Universal Registration Document 2022

EDF’s financial commitment to fund GNSL and Bradwell is subject to a cap, without any obligation to fund the project beyond the funding cap.

1.4.5.1.3 Brexit

The UK left the European Union (EU) on 31 January 2020, entering into a Transition Period that ended on 31 December 2020.

The EU-UK Trade and Cooperation Agreement (TCA), agreed on 24 December 2020, sets the basis for the EU-UK relationship from 1 January 2021. EDF Energy had identified the business risks arising from the UK’s exit from the EU and was well prepared, enabling the business to manage most of the adverse impacts.

A civil nuclear agreement, the EU-UK Nuclear Cooperation Agreement (NCA), is similar to other NCAs that the EU has signed with third countries. It will operate for an initial period of 30 years, providing a commitment to cooperation on civil nuclear, including safeguards, safety and security. It also provides a framework for trade in nuclear materials and technology, facilitates research and development, and enables exchange of information.

EDF Energy continues to work closely with the UK Government and trade associations to monitor and adapt to the evolving EU-UK trade relationship.

1.4.5.2 Italy

1.4.5.2.1 EDF group market and footprint in Italy

Italy is one of the EDF group’s four key markets in Europe alongside France, the United Kingdom and Belgium. The Group is mainly present in Italy through its 97.172% shareholding in Edison ⁽¹⁾, which is a major player in the Italian electricity, gas and energy and environmental services markets and a well-known Italian brand.

1.4.5.2.2 Edison’s strategy

Like the majority of European energy systems, the Italian market is currently facing a certain number of challenges due, in particular, to the energy transition and the choice of a long-term energy mix. Thanks to its positioning and integrated presence in the gas and electric power value chain, Edison is well placed to seize opportunities created by changes in this market. At the same time, it aims to achieve efficiency and profitability, in line with Italian and international energy policies.

Throughout 2022, Edison continued to pursue its transformation strategy. In particular, it confirmed its position as a responsible actor in the context of the energy transition. This has resulted in particular in the streamlining and increase in renewable generation, the construction of two latest generation gas-fired power plants with low CO₂ emissions, the development of energy services, increasing its portfolio of end customers and the development of “green” gas. In keeping with this approach, Edison is implementing its decarbonisation action plan, in line with the Italian PNIEC ⁽²⁾, the European Green Deal and the United Nations Sustainable Development Goals (SDGs).

Therefore, Edison has adopted a sustainability policy based on the SDGs to work for the preservation of the environment and the improvement of the quality of life.

For example, due to the low rainfall in 2022, Edison took several actions to help protect the regions where it operates and the needs of local communities, such as increasing water discharges downstream of the Valtellina dams in Lombardy. Despite the difficulties facing the hydroelectric sector because power generation was 35.3% lower relative to historical averages, Edison chose to temporarily adjust the electricity generation schedule, thereby confirming its commitment as a responsible operator.

Similarly, in a context of high price volatility and uncertainty about the security of gas supplies, Edison was able to maximise the flexibility of its gas import portfolio for the benefit of its customers and the Italian market in general. The company also contributes to achieving security of supply with Edison Stoccaggio, which by October 2022 had already reached 100% of its storage capacity.

Going forward, the main avenues of development are as follows:

• Renewable energy and flexibility: Edison aims to increase its renewable energy generation by promoting specific capital investments in hydro power, wind power and solar power projects to optimise its electricity generation portfolio in Italy and to reduce its carbon emissions to reach 5GW capacity by 2030. Simultaneously, Edison aims to develop tools for managing flexibility such as additional storage and pumped storage hydropower capacity for intermittent unscheduled renewable energies.
• Customers and services: Edison’s goal is to strengthen its position on the Italian market by increasing its portfolio of customers and proposing an innovative offering, through the development of energy services designed for end customers, and for residential consumers and industrial, services, and public administration customers in particular. Edison aims to increase its market share by helping customers and territories increase their competitiveness, efficiency, environmental sustainability and individual well- being. Edison promotes sustainable mobility, both with electric mobility solutions and by encouraging the development of facilities for the sale of LNG for heavy-duty land and sea transport.
• Gas/green gas: Edison is participating in the development of two high- efficiency CCGT power plants, which are expected to be commissioned in 2023. The aim is to compensate for the intermittency of non-programmable renewable sources and reduce emissions. Edison also intends to play a key role in the development of green gases (hydrogen and biomethane). Moreover, Edison’s role is crucial in ensuring security of supply for Italy, through a diversified gas portfolio that is not dependent on Russian gas and through its gas storage facilities.

Edison is also the EDF group’s gas platform. Since 2017 the company has had a service agreement with EDF enabling it to provide integrated management of all assets and develop EDF’s upstream gas business (in particular the supply of gas and LNG, contract management, medium to long-term optimisation, transport, and storage). The Group also benefits from EDF Trading, responsible for the promotion of existing assets, as well as from short-term operations on wholesale markets on the continent and in the United Kingdom.

In February 2022, Moody’s reviewed its outlook for Edison to “Baa3 with negative outlook”, following the downgrade of EDF by one notch to “Baa1 with negative outlook”. In December 2022, S&P confirmed its “BBB with stable outlook” rating and removed the negative outlook following similar action on EDF’s rating. Standard & Poor’s and Moody’s both noted Edison’s strong underlying operating performance, its solid credit metrics, its improved business risk profile and the progresses made in Edison’s strategic repositioning.