15 Contingent Liabilities, Contingent Assets, Other Financial Obligations and Other Risks

Contingent Liabilities

The values assigned to contingent liabilities correspond to the extent of the liability as of the reporting date. At WACKER, contingent liabilities primarily concern incurred guarantees totaling €0.5 million, versus €0.5 million in the prior year. It is unlikely that the 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.

Obligations from orders for planned investment projects (commitments) amounted to €192.5 million, after €121.3 million in the prior year, and concern the operating segments.

The Group ensures capacity utilization at its joint venture with Dow Corning via long-term purchasing commitments of some €95 million annually, versus €90 million in the prior year. The contractually agreed transfer prices led to recognition of a provision for onerous contracts, which is included in other provisions.

As regards raw-material supplies, WACKER has entered into long-term agreements to purchase strategic raw materials, electricity and gas. Accordingly, in net terms, the company had other financial obligations in the amount of €1.16 billion arising from significant minimum-purchasing arrangements in the reporting period, after €1.32 billion the year before. The agreements have terms of between one and seven years. There are no obligations to accept deliveries from existing consignment warehouses (compared with €8.9 million for Siltronic a year earlier).

Prospective liabilities for a euro amount in the low double-digit millions exist in connection with a contractually agreed acquisition by WACKER BIOSOLUTIONS. Execution of the transaction is still subject to fulfillment of certain closing conditions. WACKER expects the acquisition to be completed at the end of the first-half of 2018.

The insurance compensation for the operational disruption due to a hydrogen explosion at the production site in Charleston, Tennessee (USA) represents a contingent asset for WACKER. As no definitive appraisal of the loss is yet available, the insurance compensation does not qualify as a recognizable asset. WACKER received a prepayment of US$100 million in January 2018.

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, all or part of any funding received must be paid back. The period for which the Group has to fulfill its contractual commitments is limited.

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 and financial position. At the present time, WACKER does not expect any significant negative effects from pending proceedings.