edf Financial Statements Électricité de France at December 31, 2001 43
Financial Statements 43 Balance sheets assets 44 Balance sheets equity and liabilities 45 Income statements - Expenses 46 Income statements - Revenues 47 Income statements sub-total 48 Cash flows Statements 49 Accounting policies 50 I - Annual 50 II - Unbundled 54 Notes to the 58. Note 1 Intangible and tangible fixed assets 58. Note 2 Depreciation, amortization and provisions on intangible and tangible fixed assets 58. Note 3 Financial fixed assets 59. Note 4 Subsidiaries and investments greater than or equal to 50% of capital 60. Note 4 Subsidiaries and investments less than 50% of capital 61. Note 5 Balances at December 31, 2001 with related companies 62. Note 6 Inventories 62. Note 7 Receivables 63. Note 8 Deferred expenses 64. Note 9 Unrealized foreign exchange gains and losses 64. Note 10 Capital Capital contributions 64. Note 11 Revaluation of fixed assets 65. Note 12 Interest in concessionary plant facilities 65. Note 13 Provisions for risks and expenses 66. Note 14 Financial and operating liabilities 68. Note 15 Financial liabilities before swaps 69. Note 16 Breakdown of loans by currency at December 31, 2001 69. Note 17 Structure of indebtedness at fixed and variable rates 70. Note 18 Securitization 70. Note 19 Financial operations - Table of off-balance sheets commitments 71. Note 19 Financial operations - Commentary 72. Note 20 Other off-balance sheets commitments 73. Note 21 Workforce 73. Note 22 Extraordinary revenues and expenses 74. Note 23 Changes affecting the comparability of the 74. Note 24 Tax position 74. Note 25 Pensions 75. Note 26 Unbundled balance sheets 76. Note 27 Unbundled income statements 77. Note 28 Generation balance sheets 78. Note 29 Generation income statements 79. Note 30 Transmission balance sheets 80. Note 31 Transmission income statements 81. Note 32 Distribution balance sheets 82. Note 33 Distribution income statements 83. Note 34 Other activities balance sheets 84. Note 35 Other activities income statements 85. Note 36 Relations with EDF Group companies (over M 40) 86 Resolutions of the Board of Directors of March 28, 2002 86 Statutory auditors' report on the annual 87 42 N.B.: The figures included in the spreadsheets are generally expressed in millions of Euros. Consecutive approximations can hence induce a slight adjustment in total amounts or variances.
Balance sheets ASSETS December 31, 2001 December 31, 2000 December 31, 1999 (in millions of Euros) * Gross Depreciation and provisions Net Net Net Intangible assets A1,1,2 370 174 196 164 185 General plant: A2 - Lands 1,2 46852 416 473 502 - Buildings 9,776 4,972 4,804 5,167 5,377 - Technical installations, plant and machinery, equipment and fixtures 69,479 43,063 26,416 27,771 29,399 - Other tangible assets 2,166 1,674 491 533 564 Sub-total 81,888 49,761 32,127 33,943 35,842 FIXED ASSETS Plant operated under concession: A2 - Lands 1,2 49 0 49 49 49 - Buildings 9,0484,830 4,218 4,351 4,473 - Technical installations, plant and machinery, equipment and fixtures 44,339 15,060 29,279 28,211 27,378 - Other tangible assets 3831 8 9 10 Sub-total 53,474 19,920 33,553 32,620 31,910 Tangible assets in progress: A2 - Work in progress 1 2,723 2,723 2,796 2,585 - Advances 17 0 17 21 35 Sub-total 2,740 2,740 2,817 2,620 Intangible assets in progress: A1 - Computer works 1 114 0 114 157 282 Investments A3 - Investments and receivables related to investments 3,4,5,7 16,487 516 15,972 10,306 7,006 - Investment securities 1,522 2 1,520 914 897 - Loans and other financial assets 2,414 74 2,341 1,763 2,131 Sub-total 20,424 592 19,832 12,982 10,034 CURRENT ASSETS TOTAL I 159,010 70,447 88,563 82,682 80,873 Inventories and work-in-process B,6 - Raw materials 6,457 2086,249 6,709 6,443 - Other supplies 1,725 459 1,266 1,262 1,311 - Work-in-process 53 844 48 52 - Inventories of residual products 0 0 0 1 Sub-total 8,235 676 7,559 8,020 7,806 Advances on orders 7 614 0 614 580 357 Accounts receivable C,7 - Trade receivables and related accounts 8,323 186 8,137 7,406 7,620 - Other receivables 2,746 41 2,706 2,417 2,680 Sub-total 11,070 227 10,843 9,823 10,300 Marketable securities 1,495 781,417 3,628 2,903 Cash instruments G,7 0 0 0 21 Cash 130 130 866 187 Sub-total 1,625 78 1,547 4,494 3,111 TOTAL I I 21,544 980 20,563 22,917 21,575 OTHER ASSETS Prepaid expenses (III) 7 375 375 326316 Deferred charges (IV) D,8 6,716 3,345 3,371 3,663 3,995 Bond redemption premiums and costs (V) E 483 384 99 122 159 Unrealized foreign exchange gains (VI) F,9 278 278 200 282 TOTAL GENERAL (I + II + III + IV + V+ VI) 188,40675,157 113,249 109,910 107,200 * The letter corresponds to the related paragraph of accounting policies section and the figure to the additional notes. 44
edf EQUITY AND LIABILITIES (in millions of Euros) * December 31, 2001 December 31, 2000 December 31, 1999 CAPITAL AND RESERVES Capital 10 395 395 395 Capital contribution 10 7,734 7,734 7,734 Merger premium 25 0 0 Revaluation surplus 11 - Special reserves (Law of December 28, 1959) 632 632 632 - Tax-regulated reserves (Law of December 29, 1976) 42 4849 Other reserves 4,641 4,314 3,620 Tax-regulated reserves - Net long term capital gain 30 30 30 Retained earnings 127 0 0 Profit or loss for the financial year 881 327 694 Investments grants 143 94 80 Tax-regulated provisions: - Provisions related to amortized fixed assets (Law of December 30, 1977) 11 194 223 256 - Derogatory amortization 220 263 197 Sub-total 15,065 14,060 13,687 Interest in concessionary plant facilities H,12 16,825 16,324 15,913 Amortization of EDF financing 3,445 3,588 3,814 State and municipal interest in concessionary plant facilities 69 77 64 Sub-total 20,339 19,988 19,792 TOTAL I 35,404 34,048 33,478 PROV. RISKS AND CHARGES DEBTS PAYABLE Provisions for risks I,13 345 314 335 Provisions for charges: I,13 - Renewal for concessionary distribution facilities 11,22810,413 9,530 - End-of-cycle expenses for nuclear fuel 16,851 17,257 17,656 - Other charges 14,961 14,520 13,840 TOTAL II 43,38642,504 41,361 Financial debts payable: 14,15,16,17 - Debenture loans 8,967 10,665 12,366 - Loans and debts payable to credit institutions 604 1,139 840 - Other loans 5,429 3,263 3,467 Sub-total (1) 15,000 15,067 16,673 - Advances received on consumption 132 139 148 - Other debts 1,420 1,542 1,422 Sub-total (2) 16,551 16,748 18,243 Advances received on orders in progress - Sub-total 14 2,620 2,586 2,575 Trade debts, investment debts and other debts : 14 - Trade creditors 3,575 2,874 2,675 - Tax and social security debts payable 3,779 3,343 3,098 - Other debts: Creditor receivables 37 29 37 Other creditor accounts 3,556 3,100 741 Sub-total 10,947 9,347 6,551 Cash instruments G,14 1 0 12 TOTAL III (3) 30,120 28,682 27,381 OTHER LIABILITIES Deferred income (IV) 14 4,331 4,653 4,885 Unrealized foreign exchange losses (V) F,9 9 23 95 TOTAL GENERAL (I + II + III + IV + V) 113,249 109,910 107,200 * The letter corresponds to the related paragraph of accounting policies section and the figure to the additional notes. (1) Including M 10,926 and M 4,073 in foreign currencies. (2) Including creditor bank accounts: M 65. (3) Including debts due over 1 year : M 13,704. 45
Income statements - Expenses 46 December 31, 2001 December 31, 2000 December 31, 1999 (in millions of Euros) Sub-totals Sub-totals Sub-totals 1. Operating expenses Purchases and other expenses 12,732 11,905 11,230 Purchases of supply stored: - Raw materials 1,409 - Other supplies 745 Purchases of services 1,477 Purchases of energy to thirds 2,702 Not stored purchases of materials and supplies 459 Discounts, handing-over, rebates obtained on purchases (1) External services : - External personnel 116 - Rents in leasing 5 - Other 5,820 Taxes other than income taxes 2,460 2,458 2,427 Business tax 1,136 Other 1,324 Personnel expenses (1) 7,162 6,785 6,604 Salaries and wages 4,030 Profit sharing 88 Social charges 3,044 Depreciation and amortization allowance 7,289 9,271 8,098 Amortization: - On assets 3,899 - Deferred charges 367 Sub-total - Amortization 4,266 Depreciation: - On assets 0 - On working capital 177 - For risks and expenses 2,846 Sub-total - Depreciation 3,024 Other expenses 836 993 1,081 TOTAL 1 30,480 31,412 29,441 2. Share in income of joint operations TOTAL 2 21 28 35 3. Financial expenses - Depreciation and amortization allowance 699 - Interests 1,021 - Foreign exchange loss 256 TOTAL 3 1,975 2,211 1,783 4. Extraordinary expenses On operating activity 0 On capital: - Sales of assets 2,111 - Other 5 Depreciation and amortization allowance 0 Other extraordinary items 0 TOTAL 4 2,116 669 2,642 TOTAL EXPENSES BEFORE CONTRIBUTION TO THE STATE (1 TO 4) 34,592 34,320 33,900 5. Net result before income taxes and contribution to the State 1,629 914 1,103 6. Income taxes 748207 (55) 7. Contribution to the State 0 380 464 Net income 881 327 694 TOTAL GENERAL 36,221 35,234 35,003 (1) Including the contribution to the financing of retirees' pensions of the electricity and gas utilities industry. 2,104 1,839 1,737
Income statements - Revenues edf December 31, 2001 December 31, 2000 December 31, 1999 (in millions of Euros) Sub-totals Sub-totals Sub-totals 1. Operating revenues 1.1 Sales (2) 28,732 28,278 28,250 - Energy sales (3) 26,753 - Sales of residual products 9 - Sales of materials, devices and materials 9 - Works 73 - Studies, services and other (4) 1,888 1.2. Change in inventories and work in progress (4) (4) 12 1.3. Capitalized production 995 1,056 1,119 Production (1.1. to 1.3.) 29,722 29,330 29,381 1.4. Grants and subsidies 2 2 2 1.5. Reversal of depreciation 2,294 3,384 2,101 1.6. Transfer of charges 83 65 160 1.7. Other revenues 127 119 79 TOTAL 1 32,230 32,900 31,723 2. Share in income of joint operations TOTAL 2 0 1 0 3. Financial revenues - Income from investments 160 - Income from other securities and sales of assets 123 - Net income on sales of marketable securities 13 - Interests and other revenues 465 - Foreign exchange gain 146 - Reversal of depreciation 263 - Transfer of charges 53 TOTAL 3 1,223 1,581 938 4. Extraordinary Profit On operating activity 0 On financing activity: - Profit on disposal of assets 2,628 - Capital grants transfer to income statement 7 - Other 24 Reversal of depreciation and amortization 109 TOTAL 4 2,768 753 2,342 TOTAL GENERAL 36,221 35,234 35,003 (2) Export's sales 2,409 2,581 2,561 (3) Including transmission and distribution for the customers which have not subscribed a specific contract for the network access. (4) Including transmission and/or distribution revenues for the customers which have subscribed a specific contract for the network access. 47
Income statements sub-total (in millions of Euros) December 31, 2001 December 31, 2000 December 31, 1999 Sales 28,732 28,278 28,250 Change in inventories and work-in-process (4) (4) 12 Capitalized production 995 1,056 1,119 Operating revenues 29,722 29,330 29,381 Purchases of supply stored (3,107) (3,114) (3,022) Non stored purchases (3,684) (2,602) (2,282) External services (5,941) (6,188) (5,926) Purchases and other expenses (12,732) (11,905) (11,230) Gross profit 16,990 17,425 18,151 Taxes other than income taxes (2,460) (2,458) (2,427) Personnel expenses (7,162) (6,785) (6,604) Grants and subsidies 2 2 2 Operating profit before depreciation, amortization and other expenses 7,370 8,184 9,121 Increase in provisions and depreciation (7,289) (9,271) (8,098) Decrease in provisions and depreciation 2,294 3,384 2,101 Charges transferred 83 65 160 Other operating expenses (836) (993) (1,081) Other operating incomes 127 119 79 Operating profit / (loss) 1,749 1,488 2,282 Financial expenses (1,975) (2,211) (1,783) Financial incomes (other than charges transferred) 1,169 1,550 813 Charges transferred 53 30 125 Share in income of joint operations (21) (27) (34) Financial profit / (loss) (773) (658) (879) Profit / (loss) from recurring operations 977 830 1,403 Extraordinary charges (2,116) (669) (2,642) Extraordinary profits 2,768753 2,342 Extraordinary profit (loss) 652 84 (300) Net income before income taxes and contribution to the State 1,629 914 1,103 Income taxes (748) (207) 55 NET INCOME BEFORE CONTRIBUTION TO THE STATE 881 707 1,158 Contribution to the State 0 (380) (464) NET INCOME 881 327 694 48
edf Cash flows statements (in millions of Euros) December 31, 2001 December 31, 2000 Net income 881 327 Amortization, depreciation and provisions 5,085 5,364 Net gains on disposals of fixed assets (40) (19) Other variations (650) (42) Cash flows from operating activities before change in working capital and dividends received from companies accounted for under the equity method 5,2765,630 Change in working capital 1,924 2,971 Cash flows from operating activities A 7,200 8,601 Purchases of fixed assets (10,989) (6,789) Net disposals of fixed assets 1,249 1,079 Cash flows from investing activities B (9,740) (5,710) Investment grants 41 25 Issuance of borrowings 2,980 636 Repayment of borrowings (3,477) (2,331) Cash flows from financing activities C (456) (1,671) NET INCREASE / DECREASE IN CASH AND CASH EQUIVALENTS (A + B + C) (2,995) 1,221 Cash and cash equivalents-beginning balance 3,998 2,777 Cash and cash equivalents-ending balance 1,003 3,998 Contributions of third parties are included in cash flows from financing activities. Repayments of borrowings expressed in foreign currencies are included in cash flows statements at their value on the day of repayment. For short term financial instruments and commercial papers, net variances are disclosed either as an increasing or decreasing cash flow as appropriate. 49
Accounting policies I - ANNUAL FINANCIAL STATEMENTS EDF's are prepared in accordance with generally accepted accounting principles for industrial and commercial companies, including certain principles adopted because of specific features of the Company. In addition, in accordance with a decree provided on October 22, 1947, a specific chart of accounts has to be presented for examination to the CNC (French National Accounting Council) and approved by ministerial ordinance. The EDF's chart of accounts received the assenting opinion of the CNC on December 19, 1984 and was approved in 1986 by the regulatory authority (ordinance of French Ministries of Economy and Industry on December 26, 1986). In 1997, certain legislative and additional measures confirmed that all general transmission systems belong to EDF, and stipulated the accounting treatment relating to the concession on medium and low-voltage distribution networks. 1.A. Fixed assets 1.A1. Intangible assets The cost of research and development which corresponds to actual costs incurred in the carrying out of specification studies on the different series of nuclear plants are recorded as assets. They are amortized over 5 years from the date of service of the first plant in the series. 1.A2. Property, plant and equipment Fixed assets are recorded at cost, except for items to which compulsory revaluation has been applied: The cost equals to the acquisition cost or production cost (including external costs as well as costs incurred by EDF). The revaluations were performed in accordance with French legislation (law of December 28, 1959 for fixed assets put into service before January 1, 1960 and specific legislation issued for those put into service before January 1, 1977). For fixed assets hold in title by EDF, depreciation is calculated using either the straight-line or declining balance method, in accordance with principles accepted under French tax legislation. For nuclear power stations, annual depreciation is calculated by the declining balance method, which is considered to provide the best approximation of economically justified depreciation (straight-line depreciation applied to carrying values that have been restated annually using GDP indices). Since 1998, a provision for depreciation of assets is booked relating to certain non-nuclear thermal plants either temporarily or permanently closed down. This provision is justified by the fact that it is unlikely that these plants will ever be brought back into service. Production and distribution facilities operated under concession include: Hydro-electric stations (operated under State concession). French general transmission systems (operated under State concession). Medium and low-voltage distribution networks (operated under local authorities concession). Hydro-electric stations operated under concession are depreciated under the straight-line method and a provision for maintaining hydraulic potential is booked over 30 years, based on the Company s plans for maintenance of hydraulic installation components, defined for each category of assets. For the French general transmission systems operated under concession, EHV lines are depreciated by the straight-line method, while transmission systems, transformers, telecontrol and telecommunications equipment are depreciated by the declining balance method. Medium and low-voltage distribution networks operated under concession are accounted for as follows: - the amortization of the amount financed by EDF, calculated over the term of each concession, is booked in the income statement and in the interest in concessionary plant facilities, - the depreciation of the distribution networks, calculated following the straight-line method over the useful life of the assets, is booked together with corresponding depreciation of the same amount of the interest in concessionary facilities; this has no impact on the income statement, - a provision is booked to cover renewal of the installations: it is equal to the difference between their replacement cost, spread over the useful life of the assets, and the accumulated amortization, which contributes to the financing of the replacement of the assets under concession. This provision is divided into a provision for replacement, for assets arriving at the end of their useful life before the term of the concession (established on 50
edf the life expectancy of assets), and a provision for future renewal charges for other items (established on the duration of the concession), in accordance with contractual obligations. As a result of this treatment of the financing by the State and local authorities and the provision for renewal, the heading "interest in concessionary facilities" gives a permanent reflection of the effective rights of the State and local authorities to the assets. 1.A3. Investments Investments are carried at cost, except for investments acquired before January 1, 1977 which were revalued, replacing the original cost by the fair value at the end of 1976. When the book value of shares is higher than their fair value, as determined by adjusting equity to take into account information known since the last closing or stock exchange rates, a provision is generally established to cover the difference. 1.A4. Investments securities EDF holds an investment portfolio comprising generally equal portions of shares and bonds. This portfolio is intended to be used in financing endof-cycle operations for which provisions have been established in the balance sheet liabilities (see Note 3). 1.B. Inventories 1.B1. Nuclear fuel Nuclear material in whichever form they are during the processing cycle lasting more than one year, and nuclear fuel, whether being used in the reactors or stored, are recorded in inventories. These items are valued using the average weighed cost method, applied to each component (natural uranium, fluoration and other conversion services). EDF does not value the uranium obtained from reprocessed burnt fuel, due to the uncertainty over its future use. Consumption of nuclear fuel is determined for each component, based on forecasts of quantities used per kwh produced; these quantities are valued at average weighed cost at the end of the previous month, including the cost of the most recent supplies. Forecasted burn-up quantities are periodically corrected on the basis of neutronic measurements. 1.B2. Consumable materials and spare parts Inventories are valued at average weighed cost. No provision is established for spare parts stored under a maintenance program, nor for standard parts, as these are held for use during the lifetime of the plant. The useful value of emergency spare parts, which must be held to ensure continuous activity in the event of an incident, but are not to be used as part of ordinary maintenance programs, is proportional to the power production yet to be guaranteed. Depreciation is thus recorded, at an amount proportional to the useful life of the stations. 1.C. Accounts receivable and marketable securities 1.C1. Power already delivered but unbilled The estimate of quantities of power already delivered but unbilled is based on customer consumption data, adjusted of seasonal variances. The amount accounted for is estimated, based on the average selling price per kwh (excluding subscription charges) for the last month of the period. A provision is booked to cover the remaining costs and the potential risk of bad debt. 1.C2. Marketable securities Marketable securities are recorded as assets at acquisition cost. A part of this portfolio is intended to be used in financing end-of-cycle operations for which provisions have been established in the balance sheet liabilities. 1.C3. Provisions For customers delivered with the general tariff, the estimation of the potential risk of bad debt is based on statistical observation of the rates of non recoverable observed during the past 2 years. For doubtful accounts receivable, the risk of bad debt is appreciated individually. The value of listed marketable securities is estimated at their year-end quotation, and a provision is established to cover any unrealized losses, without offsetting them against unrealized gains. 1.D. Pre-operating expenses Pre-operating expenses, included interest expenses, incurred during construction of utility plants are deferred until the start of operations and amortized over 3 years. Interest expenses on the initial nuclear fuel costs (when a reactor is put into service) follow the same principle and are spread over the period during which the fuel is present in the reactor. 1.E. Bond redemption premiums and costs Bond redemption premiums are amortized on a straight-line basis over the duration of the related bond (or each phase of the debenture to maturity in the case of serial debentures). 51
Accounting policies 1.F. Translation of receivables and payables in foreign currencies Foreign currency receivables and payables are translated into euros at the year-end exchange rates. The resulting translation differences are recorded in the balance sheet in other receivables and other liabilities as Unrealized foreign currency translation gains and Unrealized foreign currency translation losses. Unrealized translation losses on bonds are spread over the relevant duration or current portion of the bond concerned. This principle is also applied to net translation gains and losses obtained on early repayment of borrowings when immediately followed by a new issue, unless such operations result in a net loss. 1.G. Financial instruments EDF manages exchange and interest rate risks inherent to the financing of its industrial and commercial activity, and its international development, on a comprehensive basis. This policy, applied within certain limits as fixed by the Board of Directors, aims to reduce the impact of risks on the net income. EDF uses a range of financial instruments to hedge these risks, based on the probable future market trends. Long-term instruments (swaps) not designated as hedges for foreign currency investments are taken into account in computing the overall exchange gain or loss and the interest expense recorded in the income statement. The recognition of unrealized exchange losses follows the same principles as those used for borrowings. Unrealized exchange gains are not taken into account, except for swaps which are specific hedging operations for borrowings, in which case gains are recognized to the extent that they cover losses arising from the borrowings concerned. Payments made and received on financial instruments are spread over the term of the contract. Payments made or received in the event of early termination, which is generally unusual, are immediately included in the income statement. Short-term instruments (short-term swaps, options, etc) are valued as follows: - Margin payments are recognized in the income statement immediately, - Premiums paid or received are recognized at the end of the contract, - Unrealized losses, calculated instrument by instrument, are provided for fully, - Unrealized gains are deferred until realization. Initial deposits are included in investments. All these instruments are included in commitments at their underlying notional principal amount. 1.H. Interest in concessionary plant facilities The portion of assets operated under concession financed by the State and local authorities, the portion financed by third parties on their behalf, the net impact of tax-based revaluations, the amount of provisions for renewal relative to items removed from the assets and replaced, and the amortization recorded by EDF to recover its own financing are all included in the balance sheets liabilities under the heading Interest in concessionary plant facilities. 1.I. Provisions for risks and expenses These provisions mainly cover the following: renewal costs for concessionary distribution facilities, end-of-cycle expenses for nuclear fuel. A provision for the reprocessing of burnt fuel and the disposal and storage of the resulting waste is established for all fuels currently in use (amount burnt up) or already used: - for reprocessing burnt fuel, when there is no new reprocessing services contract or reference market, EDF based its estimate until 1999 on the contract price agreed in 1988 between the reprocessor and a company in the industry segment, revalued according to the contractual indices. This practice was no more appropriate in 2000 due to changes in the business environment, including the preparation of the post-2000 contractual framework. Estimated reprocessing costs had therefore been revised, by revaluing the basic 1988 contract price using the GDP indices (used for nuclear provisions). As at December 31, 2001, the reprocessing costs which include the EDF's share in the decommissioning cost of reprocessing installations, have been based on the August 30, 2001 agreement signed with Cogema for all burnt fuel, including burnt fuel which will be covered by a later contract. - for the conditioning of old waste, the Company has evaluated the cost according to the general terms of the EDF-Cogema agreement signed as of August 30, 2001. This valuation is based on long-term estimations resulting from specific assumptions taken by the Company. - for the disposal and storage of radioactive waste with high radioactivity and a long life, the law of December 30, 1991 introduced a maximum period of 15 years of research into such waste and studies concerning storage options and packaging processes. In particular, this law triggered the creation of laboratories for the study of geological formations in areas where such waste could be stored. The decision to build two laboratories was confirmed by a governmental decision of December 9, 1998. A decree of August 3, 1999 authorized ANDRA to set up and run an underground laboratory on the territory of Bure (Meuse); the second site has not yet been selected. The provision for disposal and storage of waste is based on: - the estimated research costs of the laboratories, and the cost of constructing and running the Bure laboratory as determined on the basis of ANDRA's medium-term plan of September 2000, 52
edf - an estimation of the costs of disposal and final storage based on the quotation provided by ANDRA in 1996, since the outcome of research and studies currently in progress cannot be predicted. The provisions for end-of-cycle expenses for treatment of fuels also comprise a provision for decommissioning the GCR burnt fuel reprocessing plant in Marcoule, determined on the basis of an estimate provided by Cogema in 1994. The future cost of decommissioning nuclear power stations: - for PWR stations (900 MW, 1300MW and N4), this provision has been based on assumptions defined by the PEON commission (15% of nuclear plant construction costs). These assumptions cannot be validated until the actual costs of the first decommissioning are known. The first decommissioning will not begin in the foreseeable future. The provision is revalued annually, by application of the trade GDP index until 1998, and the GDP index since 1999. The costs used as a basis for calculation were adjusted in 1991 by a decision of the French Ministry of Industry and Foreign Trade. - for other nuclear power stations (first-generation stations), the provision was until 1999 established on the same basis as for PWR stations. As of 2000, as a result of experience gained on the first decommissioning operations (on the Brennilis and Chooz A stations), the provision is based on the cost of work already completed and on studies, estimates and a comparison made by the Company. The future cost of decommissioning non-nuclear thermal power stations. This provision is based on estimated future costs, measured using the charges recorded on past transactions together with more recent estimations for plants still in operation. This provision is established over the remaining life of the stations. The estimated cost of certain components of nuclear power stations included in a replacement program. At the year-end, these provisions are revalued based on specific indices published in the industry s official journals, or if no such data is available, on the GDP index. When the provision concerns the costs for renewal of assets under concession and decommissioning expenses for nuclear power stations, the revaluation difference is spread over the residual life of the plants concerned. Provisions for risks and expenses include accrued expenses for end-of-cycle nuclear fuel treatment, and EDF s estimated share in the cost of decommissioning Cogema s installations for reprocessing GCR fuels. 1.J. Retirement benefits EDF s retirement benefit commitments are covered by insurance contracts. They are calculated under the prospective actuarial method on a prorata basis to the entitlements at term. This method, recommended by the "Ordre des Experts-Comptables" (French Chartered Accountants Institute), estimates the value of benefits and evaluates the amount of the commitment for benefits already earned as a prorata of the number of years the employee will have been in the company s service when he or she retires. 1.K. Self insurance Damages caused to its own plants or plants operated under concession are not generally insured. There are some exceptions, principally damages to vehicles, equipment in transit and office buildings. EDF is obliged by law to have insurance against liability for damages caused to third parties as a result of nuclear activities, to a maximum of M 91.45 per claim. The company has set up two-tier cover totaling M 91.45. 1.L. Debt securitization program The future trade receivables transferred as a result of a securitization program to an ad hoc entity are included in other liabilities. 53
Accounting policies II - UNBUNDLED FINANCIAL STATEMENTS In accordance with the French law of February 10, 2000, EDF keeps separate accounts for the activities of generation, transmission, distribution of power, and its other activities, and publishes the corresponding balance sheets and income statements in the notes to the company's. These notes also disclose the scope of each activity, the rules for allocation of assets, liabilities, expenditure and income between the activities, and the principles governing financial relations between them. This is the third year EDF publishes unbundled accounts and the second year these accounts are prepared in accordance with the principles of unbundling decided by the CRE (Electricity Regulatory Board) and provided in its decision of February 15, 2001. In accordance with the French law of February 10, 2000 (article 25), the notes to the include the following: the definition of the scope of each unbundled activity; the principles of unbundling applied and the description of the conventions used; the balance sheets and income statements of each unbundled activity; the relations with EDF Group companies (without further recommendation, only amounts over M 40 are disclosed). For 2001 unbundled accounts, EDF carried out a comparison between the balance sheets and income statements of unbundled activities and those of the. The main variances are explained in the notes to the unbundled accounts. 1. Activities 1.1. Scope of activities Transmission The Transmission activity corresponds to RTE (Réseau de Transport d Electricité), the Power Transmission System Operator set up within EDF. It is managed as an independent entity, this independence being guaranteed by French law. The network operated by RTE comprises all connections to the metropolitan network in mainland France with voltages of 63kV or more, except for distribution concessions to public utilities, in accordance with article 2 of the concession agreement for the general transmission system. The following activities are included in Transmission: research and development work concerning the electricity network; operation of the electric system, involving management of flows of electricity such that supply and demand are balanced at any given time; management of the network infrastructure (operation, construction, dispatching and plant maintenance): - dispatching involves management at national and regional level of the power flows as appropriate depending on supply and demand. RTE acts as a regulator in adjusting power consumption; - plant maintenance involves ongoing maintenance, ranging from monitoring to major repair work, on existing lines to ensure continuous compliance with requirements for electrical line networks; meter reading and any work on meter equipment that is RTE's responsibility; relations with users of the transmission network (in particular management of contractual relations with third parties wishing to access the network) and related services. The Transmission activity also includes the support functions necessary for independent management of RTE. Distribution The Distribution activity concerns the management of the distribution network in mainland France and in non-interconnected zones. For the purposes of the unbundled accounts, Distribution thus comprises all distribution network management entities as defined by law. The following activities are also included: operation of electricity distribution networks, in particular research and development concerning these networks; management of network infrastructures (operation, construction, dispatching and plant maintenance); meter reading and any work on meter equipment; relations with users of the network and related services (access to power, disconnection/reconnection, disconnection of clients' facilities, work on clients' facilities, installation of charge-limiting devices, disconnection with prior notification, invoicing, etc); relations with the concessionary authorities. Generation Generation comprises all activities relating not only to the generation of electric power, but also the supply of that power. In the unbundled accounts, the Generation activity thus includes supply activities. The scope is as follows: electricity generating activities (construction, operation, maintenance, forecasting and planning, dispatching, discontinuation of operations and closure of plants) in mainland France and non-interconnected zones (Corsica and French overseas territories): supply and customer relations (customer services, invoicing, account monitoring, disputes, sales support); purchases of power; exchanges of electricity with other countries. 54
edf Other activities Other activities cover all activities outside the electricity industry. The main examples are: public lighting services; activities relating to hydro-electric generation (river transport, irrigation, etc); work and services for subsidiaries, engineering, consulting and research services and other work and services provided to third parties in sectors other than electricity. 1.2. Further information Support functions Each activity also comprises the support functions dedicated entirely or principally to that activity. The Transmission activity thus includes management functions necessary to guarantee its independence (purchasing, finance, legal services, communications, etc). As a result, the costs of EDF's central functions are only allocated to RTE if a function cannot be carried out directly by RTE due to organizational constraints or for reasons of cost optimization. Investments Investments made prior to December 31, 2000 were attributed to the Generation activity. All new investments were allocated to the activity which financed them. 2. Allocation rules The basic principle for establishment of these balance sheets and income statements was to allocate the various items or flows directly to the relevant activity. When this was not possible, the allocation was made using percentages and conventions. 2.1. Balance sheets Allocation rules applied for 2001 unbundled accounts are the same as those used in 2000. Assets Fixed assets are directly allocated in accordance with the scope of the activity. When a fixed asset is by its nature used by more than one of the defined activities, it is allocated to the activity which is the main user. The same principle applies to current assets. Accounts receivable for each activity thus include accounts receivable overdue at year-end closing on non EDF users, which are accounted directly by each activity, and those resulting of unbundling conventions. When an asset is by its nature used by more than one of the defined activities, and cannot be allocated to any one activity as main user, allocation follows the non-discrimination and anti-cross subsidy principles, while respecting the working capital requirements of the activity concerned. Liabilities The liabilities of the separate activities comprise a portion of each component of the individual accounts of EDF (equity, financial debts, provisions, revaluation differences, operating liabilities, etc.). Each activity is attributed all liabilities necessary for its operations. Wherever possible, items are directly allocated to the appropriate activity: operating liabilities (accounts payable, accrued charges, etc) provisions (provisions for renewal of concessionary distribution facilities are attributed to Distribution, and provisions for end-of-cycle costs to Generation); other directly attributable liabilities (revaluation differences, interest in concessionary plant facilities, investment subsidies granted). However, certain liabilities, namely equity and financial debts, were considered non-specific in view of the integrated nature of the company (before issuance of an agreement regarding the allocation of EDF financial debts and instruments, a convention has defined for 2001 the allocation to RTE of an amount of short and long term debts on January 1, 2001 and on December 31, 2001 and resulting interest expenses). Income taxes Income taxes are allocated between the separate activities on a prorata basis following their contribution (positive or negative) to the taxable income. This has led to negative taxes being recorded for loss-making activities. 2.2. Income statements The main principle was direct allocation of expenses. When expenditure or income related mainly to one activity, direct allocation was applied, and where necessary income was reallocated or expenses reinvoiced to other activities using allocation bases, or percentages when this was not possible. In 2001, the internal transactions between the activities have been recorded for the first time on the basis of signed conventions (see section 3), which define, in particular, the principles of valuation and invoicing of these operations. Sales revenues for the Transmission activity include revenues on eligible customers which have signed an energy delivery contract (MADE contract) 55
Accounting policies and revenues resulting from the application of the related conventions. Sales revenues for the access on the network of the Distribution activity include, as for the Transmission activity, revenues on eligible customers which have signed an energy delivery contract and revenues resulting from the application of the related conventions. For the Generation activity, revenues result from sales of electricity to end customers in France and other countries and services related to the application of the conventions (services rendered to the operating system, sales of power in order to compensate the power losses from the network of the Transmission and Distribution activities, other services, etc). 3. Unbundling conventions The financial relationships between the unbundled activities are defined by near a hundred of internal conventions, covering all the flows accounted in 2001. These conventions are likely to be modified. Two thirds of these unbundling conventions (handling technical or financials matters) were signed between RTE and the other activities (Generation, Distribution, Other activities). These conventions define precisely the kind of services that the different activities can realize for the other ones and clarify the transaction form (valuation, invoicing frequency and methods of payment). The support functions, necessary to ensure the management independence of RTE, which cannot be totally or partially provided directly by RTE because of organization constraints or costs optimization, are the subject of conventions establishing the disposal of the corresponding resources. 3.1. Description of conventions The unbundling conventions include: Conventions settling, in application of article 23 of the law no. 2000-108, the access conditions to the transmission and distribution networks and their use, as well as the rate conditions for the network uses; Conventions settling, in application of article 15 of the law no. 2000-108, the relations relative to the services, provided by the Generation activity to RTE, necessary to the functioning and the security of the transmission network (purchase of power losses from the network, services rendered to the operating system, contribution to the balancing mechanism, management planning and production programming, balance responsibility); Services conventions, in application of article 25, including: on one hand, services provided by central management units (included, for accounting purposes, in the Generation activity) in the social (human resources, training, security prevention), logistics (information and technology, telecommunications, real estate, ), finance, research and development domains, and on the other hand, more technical services (material maintenance, ); Charges allocation conventions, in particular the central charges of EDF. Network access conventions The network access conventions include: The access of the Distribution activity to the public transmission network, The access to the public transmission network in order to realize the injection and the withdrawal of the electricity produced or utilized by the EDF production sites, The access to the public transmission network in order to ensure the execution of the electricity exportation and importation contracts concluded by EDF, and the participation to the mechanisms of attribution of interconnection capacities with the networks of adjacent countries, The pay-back of the portion of the revenues relative to the network access, collected by the Generation activity, regarding its marketing activity to customers which are buying its electricity at sales tariffs: - To RTE, for customers connected to the public transmission network, - To the Distribution activity, for customers connected to the public distribution network conceded to EDF. The pay-back of the portion of the revenues relative to the network access, collected by the Generation activity, regarding its marketing activity to eligible customers demanding single invoicing. 3.2. Financial principles The financial relationships between the unbundled activities were formalized within unbundling conventions, with transparency, absence of crosssubsidy and non-discrimination. They are determined according to the situation that would exist between distinct companies, applying in their relationship identical conditions to those applied with a third party. When conditions applied to third parties are following a public tariff or regulation, these public rules constitute the reference of applicable rules between unbundled activities. Considering that these relationships are within the same legal company, the financial transactions under these conventions are tax free (especially VAT). Valuation of the network access conventions For the transmission network access conventions, the RTE revenues were calculated following the principles of the article no.5 of the April 26th, 2001 decree no. 2001-365 (related to the public transmission network and electricity distribution tariffs), and in waiting of the publication of these tariffs, by referencing to the table published in 1999, applied by RTE to eligible customers. Without published tables for the whole distribution networks, the Distribution activity networks access revenues (excluding the direct revenues from third party eligible customers) were defined in a standard way to cover operating expenses and to generate a return on equity of 6.5 %. 56
edf Valuation of the services rendered conventions The valuation is based on the coverage of the services rendered unit cost, except when a market price reference exists. The unit cost calculation is established by each entity with their own cost basis (costs directly affected to the service, fixed costs of the entity) and the costs induced by the entity to the other internal units who receive the services. 57
Notes to the Note 1. Intangible and tangible fixed assets (in millions of Euros) Gross value Acquisitions Disposals Gross value Gross value 2001.12 2000.12 1999.12 Intangible assets Concessions and similar rights 263 101 137 299 282 Other 107 5 1 103 102 Sub-total 370 106138 402 384 Owned tangible fixed assets Land and improvements to land 46822 72 518547 Buildings 9,776 139 582 10,219 10,096 Nuclear power stations 37,653 129 0 37,524 34,796 Machinery and plant other than networks 10,358181 152 10,329 10,226 Networks 21,467 661 136 20,942 20,585 Other tangible fixed assets 2,166 137 257 2,286 2,307 Sub-total 81,889 1,269 1,198 81,818 78,558 Tangible fixed assets under concession Land and improvements to land 49 0 0 49 49 Buildings 9,047 19 20 9,0489,025 Machinery and plant other than networks 1,760 56 81 1,785 1,800 Networks 42,579 2,234 245 40,589 38,859 Other tangible fixed assets 381 3 41 44 Sub-total 53,473 2,310 349 51,512 49,777 Fixed assets in progress Tangible fixed assets 2,705 2,944 3,006 2,767 2,545 Intangible fixed assets 114 60 (1) 277 332 282 Pre-investments 17 0 11 2839 Advances paid 17 5 9 21 35 Sub-total 2,853 3,009 3,304 3,148 2,902 OVERALL TOTAL 138,586 6,694 4,989 136,880 131,622 (1) Of which M 174 following removal of expenses in respect of the Optimia project. The principal useful lives retained for fixed assets are as follows: Fuel driven power stations (including nuclear power stations) 30 years; Hydroelectric dams: 75 years; Electrical/mechanical equipment in hydroelectric facilities: 50 years; Transport and Distribution facilities (lines, transformers,..): 30 to 45 years. Note 2. Depreciation, amortization and provisions on intangible and tangible fixed assets (in millions of Euros) Cumulative Increase Removals Cumulative Cumulative amount in financial and amount amount 2001.12 year others 2000.12 1999.12 Intangible assets Concessions and similar rights 132 69 137 200 163 Other 42 5 1 3836 Sub-total 174 74 138 238 199 Owned tangible fixed assets Buildings 5,024 371 444 5,097 4,765 Nuclear power stations 25,002 1,192 23,810 19,999 Machinery and plant other than networks (1) 8,276 380 153 8,049 7,693 Networks (2) 9,784 715 97 9,165 8,515 Other tangible fixed assets 1,674 170 249 1,753 1,743 Sub-total 49,761 2,829 943 47,875 42,716 Tangible fixed assets under concession Buildings 4,830 148 15 4,697 4,552 Machinery and plant other than networks 1,094 100 81 1,075 1,045 Networks (3) 13,965 1,095 219 13,089 12,237 Other tangible fixed assets 30 2 3 32 34 Sub-total 19,920 1,346318 18,893 17,868 Intangible assets in progress Computer development costs (4) 0 174 174 0 Sub-total 0 174 174 0 OVERALL TOTAL 69,855 4,249 1,573 67,180 60,782 (1) including provisions for impairment of non-nuclear fuel driven power stations 2811 39 56 (2) including provisions for storms in 1999 0 4 4 4 (3) including provisions for storms in 1999 0 37 37 61 (4) this provision was booked in 2000 following the abandonment of the Optimia project and was written back in 2001 following removal of costs related to this project from gross intangible assets in progress. 58
edf Note 3. Financial fixed assets (in millions of Euros) Gross value Acquisitions Disposals Gross value Gross value 2001.12 2000.12 1999.12 Investments in, and loans to, subsidiaries and affiliates (1) 16,487 7,522 1,445 10,410 7,564 Investment securities (2) 834 101 136 869 869 Other fixed asset investments (3) 689 641 7 55 45 Loans and other financial fixed assets (4) 2,414 1,126 615 1,903 2,266 TOTAL 20,424 9,390 2,203 13,237 10,744 Provisions (5) 592 430 93 255 711 (1) The change in this account heading arises mainly as a result of: investments made in Dalkia Investissement (M 200) and Dalkia Holding (M 92). In the context of transactions between EDF and the Vivendi Environment group, Charth (EDEV), a 100% subsidiary of EDF contributed, on April 29 2001, 88.52% of its Cogetherm shares to Dalkia Holding. The distribution by Charth of its Dalkia shares to EDF benefited from the favorable treatment envisaged in section 115-2 of the French tax code. As a result, and in accordance with tax requirements, Charth decided on September 27, 2001 to distribute, in the form of an interim dividend, a 4.66% shareholding in Dalkia Holding to EDF. These shares distributed free of charge to EDF were recognized, in application of the French tax rules cited above, at M 35, with the double entry being a reduction in the net book value of Charth shares, the payment of M 5,430 of advances convertible into capital to EDF International (M 5,408 were converted by EDFI), notably in order to allow it to increase its shareholdings in EnBW (Germany) and Edenor (Argentina) by M 3,289 and M 1,044 respectively, the merger, by absorption, of Framatome by Areva, which was accounted as a disposal of Framatome shares for M 45 and a purchase of Areva shares for M 123. (2) This account contains financial investments made, in a going concern perspective, in order to assist with financing end of nuclear fuel cycle costs provided for in liabilities. Assets dedicated to coverage of these costs also include M 751 of investment trust balances shown in marketable securities. In total, dedicated assets amounted to M 1,585 at December 31, 2001. (3) The change in this account heading principally results from the purchase of Italenergia shares (M 572). (4) This account heading has changed mainly as a result of the following matters: loan of M 606 made to EDF International (refinancing of a loan made to Light), advance made to Cogema (M 349), decrease of amounts owed by EDF s subsidiary Sapar (M -153), decrease of PAP housing loans to employees (M -188) mainly due to the securitization of such amounts (M - 414), decrease of property loans through the outsourcing of EDF s 1% housing tax balances (M -134). (5) The change in provisions is notably due to a provision for impairment of M 400 in respect of EDF International shares because of its investments in Argentina and Brazil. Estimated value of investment securities (in millions of Euros) At the beginning of the year At year-end Investment securities valued Gross Net Estimated Gross Net Estimated on basis of stock market book book value book book value Value Value Value Value Estimated value of portfolio 869 859 950 834 832 987 59