Universal Registration Document 2022

c3) Control of future projects

1. Renewal of the nuclear plant in France – EPR2 (see section 1.4.1.1.3.2 Other "New Nuclear" projects)

The main challenge is to ensure that the conditions are fulfilled as early as possible for a decision to launch the programme and its transposition into the legal and financial framework necessary for its implementation.

This requires several main prior actions:

• consolidation of estimated costs to completion and planning costs;
• signature of principal contracts before the programme commitment decision;
• following the structuring of the programme with the creation in 2022 of the Directorate for the New Nuclear Programme for France, defining in particular the schedule for financing, regulation and governance to which the French State and EDF will commit;
• If necessary, notification by the French State to the European Commission of the programme’s structuring arrangements, having regard to state aid regulations;
• public consultation on the programme and on the site for the first buildings. The conclusions of this consultation must be taken into account as a constituent part of the application for authorisation to create (DAC) that the nuclear operator must submit to the administrative authorities in order to launch the construction of a new nuclear facility.

2. Sizewell C (United Kingdom)

A description of the Sizewell C project development is provided in section 1.4.5.1.2.5. EDF’s ability to make the final investment decision alongside other investors and to contribute to the financing of the construction phase is contingent on, inter alia:

• securing the project financing which relies among others on the regulatory framework and the level of residual risk post GSP, also depending on macroeconomic trends;
• EDF’s ability to deconsolidate the project in the Group’s financial statements (including in the calculation of the economic indebtedness by the rating agencies) following the final investment decision;
• remuneration of the capital expected by EDF as investor to within 19.99%, in line with its investment policy;
• the obtaining of all the required authorisations remaining outstanding, particularly the authorisation concerning control of subsidies;
• the finalising of the Government Support Package (GSP);
• an agreement with the British government concerning the reference estimation of the cost to completion and the estimated project timetable;
• the finalising of the main EDF contracts to be signed on the date of the Final Investment Decision (FID).

EDF’s commitment to fund Sizewell C up until the date of the FID is subject to an equity cap, without any obligation to fund the project beyond the funding cap.

Failure to bring about these conditions could result in the Group not making a final investment decision. In particular, an investment decision when EDF’s ability to deconsolidate the project is not secured would heavily penalise the Group.

The main control actions to create favourable conditions for the decision include:

• work with the British government to finalise the remaining stages and prepare for future investments. On 29 November 2022, the British government announced its decision to invest some £700 million in the Sizewell C project and to sustainably assist the project’s development in the long term;
• work with supply chain operators to develop an appropriate contractual strategy, particularly including the replication strategy; Organisational and collaborative discussions with Hinkley Point C are underway to secure the benefits of HPC’s replication on the Sizewell C project, while taking into account the difference in governance (percentage of eventual ownership, partners, etc.). Depending on the schema, the risk of non-compatibility with the deconsolidation target could be significantly aggravated.
• a detailed review of the cost and planning, taking into account the feedback from the HPC project.

3. Jaitapur (India)

EDF and its partners submitted a comprehensive conditional non-binding bid to NPCIL at the end of 2018; in this offer, the EDF group and its partners would undertake to supply all the studies and equipment for the nuclear island, the conventional island, the auxiliary systems, as well as the heat sinks and galleries of the EPR technology.

EDF does not plan to invest in the project. The NPCIL client will be the overall project manager and integrator in the implementation phase (bearing in particular the risks of licensing, construction, assembly and overall integration). In April 2021, a binding technical and commercial offer was transmitted and discussions are ongoing (see section 1.4.1.1.3.2 “Other New Nuclear projects”).

The project has the risk profile of a supplier of engineering services and plant and equipment supplies. Its value therefore lies in the realisation of the margin included in the price of the services sold. Like all large, complex industrial projects, this project presents technical, industrial and cost control risks for the scope under the responsibility of EDF and its partners, as well as a risk relating to compliance with pre-defined milestones, having regard in particular to the expected revenue model. In addition to the country risk, which includes a substantial tax dimension, the conditions related to the scope of nuclear liability in India must be met, and the project’s financing plan must be secured before the final contracts are signed.

c4) Control actions specific to Framatome

Framatome can expose the Group to risk through its activities in France and abroad, for nuclear operators other than EDF, or other customers.

The Group’s exposure may be financial or address its reputation. Framatome’s industrial performance is strategic for EDF as a nuclear Operator in France and the UK.

The success of EPR projects, the competitiveness of the nuclear industry in France, and the success of the Group’s international development all depend on the quality and compliance with contractual clauses in the production of studies, components and services by Framatome.