Universal Registration Document 2022

Introduction

c) Control actions
  • Control actions are limited for those risks, which stem from decisions originating outside the Company. Nevertheless, the control actions include the following:
    • monitoring the political, legislative and regulatory context in France, Europe and in the regions where the Group operates;
    • analysis of the potential consequences of published or still pending legislative or regulatory instruments in order to identify the impact on the Group, particularly as concerns the ARENH, the tariff shield, the cushioning, the taxation of infra-marginal power generation revenues; see in particular the action plan for strengthening the Group’s balance sheet structure;
    • dialogue with and lobbying of public authorities (particularly in France and Europe) to share views on all the potential direct and indirect impacts on the EDF group of the pending instruments and public policies;
    • contribution to public consultations on relevant pending texts at the national and European level;
    • participation of EDF in the Conseil supérieur de l’énergie (CSE);
    • EDF’s participation in industry associations and think tanks in France and at the European level;
    • the institution of operational measures to align with legislative and regulatory instruments posing a significant challenge or impact identified for EDF or the Group;
    • energy market risk and financial risk control policies.
  • Concerning the energy public service expenses: frequent dialogue with DGEC, APE and the Budget Directorate in order to support the parliamentary examination of the Finance Act for 2023 (with particular reference to the amount of budget allocations to the “Energy Public Service” programme), and to defend the compensation for expenses in 2023 in order to ensure the closest possible fit with the expenses actually recognised (including expenses relating to price freezes) making sure that such compensation is as complete and up-to-date as possible.
  • EDF maintains a close dialogue with the French State authorities on the issue of financing public energy service obligations, in order to secure implementation of the compensation mechanism. EDF is particularly vigilant regarding capital-outflow risks, and actively seeks to secure payment by the French State at the end of the year and avoid year-on-year trade-offs by the State.
1B – Changes in the legal and regulatory framework for hydraulic concessions

Summary: The Group carries on its hydropower generation activities mainly in France under concessions or licence agreements. Therefore, the Group does not always own the assets it operates. In France, changes in the legislative and regulatory framework, particularly for the renewal of concessions (provisions for facilities with installed capacity above 4.5MW), changes in the economic conditions of concession specifications and in the conditions for implementing publicity and competitive-bidding procedures could have an impact on the Group’s earnings.

Criticality: ●● Intermediate

a) Main risks

The challenges associated with the renewal of hydraulic concessions in France are specified in section 1.4.1.3.1.4 “Issues relating to hydropower generation”. The French State has not renewed 31 concession titles that expired on 31 December 2022, corresponding to an installed capacity of 3,260MW. On the topic of concessions renewal, discussions have begun between the French State and the European Commission on the rescission of two formal notices dated 22 October 2015 and 7 March 2019.

There is the risk that the EDF group may not obtain the renewal of each of its concessions in its favour or may obtain the renewal under less favourable economic conditions. In addition, the compensation that should be paid by the State, in particular, in the event of early termination of the operation of a concession, may not fully compensate the loss of revenue borne by the Group. Future regulations or the discussion with the European Commission could also change in a way that is detrimental to the Group. These factors could have an adverse impact on its activities and financial position.

Depending on the conditions in each country, and mainly in Italy, these concessions may not be continued or may not be renewed in its favour with changes to the financial terms and conditions of the concession specifications, which would have an adverse impact on the Group’s activities and financial position.

b) Control actions

EDF operates as a responsible concession holder through dialogue and joint construction with all its stakeholders, chiefly regarding the management of water resources and support for local economic development in the regions.

This consultation is conducted on a daily basis by EDF’s close collaboration with actors from the economic, political and trade-association sectors in the geographical areas concerned and by maintaining a close dialogue with the people living near the facilities.

In France, anchoring the economy in the regions means maximising local economic benefits by making 67% of all of its purchases in the hydraulic regions to support the local industrial fabric (referencing in the supplier panels of more than 1,980 local companies in the specifically hydraulic trades).

1C – Changes in the legislative and regulatory framework for electricity distribution concessions

 

Summary: Enedis conducts its distribution activities under public service concessions and does not own most of the assets it operates. Changes in the legislative framework, and in concession specifications, could have an impact on the Group’s results.

Criticality: ●● Intermediate

a) Context

In France, the law stipulates that Enedis and the Local Distribution Companies (LDC) have exclusive rights, in their respective service areas (as well as EDF for areas not interconnected with the continental metropolitan network), to carry out the mission of developing and operating the public electricity distribution networks. Similarly, EDF and the LDCs carry out a supply mission in their service areas at regulated tariffs, here again under the exclusive rights granted to them by law. Insofar as the powers of AODE (authority responsible for organising public electricity distribution) are conferred by law upon local authorities (municipalities or EPCIs, which are inter-municipality cooperation establishments) and where these

AODEs are, except for source stations, the owners of the assets constituting the public electricity distribution network, the law requires Enedis to enter into concession contracts with them for a period generally ranging from 25 to 30 years.

Consequently, Enedis carries out its public service missions (maintenance, renewal and development of the network, metering, connections, etc.) both under the law (the French Energy Code designates the operators of the electricity distribution networks and specifies the missions conferred upon them) and under these concession contracts. Moreover, the purpose of such contracts is, yet again in application of the law, to provide access to the TRVE regulated sales tariffs; they are therefore trilateral (they bind the AODEs, the distribution network operators and the regulated tariff supplier).