Contingencies

Contingencies are potential obligations that are based on past events and 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 reporting date.

The contingencies and other obligations shown below are nominal values.

In 2013 the financing of associated companies was restructured, thereby negating the need for a number of guarantees. There was a decrease in the existing guarantees for customers’ advance payments to former 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

The Group leases property, plant and equipment, motor vehicles and IT equipment by way of rental agreements and operating leases. 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 investment projects (commitments) amount to € 223.6 million (2012: € 431.9 million) and mainly concern investments in the polysilicon segment.

Long-term purchasing commitments of some € 110.0 million annually (2012: € 118.0 million) enable the Group to ensure capacity utilization at its joint venture companies with Dow Corning and Samsung. WACKER has pledged its investment in the joint venture with Samsung. The stake serves as collateral for bank loans for joint venture project financing. The pledging ceases with repayment of the project loans on February 28, 2014 following WACKER’s acquisition of a majority stake.

Within the framework of its raw-material supplies, 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 € 2.27 billion (2012: € 2.41 billion). The reduction over the previous year’s figure is due to the expiration of existing long-term supply contracts to secure raw materials and energy. The agreements have terms of between one and ten years.

The Group receives government incentives and allowances for investing activities. These incentives 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.

The aforementioned other financial liabilities also include possible burdens on liquidity arising from potential back payments relating to the German Renewable Energy Act (EEG) levy. In mid-December 2013, the EU Commission began an investigation into the EEG. The subject of the investigation is, among other things, whether the partial exemptions granted power-intensive companies are justified or whether they possibly unreasonably distort competition. Wacker Chemie AG, as a power-intensive company, was granted this type of partial exemption in the terms sought. If the outcome of the proceedings is negative, back payments of exemptions granted may be required. In light of current European Court of Justice case law and the pending amendment to the German Renewable Energy Act, the German federal government is convinced that it will be able to dispel the Commission’s reservations regarding the legality of the incentives. In this regard, Wacker Chemie AG currently rates the risk of a future negative impact arising from back payments of EEG levy exemptions as being low.

WACKER is occasionally involved in legal or arbitration proceedings as well as official investigations and procedures. Pending proceedings can have a negative impact on WACKER’s earnings, net assets or financial position. At the present time, WACKER does not expect any significant negative effects from pending proceedings.