Universal Registration Document 2022

• The risk of a reform of the market architecture at variance with the issues facing the Company
  • Negotiations between the French State and the European Commission on a future regulatory framework have been halted;
  • The following would be the main risks to the Company in the future:
    • the unavailability of the resources required to implement an industrial investments programme which is essential to a successful energy transition;
    • the risk of the authorities systematically resorting to regulatory measures or measures adopted in emergency that are at variance with this policy aim, and of EDF not enjoying the optimum conditions for generating value from its power generation at a fair price freely negotiated with its customers, and of its being hampered in deploying its industrial strategy.

• Risks of upward spiralling of the levy on electricity generators’ infra-margin revenues
  The amount of this levy for 2023 is estimated at between €0 billion and €5 billion (see the context described above):
  
  • owing to the uncertainties regarding its calculation, the contribution amount could be reevaluated;
  • the contribution amount is limited in 2023 because the calculation includes the period from July to December 2022, in which EDF has recognised a “deficit” that could be carried forward to 2023. in the event of this carry- forward being disputed, EDF would then be exposed to a very high tax charge;
  • lastly, there is a risk of the measure being extended to 2024.

• Risks related to compensation for public-service expenses
• • The mechanisms described in the foregoing context can be summarised as follows: first, the pricing cap for 2023, protecting consumers by limiting pricing increases to 15%, and other shielding mechanisms, should be reflected in a compensation payment by the French State to EDF, of an amount not yet defined, but evaluated by EDF at €18 billion. Furthermore, the compensation for energy expenses will give rise in 2023 to a compensation payment by EDF to the French State, not yet finally evaluated, but estimated by EDF at some €14.8 billion:
    • these figures are not consolidated and are subject to a high degree of uncertainty in a highly volatile market context,
    • the precise compensation terms (implementation date, flows neutralisation mechanism, etc.) are also uncertain and have not been validated,
    • these uncertainties entail a capital-outflow risk for EDF (a risk of EDF making overpayments in 2023 which would only be offset in 2024) ;
  • More broadly, the legislation provides for EDF to be fully compensated for the public service expenses it bears. However, it cannot be completely ruled out that the terms of such compensation may be called into question and that such compensation may not entail any new public service obligation imposed upon EDF.

• Other price and tariff risks 
  • TURPE (Public Transmission System Access Tariff): the French Energy Regulation Commission (CRE) deliberations in January 2021 formalised the implementation of TURPE 6 HVB and TURPE 6 HVA/LV as from 1 August 2021. The risk is that the level of compensation of network operators may not be sufficient to enable them to carry out the tasks entrusted to them, which are inherently evolving, beyond the TURPE 6 tariff period;
  • CO₂ price: the revision of the EU Emissions Trading Scheme (EU-ETS) could introduce many uncertainties and risks regarding the level and predictability of prices;
  • emergency supply: there is a risk of not being able to recoup the costs incurred in providing emergency supply to customers who can leave EDF’s portfolio at any time, subject to prior notice to the companies. This risk exists in both the transitional and the permanent arrangements for emergency supply;
  • hedging of costs of customers reverting to TRVE (regulated tariffs for electricity sales): as a result of the crisis in prices, the disappearance of some suppliers and the leap-frogging increases of market offers, in 2022 a considerable and unforeseen number of eligible customers requested subscription to TRVE contracts. This trend may continue in 2023. This results in unforeseen expenses for supply to those contracts, and it is desirable to organise hedging of those expenses in 2023.
• Risks related to the energy mix
  • Decisions ruling premature shutting down of power generating assets may arise, not due to an industrial choice, but to an energy policy decision or a court ruling. Such potential energy-policy decisions should lead to EDF being compensated for the harm suffered, as recalled by the French Conseil constitutionnel (the French Constitutional Council) in a decision of 13 August 2015. There is a risk that EDF would not be compensated for the entire loss;
  • Risk of the French State failing to make or delaying the formal decision to launch a programme for the construction of new EPR2 or even SMR nuclear reactors, particularly in view of the Energy Programming Act.

• LPEC related risks (Energy Climate Planning Act)

The overall framework proposed by the French State during the preliminary exchanges, as it emerges during the first twelve months of deliberations, lays down a satisfactory breakdown of EDF’s strategic policy orientations (priority to de-carbonation, first and foremost via electrification, upward revision of the nuclear generation trajectory complementary to the development of new, renewable energies (ENR), in line with the strategy announced by the President of the Republic in Belfort on 10 February 2022, etc.). In this context, the risks are as follows:

• • a risk of delay or reduction in the aims of the LPEC (Quinquennial Planning Act on energy and climate) seeking to decarbonise all sections of society efficiently and fairly from an economic and climatic standpoint, with particular reference to decarbonising buildings by electrification via the installation of heat pumps;
  • the risk of the respective development trajectories for new generation resources (offshore wind power, solar energy, hydropower, nuclear power) lacking sufficient consistency with each other to ensure the most efficient possible electrical mix, having regard to the electrical system;
  • the risk of the role allocated to hydrogen in the long-term energy mix being insufficiently clarified, and likewise as concerns the strategy and regulatory framework for production of low-carbon hydrogen, to be developed in coordination with our European partners;
  • the risk of the CCS technology strategy, not mature as yet, being insufficiently detailed.

• Risks associated with the European context
  • the risk of difficulties or delays in validation by the European Commission of the NNF programme framework;
  • the risk entailed in the design of a reform in the domestic electricity market (market design) not being favourable to the Group’s interests;
  • additional emergency measures by the European Commission, in response to a prolonging of the energy crisis, cannot be ruled out, with likely impacts on the Group;
  • proposals to accelerate the permitting procedures for development of renewable energies are currently under discussion within the framework for RepowerEU, and the revision of the RED II renewable energy Directive. However, risks of hampering the development of renewable energies persist;
  • regarding electrolytic hydrogen, risks remain from the European regulatory framework and from the French strategy for the method of calculating emissions associated with hydrogen generated using network electricity;
  • taxonomy: the Complementary Delegated Act includes nuclear energy as a transitional energy source. There remains a risk regarding the interpretation of the technical alignment criteria for purposes of their implementation as from 1 January 2023, and from the appeal for annulment lodged by Austria and Luxembourg;
  • the risk of introducing a cap on the use of woody biomass, and of a definition that would exclude this resource from renewable energies (review of the renewable energy Directive). This would significantly impact the activities of Dalkia;
  • the risk from the introduction of technical provisions precluding the decarbonisation of electricity mixes in ultra-peripheral regions with electricity generating plant operating using bio liquids.