Daniel LEVY (EDF, France)

1. The Purchasing Function within a Large Electricity/Power Companyin the French Utility SectorKey features in the procurement process Daniel LEVY(EDF, France) Regional Conference on “Public Procurement Reform in West Balkan"Pristina, 16-17september 2008

2. The Purchasing Function within a large Electricity/Power Companyin the French Utility Sector- Key features in the procurement process I – EDF a new type of Company – public owned with a private status – and an International Group II – Purchasing at EDF – A continuous evolution facing changes in its environnement as well as new profitability requirements III – The present procurement organisation and its challenges

3. The Purchasing Function within a large Electricity/Power Companyin the French Utility Sector- Key features in the procurement process I EDF - a new type of Company which is publicly owned with a private status and an International Group

4. REASONS FOR CHANGING THE EDF STATUTE(17 november 2004) • Increased financial needs to support an international strategy • Competition laws in the electricity sector • changing the principle of speciality, that is not only production, transport and distribution but also undertaking any type of activity in relation to those, enabling the company to develop its activities

5. AN ORIGINAL STATUTE … • EDF remains a public undertaking (more than 70 % of its capital belonging to the state) • EDF becomes a company with a private status • EDF keeps its public utility missions

6. … WITH MAIN CONSEQUENCES Public undertaking - governance (notably through the board and the crucial influence on the Chaiman’s choice) - legal prescriptions (regulation, fiscal aspects) Private status - following the rules of a company which is listed on the Paris Stock Exchange - an International Group (which must adapt to local laws) - employee representation (but the personal status is unchanged) Public utility sector - tariff regulation including help of the poor clients, - territorial solidarity and local obligations - preservation of common goods (management of water) These missions have to be defined and contracted through written agreements with the State

7. DIRECTIVE 2004/17/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL0F 31 MARCH 2004 • The Directive 2004/17 of 31st March 2004 Co-ordinating the programme procedures of entities operating in the water, energy, transport and postal services sectors remains totally applicable after EDF’s status changed. The exemption clause depends upon the level of competition in the electricity sector but not the status of the companies themselves. • EDF has a long experience of this legal framework requiring a systematic call for competition except for given cases, described in the Directive considering elements, such as the specific technicality of products or services, or additional phases of works very closely linked to those of the previous contract. • EDF takes benefit from the new possibilities of the Directive (most economic choices criteria) • New questions may be addressed with the evolution of the energy sector (commercial and partnership matters)

8. The Purchasing Function within a large Electricity/Power Companyin the French Utility Sector- Key features in the procurement process II Purchasing at EDF – A continuous evolution facing changes in its environment as well as new profitability requirements

9. PURCHASING AT EDF : A COMPLEX ENVIRONNEMENT • Increased role expected from the purchasing activity • Increased pressure for utilities entering competition • Legal framework • Specific missions for a public utility Long cycle industrial sector historical often oligopolistic suppliers Technical constraints and habits Weight of nuclear safety PURCHASING AT EDF

10. Main steps of the EDF Procurement Division construction to achieve performance objectives and quality(1) A CONSTANT ADAPTATION AND EVOLUTION 2000 : foundation of the Procurement Division on the following basics : • a centralized and highly-qualified business line • No purchase without a purchaser above €20 000 • performance achieved by teamwork between technicians (business units) and purchasers : strategy is defined, segment by segment, by a lead buyer through a close relationship with technicians and business representatives. For important issues, management is involved on both sides. • Since 2002, new improvements consisting of : • enhancing and broadening framework agreements ; • organising strategic sourcing and optimising suppliers panel ; • helping business units in controlling their expenditures (volume and price effects) ;

11. Main steps of the EDF Procurement Division construction so as to reach performance objectives and quality (2) • 2005 – 2008 an increased ambition Introduce new levers – not giving up former levers such as strategic sourcing, massification of contracts, duration of contracts optimisation - so as to increase performance : • achieve better estimation of costs, especially when the level of competition is low, and use it during negotiations • simplify and redefine specifications with respect to general standards • Enhance productivity and create win/win situations through partnership relationships • Develop purchasing synergies within the Group, from simple co-ordination to common tenders.

12. The Purchasing Function within a large Electricity/Power Companyin the French Utility Sector- Key features in the procurement process III The present procurement organisation and its challenges

13. Organisation chart of the Procurement Division Director of Procurement Bruno CRESCENT Deputy Director François-Régis DE LA PORTE Secretary / Communication Gilles BELOIS Group Purchasing Control / internal audit Gérard SAMSON Support Departments Procurement Departments Generation / Engineering Jean-François DEMALDENT Human Resources Catherine QUEVRAIN Services Pierre SCHICK Methods of Purchasing – Industrial Relations and Group Synergies Quality / Sustainable Developpement Daniel LEVY Information Technology / Telecom Pierre GUY Performance / Information System Didier DECELLE Networks / Customers Laurent CACHEUX

14. SERVICES PURCHASING INFORMATION TECHNOLOGY / TELECOM PURCHASING GENERATION / ENGINEERING PURCHASING NETWORKS / CUSTOMERS PURCHASING € 2,8 bn € 0,8 bn € 3,1 bn € 1,6 bn Key figures of the Procurement Division in 2007EDF France (except the TRANSMISSION SUBSIDIARY) OPEX & CAPEX Four Procurement Domains Totalizing € 8,3 bn among which OPEX : € 5,6 bn CAPEX : € 2,7 bn STAFF 850 People located on 15 Sites

15. LOCALISATION OF PURCHASING Teams Agence Nat. Achats Informatique Télécoms (Information Technology and Telecommunication) I NP Lille Agence Nat. Achats Matériels Électriques (Networks materials) D Rouen Agence Nat. Achats Prestations Intellectuelles (Intellectual Services) P PRI Nancy TH PRI NP La Défense D Agence Tertiaire Nord et Paris (Services) PRI P NP I Noisy Le Grand P Agence Nationale Achats Production (Nuclear Generation/National) P Montrouge Agence Achats Thermique (Thermal) P P To TH Tours Nantes Agence Achats Hydraulique (Hydraulic) H Lyon Agence Achats Ingénierie (Engineering) P Le-Bourget-du-Lac P P Ts H Agence Régionale Achats Production (Nuclear Generation/Regional) P To P Donzère - Mondragon Bordeaux P Agence Tertiaire Sud (Services) To Toulouse Ts Agence Tertiaire Sud (Services) P Ts To Montpellier Marseille H*

16. 24 PURCHASING SEGMENTS ACCORDING TO THE « SUPPLY MARKET » Information Technology Telecom Services Networks Generation:Engineering • Connector, cables and support • Swichtgear • Equipment and Transformers) • Customer Interface (meters) • Distribution Works • Nuclear process • Rotating machines • Civil engineering • Maintenance logistics • Boilerworks/pipeworks/taps • Electricity • Waste and dismantling • Instrumentation and control • Fossil fired power plants process • Non destructive testing • Properties • Intellectual Services • (Consultancy, Communication, Advertising, Legal, Finance) • Research & Development • Training • Services • Travels/Vehicles • Corporate Purchasing Mail/transportation • Industrial Logistics • Hardware • Software • Computer services • Telecoms

17. THE PURCHASING PROCESS MAIN STEPS STRATEGIC STAGE With strong involvement of business units and management • Management role • Anticipate • make or buy decisions • Manage risks Evaluate needs • quantitative • qualitative (including specification) • Allotment • Panel optimisation • Level of globalisation • Management of interfaces • Strategic and global sourcing • Qualification criteria

18. THE PURCHASING PROCESS MAIN STEPS OPERATIONAL STAGE • Post award evaluation • quality of products and services • ways of using contracts by business units (respect of allocation between suppliers) • Organize tenders • Publicity • Technical assessment (including final qualification) • negotiation • Award of contracts • Evaluate suppliers • Prequalification • Qualification (emphasis on the product itself)

19. The Purchasing at EDF : present and new challengesEnhance Performance and quality in all its dimensions • Performance : - Purchasing must work closely with its internal customers, at all levels and stages (strategic, tactical and operational) - Purchasing must contribute to EDF’s ambitions to increase its performance objectives of its « Operational Excellence » program by introducing new levels of productivity, such as the redefinition of needs, process and products, which requires the convincing of internal customers (often technically orientated) and methodical support. - Purchasing must contribue to Group Synergies, notably by extending the scope of common tenders

20. The Purchasing at EDF : present and new challengesEnhance Performance and quality in all its dimensions Quality, Sustainable development, and Social responsibility - Human resources : maintain and develop skills in a changing environment: notably international - Process *Maintain ISO 9001 and ISO 14001 certification * lead audits and control activities within a constant improvement philosophy, including coaching and mentoring * involve suppliers on environmental ambitions (environmental chart) - Socal responsibility and ethics : respect of commitment qualification of suppliers subcontractors treatment and consideration