2011 Annual Report - OTCIQ.com

132 Notes
(27) Contingencies and Other Financial Obligations
As part of its business activities, E.ON is subject to contingencies
and other financial obligations involving a variety of
underlying matters. These primarily include guarantees, obligations
from litigation and claims (as discussed in more
detail in Note 28), short- and long-term contractual, legal and
other obligations and commitments.
Contingencies
The fair value of the E.ON Group’s contingent liabilities arising
from existing contingencies was €195 million as of December
31, 2011 (2010: €252 million). E.ON currently does not have
reimbursement rights relating to the contingent liabilities
disclosed.
E.ON has issued direct and indirect guarantees to third parties,
which require E.ON to make contingent payments based on
the occurrence of certain events or changes in an underlying
instrument that is related to an asset, a liability or an equity
instrument of the guaranteed party, on behalf of both related
parties and external entities. These consist primarily of financial
guarantees and warranties.
In addition, E.ON has also entered into indemnification agreements.
Along with other guarantees, these indemnification
agreements are incorporated in agreements entered into by
Group companies concerning the disposal of shareholdings
and, above all, cover the customary representations and warranties,
as well as environmental damage and tax contingencies.
In some cases, obligations are covered in the first instance
by provisions of the disposed companies before E.ON itself is
required to make any payments. Guarantees issued by companies
that were later sold by E.ON AG (or VEBA AG and VIAG AG
before their merger) are usually included in the respective
final sales contracts in the form of indemnities.
Moreover, E.ON has commitments under which it assumes
joint and several liability arising from its interests in civil-law
companies (“GbR”), non-corporate commercial partnerships
and consortia in which it participates.
The guarantees of E.ON also include items related to the operation
of nuclear power plants. With the entry into force of
the German Nuclear Energy Act (“Atomgesetz” or “AtG”), as
amended, and of the ordinance regulating the provision for
coverage under the Atomgesetz (“Atomrecht liche Deckungsvorsorge-Verordnung”
or “AtDeckV”) of April 27, 2002, as
amended, German nuclear power plant operators are required
to provide nuclear accident liability coverage of up to €2.5 billion
per incident.
The coverage requirement is satisfied in part by a standardized
insurance facility in the amount of €255.6 million. The institution
Nuklear Haftpflicht Gesellschaft bürgerlichen Rechts
(“Nuklear Haftpflicht GbR”) now only covers costs between
€0.5 million and €15 million for claims related to officially
ordered evacuation measures. Group companies have agreed
to place their subsidiaries operating nuclear power plants
in a position to maintain a level of liquidity that will enable
them at all times to meet their obligations as members of
the Nuklear Haftpflicht GbR, in proportion to their shareholdings
in nuclear power plants.
To provide liability coverage for the additional €2,244.4 million
per incident required by the above-mentioned amendments,
E.ON Energie AG (“E.ON Energie”) and the other parent companies
of German nuclear power plant operators reached a
Solidarity Agreement (“Solidarvereinbarung”) on July 11, July 27,
August 21, and August 28, 2001, extended by agreement dated
March 25, April 18, April 28, and June 1, 2011. If an accident
occurs, the Solidarity Agreement calls for the nuclear power
plant operator liable for the damages to receive—after the
operator’s own resources and those of its parent companies
are exhausted—financing sufficient for the operator to meet
its financial obligations. Under the Solidarity Agreement,
E. ON Energie’s share of the liability coverage on December 31,
2011, remained unchanged from 2010 at 42.0 percent plus
an additional 5.0 percent charge for the administrative costs
of processing damage claims. Sufficient liquidity has been
provided for within the liquidity plan.
In accordance with Swedish law, the companies of the Swedish
generation unit and their parent company have issued guarantees
to governmental authorities. The guarantees were issued
to cover possible additional costs related to the disposal of
high-level radioactive waste and to the decommissioning of
nuclear power plants. These costs could arise if actual costs
exceed accumulated funds. In addition, the companies of the
Swedish generation unit and their parent company are also
responsible for any costs related to the disposal of low-level
radioactive waste.