Under the Euro Medium Term Note Programme ... - Finance - EDF

Risk Factors
Hydropower generation facilities of 4.5 MW or more are also operated under concessions
awarded by the French government. When they expire, these concessions are now renewed
by a competitive tender procedure. In addition, the Water law adopted on 30 December 2006
eliminated the preferential right of the incumbent concession holder at the time of renewal,
and Decree no. 2008-1009 of 26 September 2008, provides the conditions under which
concessions may be renewed. If an expired concession is not renewed, under current laws,
the incumbent concession holder will not receive any compensation. However, the 2006
Supplementary Finance law provides for either reimbursement of non-amortised
expenditures incurred for modernisation works or works for increasing generation capacity if
such works are performed during the second half of the concession’s term.
In addition, in April 2010, the French government announced the scope of the hydropower
concessions that will be renewed by 2015, thus confirming the decision to advance the
expiry of certain concessions in order to group them by valley. Because some of these
renewal deadlines have already been exceeded, in 2011, the Rhônes Alpes Environmental,
Land Planning and Housing Department (DREAL) updated the anticipated schedule for the
first two concessions (Lac Mort and Drac). A complete update by the General Energy and
Climate Department (DGEC) of the schedule for invitations to tender concerning hydropower
concessions is expected in 2012. If the French government shortens the term of a
concession, it may compensate the incumbent concession holder the shortfall due to the
early termination of the concession, in accordance with the concession’s terms of reference.
When renewed, hydropower concessions are subject to an annual fee indexed to the
revenue from sales of electricity produced by the concession hydropower facilities, which is
paid to the French government and allocated in part to the departments through which the
watercourses used flow. The Grenelle 2 law of 12 July 2010 provides that the fee shall not
exceed a limit set on a case-by-case basis by the concession grantor as part of each
competitive tender.
The EDF Group cannot guarantee that each of the concessions that it currently operates will
be renewed, or that any concession will be renewed under the same financial terms as the
initial concession.
Furthermore, the EDF Group cannot guarantee that the compensation paid by the
government in the event of early termination of a concession’s operations will fully
compensate the EDF Group’s consequent loss of revenue, or that future regulations
regarding the limitation of fees will not change in a way that could negatively affect the EDF
Group. These factors could have a negative impact on its activities and financial results.
Outside France, the EDF Group also operates under electricity distribution or generation
concessions in other countries where it does business, particularly in Italy. Depending on the
conditions in each country, the transmission, distribution or generation concessions may not
be continued or may be renewed in its favour with changes to the financial conditions of the
concession terms of reference, which would have a negative impact on the EDF Group’s
activities and financial results.
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