Universal Registration Document 2022

These projects require, among other things, administrative authorisations, licences or permits which may be subject to disputes, withdrawals or delays in obtaining them.

Risks related to CSR issues

A very large number of stakeholders are involved in these projects, which may, for example, need to be associated with territorial development projects or suffer from difficulties related to local acceptance.

Cyclical risks

Inflationary pressures could also lead to higher project costs (see in particular risk 4B “Operational continuity of supply chains and contractual relationships”).

The health crisis has affected the deployment of these major projects and could, if it were to worsen, lead to further delays or additional costs.

In addition, the health crisis may have weakened the financial strength of some partners.

Other risks

Other issues and risks specific to nuclear activities, whether in terms of nuclear safety, control of operations and maintenance activities, long-term commitments or the fuel cycle, are specified in section 2.2.5 “Specific risks related to nuclear activities”.

c) Control actions

c1) Cross-cutting control actions

• As part of a continuous improvement approach to project management, the Group has a project management policy and a Commitments policy which require an analysis of risks and associated security measures. Regular project reviews are carried out and the Group set up a Major Project Control unit at the end of 2020. The Group has been implementing the Excell plan since December  2019, which will return the French nuclear industry to a high standard of stringency and quality to ensure success for the major projects under way and to be carried out in France, the United Kingdom and elsewhere in the world (see section 1.4.1.1.1 “The excell plan”).
• Project management takes into account, in accordance with EDF’s vigilance plan, the potential impacts of projects on human rights, the environment, health and safety, as well as the CSR issues of dialogue and consultation with stakeholders, territorial development, development of industrial sectors, ethics and responsible land management (see sections 3.2, 3.3, 3.4 and 3.9).

c2) Control of committed EPR projects

1. EPR Flamanville 3 (France)

In particular, meeting the timetable and cost objectives as announced⁽¹⁾ is still dependent on the following (see section 1.4.1.1.3.1 “Flamanville 3 EPR project”):

• the finalising of Non-Destructive Tests and Stress-relieving Heat Treatments for “complex geometric shapes”, following on from upgrading the Main Secondary Circuit and conducting hydraulic tests for its fresh approval;
• ASN’s confirmation of the conclusions drawn by EDF from the loop tests demonstrating the adequacy of the work conducted to assure the efficiency of the SIS/CHR filtration when recirculating water from the Main Primary Circuit after a pipe breach;
• the remainder of the examination of the last technical issues in conjunction with the French Nuclear Safety Authority (ASN) with a view to obtaining the administrative authorisations;
• the completion of the final stages of the facility;
• the possible emergence of new technical issues, particularly in the context of further work. A decree of 25 March 2020 extended the maximum time limit for commissioning the reactor to April 2024.

In addition to the activities still to be carried out before the fuel is loaded into the reactor vessel and the overall start-up tests are carried out, the project could also face other potentially significant additional costs and delays in the event of a new hazard. Schedule and cost to completion risks remain high.

2. EPR Taishan (China)

In China, the Group has a 30% stake in TNPJVC (Taishan Nuclear Power Joint Venture Company Limited) alongside its Chinese partner CGN and Guangdong Energy Group (19%). Taishan 1 was the first EPR reactor to be coupled to the grid on 29 June 2018. It became commercially operational on 13 December 2018. The Taishan 2 reactor became commercially operational on 07 September 2019 (see section 1.4.1.1.3.2 “Other New Nuclear projects”).

The profitability of the asset is linked to the feed-in tariff for electricity produced by Taishan and could be affected if tariff decisions are not favourable. On 20 March 2019, a temporary tariff was set by the National Development and Reform Commission (NDRC) at RMB 435/MWh until the end of 2021, for a guaranteed annual volume of generation offtake equivalent to 7,500 hours of full power operation. Any surplus above this volume is sold at the market price. As with any scalable generation facility, the actual call-up of the Taishan plant is decided by the Guangdong provincial power grid operator. The temporary tariff was extended on 22 December 2021 until the publication of the new tariff mechanism applied to Chinese third-generation nuclear power plants, particularly the Taishan plant. The authorities had issued no further publication at the beginning of 2023. The profitability of the asset is also subject to the risk of changes in the volume of sales at this tariff, against a background of development in the electricity market.

The financing arrangements put in place by TNPJVC include provisions to secure the repayment of the joint venture’s financial liabilities. In certain situations, these provisions may temporarily limit the payment of dividends. If the company were to fail to generate a positive cumulative net result or a sufficient level of cash flow, the amount of dividends expected by EDF would be revised downwards which could result in the need for depreciation of the asset ⁽²⁾.

3. Hinckley Point C – EPR (United Kingdom)

Control of the design and bringing the manufacturing and the major milestones of the Hinckley Point C (HPC) construction site under control will determine the profitability of the project and the financing of any future projects in the United Kingdom.

Construction passed a number of milestones in 2022 (see section 1.4.5.1.2.5 “Nuclear New Build business”). However the project was marked by:

• civil engineering performance remaining lower than expected;
• shortages in the global building materials market and job market;
• one fatal accident on the site in November 2022, still under investigation by the ONR (Office for Nuclear Regulation). The project team maintains constant vigilance as to health and safety of workers;
• supply chain problems due to the geopolitical and macroeconomic climate.

There is a risk that these factors will continue to impact construction progress and the supply chain. Action plans are under way to catch up delays and improve civil engineering performance. Compliance with the schedule and cost to completion (see section 1.4.5.1.2.5 “Nuclear New Build business”) requires that these actions produce the expected results.

The IRR of the HPC project is sensitive to:

• inflation and changes in electricity market prices beyond the term of the CfD;
• impacts of the agreements between EDF and CGN which include a mechanism for compensating certain EDF price supplements between the two shareholders in case of a deviation from the initial cost budget or delays. Given the current schedule and the forecast cost to completion, this mechanism was triggered in January 2023 (see section 1.4.5.1 “United Kingdom”);
• the risk of CGN not contributing Voluntary Equity;
• the exchange rate between the British Pound and the Euro. A hedging strategy for this risk is in place at the HPC project and Group levels.