Siemens 2012 Annual Report Download - page 280

1 A. To our Shareholders 49 C. Combined Management Report 21 B. Corporate Governance
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S&P’s rating for Siemens’ short-term corporate credit rating is
A-+. This is the highest short-term rating within the S&P’s
short-term rating scale. During fiscal , S&P’s did not
change our long-term or short-term credit rating.
  Commitments and contingencies
   
The following table presents the undiscounted amount of
maximum potential future payments for each major group of
guarantee:
September ,
(in millions of €)  
Guarantees
Credit guarantees 326 591
Guarantees of third-party performance 1,562 2,718
HERKULES obligations 2,290 2,690
Other 3,632 3,613
7,810 9,612
As of September , , in addition to guarantees disclosed
above, Siemens has credit guarantees of € million, guaran-
tees of third-party performance of € million and other guar-
antees of € million relating to discontinued operations.
Item Credit guarantees cover the financial obligations of third
parties in cases where Siemens is the vendor and (or) contrac-
tual partner. These guarantees generally provide that in the
event of default or non-payment by the primary debtor, Siemens
will be required to settle such financial obligations. In addition,
Siemens provides credit guarantees generally as credit-line
guarantees with variable utilization to joint ventures and associ-
ated and other companies accounted for using the equity meth-
od. The maximum amount of these guarantees is subject to the
outstanding balance of the credit or, in case where a credit line
is subject to variable utilization, the nominal amount of the
credit line. These guarantees usually have terms of between
one and five years. Except for statutory recourse provisions
against the primary debtor, credit guarantees are generally not
subject to additional contractual recourse provisions. As of Sep-
tember ,  and , the Company accrued € million and
€ million, respectively, relating to credit guarantees.
Furthermore, Siemens issues guarantees of third-party perfor-
mance, which include performance bonds and guarantees of
advanced payments in cases where Siemens is the general or
subsidiary partner in a consortium. In the event of non-fulfill-
ment of contractual obligations by the consortium partner(s),
Siemens will be required to pay up to an agreed-upon maxi-
mum amount. These agreements span the term of the con-
tract, typically ranging from three months to seven years. Gen-
erally, consortium agreements provide for fallback guarantees
as a recourse provision among the consortium partners. In fis-
cal , item Guarantees of third-party performance, included
a significant amount of guarantees relating to the Siemens IT
Solutions and Services business, yet to be transferred to AtoS
in fiscal . In case a beneficiary had raised a claim under
these guarantees, AtoS would have been required to indemni-
fy Siemens. As of September ,  and , the Company
accrued € million and € million, respectively, relating to
performance guarantees.
In fiscal , The Federal Republic of Germany commissioned
a consortium consisting of Siemens and IBM Deutschland
GmbH (IBM) to modernize and operate the non-military infor-
mation and communications technology of the German Feder-
al Armed Forces (Bundeswehr). This project is called
HERKULES. A project company, BWI Informationstechnik
GmbH (BWI), will provide the services required by the terms of
the contract. Siemens is a shareholder in the project company.
The total contract value amounts to a maximum of approxi-
mately € billion. In connection with the consortium and exe-
cution of the contract between BWI and the Federal Republic of
Germany in December , Siemens issued several guaran-
tees connected to each other legally and economically in favor
of the Federal Republic of Germany and of the consortium
member IBM. The guarantees ensure that BWI has sufficient
resources to provide the required services and to fulfill its con-
tractual obligations. These guarantees are listed as a separate
item HERKULES obligations in the table above due to their
compound and multilayer nature. Total future payments po-
tentially required by Siemens amount to €. billion and
€. billion as of September ,  and , respectively
and will be reduced by approximately € million per year
over the remaining five-year contract period as of September
, . Yearly payments under these guarantees are limited
to € million plus, if applicable, a maximum of € million
in unused guarantees carried forward from the prior year.
Item Other includes indemnifications issued in connection
with dispositions of business entities. Such indemnifications,
if customary to the relevant transactions, may protect the buy-
er from potential tax, legal and other risks in conjunction with
the purchased business entity. Indemnifications primarily re-
late to NSN, disposed of in fiscal , EN, disposed of in fiscal
, and to Siemens IT Solutions and Services disposed of in
fiscal . As of September ,  and , the total amount
accrued for guarantees in item Other is € million and €
million, respectively.