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

Risk Factors
markets that are still under development. Therefore, a lack of liquidity may limit the EDF
Group’s ability to hedge its exposure to risks in the energy market. Moreover, certain of
these markets continue to be partially partitioned by country due to, in particular, the lack of
interconnections. Furthermore, these markets may experience significant price increases or
decreases that are difficult to foresee, as well as liquidity crises.
Energy market risks are managed in accordance with the “Energy market risks” policy
adopted by the EDF Group. The EDF Group hedges its positions on these markets through
derivatives, such as futures, forwards, swaps and options traded on organised markets or
over the counter. However, the EDF Group cannot guarantee that it is totally protected, in
particular against liquidity risks and significant price fluctuations, which could have a negative
impact on its financial results.
The EDF Group is exposed to variations in the price and availability of materials and
services (other than fuels) that it purchases in connection with its business
operations
In the event of significant and sustained increases in the prices of raw materials, the EDF
Group may experience higher procurement costs for certain critical products or services.
Such increases may also lead certain suppliers to reduce supply due to reduced profit
margins. In addition, there is increased demand for certain materials or services, which may
have an impact on their availability, in particular materials used for gas-fired combined cycle
power stations, wind turbines and services and materials in the nuclear sector.
The EDF Group is exposed to risks in the financial markets
As a result of its activities, the EDF Group is exposed to risks associated with the financial
markets:
(a)
(b)
(c)
Liquidity risk: the EDF Group must at all times have sufficient financial
resources to finance its day-to-day business activities, the investments
necessary for its expansion and the annual appropriations to the dedicated
portfolio of assets covering long-term nuclear commitments, as well as to
deal with any exceptional events that may arise. Furthermore, in accordance
with the practice in the organised energy and financial markets, some EDF
Group entities have set up a margin call system for certain over-the-counter
transactions in order to limit counterparty risk. This system may require the
EDF Group to mobilise cash in case of the high current volatility on financial
and energy markets.
Currency risk: due to the diversity of its activities and the geographical
distribution thereof, the EDF Group is exposed to the risks of fluctuations in
foreign exchange rates, which may impact currency translation adjustments,
balance sheet items and the EDF Group’s financial expenses, equity and
financial results.
Equity risk: the EDF Group is exposed to equity risk on securities held
primarily as dedicated assets constituted to cover the cost of long-term
commitments in relation with the nuclear business or as part of externally
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