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 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

Citation:

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

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Accounting for Nuclear Power Provisions at RWE

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Accounting for Nuclear Power Provisions at RWE

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