Articles L. 594-1 and following of France’s Environment Code and their implementing regulations require assets (dedicated assets) to be set aside for secure financing of nuclear plant decommissioning expenses and long-term storage expenses for radioactive waste. These regulations govern the way dedicated assets are built up, and the management and governance of the funds themselves. Dedicated assets are clearly identified and managed separately from the Company’s other financial assets and investments. They are also subject to specific monitoring and control by the Board of Directors and the administrative authorities.
The law requires the realisable value of dedicated assets to be higher than the value of the provisions corresponding to the present value of the long-term nuclear expenses defined in France’s Environment Code.
The Decree of 1 July 2020 codified the regulatory obligations concerning dedicated assets in Articles D. 594-1 and following of the Environment Code, complemented by the ministerial order of 21 March 2007 amended by the order of 1 July 2020. These documents define the list of eligible assets, which is largely based on France’s Insurance Code and mainly includes unlisted assets. In particular, they authorise allocation to dedicated assets of the shares of CTE, which has held 100% of the capital of RTE since 31 December 2017 (see note 15.1.2.2 below).
EDF received ministerial authorisation on 31 May 2018 to increase the portion of unlisted assets in its dedicated assets from 10% to 15% subject to conditions (this does not apply to the shares of CTE or real estate assets).
Since the decree of 1 July 2020, EDF is no longer obliged to add to dedicated assets when the coverage rate of obligations, determined by the ratio of the assets’ realisable value to the amount of the provisions concerned, is above 100%, and withdrawals from assets are not authorised unless that rate is above 120%. The decree also increased the maximum period for allocating funds to dedicated assets in the event of undercoverage, subject to authorisation by the administrative authority, to 5 years (instead of 3 years previously).
Given the regulations governing dedicated assets, they form a highly specific category of assets.
Dedicated assets are structured and managed according to a strategic allocation defined by the Board of Directors and reported to the administrative authorities. The strategic allocation is designed to meet the overall objective of long-term coverage of obligations, and determines the structure and management of the portfolio as a whole. It takes into account regulatory constraints concerning the nature and liquidity of the dedicated assets, the financial outlook for the equity and bond markets, and the diversifying contribution of unlisted assets.
Several changes have been made to this strategic allocation in order to pursue the diversification into unlisted assets, particularly in 2010 when the shares in RTE (now held via CTE) were allocated to dedicated assets, and in 2013 when an unlisted asset portfolio (consisting of infrastructures, real estate and debt or equity funds) was set up. This portfolio is managed by EDF’s “EDF Invest” Division.
On 29 June 2018 the Board of Directors validated the principle of strategic allocation for dedicated assets:
These targets should be reached gradually by 2025.
Certain growth and fixed-income assets take the form of bonds held directly by EDF. Others consist of specialised collective investment funds on leading international markets and French general-purpose investment funds (FIVGs), managed by independent asset management companies. They take the form of open-end funds and “reserved” funds located in France, established for the Company. The reserved funds are owned by EDF and are not consolidated as EDF does not participate in management of these funds and provides no financial support for them.
The value of the assets of the reserved investment funds amounts to €12,192 million at 31 December 2022 (€13,106 million at 31 December 2021). These funds mainly consist of 17 listed funds with total value of €11,000 million (at 31 December 2021, 16 listed funds with total value of €12,153 million).
The listed equity funds consist of international equities (mainly in North America but also in Europe, Asia-Pacific and emerging countries). Listed bonds and listed bond funds consist of sovereign and corporate bonds.
These investments are structured and managed in line with the strategic allocation, which takes into consideration international stock market cycles, for which the statistical inversion generally observed between equity market cycles and bond market cycles – as well as between geographical areas – has led the Group to define a long-term investment policy with appropriate allocation between growth assets and fixed-income assets.
Growth assets also include a small portion of funds invested in unlisted equities, and fixed-income assets also include a small portion of funds invested in unlisted debt. These funds are mainly managed by EDF Invest (see yield assets below).
At the year-end, dedicated assets are presented in debt and equity securities in the balance sheet, at their liquidation value.
In the course of operational asset monitoring, the Group applies long-term, specific management rules defined and supervised by its governance bodies (maximum investment ratios, volatility analyses and assessment of individual fund manager quality).
The yield assets managed by EDF Invest consist mainly of assets related to investments in infrastructures and real estate, made either directly by EDF Invest or by investment funds under delegated management arrangements.
Through unlisted investment funds, EDF Invest also manages growth assets and fixed-income assets.
At 31 December 2022, the assets managed by EDF Invest represent a total realisable value of €9,540 million, including €8,772 million of yield assets. Yield assets particularly include:
