17 Contingencies, Other Financial Obligations and Other Risks

Contingencies

Contingencies are potential obligations based on past events, the existence of which 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.

The guarantees essentially concern the external financing of associated companies. 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.

Obligations from orders for planned investments (commitments) amount to €580.2 million (2010: €301.4 million) and mainly concern investments in the polysilicon segment. WACKER has earmarked $1,800 million in investment spending to build new production facilities in the Americas.

In addition, the Group has undertaken to provide guarantees for borrowed funds at a joint venture amounting to around $300 million. WACKER has also signed an agreement with its 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 €150 million annually (2010: €120 million), the Group ensures that capacity at the companies.

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 €1.85 billion (2010: €1.14 billion). The increase over the previous year’s figure is due to new long-term supply contracts to secure raw materials and energy. The agreements have terms of between one and nine 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.