Siemens 2013 Annual Report Download - page 300

92 A. To our Shareholders 117 B. Corporate Governance 155 C. Combined Management Report

In fiscal  and , the Power Transmission Division of the
Energy Sector incurred project charges primarily related to grid
connections to offshore wind-farms. These charges were due
to project delays resulting from a complex regulatory environ-
ment and the projects’ complex marine environment, which
required revised estimates of resources and personnel. This
led to €() million and €() million pretax effects on the
income statement in fiscal  and , which were mainly
recorded as provisions for order related losses and risks.
Asset retirement obligations – The Company is subject to
asset retirement obligations related to certain items of proper-
ty, plant and equipment. Such asset retirement obligations are
primarily attributable to environmental clean-up costs which
amounted to €, million and €, million, respectively, as
of September ,  and  (the non-current portion
thereof being €, million and €, million, respectively)
and to costs primarily associated with the removal of lease-
hold improvements at the end of the lease term.
Environmental clean-up costs relate to remediation and envi-
ronmental protection liabilities which have been accrued
based on the estimated costs of decommissioning facilities for
the production of uranium and mixed-oxide fuel elements
in Hanau, Germany (Hanau facilities), as well as a nuclear
research and service center in Karlstein, Germany (Karlstein
facilities). According to the German Atomic Energy Act, when
such a facility is closed, the resulting radioactive waste must
be collected and delivered to a government-developed final
storage facility. In this regard, the Company has developed a
plan to decommission the Hanau and Karlstein facilities in the
following steps: clean-out, decontamination and disassembly
of equipment and installations, decontamination of the facili-
ties and buildings, sorting of radioactive materials, and inter-
mediate and final storage of the radioactive waste. This pro-
cess will be supported by continuing engineering studies and
radioactive sampling under the supervision of German federal
and state authorities. The decontamination, disassembly and
final waste conditioning are planned to continue until ;
thereafter, the Company is responsible for intermediate stor-
age of the radioactive materials until a final storage facility is
available. With respect to the Hanau facility, the process of set-
ting up intermediate storage for radioactive waste has nearly
reached completion; on September , , the Company re-
ceived official notification from the authorities that the Hanau
facility has been released from the scope of application of the
German Atomic Energy Act and that its further use is unre-
stricted. The ultimate costs of the remediation are contingent
on the decision of the federal government on the location of
the final storage facilities and the date of their availability.
Consequently, the provision is based on a number of signifi-
cant estimates and assumptions. Several parameters relating
to the development of a final storage facility for radioactive
waste are based on the assumptions for the so called Schacht
Konrad final storage. Parameters related to the life-span of the
German nuclear reactors reflect a planned phase-out until
. The valuation uses assumptions to reflect the current
and detailed cost estimates, price inflation and discount rates
as well as a continuous outflow until the ’s related to the
costs for dismantling as well as intermediate and final storage.
Using the input of an independent advisor, management up-
dated its valuation of the liability due to changes in estimates
which resulted in minor adjustments in fiscal  and .
Facts and circumstances of the changes were as follows:
In fiscal , the parameters related to operating costs and
the timeframe of the storage process of the radioactive waste
in the Konrad final storage were updated by The Federal Office
for Radiation Protection (Bundesamt für Strahlenschutz).
In fiscal , the parameters related to the set up cost of the
Konrad final storage were updated by The Federal Office for
Radiation Protection.
The determination of the provisions related to major asset
retirement obligations will continue to involve significant
estimates and assumptions. Uncertainties surrounding the
amount to be recognized include, for example, the estimated
costs of decommissioning and final storage because of the
long time frame over which future cash outflows are expected
to occur. Amongst others, the estimated cash outflows related
to the asset retirement obligation could alter significantly if,
and when, political developments affect the government’s
plans to develop the so called Schacht Konrad. As of Septem-
ber ,  and , the provision totals €, million and
€, million, respectively, and is recorded net of a present
value discount of €, million and €, million, respec-
tively reflecting the assumed continuous outflow of the total
expected payments until the ’s.
The Company recognizes the accretion of the provision for en-
vironmental clean-up costs using the effective interest method
applying current interest rates prevailing at the period-end
date. In fiscal  and , the Company recognized € mil-
lion and € million, respectively, in accretion expense for en-
vironmental clean-up costs in line item Other Financial income
(expenses), net. Changes in discount rates decreased the car-
rying amount of provisions by € million as of September ,
 and increased it by € million as of September , .
Other – Other includes transaction-related and post-closing
provisions in connection with portfolio activities as well as
provisions for legal and regulatory matters.