans are calculated by the projected unit credit method, which determines the present value of entitlements earned by employees at year-end to post-employment benefits and long-term benefits, taking into consideration the prospects for wage increases and the country’s specific economic conditions.

Post-employment benefit obligations are valued mainly using the following methods and assumptions:

• retirement age, determined on the basis of the applicable rules, and the requirements to qualify for a full pension;
• career-end salary levels, with reference to employee seniority, projected salary levels at the time of retirement based on the expected effects of career advancement, and estimated trends in pension levels;
• forecast numbers of pensioners, determined based on employee turnover rates and mortality data;
• reversion pensions where relevant, taking into account both the life expectancy of the employee and his/her spouse and the marriage rate for IEG sector employees;
• a discount rate that depends on the duration of the obligations, determined at the year-end date by reference to the market yield on high quality corporate bonds or the rate on government bonds whose duration is coherent with EDF’s commitments to employees.