Contingent Liabilities

Contingent liabilities are potential obligations that are based on past events and the evidence of their 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 contingent liabilities if the likelihood of an outflow of resources is not strong enough to justify the creation of a provision and/or the amount of the obligations cannot be estimated with sufficient reliability. The values assigned to contingent liabilities correspond to the extent of liability that exists on the reporting date.

The liabilities shown below are nominal values.

The guarantees for customers’ advance payments to former joint ventures were omitted in 2014. Similarly, guarantees issued to cover the payment of government grants to third parties in connection with the investment project in Charleston, Tennessee (USA) were omitted following payment of the grant.

It is unlikely that the remaining guarantees will be utilized.

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. Due to regulatory requirements, the Group is also leasing the land on which its production facilities in Singapore were built.

Obligations from orders for planned investment projects (commitments) amount to € 421.6 million (2013: € 223.6 million) and mainly concern investments in the WACKER POLYSILICON segment.

The Group ensures capacity utilization at its joint venture company with Dow Corning via long-term purchasing commitments of some € 100 million annually (2013: € 110 million). The contractually agreed transfer prices led to creation of a provision for onerous contracts, included in other provisions.

In connection with 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 other financial obligations in connection with the significant minimum purchasing obligations in the amount of € 2.06 billion (2013: € 2.27 billion). The agreements have terms of between one and ten years. The Group has obligations in the amount of € 10.2 million to take back stock from consignment warehouses.

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.

Contingent considerations from the acquisition of Scil Proteins Production GmbH were recognized in the consolidated balance sheet as based on contracted milestone payments. The fulfillment of these milestones is tied to contract renewals and official approvals of developed products. WACKER assumes that the conditions for payment of these contracted obligations will be met in 2015. The amount of the contingent considerations was defined in the purchase agreement.

WACKER is occasionally involved in legal or arbitration proceedings as well as official investigations and actions. 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.