1.4 Comparability
1.4.1 Effects of market price levels on comparability
The level and volatility of market prices affect the financial statements, and for certain aggregated items this effect is more pronounced than at 31 December 2021.
The balance sheet total has increased from €361 billion to €388 billion, particularly as a result of the higher fair value of derivatives (see notes 18.1.1 and 18.3.1) (trading derivatives: +€10.5 billion in the assets and +€6.9 billion in the liabilities; hedging derivatives: +€2.3 billion in the assets and +€7.8 billion in the liabilities). The balance sheet total had already increased from €306 billion to €361 billion between 31 December 2020 and 31 December 2021, similarly due to a rise in the fair value of derivatives and also in the working capital relating to trade receivables and payables, and margin calls on assets and liabilities in the trading activities (see note 13 to the consolidated financial statements at 31 December 2021). In “Other current receivables”, the normal debit position of the CSPE for EDF (a receivable of some €2 billion at 31 December 2020) is in a credit position in “Other current liabilities” at the value of €0.3 billion at 31 December 2021 and €6.1 billion at 31 December 2022 (see note 13.5.4).
In the income statement, the main points of note are as follows:
- sales excluding the trading activity increased from €82.9 billion to €136.4 billion (+64%), reflecting the effect of market price rises for electricity and gas. In France, the rise in electricity sales revenues was restricted by government measures to limit the amounts billed to final customers (the bouclier tarifaire tariff cap). Some other countries, for example the United Kingdom, particularly from September 2022, provided support measures in the form of direct aid to final customers, which consequently had no effect on the sales revenues recognised under IFRS 15. Other countries preferred to introduce tax measures, imposing additional income taxes as in Italy;
- fuel and energy purchases increased from €44.3 billion to €121 billion (+173%): this includes the very significant price effect of electricity purchases made necessary by the lower nuclear power output due to the stress corrosion phenomenon (see note 5.2);
- the trading margin reached €7 billion compared to €1.5 billion for 2021. This margin includes an increase in the provisions for counterparty risks in the specific context of the European market;
- the volatility of commodities (IFRS 9) in the income statement was €(0.8) billion, compared to €(0.2) billion for the year 2021.
1.4.2 Effect of inflation and interest rates on comparability
The financial statements are also affected by current inflationary pressure, which led to a substantial rise in interest rates in 2022 through the action taken by the central banks to control inflation expectations, with the following main consequences:
- an increase in the real discount rates used for provisions related to nuclear generation, resulting in a €(4.6) billion decrease in provisions in France in 2022 (see note 15.1.1), in contrast to the +€1.1 billion increase in provisions in 2021 after a reduction in the real discount rate in France; the higher discount rates also resulted in a €(2.9) billion decrease in nuclear provisions in the United Kingdom (see note 15.2), and a concurrent decrease in the receivable on the NLF and the British government, which is discounted at the same rate as the provisions it funds;
- an increase in the real discount rates used for the actuarial assumptions concerning employee benefit obligations, which principally explains the €(12.8) billion decrease in obligations in 2022 (see notes 16.1.1 and 16.1.2). In 2021, the actuarial gains and losses associated with these assumptions varied by €(0.2) billion;
- an increase in the WACC used for impairment testing of goodwill, intangible assets and property, plant and equipment: the average increase was 100-130 base points, leading to partial impairment of EDF Energy goodwill, in the amount of €1.2 billion (see note 10.8).
Meanwhile, the context of inflation and rising interest rates was the primary explanation for developments on the financial markets during the year, and thus for the difference in the balance sheet value of EDF’s dedicated assets between 31 December 2021 and 31 December 2022 (a decrease of €(3.6) billion – see note 15.1.2.4) and the assets funding employee benefit obligations (a decrease of €(10) billion – see note 16.1.1). Between 31 December 2020 and 31 December 2021, the balance sheet value of dedicated assets and assets funding employee benefit obligations varied by +€3.1 billion and +€1.7 billion respectively.
1.4.3 Impacts of the war in Ukraine
The Group has very limited direct exposure in Russia and Ukraine. Its dependency on Russian uranium imports is low in view of its existing stocks and diversified, long-term supply contracts. For gas, the Group has only one contract (through Edison) with a European subsidiary of a Russian company, which represents 4% of the Group’s gas supplies and terminates at the end of 2022. The Group has no exposure with respect to businesses or banks that are currently affected by international sanctions. The Moscow office has been closed down, and the subsidiary Dalkia Russia was sold during the first half of 2022 (see the Dalkia press release of 23 May 2022, and note 7).
Note 2 Summary of significant events
The main significant events and transactions for the Group in 2022 and up to the date of approval of the consolidated financial statements were the following:
- Nuclear developments:
- Zero-carbon electricity generation ended and defueling began at Hunterston B (see the EDF Energy press releases of 7 January 2022 and 17 May 2022, and note 15);
- An update was released on the Flamanville EPR (see the Group press release of 12 January 2022, and note 10.6);
- On 13 January 2022 EDF updated its estimated nuclear output in France for 2022 (see the Group press release of 13 January 2022, and note 5);
- On 7 February 2022 EDF adjusted its estimated nuclear output in France for 2022 (see the Group press release of 7 February 2022, and note 5);
- On 11 February 2022 EDF adjusted its estimated nuclear output in France for 2023 (see the Group press release of 11 February 2022);
- Hinkley Point C update: the project schedule and costs were reviewed (see the Group press release of 19 May 2022, and notes 10.6 and 10.8);
- An update was released on the stress corrosion phenomenon and the 2022 French nuclear output estimate was adjusted (see the Group press release of 19 May 2022, and notes 5 and 10.6);
- A major milestone was reached as the UK Government granted the Development Consent Order to Sizewell C (see the EDF Energy press release of 20 July 2022, and note 10.6)
- On 15 September 2022, EDF adjusted the estimated impact of the decline in nuclear power output for 2022 following the French government’s announcement that price increases would be capped in 2023 (see the Group press release of 15 September 2022, and note 5);
- On 3 November 2022, EDF updated its estimated nuclear output in France for 2022 (see the Group press release of 3 November 2022, and note 5);
- EDF signed an exclusive agreement to acquire part of GE Steam Power’s Nuclear Activities (see the Group press release of 10 February 2022 and 4 November 2022, and note 3.1);
- EDF welcomed the UK government’s decision to cofinance development of the Sizewell C project (see the Group press release of 29 November 2022, and note 10.6);
- An update was released on the Flamanville EPR (see the Group press release of 16 December 2022, and note 10.6).
