In addition to provisions and liabilities carried on the balance sheet and to the reported contingent liabilities, there also are other mostly long-term commitments arising mainly from contracts entered into with third parties and related parties, or on the basis of legal requirements.
Other purchase commitments amounted to approximately €2.0 billion as of December 31, 2008 (€0.2 billion due within one year). In addition to purchase commitments for heat and alternative fuels, there are long-term contractual obliga- tions in place at the Central Europe market unit for the pro- curement of services in the area of reprocessing and interim storage of spent nuclear fuel elements delivered through June 30, 2005.
Other financial obligations in place as of December 31, 2008, totaled approximately €2.8 billion (€1.1 billion due within one year). Among others, they include financial obligations from services to be procured, obligations concerning the acquisition of shares and the acquisition of real estate funds held as finan- cial assets, as well as financing commitments.
Additional long-term contractual obligations in place at the E.ON Group as of December 31, 2008, relate primarily to the purchase of fossil fuels such as natural gas, lignite and hard coal. Obligations under these purchase contracts amounted to roughly €312.8 billion on December 31, 2008 (€29.4 billion due within one year).
Gas is usually procured on the basis of long-term purchase contracts with large international producers of natural gas. Such contracts are generally of a “take-or-pay” nature. The prices paid for natural gas are normally tied to the prices of competing energy sources, as dictated by market conditions. The conditions of these long-term contracts are reviewed at certain specific intervals (usually every three years) as part of contract negotiations and may thus change accordingly. In the absence of an agreement on a pricing review, a neutral board of arbitration makes a final binding decision. Financial obligations arising from these contracts are calculated based on the same principles that govern internal budgeting. Further- more, the take-or-pay conditions in the individual contracts are also considered in the calculations.
In 2008, purchase commitments for natural gas increased primarily as a result of the rising cost of natural gas deliveries and of the associated change in planning assumptions, in addition to the extension and replenishment of existing supply contracts and the conclusion of new contracts.
As of December 31, 2008, €10.3 billion (€4.3 billion due within one year) in contractual obligations are in place for the pur- chase of electricity; these relate in part to purchases from jointly operated power plants in the Central Europe market unit. The purchase price of electricity from jointly operated power plants is generally based on the supplier’s production cost plus a profit margin that is generally calculated on the basis of an agreed return on capital.
In June 2008, the European Commission transmitted a state- ment of objections as part of its antitrust proceedings against E.ON Ruhrgas concerning suspected market-sharing with Gaz de France. E.ON Ruhrgas has responded to the objections in a hearing and by other means. It is not possible at this time to estimate any possible fine by the Commission. In the event of the Commission ordering a fine, legal action can be taken.
Cash provided by investing activities was negative in 2008. As proceeds from sales of shareholdings declined, spending on investments in property, plant and equipment and on equity investments rose significantly over the previous year. The largest individual project was the acquisition of the Endesa Europa/Viesgo activities.
The net payments for treasury shares relate primarily to the share buyback program. The delivery of own shares and of the power plant units in the amount of €4,346 million as part of the Statkraft/E.ON Sverige transactions was a non-cash consideration and is therefore not presented in the cash flow statement (see also Notes 4 and 23).
Funds tied down in fixed-term deposits and securities declined slightly in 2008.
Increased borrowing led to a strong increase in cash provided by financing activities.
Exploration activity resulted in operating cash flow of -€78 mil- lion (2007: -€55 million) and in cash flow from investing activities of -€26 million (2007: -€377 million).
(28) Litigation and Claims
A number of different court actions (including product liability claims and allegations of price fixing), governmental investi- gations and proceedings, and other claims are currently pending or may be instituted or asserted in the future against companies of the E.ON Group. This in particular includes legal actions and proceedings concerning alleged price-fixing agreements and anticompetitive practices. In addition, there are lawsuits pending against E.ON AG and U.S. subsidiaries in connection with the disposal of VEBA Electronics in 2000. Since litigation and claims are subject to numerous uncer- tainties, their outcome cannot be ascertained; however, in the opinion of management, any potential obligations arising from these matters will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company.