Universal Registration Document 2022

The basic principle for hedging is:

• netting of upstream/downstream positions; wherever possible, sales to final customers are hedged by Internal sales;
• gradual closing of most positions before the end of the budget year, based on a predefined hedging trajectory ⁽¹⁾ that captures an average price, potentially with overweighting of year N-1 in view of liquidity constraints on the forward markets.

The energy risk control process involves Group management and is based on a risk indicator and measurement system incorporating escalation procedures in the event risk limits are exceeded.

The Group’s exposure to energy market risks through operationally controlled entities is reported quarterly to the Executive Committee. The control processes are regularly evaluated and audited.

5.1.6.2.3 Principles for operational management and control of energy market risks

The principles for operational management and control of energy market risks for the Group’s operationally controlled entities are based on strict segregation of responsibilities for managing those risks, distinguishing between management of assets (generation and supply) and trading.

The operators of generation and supply assets are responsible for implementing a risk management strategy that smooths the impact of energy market risks on the variability of their financial statements (the accounting classifications of the hedges used are described in note 18.7 to the 2022 consolidated financial statements, “Derivatives and Hedge accounting”). However, they are still exposed to structural price trends to the extent of volumes that are not yet hedged, and uncertainties over volumes (relating to the ARENH system, generation plant availability, and customer consumption). In view of the inspections of the nuclear fleet announced on 13 January 2022, and announcements of additional ARENH volumes, the volume risk in France was particularly high in 2022.

For operationally controlled entities in the Group, positions on the energy markets are taken predominantly by EDF Trading, which as the Group’s trading entity executes most of the Group’s purchase/sale orders on the wholesale markets. Consequently, EDF Trading is subject to a strict governance and control framework, particularly the European regulations on trading companies.

EDF Trading trades on organised or OTC markets in derivatives such as futures, forwards, swaps and options (regardless of the accounting classification applied at Group level). Its exposure on the energy markets is strictly controlled through daily limit monitoring overseen by the subsidiary’s management and by the division in charge of energy market risk control at Group level. Automatic escalation procedures also exist to inform members of EDF Trading’s Board of Directors of any breach of limits for risks (value at risk limit) or losses (stop-loss limits). Value at Risk (VaR) is a statistical measure of the potential maximum loss in market value on a portfolio in the event of unfavourable market movements, over a given time horizon and with a given confidence interval ⁽²⁾. Specific Capital at Risk (CaR) limits are also used in certain areas (operations on illiquid markets, long-term contracts and structured contracts) where VaR is difficult to apply. The stop-loss limit stipulates the acceptable risk for the trading business, setting a maximum level of loss in relation to the trading margin over a rolling three-month period. If these limits are exceeded, EDF Trading’s Board of Directors takes appropriate action, which may include closing certain positions.

In 2022, EDF Trading’s commitment on the markets was subject to a VaR limit of €70 million from 1 January, successively reduced to €51 million on 9 February and €42 million on 15 March before being raised to €57 million on 24 May, a CaR limit for long-term contracts and a CaR limit for operations on illiquid markets of €250 million each, and a stop-loss limit of €210  million from 1  January to 8 February, then €180 million from 9 February.

In an extremely volatile market environment, the VaR limit was occasionally exceeded during the first half of 2022, and between 26 and 30 August, triggering the procedures defined for such situations. The VaR indicator has remained below the limit since 30 August 2022.

For an analysis of fair value hedges of the Group’s commodities, see note 6 to the 2022 consolidated financial statements. For details of commodity derivatives, see note 18.7.4 to the 2022 consolidated financial statements.

5.2 Subsequent events until closing of accounts

The developments occurred since the year-end and until closing of accounts are described in Note 23 to the consolidated financial statements closed on 31 december 2022.

5.3 Subsequent events to closing of accounts

On 28 February 2023, EDF announced⁽³⁾ that the French State had requested the conversion of 87,831,655 EDF OCEANES into shares. This conversion results in the issuance of 113,215,003 new shares. It results in a capital increase for a total nominal amount of 56,607,501.50 euros and a premium for the conversion of EDF OCEANES into shares for an amount of 903,392,484.15 euros. EDF’s share capital is thus increased to 2,000,466,841 euros, consisting of 4,000,933,682 shares with a nominal value of 0.50 euro each.

On 16 March 2023, EDF issued a press release regarding a clarification on the stress corrosion phenomenon detected on parts of the auxiliary circuits of the main primary circuit of several nuclear reactors.