Contribution to consolidated sales revenue by business division and customer location
Note 5 - Income tax
The AREVA group calculated its income tax expense at June 30, 2006 by applying the estimated average tax rate for the year to before-tax income. The group’s estimated effective tax rate for 2007 is 16.28%. This rate takes into account the decision made by the Bundestag on June 30, 2007 and approved by the Bundesrat on July 7, 2007 to reduce the tax rate in effect in Germany. The group’s effective tax rate for 2006 was 10.12%.
Changes in deferred taxes for the first half of 2007 in the amount of €127 million, resulting from changes in the fair value of financial instruments recognized in retained earnings, were recorded directly in equity.
Note 6 - Goodwill
Goodwill as of June 30, 2007 was as follows:
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The increase in goodwill in the Nucleardivisions comes primarily from an adjustment related to put options held by AREVA NP’s minority shareholder, based on income recognized and dividends paid by that company for the period January 1, 2006 to June 30, 2007.
Allocation of the acquisition price for Sfarsteel, which the group acquired in September 2006, generated €21 million in additional goodwill.
The Transmission & Distributiondivision recognized €12 million in goodwill in connection with the acquisition of Passoni & Villa in April 2007, before allocation of the purchase price.
There was no indication of goodwill impairment and no goodwill impairment tests were performed as of June 30, 2007.
Note 7 - End-of-life-cycle operations
The table below summarizes the AREVA balance sheet accounts affected by the treatment of end-of-life-cycle operations and their financing.
ASSETS June 30, December 31, LIABILITIES June 30, December 31,
(in millions of euros) 2007 2006 2007 2006
End-of-life-cycle Provisions for end-of-life-cycle
asset – AREVA share (1) 188 198 operations 4,680 4,585
Assets earmarked for
end-of-life-cycle operations 5,205 5,077 - funded by third parties (2) 2,132 2,091
- End-of-life-cycle asset – third
party share (2) 2,132 2,091 - funded by AREVA 2,548 2,494
- Assets earmarked for
end-of-life cycle operations (3) 3,073 2,986 (1) Amount of total provision to be funded by AREVA still subject to amortization.
(2) Amount of the provision to be funded by third parties.
(3) Portfolio of financial assets and receivables earmarked to fund AREVA’s share of the total provision.
End-of-life-cycle assets
In addition to the value of its property, plant and equipment, AREVA NP recognizes the deferred portion of the group’s share of end-of-life-cycle operations, such as nuclear facility dismantling, decontamination, etc. The group’s share of this adjustment account asset is amortized according to the same schedule as the underlying property, plant and equipment.
An adjustment account asset is also recognized for the third party share of end-of-life-cycle operations, corresponding to the share of dismantling, waste retrieval and packaging operations to be funded by some customers. Conversely, a provision is established to cover total estimated end-of-life-cycle costs as soon as a facility starts up, including any share to be funded by third parties.
Group share
Third party June 30, December 31,
(in millions of euros) Gross Amortization Net share 2007 2006
Dismantling 675 (487) 188 1,621 1,808 1,786
Waste retrieval and packaging 512 512 503
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CONSOLIDATED FINANCIAL STATEMENTS
5.7. Notes to the consolidated financial statements
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CONSOLIDATED FINANCIAL STATEMENTS
5.7. Notes to the consolidated financial statements
5
Assets earmarked for end-of-life-cycle operations This heading consists of the following:
(in millions of euros) June 30, 2007 December 31, 2006
Receivables related to dismantling 116 113
Earmarked assets 2,958 2,873
Total 3,073 2,986
•Receivables related to dismantling correspond to receivables resulting from the signature of a contract in December 2004 under which the CEA agreed to fund a share of facility dismantling expenses at the La Hague and Cadarache plants. This receivable, which bears interest at a rate of approximately 6%, totaled €116 million as of June 30, 2007 (before value added tax). This receivable has no set due date.
•The portfolio of assets earmarked to fund end-of-life-cycle operations includes the following:
(in millions of euros) June 30, 2007 December 31, 2006
At market value
Publicly traded shares 1,033 718
Equity mutual funds 1,010 1,001
Bond and money market mutual funds 914 1,154
Total 2,958 2,873
(in millions of euros) June 30, 2007 December 31, 2006
Dismantling of nuclear facilities 3,423 3,371
Waste retrieval and packaging 1,257 1,215
Provisions for end-of-life-cycle operations 4,680 4,585
As an operator of nuclear facilities, the AREVA group has a legal obligation to secure and dismantle its facilities when they are shut down permanently. The group must also retrieve and package, in accordance with prevailing standards, the various waste types generated by operating activities which could not be processed during treatment. Group facilities subject to these obligations include facilities in the front end of the fuel cycle, in particular Eurodif’s enrichment plant at Pierrelatte and the fuel fabrication facilities, but they are predominantly facilities at the back end of the fuel cycle, including the treatment plants at La Hague and the Melox and Cadarache MOX fuel fabrication plants.
Under certain circumstances, essentially in the case of used fuel treatment, several customers have agreed to fund a portion of the costs related to dismantling operations and to the retrieval and packaging of waste for which they retain ownership. For AREVA, this has the effect of transferring the financial responsibility for dismantling and for waste retrieval and packaging from the group to third parties.
EDF/AREVA NC negotiations
EDF and AREVA NC embarked on framework negotiations to establish:
Firstly:
•The legal and financial terms of a transfer to AREVA NC of EDF’s current financial obligations with respect to dismantling operations at 99996_AREVA_SEM07_UK_2:Mise en page 1 26/09/07 16:44 Page 36
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CONSOLIDATED FINANCIAL STATEMENTS
5.7. Notes to the consolidated financial statements
•EDF’s and AREVA NC’s respective shares of obligations for the retrieval and packaging of waste at the La Hague and Saint-Laurent des Eaux sites.
Secondly:
•The financial terms of the future used fuel treatment contract beyond 2007.
Considering the global nature of this negotiation, AREVA did not modify in its financial statements the respective shares of dismantling expenses allocated to the parties as of December 31, 2006. Based on available information, this is not expected to have any significant impact on the group’s financial statements or financial position.