Contingencies
Contingencies are potential obligations based on past events of which the existence will not be confirmed until the occurrence of one or more uncertain future events that are beyond the Group’s influence. Present obligations, moreover, can likewise be contingencies if the likelihood of an outflow of resources is not strong enough to justify the formation of a provision and/or the amount of the obligations cannot be estimated with sufficient reliability. The values assigned to contingencies correspond to the degree of liability that exists on the statement of financial position date.
The contingencies and other obligations shown below are nominal values.
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€ million |
2010 |
2009 | ||
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Guarantees |
119.6 |
143.1 |
The guarantees essentially concern the external financing of joint ventures. In addition, there are guarantees for customers’ advance payments to former subsidiaries or joint ventures from which WACKER was released by the purchaser but for which no transfer to the purchaser has occurred.
In view of the present financial situation of the companies for which WACKER has taken on guarantees, utilization of these guarantees is unlikely.
Other Financial Obligations and Other Risks
Under rental agreements and operating leases, the Group leases property, plant and equipment, motor vehicles and IT equipment. These leases generally have terms of between three and five years. Tenancy agreements for office space, property, plant and equipment, etc. have considerably longer terms. The following table provides a breakdown of these leases and agreements:
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€ million |
2010 |
2009 | ||
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Obligations from rent and operating leases |
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Due within one year |
16.3 |
16.8 | ||
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Due between one and five years |
30.6 |
33.6 | ||
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Due after five years or more |
18.6 |
24.3 | ||
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65.5 |
74.7 | ||
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Lease payments occasioned by operating leases |
15.2 |
15.9 | ||
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Obligations from orders for planned investment projects (commitments) |
301.4 |
206.9 |
Obligations from orders for planned investments (commitments) amount to €301.4 million (2009: €206.9 million) and mainly concern investments in the polysilicon segment. WACKER has earmarked a total of around €345 million for further investment in the construction of new production facilities in Germany and Asia.
In addition, the Group has undertaken to provide guarantees for borrowed funds at a joint venture amounting to around US$250 million. Of this total, guarantees for approximately €51 million have already been given. These are already included in the disclosure of guarantees. WACKER has also signed an agreement with its joint-venture partners Dow Corning and Samsung to make investments in future years and to provide the necessary equity funds and/or loans. Through long-term purchasing commitments of some €154 million annually, the Group ensures that capacity at its joint ventures is utilized.
Within the framework of its raw-material supply, WACKER has entered into long-term agreements to purchase strategic raw materials, electricity and gas. As a result, the company has, on balance, other financial obligations in connection with minimum purchasing obligations in the amount of €1.14 billion (2009: €1.43 billion). These agreements have terms of between one and five years.
The Group receives government subsidies for investment activities. These subsidies are granted on condition that a certain number of jobs be created or maintained at certain sites. If these contractual commitments are not fulfilled, any funding received must be paid back either in full or in part. The period for which the Group has to fulfill its contractual commitments is limited.