Accounting for Nuclear Power Provisions at RWE

Paul  Healy; Jonas  Heese

Case | HBS Case Collection | August 2017 (Revised December 2017)

Accounting for Nuclear Power Provisions at RWE

Abstract

In early 2016, RWE, a utility that operates nuclear power plants in Germany, came under scrutiny from regulators and the media over the adequacy of its provisions for costs of decommissioning and dismantling (D&D) its nuclear power plants. Accounting standards required utilities to record the present value of projected D&D costs as a liability. However, there were many uncertainties associated with these estimates given the actual cash outlays that would be incurred decades into the future. In addition, German government bond rates used to discount projected future costs had fallen to record lows, and RWE as well as its competitors were struggling with depressed electricity prices. Would RWE's provisions be adequate to cover the future costs?

Keywords: liabilities; provisions for long-term obligations; discounting; Accounting; Energy Generation; Energy Industry; Germany;

Language: English

Format: Print

14 pages

Educators Purchase

Citation:

Healy, Paul, and Jonas Heese. "Accounting for Nuclear Power Provisions at RWE." Harvard Business School Case 118-013, August 2017. (Revised December 2017.)

Article | Accounting Horizons | March 2020

Voluntary, Self-Regulatory, and Mandatory Disclosure of Oil and Gas Company Payments to Foreign Governments

Paul M. Healy and George Serafeim

Concerns about high rates of government corruption in resource-rich countries have led transparency advocates to urge oil and gas firms to disclose payments to host governments for natural resources. Transparency, they argue, can increase government accountability and mitigate corruption. However, we find a low frequency of voluntary disclosures of payments by oil and gas firms and negative stock price reactions for affected firms at the announcement of regulations mandating disclosure. This suggests that sample firm managers and their investors perceive that such disclosures generate private costs, despite any public benefits. We document that industry self-regulation has generated information to substitute for the gap in voluntary company disclosure and that such disclosures are accompanied by lower country corruption ratings. This suggests that collective action could be an effective way for companies to manage the private costs of disclosure and respond to public pressure for transparency that could provide public benefits.

Keywords: oil ＆ gas; corruption; transparency; self-regulation; industry self-regulation; regulation; disclosure; disclosure regulation; Energy Sources; Crime and Corruption; Corporate Disclosure; Governing Rules, Regulations, and Reforms; Energy Industry;