EDF : Quarterly Financial Information

Quarterly Financial Information

• First quarter 2016 sales of €21.4bn, down 6.0% in organic terms^[1], in an unfavourable environment in Europe
  • Increasingly competitive environment
  • Wholesale power prices at historically low levels, in particular in France
  • Sales negatively affected by mild winter weather
• Nuclear output down slightly in France due to weather conditions
  • 116.1TWh, down 1.8% vs. the first quarter 2015
  • 2016 target adjusted to 408 - 412TWh, to take into account the extended duration of the outage of Paluel 2
• Continuation of the Group's strategic developments
  • Developments in renewable energy in the United States:
    • Signing of the agreement for the acquisition of Global Resource Options, Inc. (groSolar) on 25 April 2016
    • Power purchase agreement with Southern California Edison Company for a 111MW solar project signed on 7 April 2016
  • Ramp up in development of low-carbon energy in India and in Egypt
  • Announcement on 20 April 2016 of the signing of the project to acquire Studsvik's decommissioning and radioactive waste management activities in Sweden and in the UK
  • Opening of the Group's research and development centre at Saclay
  • Signing of a strategic partnership with Enbridge for the first three offshore wind farms projects off the French coast
• Financial outlook
  • 2016 targets confirmed
  • Ambition of a positive cash flow after dividends^[2] in 2018 maintained
• Action plan presented on 22 April 2016 to support the Group's development under the CAP 2030 strategy
  • Net investments (excluding Linky and excluding new developments) optimised by close to €2bn in 2018 compared to 2015. Net investments should reach €10.5bn in 2018
  • A reduction in operational expenditures of at least €1bn in 2019 compared to 2015
  • An asset disposal plan of approx. €10bn by 2020
  • A project to increase equity capital

Change in EDF Group sales

* €135m of UK net power sales on the wholesale electricity markets (excluding trading activities) relating to Q1 2015 have been reclassified from energy purchases to sales

The Group's first quarter 2016 sales were €21.4bn, down 6.7% compared to the first quarter 2015. This figure includes a negative foreign exchange effect of €159m, due mainly to the appreciation of the euro against the pound sterling. At constant scope and exchange rates, sales were down 6.0%, across all segments.

In France, sales were down 4.8% in organic terms due to the impacts of increased competition in a historically low price environment and mild weather. In the United Kingdom, there was an organic decrease in sales of 9.8%, due to the impact of the lower number of residential customer accounts on power and gas sales. In Italy, sales on an organic basis were down 4.3%, mainly due to an unfavourable price environment. Sales in the Other International segment were down 7.2% in organic terms, due to negative price and weather effects in Belgium and the end of a concession agreement in Asia. The change in sales in the Other activities segment, down 9.4% in organic terms, was also due to a difficult market environment, in particular for EDF Trading's activities.

2016 targets and 2018 roadmap

The EDF Group confirms its financial targets for 2016:

• EBITDA: 16.3 - 16.8 billion euros
• Net financial debt/EBITDA: 2x - 2.5x
• Payout ratio of Net income excluding non-recurring items^[3]: 55% to 65%

The ambition of a positive cash flow after dividends^[4] in 2018 is maintained.

Board of Directors' meeting held on 22 April 2016

During its meeting held on 22 April 2016, EDF's Board of Directors reviewed the Group's long-term financial trajectory under the new adverse market price conditions.

The ambitions of EDF Group, as a responsible and efficient electricity producer that champions low carbon growth, are consistent with its CAP 2030 strategy priorities:

• Proximity to customers and local communities;
• Low carbon generation, with a balanced mix of nuclear and renewable energy;
• International expansion.

An action plan was presented to the Board of Directors which includes:

• Net investments (excluding Linky and excluding new developments) optimised by close to €2 billion in 2018 compared to 2015. Net investments should reach €10.5 billion in 2018;
• A reduction in operational expenditures of at least €1 billion in 2019 compared to 2015;
• An asset disposal plan of approx. €10 billion by 2020.

These measures will be included in the Group's Medium Term Plan to be presented to the Board of Directors in December as every year.

The Board of Directors examined the need to increase the company's equity capital:

• EDF shared its intention to propose an option to pay the dividend related to fiscal years 2016 and 2017 in shares and to submit to the Board of Directors, by the closure date of the 2016 accounts and subject to market conditions, a capital increase project via rights issue of approximately €4 billion.
• The French State informed the Board of its position on the matter: it was disclosed separately^[5].

Change in Group sales by segment

France: lower sales due to market conditions
and mild temperatures

In France, first quarter 2016 sales were €12.1 billion euros, down 4.8% in organic terms from the first quarter 2015.

The change is due to a weather effect, accounting for -€320 million euros. Temperatures during the period were above normal and 0.8°C higher than in the first quarter 2015, which led to a 3.8TWh decrease in the volume of electricity sold to end customers. Sales benefited from the regulated tariff increase in France on 1 August 2015 (+€140 million). They suffered, however, from poor market conditions for -€442 million, with in particular a negative price effect for -€278 million, due mainly to the end of the Yellow and Green tariffs. Sales were also penalised by the lack of volumes sold under ARENH and by the drop in sales to end customers due to increased competition; on the whole, the corresponding volumes were sold on the wholesale market at prices below those of 2015.

Nuclear generation amounted to 116.1TWh, down 2.1TWh (-1.8%), due to lower demand on the fleet stemming from milder temperatures compared to 2015. The Group adjusted its nuclear output target for 2016 to between 408 and 412TWh, to take into account the consequences on the duration of the outage of the handling accident that occurred on a steam generator at Paluel's reactor 2.

Hydropower generation was relatively stable (-0.1TWh) at 12.3TWh^[6], the improvement in hydro conditions compared to first quarter 2015 compensated for water stocks at a lower level at the beginning of 2016 compared to 2015.

Output by thermal power plants was down 0.8TWh compared to the first quarter 2015, to 2.6TWh.

Thus, total output in continental France amounted to 130.9TWh in the first quarter 2016, down 2% compared with the same period last year.

United Kingdom: sales down due to a drop in the
average number of residential customers

* €135m of UK net power sales on the wholesale electricity markets (excluding trading activities) relating to Q1 2015 have
been reclassified from energy purchases to sales

In the United Kingdom, sales of €2.9 billion were down 9.8% in organic terms compared to the first quarter 2015. The appreciation of the euro against the pound sterling in the first quarter 2016 had a negative impact of €115 million.

Nuclear output amounted to 15.7TWh, stable compared to first quarter 2015 (-0.1TWh), confirming the good operational performance of the nuclear fleet.

Sales were negatively affected by the decrease in the average number of residential customers to 5.2 million, down 4% compared to the first quarter 2015, due to still highly competitive conditions and to the mild weather.

Italy: drop in sales due to a downward trend
in Electricity activities

In Italy, sales amounted to €3.1 billion, down 4.3% in organic terms compared to the first quarter 2015.

Sales were down in Electricity activities, mainly due to the drop in wholesale prices. Hydropower output was down 0.3TWh, due to weather conditions.

Despite the drop in Brent prices, Hydrocarbon activities were up thanks to an increase in sales volumes to industrial customers and to strong activity on the wholesale markets.

Other International: higher sales in Poland and in Brazil,
challenging market conditions for gas activities in Belgium

Sales in the Other International segment amounted to €1.5 billion, down 7.2% in organic terms compared to the first quarter 2015.

In Belgium, sales were down 9.6% in organic terms. Gas sales suffered from the drop in prices. The increase in power sales volumes is partially offset by lower prices.

In Poland, sales were up 6.0% in organic terms, benefiting from the increase in volumes sold and higher heat prices. Power output was also up, thanks to the improvement of the availability of generation units, in particular CHP units, following increased maintenance work in 2015.

In Brazil, sales reflected the positive effect of the tariff indexing under Norte Fluminense's PPA and higher output due to increased dispatching by the network's operator.

In Asia, sales were down following the end of the Figlec concession in China.

Other activities: unfavourable weather and price environment

Sales in the Other activities segment amounted to €1.8 billion, down 9.4% in organic terms.

Dalkia sales were down 7.7% in organic terms due to the combined effect of mild weather and lower heat prices.

Sales by EDF Énergies Nouvelles were up slightly (+0.5% in organic terms), thanks in particular to good wind conditions.

EDF Trading's activity was down 35.5% in organic terms in the first quarter 2016, due to the negative change in prices and the drop in volumes sold in a context of mild weather and low volatility.

In the other activities of the segment, power and gas sales by ES (Électricité de Strasbourg) were negatively affected by mild weather.

Main highlights
since the 16 February 2016 press release

EDF Group signs a strategic partnership with Enbridge for the first three offshore wind farms projects off the French coast

On 10 May 2016, EDF Energies Nouvelles, EDF Group subsidiary dedicated to renewable energy announced a new partnership agreement with Enbridge Inc., a leader in the North American energy sector, including renewable energy. The agreement covers the development, construction and operation of three French offshore wind farms, totaling 1,400 MW of installed capacity.
Through this agreement, Enbridge acquires a 50% stake in Eolien Maritime France (EMF), the company controlling the three future offshore wind farms. EDF Energies Nouvelles and Enbridge will be co-owners (50/50) of EMF. DONG Energy will no longer be a shareholder of EMF.
Enbridge Inc., a North American leader in energy transportation, distribution and generation, has a strong ambition in renewable energy with 2,000 MW of net capacity projects already in operation or construction. Since 2012, EDF Energies Nouvelles and Enbridge have been engaged in a successful partnership in Canada, where they operate jointly four wind farms, totalling 830 MW of installed capacity. With this further partnership, Enbridge is growing its presence in offshore wind power in the European market.
Pursuant to the first call for tenders organised by French authorities, EDF Energies Nouvelles' subsidiary, EMF, was awarded 3 offshore wind projects in 2012:
-       Eoliennes Offshore des Hautes Falaises, with an expected capacity of 498 MW off the coast of Fécamp (English Channel) ;
-       Parc du Banc de Guérande, with an expected capacity of 480 MW off the coast of Saint-Nazaire (Atlantic coast) ;
-       Eoliennes Offshore du Calvados, with an expected capacity of 450 MW off the coast of Courseulles-sur-Mer (English Channel).
Following an extensive local consultation and broad engineering and environmental studies performed since 2011, these three projects are progressing as planned. Construction is expected to start gradually from 2017.

EDF signs an agreement for the acquisition of Global Resource Options, Inc. (groSolar) pursuing its expansion in renewables in the United States

On 25 April 2016, EDF Renewable Energy (EDF RE), the EDF Group subsidiary responsible for renewable activities in the United States, signed an agreement for the acquisition of Global Resource Options, Inc. (doing business as "groSolar"), a player specialised in the development, sale and installation of solar photovoltaic plants for utilities, corporations, and industrial operators.
Established 18 years ago in Vermont, groSolar is comprised of approximately 50 employees and ranks among the leading operators in the U.S. in this specific segment of solar project development with an average installation capacity of 5 MWp. Recognised for its expertise and know-how, groSolar originates, develops, constructs, and offers end-to-end solutions for its customers.
Throughout its history, groSolar has developed more than 2,000 installations - or the equivalent of 150 MWp - across the United States, including Massachusetts, New Jersey, Pennsylvania, North Carolina, Connecticut, Indiana and California.

Continued development of EDF Energies Nouvelles: commissioning of fleets and signing of power purchase agreements

EDF Energies Nouvelles has announced several commissioning projects since 16 February 2016:

• On 26 April 2016, the commissioning of extensions to the Ventominho (additional 23 MW) and Arga (additional 4.7 MW) wind farms, two of its assets in Portugal. The additional 27.7 MW in capacity will raise the company's total gross installed capacity in the country to 535 MW.
• On 6 April 2016, the commissioning of the Joncels wind farm with 11.9 MW in installed capacity. The Group now operates 444.2 MW in wind energy capacity in the Languedoc-Roussillon-Midi-Pyrénées region, or close to 45% of local installations of wind resources.
• On 29 February 2016, the commissioning of Park Spring (8.5 MW), Burnhead Moss (26 MW) and Rhodders (12.3 MW) by its local subsidiary EDF Energy Renewables, a joint venture with EDF Energy.
• On 24 February 2016, the commissioning in the United States by EDF Renewable Energy, its North American subsidiary, of an innovative storage system combining battery energy storage and computerized control system. The McHenry plant is able to supply almost 20 MW in nameplate capacity (40 MW of flexible capacity) and to manage an energy reserve to stabilise the local power grid frequency.

Additionally, EDF Energies Nouvelles announced that it has signed several renewable Power Purchase Agreements during the period:

• On 18 April 2016, the signing of three long-term Power Purchase Agreements with Canada, covering 82 MW in combined capacity. Power will be generated by two solar projects and a wind project located in the province of Ontario, Canada. These agreements cover the purchase of electricity by the IESO, Ontario's Independent Electricity System Operator.
• On 7 April 2016, the signing of a long-term Power Purchase Agreement (PPA) in the United States between EDF Renewable Energy and Southern California Edison (SCE), a local investor-owned utility. This agreement covers the electricity to be generated by the future 111.2 MW Valentine solar plant, to be built in California.

EDF and Studsvik sign an agreement in decommissioning and radioactive waste management activities

On 20 April 2016, EDF and Studsvik announced the signing of an agreement regarding decommissioning and radioactive waste management activities. EDF thus rounds out its low-level radioactive waste treatment activities by reinforcing the existing capacity of its French subsidiary Socodei.
According to this agreement, EDF Développement Environnement SA, a 100% subsidiary of EDF SA, will acquire Studsvik's waste treatment business and facilities in Sweden and the UK. The scope of the transaction includes Studsvik's waste treatment assets and facilities for metal recycling, incineration and pyrolysis situated at the Studsvik site, near Nykoping in Sweden, as well as the Metal Recycling Facility (MRF) near Workington in the UK.
As part of the transaction, EDF and Studsvik have also signed a cooperation agreement in the areas of nuclear decommissioning and waste management. This agreement will enable both companies to pool their expertise and to grow their activity in order to become benchmark operators in the sector.
The acquisition of Studvisk's waste treatment activity will significantly increase EDF's industrial capacity and represents a major milestone for EDF's development in waste management and decommissioning activities.
EDF expects to complete this acquisition after obtaining all necessary authorisations and permits from the relevant authorities for the waste treatment activities in question. The transaction should be concluded in third quarter 2016.

EDF signs 5 memoranda of understanding and gets set for the development of renewable energies in Egypt

On 19 April 2016, on the occasion of the State visit by the President of the French Republic, François Hollande, EDF signed five memoranda of understanding, thereby confirming its strategy for the development of low carbon energy in Egypt.
Three of these agreements concern the future development of EDF Energies Nouvelles projects in wind power and solar energy in partnership with the Egyptian El Sewedy Electric Group as well as the future funding of solar projects. EDF EN, the NREA and Proparco (a subsidiary of the French Development Agency) also signed a joint statement in favour of the development of renewable energies.
Another agreement concerns technical cooperation for projects of new power generation plants taking full advantage of EDF's know how in thermal engineering. The purpose of this agreement is also to initiate discussions with the local authorities in the field of smart grids. Finally, Edison International, a subsidiary of EDF, has signed an agreement on the implementation of a projected gas-fired power plant and on the plant's supply from a future gas production facility operated by Edison.

EDF, the CEA and AREVA establish the French Nuclear Platform ("Plateforme France Nucléaire")

In order to develop aligned positions to meet the major challenges facing the French nuclear sector and to prepare the appropriate decisions, EDF, the CEA and AREVA announced on 31 March 2016 their decision to found the French Nuclear Platform ("Plateforme France Nucléaire" - PFN), a tripartite body to discuss the major transversal topics for the nuclear sector in France and abroad.
This body will gather, on a quarterly basis, six key managers from the three entities, including the Chairmen of the CEA, EDF and AREVA. Its chairmanship will be decided on a rotating basis, with the Chairman's mandate lasting one year. The first mandate will be entrusted to the Chairman of AREVA.
The purpose of the PFN is to improve the joint effectiveness of the three entities, in particular to devise a shared vision of the medium- and long-term goals for the sector, which will contribute to the preparation and implementation of decisions taken by the Nuclear Policy Council (Conseil de Politique Nucléaire), gathered around the French President.

Handling accident at Paluel power plant

Thursday 31 March 2016, a handling accident occurred in the reactor building of Unit 2, shut down since May 2015, with its tank completely defueled.
During a handling operation on a used steam generator, carried out as part of its replacement, it has switched to its height to be grounded.
The first elements of controls, carried out by a technical team of EDF, establish that the steam generator is partly positioned on the concrete of the reactor building, and partly on the protection plates of the pool of the reactor building, some of which have been damaged.
The event had no impact on the health of participants, nor on plant safety or the environment.
The ASN was informed of the event and visited the site. The expertise needed to understand the causes of the event are ongoing and an inspection program was engaged to assess the work to lead and define the terms of resumption of handling operations on the steam generator.
The reactor should remain stopped several months. At this stage, restart is not expected before March 2017.

Flamanville EPR: 1^st milestone achieved with finalisation of the primary circuit mechanical erection and advancement of reactor vessel testing

On 24 March 2016, EDF announced that the mechanical erection of the Flamanville EPR's main primary circuit has been completed, as the large components have been installed and assembled (four steam generators, reactor vessel, pressuriser and reactor coolant pumps). This stage marks the achievement of the first key milestone set by the EDF Group for the first quarter of 2016, in compliance with the schedule updated over the summer of 2015.
Quality inspections performed demonstrated that all assembly operations fulfil the expected requirements. Only one weld out of the 32 performed on the primary circuit has to be reworked to ensure compliance.

In addition, on 13 April 2016, AREVA, together with EDF, has recommended to the French Nuclear Safety Authority (ASN) to adapt the testing programme of the Flamanville 3 EPR reactor vessel head and bottom as decided at the end of 2015.
Initial analyses conducted on two parts similar to those at Flamanville 3 have shown that the carbon segregation phenomena extend beyond mid-thickness on one of them.
As specified in the initial strategy approved by the ASN, the material sampling and related tests will be extended to three-fourths of the thickness of the part concerned.
The purpose of these initial analyses is also to better specify the variability of the main manufacturing parameters of the different parts. AREVA and EDF have therefore proposed extending the testing programme to include a third part to strengthen the robustness of the demonstration.
These adaptations to the testing programme will double the number of samples analysed. A total of 1,200 material samples will be taken to consolidate the representative nature of the three forged parts tested, both for carbon content and required mechanical properties.
The ASN has approved this addition to the testing programme, which will continue through the end of 2016, when the final report will be submitted.
EDF and AREVA have reaffirmed their confidence in their ability to demonstrate the quality and safety of the reactor vessel for the start-up of the Flamanville 3 reactor planned for the last quarter of 2018. The assembly and testing activities are continuing at the construction site in line with the announced schedule.

Payment modalities of the balance of the 2015 dividend

EDF's Board of Directors, at its meeting held on 8 March 2016, decided to convene the Shareholders' Combined Meeting on 12 May 2016 and set the payment modalities of the balance of the fiscal year 2015 dividend that shareholders will be called to vote on:

• 6 June 2016: ex-date for the ordinary and the loyalty dividends;
• from 6 to 20 June 2016 inclusive: period for exercising the option to receive the payment in new shares;
• 30 June 2016: payment of the balance of the 2015 dividend and settlement & delivery of the new shares.

The balance of the dividend to be paid for fiscal year 2015 amounts to €0.53 per share and €0.64 per share receiving the loyalty dividend, after an interim dividend of €0.57 per share for fiscal year 2015 was paid out in December 2015.

EDF is strengthening its commitment to startups and innovative SMEs by joining the Alliance pour l'innovation ouverte (Alliance for Open Innovation)

On 1 March 2016, EDF announced that it was joining the Alliance pour l'innovation ouverte (Alliance for Open Innovation), a new community created by the French Ministry of the Economy, Industry and the Digital Sector, which aims to promote innovation by defining a framework of good practices between large companies and startups or SMEs.
Innovation is at the heart of EDF's strategic project and plays a vital role in the company's transformation projects and businesses.
This commitment has led to the creation of several cooperative ventures with scientific and technology institutions, industrial groups and start-ups, and to the company's participation in investment funds such as funds Electranova Capital, created in 2012.
The organisation of the Forum PME & Innovation in collaboration with the Comité Richelieu, as well as the EDF Pulse Awards, are other examples of this.

EDF is changing the organisation of working hours for its managers in France

On 22 February 2016, the French trade unions CFDT and CFE CGC signed an agreement on the organisation of the working hours of EDF SA managers ("cadres"). These two unions represent nearly 70% of managers, who account for almost one in two employees today.
This new agreement is a major step in EDF's transformation. The company must respond to major industrial and commercial challenges in an energy sector that is undergoing profound change. Personal initiative, simplification and accountability for every employee are key factors to improving team performance.
The agreement aims to develop new forms of organisation, thanks in particular to digital technologies. It provides executives, who will choose the new system of fixed number of working days, with more autonomy in the management of the time spent fulfilling their missions. The standard 209 annual working days is consistent with the practices of other major French companies. Managers who opt for this system will work an extra 7 to 16 days, with additional pay corresponding to the productivity and flexibility effort required.

EDF ramps up development in low-carbon energy in India

On 26 January 2016, EDF announced that it had made important steps in its strategy to develop low-carbon energy in India. Three areas are particularly addressed: nuclear energy, renewable energy and sustainable cities.
In the nuclear energy sector, EDF has initialed a Memorandum of Understanding with the Indian national electricity generator Nuclear Power Corp of India Ltd (NPCIL), for the projected construction of 6 EPR units at Jaitapur in the west of India. In the renewable energy sector, EDF has been active in the solar photovoltaic sector in India and is consolidating its position in the country by signing an agreement for onshore wind power with the SITAC Group. The agreement provides for EDF EN to acquire a 50% share in SITAC Wind Management and Development Private Limited. The goal of this joint venture will be to build four wind farms by the end of 2016 with a total capacity of 142MW in the state of Gujarat, one of the windiest parts of India. Finally, in the smart cities sector, EDF has signed a collaboration agreement with the public sector company Engineering Projects India (EPI), the goal of which is to support the development of Indian cities participating in India's national programme "100 Smart Cities in India".

Disclaimer

This press release does not constitute an offer to sell securities in the United States or any other jurisdiction. No reliance should be placed on the accuracy, completeness or correctness of the information or opinions contained in this press release, and none of the EDF representatives shall bear any liability for any loss arising from any use of this press release or its contents. The present document may contain forward-looking statements and targets concerning the Group's strategy, financial position or results. EDF considers that these forward-looking statements and targets are based on reasonable assumptions, which can however be inaccurate and are subject to numerous risks and uncertainties. There is no certainty that the forecast events will take place or that the expected results will actually be achieved. Important factors that could cause actual results, performance or achievements of the Group to differ materially from those contemplated in this document include in particular the successful implementation of EDF strategic, financial and operational initiatives based on its current business model as an integrated operator, changes in the competitive and regulatory framework of the energy markets, as well as risk and uncertainties relating to the Group's activities, its international scope, the climatic environment, the volatility of raw materials prices and currency exchange rates, technological changes, changes in the general economic situation. Detailed information regarding these uncertainties and potential risks are available in the reference document (Document de référence) of EDF filed with the Autorité des marchés financiers on 29 April 2016, which is available on the AMF's website at www.amf-france.org and on EDF's website at www.edf.com. EDF does not undertake nor does it have any obligation to update forward-looking information contained in this press release to reflect any unexpected events or circumstances arising after the date of this press release.