For the year ended December 31, 2022
This is a translation into English of the statutory auditors’ report on the consolidated financial statements of the Company issued in French and it is provided solely for the convenience of English-speaking users.
This statutory auditors’ report includes information required by European regulation and French law, such as information about the appointment of the statutory auditors or verification of the information concerning the Group presented in the management report. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
To the Shareholders,
Opinion
In compliance with the engagement entrusted to us by your General Meeting, we have audited the accompanying consolidated financial statements of Électricité de France S.A. (“EDF”, the “Company” or the “Group”) for the year ended December 31, 2022.
In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as at December 31, 2022 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
The audit opinion expressed above is consistent with our report to the Audit Committee.
Basis for Opinion
Audit Framework
We conducted our audit in accordance with professional standards applicable in France. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described herein in the Statutory Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report.
Independence
We conducted our audit engagement in compliance with independence requirements of the French Commercial Code (Code de Commerce) and the French Code of Ethics (Code de Déontologie) for statutory auditors for the period from January 1, 2022 to the date of our report and specifically we did not provide any prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/ 2014.
Justification of Assessments – Key Audit Matters
In accordance with the requirements of Articles L.823-9 and R.823-7 of the French Commercial Code (Code de Commerce) relating to the justification of our assessments, we inform you of the key audit matters relating to risks of material misstatement that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period, as well as how we addressed those risks.
These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on specific items of the consolidated financial statements.
Notes 1.3.4.2, 15, 18.1 and 20 to the consolidated financial statements
As at December 31, 2022, the provisions recorded to cover obligations relating to nuclear power plants for which EDF is the operator in France total €43,382 million, including €23,854 million with respect to the back-end of the nuclear cycle (management of spent fuel and radioactive waste) and €19,528 million with respect to the decommissioning of nuclear power plants and last cores.
The valuation of these provisions depends on the regulatory context is described in Notes 1.3.4.2 and 15. It requires defining technical and financial assumptions and using complex calculation models.
They are updated and the assumptions taken into consideration in the models are reviewed at least once a year. The selected assumptions reflect management’s best estimate at the reporting date of the impacts of the applicable regulation, the implementation of decommissioning, spent fuel management and storage processes or changes in the main financial parameters, inflation and discounting. More specifically in 2022, they reflect the impacts of (i) the increase in the real discount rate, (ii) the adjustment to 2022 year-end economic conditions in connection with real inflation. In addition, as every year, variations in the provisions include the effects of increasing volumes of spent fuels to be reprocessed and specific revisions of planning and decommissioning cost estimates.
Furthermore, the Company is required to allocate so-called “dedicated” assets to secure financing of certain categories of nuclear provisions in France. The realizable value of these assets should allow the Company’s commitments relating to the decommissioning of nuclear power plants and long-term storage of radioactive waste in France to be covered (Notes 1.3.4.5, 15.1.2 and 18.1). The realizable value of these dedicated assets, impacted by the decrease in the financial markets, for an amount of €33,904 million (or a net carrying amount of €31,609 million) as of December 31, 2022, was determined based on the fair value of diversified equity and bonds investments, and the equity value of a non-listed assets portfolio managed by the division EDF Invest. These dedicated assets are classified as growth assets, fixed-income assets and yield assets and ought to be compliant with the chart of responsible investor implemented in 2020.
We considered the valuation of provisions related to nuclear generation and dedicated assets to be a key audit matter due to:
- the sensitivity of the assumptions on which the valuation of these provisions is based, notably in terms of assumptions considered for decommissioning, spent fuel reprocessing, storage, costs, uncertainties and aleas, inflation and long-term discount rates, as well as the depreciation periods of nuclear power plants in operation, and forecast cash outflows; the modification of these parameters can lead to a material revision in the provisioned amounts;
- the negative impacts on the financial position of the Company (cash earmarked to increase the amount of dedicated assets) in the event of an increase in nuclear provisions in France, a change in the realisable values of dedicated assets or changes in the coverage rate of nuclear provisions for dedicated assets,
it being specified that the valuation of provisions covers and includes uncertainties related to the fact that certain scenarios and technical solutions have never been implemented.
We have analysed the measures for recognising provisions related to nuclear generation in France and gained an understanding of the industrial scenarios for decommissioning nuclear power plants and the technical solutions adopted in terms of management of spent fuel and radioactive waste. We have assessed the compliance of the methods for determining the provisions with regard to applicable accounting, legal and regulatory measures.
We have verified the calculation models used by the Company and assessed the assumptions adopted in terms of cost, forecast cash outflows and financial parameters (discount and inflation rates).
Our work also consisted in verifying the type of costs used to determine provisions and assessing the reconciliation of forecast costs and forecast cash outflows with industrial scenarios as well as the available studies and quotes, based on the current year change in assumptions.
We have also assessed the appropriateness of:
Concerning the inflation and discount rates and their calculation methods adopted by management described in note 15.1.1.5, we have verified their compliance with applicable accounting standards and regulatory measures, since 2020. We have reconciled the data used for this purpose with available market data or expertise-based documentation.
Concerning the securing of financing for certain of these provisions through dedicated assets, we have reconciled the realisable value of the dedicated assets in the portfolio at the reporting date with the available certificate of depository statements, and available external data and valuations. We have also assessed the accounting treatment and their valuation, in particular, the compliance with the IFRS 9 accounting standard of the impairment model described in the accounting principles and methods of the Note 18.1.
Finally, we have verified the appropriateness of the disclosures given in the Notes for the provisions related to nuclear generation in France and the dedicated assets, notably regarding the sensitivity of the valuation of provisions to changes in macro-economic and technical assumptions (Note 15.1.1.5) and the climate and environmental matters taken into consideration (notes 20.2.1 et 20.4).
