Universal Registration Document 2021

The amount of the provision takes into account the present value of the fund assets that cover these benefits, which is deducted from the benefit obligations.

Any actuarial gain or loss on post-employment benefit obligations in excess of 10% (the “corridor”) of the obligations or fund assets, whichever is the highest, is recognised in the income statement progressively over the average residual working life of the Company’s employees.

For other long-term benefits, actuarial gains and losses and the full past service cost are directly included in the provision, without application of the “corridor” rule.

The net expense booked during the year for employee benefit obligations includes:

• the current service cost, corresponding to additional benefit entitlements earned during the year;
• the net interest expense, corresponding to interest on obligations net of the return on fund assets;
• the income or expense corresponding to the actuarial gains and losses on long term benefits and amortisation of actuarial gains or losses on post-employment benefits;
• the past service cost, including the income or expense related to amendments or settlements of benefit plans or introduction of new plans.

1.16.2 Post-employment benefit obligations

Since the financing reform for the IEG sector system took effect on 1 January 2005, the CNIEG (Caisse nationale des IEG, the sector’s specific pension body) has managed not only the special IEG pension system, but also the industrial accident, invalidity and death insurance system for the sector.

The CNIEG is a social security body governed by private law, formed by the Law of 9 August 2004. It has legal entity status and reports to the French government, operating under the joint supervision of France’s Ministers for the Budget, Social Security and Energy.

Under the funding arrangements introduced by the Law, EDF establishes pension provisions to cover entitlements not funded by France’s standard systems (CNAV, AGIRC-ARRCO), to which the IEG system is affiliated, or by the CTA (Contribution tarifaire d’acheminement) levy on gas and electricity transmission and distribution services.

As a result of this funding mechanism, any change (whether favourable or unfavourable to employees) in the standard French pension system that is not passed on to the IEG pension system is likely to cause a variation in the amount of the provisions recorded by EDF to cover its obligations.

The benefits covered by pension provisions include:

• specific benefits of employees in the deregulated or competitive activities;
• specific benefits earned by employees from 1 January 2005 for the regulated activities (island public electricity distribution) (benefits earned before that date are financed by the CTA levy).

CNIEG management expenses payable by EDF for the administration and payment of retired employees’ pensions are also included.

In addition to pensions, other benefits are granted to IEG status former employees (not currently in active service), as detailed below:

• benefits in kind (energy): Article 28 of the IEG national statutes entitles such employees and current employees to benefits in kind in the form of supplies of electricity or gas at preferential prices. The obligation for supplies of energy to employees of EDF and Engie corresponds to the probable present value of kWh to be supplied to beneficiaries or their dependants during their retirement, valued on the basis of the unit cost (which mainly depends on the marginal production cost, the cost of delivery, and taxes). It also includes the payment made under the energy exchange agreement with Engie;
• retirement gratuities: these are paid upon retirement to employees due to receive the statutory old-age pension, or to their dependants if the employee dies before reaching retirement. These obligations are almost totally covered by an insurance policy;
• bereavement benefit: this is paid out upon the death of an inactive or disabled employee, in order to provide financial assistance for the expenses incurred at such a time (Article 26-§5 of the National Statutes). It is paid to the deceased’s principal dependants (statutory indemnity equal to three months’ pension, subject to a ceiling) or to a third party that has paid funeral costs (discretionary indemnity equal to the costs incurred);
• bonus pre-retirement paid leave: all employees eligible to benefit immediately from the statutory old-age pension and aged at least 55 at their retirement date are entitled to 18 days of bonus paid leave during the last twelve months of their employment;
• other benefits include help with the cost of studies, time banking for pre-retirement leave, and pensions for personnel sent on secondment to companies not covered by the IEG system.

1.16.3 Other long-term benefit obligations

These benefits concern employees currently in service, and include:

• annuities following incapacity, invalidity, industrial accident or work-related Like their counterparts in the general national system, IEG employees are entitled to financial support in the event of industrial accident or work-related illness, and invalidity and incapacity annuities and benefits. The obligation is measured as the probable present value of future benefits payable to current beneficiaries, including any possible reversions;
• long-service awards;
• specific benefits for employees who have been in contact with asbestos.

1.17 Derivatives

EDF uses derivatives in order to minimise the impact of foreign exchange risks and interest rate risks.

These derivatives comprise interest rate and currency derivatives such as futures, forwards, swaps and options traded on the over-the-counter market.

The application at 1 January 2017 of ANC regulation 2015-05 concerning forward financial instruments and hedging operations led to recognition of unrealised gains on the foreign exchange optimisation portfolio, and the unrealised gain or loss on currency derivatives classified as hedging instruments, in the balance sheet, in the revaluation surplus accounts created by the regulation. These accounts are netted with the unrealised foreign exchange gains or losses booked in respect of the hedged items.

Hedging derivatives correct the foreign exchange result or interest income on the corresponding asset or liability. If the foreign exchange risk is fully hedged, no provision is recorded. If it is only partly hedged, a provision is recorded for the entire unhedged portion of the unrealised loss.

For other instruments, when there is no hedging relationship, a provision is recorded for unrealised losses and unrealised gains are not recognised.

Instruments in the portfolio at the year-end are included in off-balance sheet commitments at the nominal value of the contracts.

1.18 Commodity contracts

Forward financial instruments on commodities are traded for hedging purposes. Gains and losses on these operations are included in sales or in the cost of energy purchases, symmetrically to the hedged items, in accordance with ANC regulation 2015-05 concerning forward financial instruments and hedging operations, which has been applicable since 1 January 2017.

Instruments in the portfolio at the year-end are included in off-balance sheet commitments at the quantities to be delivered or to be received under the contracts.