Akastor ASA
Annual Report 2014

Plain-text annual report

2014 AnnuAl RepoRt PRINT MHWirth AKoFS offshore other Real estate Kop Surface products Fjords processing Frontica Business Solutions 5 603 4 312 1 052 543 674 436 374 Net capital employed noK 13 billion per 31 Dec 2014 Revenue noK million 5 078 eBITDA noK million 5 326 411 262 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 4Q 13 1Q 14 3Q 14 4Q 14 2Q 14 Key fIguRes Orders and results continuing operations order backlog 31 December (NOK million) order intake (NOK million) operating revenues (NOK million) eBItDA (NOK million) eBItDA-margin (Percent) net profit (NOK million) net profit incl. discontinued operations (NOK million) Cash flow 2014 2013 21 555 17 025 25 254 18 011 21 432 18 448 1 380 1 355 6.4 (1 387) 2 493 7.3 (238) 1 124 Cash flow from operational activities (NOK million) 488 3 078 Balance sheet Borrowings (NOK million) equity ratio (Percent) share Share price 31 December Basic earnings per share (NOK) Diluted earnings per share (NOK) employees continuing operations 5 028 11 316 38.4 29.8 21.60 108.40 9.13 9.13 4.11 4.11 total employees including contracts 31 December (Full time equivalents) 7 609 7 482 Hse lost time Incident Frequency (Per million worked hours) total recordable incident frequency (Per million worked hours) Sick leave rate (Per million worked hours) 0.65 1.62 2.7 0.83 2.81 2.5 01. tHIS IS AKAStoR AkAstor in brief Akastor ASA (hereinafter referred to as Akastor) is an investment company based in norway with a portfolio of companies in the oilfield services sector, in addition to real estate and other smaller-sized holdings. the portfolio companies of Akastor were organized as independent companies following the demerger of Aker Solutions ASA, in September 2014. Akastor was the surviving entity in the demerger, and subsequently has been established as an investment company with independent portfolio companies, responsible for all aspects of their own operations. Aker Kværner Holding AS, which is owned by Aker ASA and the norwegian government, is the largest shareholder of Akastor with a shareholding of 40.27 percent. the shares of Akastor are traded on the oslo Stock exchange under the ticker AKA. Portfolio ComPAnies Akastor’s portfolio companies had 2014 revenues of about noK 21.4 billion, eBItDA of noK 1.4 billion and approximately 7 600 employees worldwide. Akastor operates a lean corporate center with 23 employees situated in oslo, norway. Akastor’s aim is to develop and refine our portfolio companies as stand-alone enterprises, with the goal of maximizing the value potential of each entity. Akastor works to clarify the portfolio companies’ business models, capitalize on their market positions, and strengthen underdeveloped areas of value creation. Akastor has a range of strategic, operational and financial value-creating measures at its disposal, including operational improvements and organic growth, acquisitions and divestments, and financial measures. MHWIRTH fRONTICA BusINess sOluTIONs mHWirth offers a full range of drilling equipment, drilling ris- frontica business solutions provides cost efficient corporate er solutions and related products and services for the drilling services that enable companies to become faster and more ef- market, primarily the offshore sec tor. the company had reve- ficient. frontica had revenues of nok 5.8 billion in 2014, and nues of nok 10.7 billion in 2014, and employs 4 200 people. has 1 350 employees. AKOfs OffsHORe fjORDs PROCessINg Akofs offshore is a global provider of vessel based subsea fjords Processing provides wellstream processing technology, well construction and intervention services to the oil and gas equipment and expertise to the oil and gas industry. it had rev- industry. it had revenues of nok 1.5 billion in 2014, and em- enues of nok 2.3 billion in 2014, and employs 600 persons. ploys 115 people. KOP suRfACe PRODuCTs ReAl esTATe AND OTHeR HOlDINgs koP surface Products offers a complete range of products for real estate and other holdings include a portfolio of 8 real es- offshore and land-based surface production, including surface tate assets, all in norway, 100 percent ownership of first Geo, wellheads, Xmas trees, valves and actuators. the company had 76 percent shareholding in steP oiltools, 50 percent stake in revenues of nok 1.1 billion in 2014, employing 850 people. Dof Deepwater and 7.4 percent shareholding in ezra. PRINT improve operations our ambition is to use the downturn as an in our opportunity to portfolio companies and strengthen their future competitiveness. unfortunately, several of our portfolio companies have had to adjust their workforce base. 02. Ceo letteR PositioninG for tHe future 2014 was a special year for Akastor. After the split of Aker Solutions on September 29, Akastor has operated as a separate company. We are an oilfield services investment company with a flexible mandate for long-term value creation through active ownership. In spite of challenging market conditions the long term work with our portfolio companies is off to a good start. Our long term approach Akastor is the result of a decade-long journey of successful restructuring and M&A-activities in Aker-owned companies. During this period, we have gained valuable experience and built effective tools. this heritage is part of our DnA. We seek to create value through active ownership combining a range of strategic, operational and financial measures. I also believe that one of the keys to successful active ownership is creating a strong alignment between owners and management. We are therefore working closely with the management in our portfolio companies in order to develop and execute value creation plans. Challenging market environment people in the different portfolio companies have a unique competence in the areas we operate in. this expertise is what makes me believe in a successful journey. Without the clever heads and hands of our employees, the companies would not be able to come up with all the good solutions for our customers. these solutions are the backbone of our businesses. 2014 was characterized by our industry adjusting to falling oil prices and reducing its cost base to adapt to uncertain energy and oil price-levels. there will be challenging times ahead. We have therefore focused on making sure our companies have a competitive cost base, so we can secure work for our businesses and for our employees going forward. our ambition is to use the downturn as an opportunity to improve operations in our portfolio companies and strengthen their future competitiveness. unfortunately, several of our portfolio companies have had to adjust their workforce base. I know this is very challenging for those affected by these changes. We take our responsibility, and will make sure the process is fair and predictable, even if it is painful. In spite of this current downturn, I am confident that our businesses have the strength to deliver shareholder value, and generate employment for a lot of people in a long-term perspective. frank o reite, Ceo PRINT Akastor will seek to maximize value by combining strategic, operational and financial measures. Akastor will establish separate financing for each operational unit to increase the portfolio companies’ flexibility and independence. 03. BoARD oF DIReCtoRS’ RepoRt Akastor ASA (Akastor) has operated as an oilfield services investment company since September 2014, following the split of Aker Solutions ASA into two separate companies. During 2014, a new corporate structure and governance model was put in place, as well as a new management team. A new board of directors has been established for Akastor and for each of its portfolio companies. Akastor has established a robust capital structure including financing facilities of noK 4.5 billion. the Akastor portfolio of companies had a total capital employed of noK 13 billion at the end of 2014. Akastor’s total revenue in 2014 increased by 16 percent, whilst eBItDA remained flat, mainly due to tougher market conditions for all portfolio companies during 2014. the order backlog amounted to noK 21.6 billion at the end of 2014 compared to noK 17 billion a year earlier. the order intake for 2014 was noK 25.3 billion. Company overview Akastor is an investment company based in norway with a portfolio of industrial holdings, real estate and other holdings, all in varying stages of maturity. Akastor, in its present form, is a result of a separation of the oilfield services company, now known as Aker Solutions ASA. on September 29 2014, the Aker Solutions share was split, and Akastor and Aker Solutions became two separately listed entities. Akastor, primarily focused on the oilfield services sector. the portfolio covers a range of industrial holdings in this sector, including: ŸŸ MHWirth, which provides drilling systems and lifecycle services ŸŸ Frontica Business Solutions, which provides corporate and staffing services to companies in the oil services industry ŸŸ AKoFS offshore, vessel-based subsea well construction and intervention services ŸŸ Fjords processing, which provides wellstream processing technology ŸŸ Kop Surface products, which delivers surface oil and gas equipment ŸŸ Akastor Real estate, which owns eight properties in norway ŸŸ Step oiltools, a drilling waste management company is organized as an each Akastor portfolio company independent business with its own board of directors, and a dedicated management team, fully responsible for all aspects of its operations. During 2014, new board of directors were established for all portfolio companies, consisting of dedicated Akastor key managers, and in some of the boards, external board representatives and employee representatives. this lays the foundation for good cooperation between Akastor, the portfolio company and its employees. Akastor is based in oslo with a core team of 23 employees. Akastor’s portfolio companies have a total of 7 600 employees with activities in 30 countries at the end of 2014. strategy Akastor is an investment company, based on a similar business philosophy as companies in the private equity sphere; advocating an independent approach for each portfolio company to optimize its development potential. Akastor aims to create long-term value for its shareholders through the active development of its portfolio companies as standalone businesses, while maintaining the flexibility to be opportunistic. Akastor will work closely with the companies’ managements to make decisions on business development, acquisitions and divestments to maximize the value of each company. each portfolio business will develop and execute independent value creation plans in cooperation with the Akastor investment team. As an owner, Akastor must understand the portfolio companies markets and challenges in depth, in order to evaluate current valuation versus future potential. Akastor will seek to maximize value by combining strategic, operational and financial measures. Akastor will establish separate financing for each operational unit to increase the portfolio companies’ flexibility and independence. Akastor will hold portfolio companies as long as it can create additional value from its ownership. Capital discipline is a key focus. Akastor will only pursue new investments generating returns above the cost of equity. In the absence of new investments, Akastor will either return excess cash to shareholders, or re-invest into its current portfolio, if such an investment can increase value or speed up the delivery of the value creation plan. Akastor holds companies at varying stages of maturity, and will base future M&A decisions on independent plans for each company, developed in close cooperation with each company’s board of directors and management. ŸŸ First Geo, which delivers subsurface advice and products to e&p companies market outlook Adding to this, Akastor also owns some financial investments such as shares in ezra Holdings ltd and DoF Deepwater AS. the market outlook for 2015 is affected by the sharp decline in oil prices seen last year. e&p companies’ increased focus on PRINT capital discipline and reduction of upstream investments are expected to persist throughout 2015. the oil & gas services segment observed significant delays and re-tendering through 2014, and the e&p companies are likely to postpone new developments and thus further prolong the current market downturn beyond 2015. We expect the market to be very challenging in 2015. Akastor’s order backlog was increased by the end of 2014 compared to 2013. Akastor still expects the market conditions to be demanding for all its portfolio companies in 2015. As an active owner, Akastor will, in the near-term, focus on adjusting its businesses to the current market conditions. In a longer- term perspective, the oilfield services market is expected to improve, and the focus of each investment manager is to work closely with the portfolio company to position the companies for growth in current and new markets. Group financial Performance Akastor presents its consolidated accounts in accordance with the International Financial Reporting Standards (IFRS) as adopted by the european union. All amounts relate to the consolidated financial statements for the group. the financial statement includes the full year accounts for all Akastor portfolio companies, including the period when they were business areas in Aker Solutions prior to the demerger. the numbers for 2013 are comparative numbers, based on the activity of the portfolio businesses in 2013. the amounts in the income statement related to disposed and demerged businesses have been re-presented as discontinued operations. However, the balance sheet in 2013 has not been restated for discontinued operations according to requirements in IFRS. the main companies included in Akastor’s consolidated accounts are the following: MHWirth, Frontica Business Solutions AKoFS offshore, Fjords processing and Kop Surface products. In addition, a portfolio of eight real estate assets are included, as well as 100 percent ownership of First Geo, 76 percent shareholding in Step oiltools, 50 percent shareholding in DoF Deepwater and 7.4 percent shareholding in ezra. income statement operating revenue for 2014 rose 16 percent to noK 21.4 billion. earnings before interest, tax, depreciation and amortization (eBItDA) remained flat at noK 1.38 billion. the revenue increased due to higher activity in AKoFS offshore in 2014 compared to 2013 and increased revenue in Fjords processing, Kop Surface products and Real estate and other holdings. earnings in 2014 were impacted by reduced margins for MHWirth in key areas and due to low activity for the AKoFS vessel AKoFS Seafarer (previously named Skandi Aker). net financial expenses fell to noK 568 million in 2014 from noK 583 million in the previous year. net financial income rose from noK 47 million in 2013 to noK 119 million in 2014, mainly due to forex exchange gain. Depreciation, amortization and impairments rose to noK 2.1 billion from noK 1.1 billion in the previous year. In 2014 Akastor recognized impairments of a total of noK 1 001 million on assets and intangible assets in AKoFS offshore. noK 664 million in impairments is related to investments in the AKoFS Seafarer vessel. the impairment is based on the revised business case after the cancellation in June by total in Angola of a two-year contract for the vessel. In addition, impairments of goodwill and other intangible assets of noK 311 million were related to a revised business case for AKoFS Seafarer and Aker Wayfarer due to weaker market conditions for the business. the group had an operating loss of noK 706 million, due to the above-mentioned impairments. Several other non-recurring items impacted the results, caused by a number of elements, primarily consisting of provisions related to onerous offices leases, cost from the MMo outplacement agreement and an income from realization of an investment in a real-estate project in Stavanger. the pre-tax loss for the year was negative noK 1.65 billion, compared to negative noK 0.2 billion the previous year. the income tax benefit for 2014 rose from noK 4 million in 2013 to noK 266 million in 2014. the effective tax rate is influenced by several one-off items. earnings per share for continued operations were negative 5.09 in 2014, compared with negative noK 0.87 a year earlier. include Mooring and loading Discontinued operations Systems (MlS), Well Intervention Services (WIS) and Aker Solutions (AKSo). profit from discontinued operations was noK 3 880 million, and includes the net profit from disposed and demerged businesses during 2014. the amount includes gains on sale of MlS and WIS of noK 2 852 million. net profit for the year, including discontinued operations, rose to noK 2.5 billion from noK 1.1 billion in 2013. earnings per share were noK 9.13 in 2014, compared with noK 4.11 a year earlier. the board of directors has resolved to propose to the annual general meeting not to distribute ordinary dividend for 2014. this proposal is in line with previous communication. balance sheet total assets of Akastor amounted to noK 24.4 billion as of December 31, 2014, compared with noK 47.9 billion at year- end 2013. the balance sheet in 2013 includes disposed and demerged businesses and is thus not comparable with 2014. For effects of disposals and demerger on the balance sheet, refer to note 5 in the consolidated accounts. the balance sheet for continuing operations is summarized in note 6 in the consolidated accounts. total operating assets in portfolio companies have increased from noK 21.1 billion in 2013 to noK 23 billion in 2014, mainly explained by increase in current operating assets. total non-current operating assets in portfolio companies increased by noK 0.6 billion, however affected by several significant events. A financial lease of the vessel Aker Wayfarer was booked by noK 1.5 billion and also impairments of vessels and goodwill in AKoFS offshore was booked by noK 1 billion. total operating liabilities in portfolio companies increased by noK 0.9 billion, mainly explained by an increase in current operating liabilities. Gross debt decreased by noK 6.3 billion reflecting a net 4.1 billion repayment of debt following the disposals in 2014, as well as the demerger of bonds of noK 2.5 billion. A financial lease obligation of noK 1.4 billion related to Aker Wayfarer increased gross debt. total equity amounted to noK 9.4 billion by the end of 2014, compared to noK 13.4 billion the year before. Due to the demerger of Aker Solutions, book equity was reduced by noK 5.6 billion. the equity ratio was 38.4 percent as of December 31, 2014. Cash flow As of December 31, 2014, Akastor had cash of noK 1.1 billion, a reduction from noK 2.3 billion in 2013. the cash flow statement includes discontinued operations as long as these were part of Akastor group. the net cash flow from operating activities amounted to noK 488 million, reduced from noK 3.1 billion in 2013. the reduction reflects an increase in working capital, mainly due to an increase in MH Wirth. include capex net cash flow from investment activities was noK 4.5 billion compared to negative noK 4.3 billion in 2013, increase is mainly due to proceeds of noK 5.9 billion from sale of businesses. investments of Investment activities also negative 1.9 billion compared to negative noK 3.5 billion in 2013. Cash flow from other investment activities were positive by noK 616 million, explained by repayment of a convertible bond in ezra ltd as well as disposal of various shareholdings. no new business acquisitions were carried out in 2014, however noK 126 million was paid in deferred consideration on acquisitions in prior periods. net cash flow from financing activities amounted to negative noK 5.3 billion, mainly explained by repayment of external debt as well as dividend payment of noK 1.1 billion in 2014, unchanged from the year before. Going Concern the board confirms that the company is a going concern and that the annual accounts for 2014 were prepared on the going concern assumption. 237 people; half of the workforce was employed in norway. the company’s business is divided to three core areas: large projects, Drilling equipment and Drilling lifecycle Services. MHWirth is the largest the company’s revenue rose by 12.5 percent during 2014, driven by large projects backlog and strong performance from the Drilling lifecycle Services business. the eBItDA-margin dropped from 10.1 percent in 2013 to 8.8 percent in 2014, driven primarily by lower margins on large projects. Working capital (nCoA) increased from 18.6 percent of revenue in 2013 to 24.1 percent of revenue in 2014, driven by the large projects business. the offshore drilling market slowed down significantly in 2014 resulting in a number of prospects and tenders being cancelled or delayed. this slowdown impacted MHWirth’s order intake, which ended down by 27 percent compared to 2013. Key large project orders in 2014 included two jackups, one floater and one large upgrade project. the order backlog was reduced by 26 percent during the year. Key figures Amounts in NOK million 2014 2013 operating revenue and other income 10 681 9 493 eBItDA eBIt CApeX nCoA net capital employed order intake order backlog employees (Fte) 941 526 762 2 573 5 603 6 941 9 566 4 237 959 742 676 1 767 4 024 9 511 13 004 4 011 MHWirth is using the market slowdown to concentrate on operational excellence in order to be well positioned when the market returns. In this context, the company is working on both near-term and longer-term initiatives. the near term priority is cost base reduction in response to the decrease in order intake levels. As a part of this effort, on February 10, 2015, MHWirth announced a plan to downsize the global work force by approximately 500-750 people. the capacity reduction is estimated to give an annual cost reduction of noK 500- 600 million at full run rate. other cost reduction initiatives include cost negotiations with subcontractors and an ongoing evaluation of consolidation of operational sites and offices. While making the adjustments necessary to face the current challenging market, MHWirth has launched a number of initiatives to increase efficiency and improve its competitive position. this work includes product standardization, streamlining of processes, targeted strengthening of customer relations and improved organizational effectiveness. the market is expected to be very challenging in 2015. the Akastor Portfolio MHWirth MHWirth is a global provider of drilling solutions and services. MHWirth has activity on five continents with presence in 14 countries. By the end of 2014, the company employed 4 Frontica Business Solutions Frontica Business Solutions is a provider of corporate services with operations in seven countries and delivery in 25 countries around the world. the company consists of three distinct business segments; recruitment and staffing, It services and consultancy, and payroll and additional support services. PRINT Key figures Amounts in NOK million operating revenue and other income eBItDA eBIt CApeX nCoA net capital employed order intake order backlog employees (Fte) 2014 5 753 315 218 110 (237) 374 8 196 2 620 1 356 Key figures 2013 Amounts in NOK million 5 680 operating revenue and other income 287 190 114 (249) 216 5 766 eBItDA eBIt CApeX nCoA net capital employed order intake 87 order backlog 1 454 employees (Fte) 2014 1 542 175 2013 908 7 (1 117) (640) 5 (73) 4 312 6 140 6 186 115 611 (216) 3 647 52 1 722 127 the staffing business is conducted under the trademark Frontica Advantage. Frontica stems from the shared services division of Aker Solutions, and has more than ten years of experience as a provider of services. Frontica was established as a separate business entity in 2014. the client base includes Kværner, Aker Solutions, Jacobs as well as companies owned by Akastor. Frontica is the second largest subsidiary within Akastor, based on sales. Frontica had revenues of noK 5 753 million in 2014, at the same level as in 2013. the eBItDA-margin increased during 2014. the eBItDA was noK 315 million, an increase of 9.8 percent from 2013. the order backlog of noK 2.6 billion represents the estimated value of the fixed contracts and frame agreements for Frontica. It outsourcing Frontica is operating in three different markets, with different characteristics: (Ito), business process outsourcing (Bpo) and recruitment and staffing services. the general market outlook for Frontica within these three markets is deemed positive, with expected steady annual market growth. With customers seeking outsourcing models to a greater extent, increased industry specific specialization and greater flexibility in cost base, the company is positioned for growth. the slow-down in the oil and gas market will most likely affect Frontica’s customers and is expected to impact the revenue level in the short term, especially within recruitment and staffing services. AKOFS Offshore AKoFS offshore is a provider of vessel-based subsea well construction and intervention services to the oil and gas industry. the company has a competent and diverse organization, covering all phases of the value chain from conceptual development to project execution and offshore operations. AKoFS offshore operates three specialized offshore vessels, Skandi Santos, Aker Wayfarer and AKoFS Seafarer, employing 115 people. the company’s revenue rose by 70 percent in 2014, whilst eBItDA increased by noK 168 million to noK 175 million. the results reflect the high level of activity for the three AKoFS offshore vessels during the first half of 2014, whilst the second half was characterized by lower activity and reduced margins after total cancelled the 2 year firm light Well Invention contract for AKoFS Seafarer after 9 months of operations in June. this contract cancellation caused AKoFS offshore to make an impairment of asset values related to AKoFS Seafarer and goodwill amounting to noK 1 001 million in 2014. During 2014 AKoFS offshore signed a five-year extension of the contract with petrobras for Skandi Santos (valid from March, 2015), and a new five-year contract (+5 year option) for Aker Wayfarer with the same client (vessel expected to be in operations from medio 2016). Both vessels will do subsea installation work outside Brazil, installing and testing of deepwater subsea Xmas trees and other production equipment. the Aker Wayfarer vessel will be, as an effect of the petrobras contract, converted to a subsea installation vessel. the conversion investment of around noK 600 million will be financed through the vessel owner ocean Yield. the vessel bareboat contract was renegotiated ahead of the offer made to petrobras and signed following the contract award in Q3. As a result of the new charter contract, the vessel charter has according to IFRS been reclassified as financial lease (previously operational lease). According to IFRS, a financial lease shall be recognized as an asset and a liability at commencement of the lease term equal to the fair value of the vessel. the asset is therefore recognized at noK 900 million. In addition, noK 600 million is recognized as other non-current assets and represents the CApeX obligation required to fulfil the petrobras contract (topside and subsea equipment) that will be made prior to the operational commencement and financed by vessel owner ocean Yield. the liability is recognized to noK 1 372 million net of prepaid charter rates. AKoFS offshore exercised its option to acquire the Skandi Aker from DoF Subsea in 2014 for a total consideration of uSD 122.5 million. the purchase was executed in February 2015. Following the transaction, the vessel was re-named AKoFS Seafarer. AKoFS Seafarer was operating in Angola for total as a light Well Invention vessel from September 2013 and during the first half of 2014. Following the cancellation of the contract effectuated by total, it was further employed on a short-term contract in the construction spot market during the second half of 2014. the SuRF market is expected to be challenging going forward. this may affect both Aker Wayfarer and AKoFS Seafarer in 2015. However, medium to longer-term, AKoFS offshore aims to redeploy the AKoFS Seafarer in the well intervention markets. delivering processing equipment to Korean epC (engineering, procurement and construction) companies, and was awarded several strategically important contracts in the Korean epC market in 2014. AKoFS offshore had an order intake of noK 6.1 billion for the full year of 2014, compared to noK 52 million in 2013. this is mainly explained by the five-year extension of the contract with petrobras for Skandi Santos, and the new five-year contract for Aker Wayfarer with the same client. Following the first five years of successful operations in Brazil, Skandi Santos will be routinely dry-docked during Q1 2015. Consequently, the vessel is expected to be out of operations for about 30 days. Due to the current weak market conditions in the e&p sector, both the subsea construction fleet and offshore drilling segment are in structural oversupply. AKoFS offshore continues to see Brazil as a positive market for the services provided by the company going forward. Installation of Xmas trees, as well as related subsea production equipment, will be essential to the expected increase in Brazilian oil and gas production. However, market conditions can be affected by the current oil market as well as actions taken by petrobras as a consequence of on- going corruption allegations against the company. Fjords Processing Fjords processing provides wellstream processing technology, systems and services to the upstream oil and gas industry. the company delivers complete processing systems for both onshore and offshore installations. Fjords processing delivers solutions across all oil, gas and water treatment segments. the company is headquartered in oslo, norway. It had 617 employees at the end of 2014, with representation in 17 countries on six continents. Key figures Amounts in NOK million operating revenue and other income eBItDA eBIt CApeX nCoA net capital employed order intake order backlog employees (Fte) 2014 2 322 2013 2 007 52 25 62 (157) 436 2 197 1 190 617 75 52 42 (50) 409 1 959 1 255 628 Revenues of Fjords processing rose by 15.7 percent in 2014. the eBItDA was reduced by 30.7 percent compared to the previous year. the reduced margin was caused by cost increases and delays on one specific project which will be delivered in 2015. Fjords processing’s order intake for 2014 increased by 12.2 percent compared to the previous year. In August 2014, Fjords processing established a position in the Korean market through a 50/50 joint venture with Kolon Water and energy. Kolon Fjords processing is focusing on Due to the current slow-down within the oil and gas space, Fjords is preparing for increased pressure on price and potential project delays going forward. KOP Surface Products Kop Surface products is a global supplier of flow control equipment to the oil and gas industry. the main products are valves, wellheads and trees for offshore and land-based surface production. the company provides engineering, manufacturing, installation and life-of-field support services. Kop Surface products has its headquarters in Singapore and its main manufacturing operations in Batam, Indonesia with a global network of service centers located in Singapore, Malaysia, India, Indonesia, thailand, the united Arab emirates, nigeria and Vietnam. Kop Surface products employed 854 people at the end of 2014. the company’s key market is in Southeast Asia. During 2014 the company made the first moves to expand into the Middle east. Key figures Amounts in NOK million operating revenue and other income eBItDA eBIt CApeX nCoA net capital employed order intake order backlog employees (Fte) 2014 1 119 156 109 32 375 674 1 052 659 854 2013 873 88 62 59 288 567 990 570 760 Revenue in Kop Surface products rose by 28.2 percent in 2014, driven by demand for surface wellheads and trees in Asia. the eBItDA-margin for 2014 was 13.9 percent, compared to 10.1 percent in 2013. Both hardware and service revenues developed positively during the year. the high margin services contributed with the highest growth, hence, impacting the margin positively. As Kop Surface products is predominantly a uSD business, foreign exchange development contributed positively to the growth in noK versus the previous year. In uSD terms revenue rose by 19 percent year on year. order intake was noK 1 052 million for 2014 as a whole, giving a backlog of noK 659 million at the end of the year. Kop Surface products is exposed to the cyclicality in the oil and energy sector, seeing softening in demand and increased competition and will need to have a strong focus on cost reduction in 2015, in order to maintain its competitive position. Real Estate and Other Holdings Akastor Real estate owns eight properties in norway, with a book value of approximately noK 1.0 billion. the properties yield revenue of about noK 80 million, with a weighted duration of 16 years. the company also held a 17 percent stake PRINT in a syndicate with a share value of about noK 30 million. In addition, the company manages a subletting portfolio and a few development projects. the other holdings are a 76 percent stake in the drilling waste products and services company Step oiltools, 50 percent of DoF Deepwater, a 7.4 percent stake in Singapore-based offshore support solutions provider ezra Holdings, the geological services firm First Geo, and investments in Aker pension Fund Company and Aker Insurance Company. DoF Deepwater is a joint venture with DoF ASA, which owns and operates five anchor handling tug supply (AHtS) vessels – all currently on charter contracts. subsequent events the purchase of Skandi Aker was executed in February 2015. Following the transaction, the vessel has been re-named AKoFS Seafarer. the purchase price was uSD 122.5 million, all financed with new bank debt. A process in MHWirth has been initiated in February 2015, with an ambition to reduce the global work force to give a reduction of approximately 500 staff through downsizing and attrition. Furthermore, the number of hired in staff will be reduced accordingly with around 250 employees during the year. Key figures Amounts in NOK million operating revenue and other income eBItDA eBIt CApeX nCoA net capital employed order intake order backlog employees (Fte) 2014 975 (260) (469) 128 (58) 1 595 2 097 1 658 430 2013 594 (62) (171) 122 464 3 073 618 272 502 Real estate and other Holdings delivered a negative eBItDA in 2014 of noK –260 million, mainly due to onerous lease provisions for unutilized office buildings. the revenue increased by 71 percent to noK 975 million in 2014 compared to noK 569 million in 2013. the order intake for real estate was high in 2014 as a result of taking lease contracts in the backlog. Parent Company results and Allocation of net Profit Akastor is the ultimate parent company in the Akastor group of companies and its business is the ownership of the portfolio of industrial holdings as set out above. Akastor has outsourced corporate functions to other companies within the group, mainly Akastor AS. However, assets and liabilities related to the Corporate treasury function are held by Akastor ASA. Akastor had a net loss of noK 80 million in 2014, down from a profit of noK 2.9 billion in 2013. the main reason for the reduction is that no dividends from subsidiaries to Akastor have been distributed in 2014. the parent company’s dividend policy is to execute ad-hoc dividend distributions from sales proceeds received by the company through divestments or other realization of assets. the company does not intend to distribute regular or annual dividends. the board thereby proposes the following coverage of the loss: Amounts in Dividend other equity total allocated noK million 0 (80) (80) risk management Key Risk Mitigation process Akastor and its portfolio companies are exposed to various risks, both financial and operational and interest rate risk, market risk, credit risk, and operational risk at the underlying company level. to manage and mitigate risks in Akastor, risk evaluation is an integral part of all business activities. Akastor actively supervises risk management in its portfolio companies through its participation on the board of directors of each company, and by defining requirements to the portfolio companies for risk management and mitigation processes and procedures. Financial Risks the group is exposed to a variety of financial risks: currency risk, interest rate risk, price risk, credit risk, M&A risk, liquidity risk and capital risk. the market risks affect the group’s income or the value of financial instruments held. the objective of financial risk management is to manage and control financial risk exposures and thereby increase the predictability of earnings and minimize potential adverse effects on the group’s financial performance. Akastor uses financial derivative instruments to hedge certain risk exposures and aims to apply hedge accounting whenever possible in order to reduce the volatility resulting from the periodic mark-to-market revaluation of financial instruments in the income statement. Risk management is a focus area in every project within the Akastor portfolio of companies. It is the responsibility of the project managers, in cooperation with the Akastor treasury, to identify, evaluate and hedge financial risks. the group has well- established principles for overall risk management, as well as policies for the use of derivatives and financial investments. Integrity risks Akastor requires all its portfolio companies to implement an Integrity program to manage and mitigate integrity risks. this program is also implemented at Akastor level, and includes requirements in respect of training, due diligence, control of third parties and regulation of gifts and hospitality. Key components in the integrity program are education and awareness training. All Akastor managers and employee groups which may face integrity challenges are required to participate in class-room based integrity training. Hired-ins in high risk roles are also required to undertake integrity training, just as third party representatives receive integrity training specially prepared for them. A Code of Conduct e-learning program has been developed in 2014 and will be introduced to all employees in 2015. the requirement for all portfolio companies is to complete and report on the training within 6 months from employment or publication of a new training session. company’s corporate responsibility work, including their HSe work, please refer to the Akastor Corporate Responsibility Report for 2014. the full report is available on the Akastor website www.akastor.com. Akastor has established a whistleblowing system in line with the company’s Governance policy. the whistleblowing system is open for all Akastor employees who wish to report a breach of the Code of Conduct, other internal guidelines or governing policies. All employees are required to report breaches of the Code of Conduct, and Akastor encourages reporting of any concerns around compliance with law and/or ethical standards. As of February 2015, Akastor received concession from the norwegian Data protection Authorities to run a whistleblowing channel which is also available for external parties. this will be implemented in 2015. For further details on risk management and exposures, see note 31. Corporate responsibility Akastor’s operating model reflects the fact that each of our companies are independent entities who operate different business models and therefore face different Corporate Responsibility risks and expectations from stakeholders. As a holding company, Akastor is responsible for setting the overall Corporate Responsibility priorities and providing the appropriate risk management framework and policies applicable for all holdings in the portfolio. In turn, each portfolio company is responsible for defining their own Corporate Responsibility strategy with relevant activities and where necessary supporting policies. Akastor is also responsible for the maintenance and development of industrial relations and collaboration with unions. Historically, good industrial relations have played an important role in Aker Solutions, and maintaining these strong relations have proven to be one of the success criteria in developing the company over the years. this work will thus continue in Akastor going forward. Akastor’s Corporate Responsibility strategy is based on four main priorities that reflect areas considered crucial to our business, our stakeholders and within the oil-services industry: ŸŸ Respecting Human Rights ŸŸ Working against Corruption ŸŸ Caring for Health & Safety ŸŸ Reducing Impact on the environment the task for Akastor going forward is therefore to ensure the systematic implementation and integration of the priorities of the Corporate Responsibility strategy, Code of Conduct and Integrity policy across all portfolio companies and business units. For in-depth reporting on Akastor and each portfolio People and teams Akastor had a total of 23 employees as of December 31, 2014, 47 percent of the employees are women. Akastor is committed to equal opportunity and non-discrimination. this commitment is described in the company’s Code of Conduct, policies and agreements, and builds on a frame agreement signed with national and international trade unions in 2008. this agreement was renewed in 2013 and sets out fundamental labor rights and standards for general employment terms and employee relations, with specific focus on non-discrimination. equal opportunities are fundamental for Akastor and its portfolio companies. Akastor and the portfolio companies had a total 7 609 people as of December 31, 2014, the same level as the previous year. 28 percent of the employees are female, 72 percent are male. the male/female ratio in the portfolio companies were as follows: MHWirth frontica fjords KOP AKOfs Female Male 19% 81% 55% 45% 27% 73% 24% 76% 12% 87% Whilst the male/female ratio is well balanced in Frontica Business Solutions, the other companies have a predominant male workforce. this is mainly due to reasons linked to history and industry tradition. each portfolio company promotes equal opportunities by setting specific requirements for diversity in recruitment and people development, and by supporting programs dedicated to equal opportunity. Akastor fulfills the requirements of the norwegian public liability Companies Act with regards to gender representation on the board of directors, , as four of eight Directors are women. Sick leave in Akastor AS amounted to 2.8 percent of total working hours in 2014. For the full Akastor group workforce, sick leave amounted to 2.7 percent in 2014. Sick leave in the Akastor portfolio companies was relatively low. there were no fatal injuries in any of the portfolio companies, and the total recordable incident frequency was low. See figure below for details: Health and Safety MHWirth frontica fjords KOP AKOfs lost time Incident Frequency (ltIF) incl. sub-contractors total Recordable Incident Frequency (tRIF) incl. subcontractors Fatalities incl. subcontractors sick leave 0.75 0.4 0 0 0 % 1.88 0.4 2.2 0 0 0 % 0 0 3 % 0 0 3.9% 2% 0.6% 2.3% there are further details on HSe available in the 2014 Corporate Responsibility report, available on www.akastor.com. PRINT environment Akastor’s portfolio companies ’ activities pose a limited burden on the environment. During 2014 no unintentional discharges or emissions to the surrounding environment were recorded in any of the portfolio companies. Akastor works with all portfolio companies to promote responsible businesses, committed to sustainable development and high environmental standards. Akastor operates from its headquarters in oslo and has negligible effect on the external environment. each portfolio company has dedicated sustainability programs aiming to reduce the business’ impact on the external environment by Co2 emission reductions, waste management, energy efficiency and recycling. the Akastor portfolio companies report individually on their impact on the external environment. the new section 3-3c in the norwegian Accounting Act requires that as of 1 June 2013, large companies account for their efforts to integrate corporate social responsibility in their business strategies and day-to-day operations. research, innovation and technology Development noK 640 million related to development activities have been capitalized in 2014, compared to noK 804 million in 2013. In addition, research and development costs of noK 112 million have been expensed during the year because the criteria for capitalization were not met (noK 275 million in 2013). All amounts include Aker Solutions until the demerger. initiatives are innovation and development All research, performed by the Akastor portfolio companies. the Akastor holding company performed no such activity in 2014. Corporate governance Corporate governance is a framework of values, responsibilities and governing documents to control the business and ensure sustainable value creation for shareholders over time. It is the responsibility of the board of directors of Akastor to ensure that the company implements sound corporate governance. the audit committee supports the board of directors in safeguarding that the company has internal procedures and systems in place to ensure that corporate governance processes are effective. Akastor’s corporate governance principles are based on the norwegian Code of practice for Corporate Governance and are available on the company’s website www.akastor.com. 04. DeClARAtIon BY tHe BoARD oF DIReCtoRS AnD Ceo the board and Ceo have today considered and approved the annual report and financial statements for the Akastor group and its parent company Akastor ASA for the 2014 calendar year ended on December 31, 2014. the board has based this declaration on reports and statements from the group’s Ceo and/or on the results of the group’s activities, as well as other information that is essential to assess the group’s position which has been provided to the board of directors. to the best of our knowledge: ŸŸ ŸŸ ŸŸ ŸŸ ŸŸ the 2014 financial statements for the group and parent company have been prepared in accordance with all applicable accounting standards the information provided in the financial statements gives a true and fair portrayal of the group and parent company’s assets, liabilities, profit and overall financial position as of December 31, 2014 the annual report provides a true and fair overview of: the development, profit and financial position of the group and parent company the most significant risks and uncertainties facing the group and the parent company oslo, March 13, 2015 | Board of Directors of Akastor ASA oslo, March 13, 2015 | Board of Directors of Akastor ASA Øyvind eriksen | Chairman lone Fønss Schrøder | Deputy Chairman Kjell Inge Røkke | Director Øyvind eriksen | Chairman lone Fønss Schrøder | Deputy Chairman Kjell Inge Røkke | Director Kathryn M. Baker | Director Sarah Ryan | Director Jannicke Sommer-ekelund | Director Kathryn M. Baker | Director Sarah Ryan | Director Jannicke Sommer-ekelund | Director Stig Faraas | Director Asbjørn Michailoff pettersen | Director Frank o. Reite | Ceo Stig Faraas | Director Asbjørn Michailoff pettersen | Director Frank o. Reite | Ceo PRINT 05. CoRpoRAte GoVeRnAnCe StAteMent Corporate governance is a framework of values, responsibilities and governing documents to control the business and ensure sustainable value creation for shareholders over time. Sound corporate governance shall ensure that appropriate goals and strategies are adopted, that the strategies are implemented in a good manner and that the results achieved are subject to measurement and follow-up. 1. the Corporate Governance report Basis for this Report the corporate governance principles of the group are laid down by the board of directors of Akastor ASA. the principles are based on the norwegian Code of practice for Corporate Governance dated october 30, 2014 (the «Code of practice»), the regulations set out in the Continuing obligations of stock exchange listed companies from oslo Børs (the stock exchange in oslo) and the relevant norwegian background law such as the norwegian Accounting Act and the norwegian public limited liability Companies Act. the Code of practice may be found at www.nues.no and the Continuing obligations listed companies may be found at of stock exchange www.oslobors.no. norwegian laws and regulations are available at www.lovdata.no. this report outlines how Akastor has implemented the Code of practice. Deviations from the Code of practice are addressed under the relevant sections. In general, the Akastor board only approves deviations that the board believes contributes to value creation for its shareholders. In addition to the Code of practice, the norwegian Accounting Act section 3-3b stipulates that companies must provide a report on their policies and practices for corporate governance either in the annual report or in a document referred to in the annual report. Such report is integrated in the below corporate governance statement.1) Governance Structure on April 29, 2014, the board of directors announced their strategy for the development of the former Aker Solutions group, thereunder their intention to propose to the company’s shareholders that the group be split into two companies. Following this proposal, the shareholders approved on August 12, 2014 a demerger pursuant to which the activities pertaining to Subsea, umbilicals, Maintenance, Modifications and operations and engineering where spun-off into a new company which was stock listed at the oslo Børs September 29, 2014. the new company adopted the Aker Solutions name and the AKSo ticker as of the first day of listing of the new company. As of the same date, the old Aker Solutions ASA changed its name to Akastor ASA, trading under the ticker AKA at oslo Børs. All references to the company or the group in this statement refer to Akastor ASA and its portfolio of companies. Akastor is an oil-services investment company with a portfolio of companies in the oilfield services industry, with a total capital employed value of approximately noK 13 billion. the company has a flexible mandate for active ownership and long-term value creation. MHWirth is a leading supplier of drilling systems and drilling lifecycle services globally. Frontica Business Solutions provides cost efficient corporate services that enable companies to become faster and more efficient. AKoFS offshore is a global provider of vessel based subsea well construction and intervention services to the oil and gas industry. Fjords processing provides world-class well-stream 1) Below, the items in respect of which information must be disclosed according to section 3-3b of the norwegian Accounting Act are specified, together with references to where such required information may be found: 1. “A statement of the recommendations and regulations concerning corporate governance that the enterprise is subject to or otherwise chooses to comply with” can be found in the introduction section of this corporate governance statement. 2. “Information on where the recommendations and regulations mentioned in no. 1 are available to the public” can be found in the introduction section of this corporate governance statement. 3. “The reason for any non-conformance with recommendations and regulations mentioned in no. 1”. The non-conformances are described in the relevant section where there are non-conformances, which are sections 6 and 14 respectively. 4. “A description of the main elements in the enterprise’s, and for entities that prepare consolidated financial statements, if relevant also the Group’s internal control and risk management systems linked to the financial reporting process” can be found in Section 10 of this corporate governance statement. 5. “Articles of Association which entirely or partly expand or depart from provisions of Chapter 5 of the Public Limited Liability Companies Act” can be found in Section 6 of this corporate governance statement. 6. “The composition of the board of directors, the corporate assembly, the committee of shareholders’ representatives and the control committee and any working committees related to these bodies, as well as a description of the main instructions and guidelines that apply to the work of the bodies and any committees” can be found in Section 8 and 9 of this corporate governance statement. 7. “Articles of Association governing the appointment and replacement of directors” can be found in Section 8 of this corporate governance statement. 8. “Articles of Association and authorizations empowering the board of directors to decide that the enterprise is to buy back or issue its own shares or equity certificates” can be found in Section 3 of this corporate governance statement. PRINT processing technology, equipment and expertise to the oil and gas industry. Kop Surface products offers a complete range of products for offshore and land-based surface production, including surface wellheads, Christmas trees, valves and actuators. other holdings include a portfolio of ten real estate assets, all in norway, 100 percent of First Geo AS, 76 percent in Step oiltools, 50 percent of DoF Deepwater and 7.4 percent of the shares in ezra. It is the responsibility of the board of directors of Akastor ASA to ensure that Akastor and its portfolio of companies implements sound corporate governance. the board of directors evaluates this corporate governance statement on an annual basis. the board’s audit committee also evaluates the corporate governance statement as well as other key policies and procedures pertaining to compliance and governance. Compliance with, and implementation of these corporate governance guidelines are continuously evaluated by the board and said committee; inter alia by way of the board being the decisive body for the company’s defined management and reporting structure, which include regular reporting. Policies and Procedures Akastor has a total of 10 corporate policies providing business practice guidance within a number of key areas. these policy documents express the overall position of the group with regard to compliance, integrity and governance, for instance. Some of these are adopted already, while some are work in progress. the policies provide instructions and guidelines that apply to the portfolio companies as such and to individual employees in order to ensure that the group’s operations are in compliance with internal and external regulatory framework. In addition, the portfolio companies are requested to implement their own policies specific to their business within areas like project execution, HSe and tendering. Values and Code of Conduct Akastor aims to develop and refine its portfolio of companies as stand-alone enterprises, with the goal of maximizing the value potential of each entity. the company works to clarify the business models of its portfolio companies, capitalize on their market positions and promote underdeveloped areas such as aftersales services for the equipment and systems delivered. the investment strategy is focused on the oilfield services sector and the current portfolio. Akastor has an opportunistic approach and will hold portfolio companies as long as it creates more value than alternative owners. Akastor wishes to contribute to sustainable social development through responsible business practices. the company’s Code of Conduct is a handbook that applies to all employees and provides guiding on what Akastor considers to be responsible ethical conduct. the Code of conduct give a framework for what is acceptable behaviour that should be reflected in every aspect of how business is conducted. the ethical guidelines and other policy documents of the group have been drafted on the basis of these basic corporate values. Corporate Responsibility Akastor takes an active approach to corporate responsibility. Corporate responsibility in Akastor is about making good business decisions, with minimum risk to reputation, brand and the future sustainability of our business. the main focus of corporate responsibility activities in Akastor, defined in our group-wide integrity policy, is to work against corruption, to respect human rights and to care for health, safety and the environment. All our portfolio companies are expected to ensure strong corporate responsibility in their operations. Akastor is a member of trace International, which supports our work against corruption. Akastor is also committed to follow the Global Framework Agreement (GFA) entered into by Aker with the trade unions Fellesforbundet, IndustriAll Global union, nIto and tekna on 17 December 2012. the GFA builds on and continues the commitment from the previous framework agreements signed in 2008 and 2010, and outlines key responsibilities in relation to human and trade union rights. the parties commit themselves to achieving continuous improvements within the areas of working conditions, industrial relations with the employees of the Aker group of companies, health and safety standards at the workplace and environmental performance. information Further in respect of the corporate social responsibility work of Akastor and its portfolio of companies can be found in the separate report published simultaneously as the company’s annual report for 2014. 2. business the objectives of the company, as defined in its articles of association, are «to own or carry out industrial and other associated businesses, management of capital, and other functions for the group, and to participate in or acquire other businesses». the articles of association are available at the company’s website www.akastor.com. the principal strategies of the group are presented in the annual report. each year, the board of directors evaluates the existing strategy and approves any significant changes to such, as well as goals and guidelines of the company, through a designated strategy process. Information concerning the financial position and principal strategies of the company, and any changes thereto is disclosed to the market in the context of the company’s quarterly reporting and in designated market presentations as well as on the company’s web site. 3. equity and Dividends Equity the management and the board regularly monitor that the group’s equity and liquidity are appropriate for its objectives, strategy and risk profile. the book equity of the group as per December 31, 2014 is noK 9 378 million, which represents an equity ratio of 38.4 percent. the management of financial risk is further described in the annual report for 2014. Dividend Policy the board proposes the level of dividend payment to the general meeting who in turn is the decisive corporate body for dividend decisions. the extent possible under local law, the shares purchased by each employee were funded by a loan provided by the local employer company. the loan will be repaid by salary deductions over a period of 12 months. over time, Akastor’s shareholders will receive a competitive return on their investment through a combination of cash dividends and increases in the share price. the ambition of the board of directors is to execute ad-hoc dividend distributions from sales proceeds received by the company through divestments or other realizations of assets. the company does not intend to distribute regular or annual dividends, but will consider dividends on an ongoing basis taking into consideration the company’s M&A activities, expected cash flow, capital expenditure plans, financing requirements and appropriate financial flexibility. Authorizations for the board of directors proposals from the board of directors for future authorisations for share capital increases, share buy-backs or similar shall be for defined purposes, such as share purchase programs and acquisitions of companies, and shall remain in effect until the next annual general meeting. the company’s annual general meeting on April 10, 2014 resolved to authorize the board to purchase treasury shares up to an aggregate nominal value of noK 45 484 000 (ten percent of the share capital). the resolution specified three purposes for utilization all of which were subject to separate voting under the general meeting: (i) purchase of treasury shares to be used as transaction currency in connection with acquisitions, mergers, demergers and other transfers of business, (ii) purchase of treasury shares to be sold and/ or transferred to employees under share purchase programs for employees and (iii) purchase of treasury shares for the purpose of subsequent deletion of such shares. the board’s authorization to purchase treasury shares is valid for the period until the date of the annual general meeting of 2015, however in no circumstances beyond June 30, 2015. In total, 2 705 000 shares were bought by the company in 2014 for use in the share purchase program in 2014. As of December 31, 2014, the company holds 2 976 376 own treasury shares. there are no current provisions in the Articles of Association of the company or power of attorney from the general meeting which grant the board of directors the mandate to issue or buy back in the company for the purposes of capital increases, or to distribute extraordinary dividends. However, it is the board’s ambition to propose to the annual general meeting on April 8, 2015 that the board of directors is granted such authorizations. Share Purchase Program for Employees Since 2012 the company has had an annual share purchase programs for eligible employees. In the 2014 program, all employees in norway and eight other countries were invited to buy shares for a maximum amount of noK 60 000. to In the 2014 program participants were offered a standard discount of noK 1 500 for participation in addition to a price reduction of 25 percent on the share price. Management was also invited to take part in a separate management share program allowing eligible managers to purchase shares for an amount equal to 25 percent of their salary and with a discount of 25 percent on the share price. the board of directors of Akastor ASA resolved in 2014 that Frank o. Reite, Chief executive officer of Akastor ASA (either personally or through his wholly-owned subsidiary Fausken Invest AS) could purchase up to 100 000 treasury shares yearly from the company under the management share purchase program of Akastor described above. Chief Financial officer leif H. Borge and Investment Director Karl erik Kjelstad were authorized to buy up to 100 000 shares each under the management share purchase program for 2014 (either personally or through their wholly-owned subsidiaries). Furthermore, the board resolved that Mr. Reite could purchase up to 100 000 additional treasury shares in 2014 at the price of 18.72 noK per share (equivalent with the average share price for the first 20 days of trading following completion of the demerger of the Aker Solutions group on September 29, 2014, less a discount of 20 percent. All shares purchased under the share programs described above were subject to a three year lock-up period under which the acquired shares may not be sold or otherwise disposed of. the sale of shares to employees pursuant to the programs were realized from treasury shares held at any given time, or by acquiring additional treasury shares pursuant to existing authorizations for the board of directors. 4. equal treatment of shareholders and transactions with related Parties the company has only one class of shares, and all shares carry equal rights. existing shareholders shall have pre-emptive rights to subscribe for shares in the event of share capital increases, unless otherwise indicated by special circumstances. If the pre-emptive rights of existing shareholders are waived in respect of a share capital increase, the reasons for such waiver shall be explained by the board of directors. transactions in own shares are effected via the oslo Børs. As of December 31, 2014, Aker ASA holds 70 percent of the shares of Aker Kværner Holding AS which holds 40.27 percent of the shares of Akastor. As per the same date, Aker ASA directly held 17 331 762 shares of Akastor, equivalent to 6.3 percent of the shares, as well as being exposed to 891 762 shares of Akastor through a total return swap arrangement. proposition no. 88 (2006–2007) to Stortinget (the norwegian PRINT parliament) contains more detailed information concerning the establishment of Aker Kværner Holding AS and the agreement between Aker ASA and the other shareholder of Aker Kværner Holding AS. the board of directors is of the view that it is positive for Akastor that Aker ASA assumes the role of an active owner and is actively involved in matters of importance to Akastor and to all shareholders. the cooperation with Aker ASA offers Akastor access to special know-how and resources within strategy, transactions and funding. Moreover, Aker ASA offers network and negotiation resources from which Akastor benefits in various contexts. this complements and strengthens Akastor without curtailing the autonomy of the group. It may be necessary to offer Aker ASA special access to commercial information in connection with such cooperation. Any information disclosed to Aker ASA’s representatives in such a context will be disclosed in compliance with applicable laws. Applicable accounting standards and regulations require Aker ASA to prepare its consolidated financial statements to include accounting information of Akastor. As of January 1, 2014, Aker ASA is deemed to have control of Akastor pursuant to the revised accounting standard IFRS 10. Akastor is thus consolidated as a subsidiary in Aker ASA’s accounts from this date. Subsequently, Aker Solutions ASA and Kværner ASA are deemed as related parties to Akastor for accounting purposes. In order to comply with these accounting standards, Aker ASA has in the past received, and will going forward receive, unpublished accounting information of Akastor. Such distribution of unpublished accounting information from Akastor to Aker ASA is executed under strict confidentiality and in accordance with applicable regulations on handling of inside information. Aker ASA, Kværner ASA and Aker Solutions ASA (or their subsidiaries) are however not deemed, within the meaning of the public limited liability Companies Act, to be a related party of Akastor. the board of directors and the executive management team of Akastor are nevertheless very conscious that all relations with these companies, shall be premised on commercial terms and structured in line with arm’s length principles. In the event of any material transactions between the company and shareholders, directors, senior executives, or related parties thereof, which do not form part of the ordinary course of the company’s business, the board of directors shall arrange for an independent assessment. the same shall, generally speaking, apply to the relationship between Akastor and Aker ASA related companies. Akastor has prepared guidelines as part of its rules of procedure for the Chief executive officer and board of directors ensuring that directors and the Chief executive officer notify the board of directors if they have any material direct or indirect personal interest in any agreement concluded by the group. the guidelines stipulate that the board members and the Chief executive officer shall not participate in the preparation, deliberation, or resolution of any matters that are of such special importance to themselves, or any of their related parties, so that the board member in question must be deemed to have a prominent personal or financial interest in such matters. the relevant board member or the Chief executive officer shall raise the issue of his or her competence whenever there may be cause to question it, and are the primary responsible for adopting the correct decision as to whether he or she should step down from participating in the discussion of the matter at hand. In general, as further stipulated in Akastor’s principles for related party transactions, directors of Akastor should be cautious in participating in the consideration of issues where a potential conflict of interest or conflict of role may arise, undermining the confidence in the decision process. Such person may not participate in board discussions of more than one company that is part of the same related party agreement, unless the companies have common interests. these assessments will be carried out on a case-by-case basis; in most events, and as a starting point, by the relevant board members themselves, but often also in cooperation with internal and/or external legal counsel. For instance, board member Kjell Inge Røkke, who is an indirect shareholder of both Aker ASA and Akastor as well as chairman of the board of Aker ASA will, as a ground rule, not participate in the board’s discussions of matters that concern commercial relationships between Akastor and Aker ASA related companies as his relative indirect ownership interests in Aker ASA exceed his ownership interests in Akastor. Also, chairman of the board Øyvind eriksen is the Ceo and shareholder of Aker ASA, but external legal counsel has concluded that such shareholding, as a ground rule, is not significant enough to, under normal circumstances, imply that he is under an obligation to automatically step down from such discussions. the above principles will normally also be applied if Akastor contracts with other companies in which said board members hold direct or indirect ownership interests that exceed, in relative terms, their ownership interests in Akastor. If ground for incapacity is concluded, the relevant board member will, as a ground rule, prior to the relevant board meeting, not be granted access to any documentation prepared to the board of directors for the deliberation of the agenda item in question. In general, Akastor applies a strict norm as far as competence assessments are concerned. In cases where the chairman of the board of directors does not participate in the deliberations, the deputy chairman of the board of directors chairs the meeting. As far as the other officers and employees of Akastor are concerned, transactions with related parties and conflicts of interest are comprehensively addressed and regulated in the group’s Code of Conduct. the Related parties note to the consolidated financial statements contains information on the most significant transactions between Akastor and companies within the Aker ASA group. 5. freely negotiable shares the shares are listed on the oslo Børs and are freely transferable. no transferability restrictions are laid down in the articles of association. 6. General meetings Attendance, Agenda and Voting the company encourages shareholders to attend the general meetings. It is also the intention to have representatives of the board of directors as well as the chairman of the nomination committee and the company’s auditor to attend the general meetings. notices convening general meetings, including comprehensive documentation relating to the items on the agenda, including the recommendation of the nomination committee, are made available on the company’s website no later than 21 days prior to the general meeting. the articles of association of the company stipulate that documents pertaining to matters to be deliberated by the general meeting shall only be made available on the company’s website, and not normally be sent physically by post to the shareholders unless required by statute. the following matters are typically decided at the annual general meeting, in accordance with the articles of association of Akastor ASA and norwegian background law: ŸŸ election of the nomination committee and stipulation of the nomination committee’s fees; ŸŸ election of shareholder representatives to the board of directors; ŸŸ election of the external auditor and stipulation of the auditor’s fee; ŸŸ Approval of the annual accounts and the board of directors’ report, including distribution of dividend. ŸŸ other matters which, by law or under the articles of association, are the business of the annual general meeting. the deadline for registering intended attendance is as close to the general meeting as possible, but not shorter than five days before the meeting. Shareholders who are unable to attend may vote by proxy. Moreover, information concerning both the registration procedure and the filing of proxies is included in the notice convening the general meeting and on the registration form. the company also aims to structure, to the extent practicable, the proxy form such as to enable the shareholders to vote on each individual item on the agenda. Chairman the articles of association stipulate that the general meetings shall be chaired by the chairman of the board of directors or a person appointed by said chairman. According to the Code of practice the board should however «make arrangements to ensure an independent chairman for the general meeting». thus, the articles of Akastor ASA deviate from the Code of practice in this respect. this has its background in a long- lasting tradition in Akastor. Having the chairman of the board chairing the general meeting also simplifies the preparations for the general meetings significantly. Election of Board Members It is a priority for the nomination committee that the board of directors shall work in the best possible manner as a team, and that the background and competence of the board members shall complement each other. As a consequence, the board of directors will propose that the shareholders are invited to vote on the full board composition proposed by the nomination committee as a group, and not on each member separately. Hence, Akastor deviates from the Code of practice stipulating that one should make «appropriate arrangements for the general meeting to vote separately on each candidate nominated for election to the company’s corporate bodies». Physical Attendance and Electronic Voting It is a priority for the general meeting to be conducted in a sound manner, with all shareholder votes to be cast, to the extent possible, on the basis of the same information. the company has thus far not deemed it advisable to recommend the introduction of an electronic attendance, i.e. arranging for general meetings to be held as physical meetings with online coverage allowing for shareholders to participate via web. the company will contemplate the introduction of such arrangements on an on-going basis in view of; inter alia, the security and ease of use offered by available systems. Shareholders will have the opportunity to cast votes electronically in advance of general meetings (however, not during the meeting). Minutes Minutes of general meetings will be published as soon as practicable on the announcement system of the oslo Børs, www.newsweb.no (ticker: AKA), and on the company’s own website, www.akastor.com. 7. nomination Committee the articles of association stipulate that the company shall have a nomination committee. the nomination committee shall have no less than three members, who shall normally serve for a term of two years. the current members of the nomination committee are leif-Arne langøy (chairman), Gerhard Heiberg, trond Brandsrud and Mette Wikborg. the members leif-Arne langøy and Mette Wikborg are elected up until the annual general meeting 2015, while Gerhard Heiberg and trond Brandsrud are elected up until the annual general meeting 2016. langøy is deputy chairman of the board in tRG Holding AS and the Resource Group tRG AS, as well as chairman of the board of Kværner ASA. trond Brandsrud is CFo of Aker ASA. no members of the nomination PRINT committee are employed by, or board members of, Akastor. the majority of the members of the nomination committee are independent of both Akastor’s board of directors and the executive management of the company. the right of the employees to be represented and participate in decision making is safeguarded through expanded employee representation on the board of directors of both Akastor ASA and in a number of the group’s portfolio companies. the committee’s recommendations (relating to particularly members of the board of directors and their remuneration) shall address how the new board candidates will attend to the interests of the shareholders in general and fill the requirements of the company, including with respect to competence, capacity and independence. the composition of the nomination committee shall reflect the interests of all shareholders and ensure independence from the board of directors and the executive management. the members and the chairman of the nomination committee are appointed by the general meeting, which also determines the remuneration of the committee. the annual general meeting 2010 adopted guidelines governing the duties of the nomination committee. According to these guidelines, the committee shall emphasize that candidates for the board have the necessary experience, competence, and capacity to perform their duties in a satisfactory manner. A reasonable representation with regard to gender and background should also be emphasized. the chairman of the nomination committee has the overall responsibility for the work of the committee. In the exercise of its duties, the nomination committee may contact, among others, shareholders, the board, management, and external advisors. the nomination committee shall also ensure that its recommendations are endorsed by the largest shareholders. Information concerning the nomination committee and deadlines for making suggestions or proposing candidates for directorships will be made available on the company’s website, www.akastor.com when there are candidates up for election. For the annual general meeting 8 April 2015, none of the directors are up for election. 8. Composition and independence of the board of Directors Composition It has been agreed with the employees that the company shall have no corporate assembly. Hence, the board appoints its own chairman, cf. the public limited liability Companies Act section 6-1(2), unless the chairman is appointed by the general meeting. the proposal of the nomination committee will normally include a proposed candidate for appointment as chair of the board of directors. the board of directors appoints its own deputy chair. According to the public limited liability Companies Act, the directors are appointed for a term of two years at a time unless otherwise stated in the company’s articles of association. the articles of association of Akastor ASA stipulate that directors may be elected for a period of one to three years. the articles of association stipulate that the board of directors shall comprise six to twelve persons, one third of whom shall be elected by and amongst the employees of the group. In addition, up to three shareholder-appointed alternates may be appointed. the board of directors comprised eight members as per September 29, 2014, five of whom were elected by the shareholders and three of whom were elected by and among the employees. the company encourages the board members to hold shares of the company. the shareholdings of the board members as of December, 31 2014 will be set out in the Management remunerations note to the consolidated annual statements in the annual report for 2014. In addition to Øyvind eriksen’s and Kjell Inge Røkke’s indirect ownership of shares in the company, also the directors lone Fønss Schrøder, Jannicke Sommer-ekelund and Asbjørn Michailoff pettersen are currently shareholders in Akastor ASA. the board composition, including the board meeting attendance and information about the board members’ background and expertise will be detailed in the annual report for 2014. the appointment of employee representatives to the board of directors is conducted as prescribed by the public limited Companies Act and the Representation Regulations. the board of directors has appointed a designated appointment committee charged with implementing the appointment of such employee representatives. Independence A majority of the board members elected by the shareholders are independent of the executive personnel and important business associates. none of the executive personnel of the company are members of the board of directors. the composition of the board of directors aims to ensure that the interests of all shareholders are attended to, and that the company has the know-how, resources, and diversity it needs at its disposal. Among the five shareholder-elected board members, three of such (Sarah Ryan, lone Fønss Schrøder and Kathryn M. Baker) are deemed independent from the company’s largest indirect shareholder, Aker ASA. 9. the Work of the board of Directors Procedures the board adopts an annual plan for its work. Furthermore, there are rules of procedure for the board of directors, which govern areas of responsibility, duties and the distribution of roles between the board of directors, the chairman of the board of directors and the Chief executive officer. the rules of procedure for the board of directors also include provisions on convening and chairing board meetings, decision making, the duty and right of the Chief executive officer to disclose information to the board of directors, the duty of confidentiality, etc. According to the company’s articles of association, each of the board members elected by the shareholders will serve for a period of one to three years pursuant to further decision by the general meeting. this to provide the nomination committee with the flexibility to propose varying terms of service for the candidates. Meetings the board of directors will hold board meetings whenever needed, but normally six to twelve times a year. the need for extraordinary board meetings may typically arise because the internal authorization structure of the company requires the board of directors to deliberate and approve material tenders to be submitted by the company. Whilst the deadlines for such submission often change, it is difficult to fit this into the calendar of ordinary board meetings. the board of directors held ten ordinary board meetings in 2014, and in addition, two extraordinary board meetings were held. the total attendance rate at board meetings for 2014 was 94 percent. The Matters Discussed in the board the Chief executive officer prepares cases for deliberation by the board of directors in cooperation with the chairman of the board. Weight is attached to having matters prepared and presented in such a way that the board of directors is provided with an adequate basis for its deliberations. the board of directors has overall responsibility for the management of Akastor and shall, through the Chief executive officer, in cooperation with the chairman of the board, ensure that its activities are organized in a sound manner. the board of directors shall adopt plans and budgets for the business, and keep itself informed of the financial position of, and development within, Akastor. this encompasses the annual planning process of Akastor, with the adoption of overall goals and strategic choices for the group, as well as financial plans, budgets, and forecasts for the group and the portfolio companies. the board of directors performs annual evaluations of its work and its know-how. Audit Committee Akastor will have an audit committee comprising two to four of the board members. the audit committee currently comprise the directors lone Fønss Schrøder (chair), Kathryn M. Baker and Asbjørn Michailoff pettersen. the audit committee is independent from the management. At least one of the members of the audit committee shall have either formal qualifications within accounting or auditing, or relevant experience and skills within the same. Both members Fønss Schrøder and Baker have such relevant experience and skills. the audit committee has a mandate and a working method that complies with statutory requirements. the audit committee mandate forms an integrated part of the rules of procedures for the board of directors. the committee will participate, on behalf of the board of directors, in the quality assurance of guidelines, policies, and other governing instruments pertaining to Akastor. the audit committee performs a qualitative review of the quarterly and annual reports of Akastor. Significant judgment calls (uncertain estimates) made in the financial statements in the quarter are reviewed by the audit committee. the audit committee further supports the board of directors in safeguarding that the company has sound risk management and internal controls over financial reporting. the audit committee reviews the status on internal controls on an annual basis. In order to safeguard appropriate processes and assessments, the board’s audit committee shall also review major M&A transactions as well as related party transactions which are not part of the company’s ordinary course of business, unless such related party transactions are immaterial. Akastor currently has no remuneration committee as the experiences from having such showed more merit in discussing matters comprised by this committee’s mandate with all board members present. As of 31 December 2014, there are no other board committees than the audit committee. the board does not envisage appointing any further board committees in 2015. 10. risk management and internal Control Governing principles the board of directors shall ensure that Akastor has sound internal control and systems for risk management that are appropriate in relation to the extent and nature of the company’s activities. the audit committee supports the board of directors in safeguarding that the company has internal procedures and systems that ensure good corporate internal controls and proper risk governance, effective management, particularly in relation to financial reporting. the Chief Financial officer reports directly to the audit committee on matters relating to financial reporting, financial risks and internal controls. Akastor has implemented an internal system for reporting serious matters such as breaches of ethical guidelines and violations of the law. In 2015, it is the ambition of the company that such reporting system will also be made available to external parties on www.akastor.com. Risk Management the board of directors carries out an annual review of the company’s most important areas of exposure to risk and its internal control arrangements. Akastor employs a decentralised model for allocating managerial responsibility under which the portfolio companies are required to establish their own risk management and control systems. Akastor’s representatives on boards of directors seek to ensure that the portfolio companies follow the principles of sound corporate governance. Akastor manages risk through an internal framework both on a corporate and portfolio company level comprising guidelines, PRINT policies and procedures intended to ensure good business operations and provide unified and reliable financial reporting. Some of these are adopted already, while some are work in progress. the board of directors has adopted an authorisation matrix that forms part of its governing documents where authority is delegated to the Akastor Chief executive officer. Furthermore, authorization matrices are adopted for each of the group’s portfolio companies, pursuant to which the Akastor Chief executive officer delegates authority to the boards and Ceos of the respective portfolio companies, which again adopts authorization matrices for the portfolio organizations. Special expenditure approval procedures have also been developed. the board receives and reviews risk reports prepared by the management. the management’s risk reporting is based on the total level of insight obtained through regular reporting and the close cooperation that Akastor has with the portfolio companies, including from Akastor’s investment directors and board representatives. the management of operational risk primarily occurs in the underlying portfolio companies, although Akastor acts as an active driver through its involvement in the boards. Akastor’s management holds review meetings with the management of the different portfolio companies. the purpose of the meetings is to conduct an in-depth review of the development of each portfolio company, focusing on operations, risk management, market conditions, the competitive situation and strategic issues. these meetings provide a solid foundation for Akastor’s assessment of its overall financial and operational risk. prior to the board’s review of risk reporting, the audit committee reviews the reported risks and associated risk-reducing measures. the audit committee also reviews the company’s in-house reporting systems and internal control and risk management, and prepares the board’s review of financial reporting. Financial Reporting the corporate financial reporting division reports to the Chief Financial officer and is responsible for the external reporting process and the internal management reporting process. this also includes assessing financial reporting risks and internal controls over financial reporting in the group. the internal management reporting consists of both financial and operational information. the consolidated external financial statements are prepared in accordance with IFRS and IAS standards as approved by the eu. the existing policies and standards governing the annual and quarterly financial reporting in the group, including the Akastor accounting principles, are available on the Akastor intranet for Akastor employees. Clearing meetings are held with the management teams of the portfolio companies in connection with the annual closing of accounts and may also be held in connection with quarterly financial reporting. For the 2014 financial year, clearing meetings were held in october 2014 and January 2015. the main purpose is to ensure high-quality financial reporting. Such meetings focus on important items involving estimation and judgment, non-balance-sheet items, new or modified accounting principles and other topics relevant to the respective portfolio companies. the external auditor is present in the clearing meetings. In addition, there are regular business review and board meetings in the portfolio companies which ensures reporting from the portfolio companies to the corporate management. Regular reports for Akastor ASA and the portfolio companies are submitted to the board of directors. the quarterly business update contains key financial numbers, M&A, financing, status of value creation plans, compliance, risk management and share price information for the Akastor group. Further, it contains key financial numbers, key operational topics, status on value drivers as well as key market information for the main portfolio companies. the monthly business update contain high level financial and operational information for the Akastor group, as well as key highlights for the main portfolio companies. 11. remuneration of the board of Directors the remuneration of the board of directors will reflect its responsibilities, know-how and time commitment, as well as the complexity of the business. the remuneration will be proposed by the nomination committee, and is not performance-related or linked to options in Akastor. More detailed information about the remuneration of individual board members will be provided in the Management remunerations note to the consolidated financial statements for the group in the annual report for 2014. neither the board members, nor companies with whom they are affiliated, should accept specific paid duties for Akastor beyond their directorships. If they nevertheless do so, the board of directors shall be informed and the reward shall be approved by the board of directors. no remuneration shall be accepted from anyone other than the company or the relevant group company in connection with such duties. 12. remuneration of executive Personnel the board of directors has adopted designated guidelines for the remuneration of executive management pursuant to the provisions of Section 6-16a of the public limited liability Companies Act. the guidelines were adopted by the general meeting April 10, 2014. the board of director’s statement on the remuneration of executive personnel for 2014/2015 will be a separate appendix to the agenda for the annual general meeting on April 8, 2015. Akastor has no option schemes or option programs for the allotment of shares to employees. the Chief executive officer determines the remuneration of executive management on the basis of the guidelines laid down by the board of directors. All performance-related remuneration within the group will be made subject to a cap. 13. information and Communication the company has adopted a designated investor relations policy which covers, among other things, guidelines for the company’s contact with shareholders other than through general meetings. extracts from the policy is available on the company’s website. Aker ASA has undertaken to retain control of Aker Kværner Holding AS for a minimum of ten years from June 2007. the board of directors has not deemed it appropriate to adopt specific guidelines for takeover situations for as long as the ownership cooperation context within Aker Kværner Holding AS remains intact. this is a deviation from the Code of practice. the company’s reporting of financial and other information is based on openness and the equal treatment of all securities market players. the long-term purpose of the IR function is to ensure access for the company to capital on competitive terms, whilst at the same time ensuring that the shareholders are provided with the most correct pricing of the shares that can be achieved. this shall take place through the correct and timely distribution of price-sensitive information, whilst ensuring, at the same time, that the company is in compliance with applicable rules and market practices. Reference is also made to the above discussion concerning the flow of information between Akastor and Aker ASA in connection with their cooperation within, inter alia, strategy, transactions, and funding. All stock exchange announcements and press releases are made available on the company’s website, and stock exchange announcements are also available on www.newsweb.no. All information sent to the shareholders is posted on the company’s website at the same point of time. the company holds open presentations in connection with the reporting of financial performance, and these presentations are broadcasted live via the internet. the financial calendar of the company will be made available on the company’s website. 14. take-overs the overriding principle for Akastor is equal treatment of shareholders. In a bid situation, the board of directors and management have an independent responsibility to help ensure that shareholders are treated equally, and that the company’s business actitivities are not disrupted unnecessarily. In a take- over situation, the board will have a particular responsibility to ensure that shareholders are given sufficient information and time to form a view of the offer. 15. Auditors the external auditor annually presents a plan for the performance of the audit work to the audit committee. In addition, the auditor provides the board of directors with a written confirmation to the effect that the independence requirement is met annually. the auditor attends all audit committee meetings, and the auditor has reviewed any material changes to the accounting principles of the company, or to the internal controls of the company, with the audit committee. the external auditor also attends the board meeting where the annual financial statements are reviewed and approved, normally in March. the board of directors holds a minimum of one annual meeting with the auditor without any executive personnel being in attendance. the board’s audit committee stipulates guidelines on the scope for using the auditor for services other than auditing, and makes recommendations to the board of directors concerning the appointment of the external auditor and the approval of the auditor’s fees. Fees payable to the auditor, separated into those relating to auditing and those relating to other services, are specified in the other operating expenses note to the consolidated financial statements for the group. For the approval of the auditor’s fees by the annual general meeting, the fees are specified into those relating to auditing and those relating to other services in the proposed resolutions to the general meeting. the external auditor has issued a statement to the chair of the audit committee confirming its independence. PRINT 06. FInAnCIAlS AnD noteS AkAstor GrouP Akastor Group | Consolidated income statement Akastor Group | Consolidated statement of comprehensive income Akastor Group | Consolidated statement of financial position Akastor Group | Consolidated statement of changes in equity Akastor Group | Consolidated statement of cash flow general note 1 | Corporate information note 2 | Basis for preparation note 3 | Accounting principles note 4 | Accounting estimates and judgements Performance of the year note 5 | Disposal of subsidiaries and demerger of new Aker Solutions note 6 | operating segments note 7 | operating revenue and other income note 8 | Salaries, wages and social security costs note 9 | operating leases note 10 | other operating expenses note 11 | Finance income and expenses note 12 | tax note 13 | earnings per share Assets note 14 | property, plant and equipment note 15 | Investment property note 16 | Intangible assets note 17 | Interest-bearing receivables note 18 | equity-accounted investees note 19 | other investments note 20 | Construction contracts note 21 | Inventories note 22 | trade and other receivables note 23 | Cash and cash equivalents equities and liabilities note 24 | Capital and reserves note 25 | Borrowings note 26 | other non-current liabilities note 27 | employee benefits - pension note 28 | provisions note 29 | trade and other payables financial risk management note 30 | Capital management note 31 | Financial risk management and exposures note 32 | Derivative financial instruments note 33 | Financial instruments Other note 34 | Group companies note 35 | Related parties note 36 | Management remunerations note 37 | Correction of errors note 38 | Subsequent events PRINT 29 30 31 32 33 34 34 35 41 43 44 47 47 48 49 49 50 51 52 53 54 56 56 57 58 58 58 59 59 60 62 63 66 66 66 67 70 72 75 78 80 84 84 Akastor Group | Consolidated income statement for the year ended December 31 Akastor Group | Consolidated statement of comprehensive income for the year ended December 31 Amounts in NOK million operating revenue other income Total revenue and other income Materials, goods and services Salaries, wages and social security costs other operating expenses Operating expenses before depreciation, amortization and impairment Operating profit before depreciation, amortization and impairment Depreciation and amortization Impairment Operating profit (loss) Finance income Finance expenses profit (loss) on foreign currency forward contracts profit (loss) from equity-accounted investees Profit (loss) before tax Income tax expense Profit (loss) from continuing operations profit from discontinued operations (net of income tax) Profit for the period Profit for the period attributable to: equity holders of the parent company non-controlling interests Note 7 7 37 8 10 14, 15, 16 14, 15, 16 11 11 11 18 12, 37 5, 37 37 2014 21 155 277 21 432 (12 742) (5 104) (2 206) (20 052) 1 380 (922) (1 164) (706) 119 (568) (372) (126) (1 653) 266 (1 387) 3 880 2 493 2 482 11 Profit for the period 1) Certain amounts shown here do not correspond to the 2013 financial statements and reflect adjustments made, refer to Note 37. 2 493 earnings per share (NOK) Basic earnings per share Diluted earnings per share earnings per share continuing operations (NOK) Basic earnings per share Diluted earnings per share 13, 37 13, 37 9.13 9.13 (5.09) (5.09) Restated1) 2013 18 388 60 18 448 (10 230) (4 819) (2 044) (17 093) 1 355 (749) (370) 235 47 (583) 84 (25) (242) 4 (238) 1 362 1 124 1 114 10 1 124 4.11 4.11 (0.87) (0.87) Amounts in NOK million profit for the period other comprehensive income Items that may be reclassified subsequently to profit or loss: Cash flow hedges, effective portion of changes in fair value Deferred tax of cash flow hedges, effective portion of changes in fair value Cash flow hedges, reclassification to income statement Deferred tax of cash flow hedges, reclassification to income statement total change in hedging reserve, net of tax Change in fair value reserve Currency translation differences - foreign operations Total items that may be reclassified subsequently to profit or loss, net of tax Items that will not be reclassified to profit or loss: Remeasurement gain (loss) net defined benefit liability Deferred tax of remeasurement gain (loss) net defined benefit liability Total items that will not be reclassified to profit or loss, net of tax Total other comprehensive income, net of tax Total comprehensive income for the period, net of tax Attributable to: equity holders of the parent company non-controlling interests Total comprehensive income for the period Note 2014 2 493 2013 1 124 19 27 (942) 254 345 (99) (442) (168) 939 329 (70) 19 (51) 278 2 771 2 750 21 2 771 495 (134) (134) 40 267 49 973 1 289 25 (7) 18 1 307 2 431 2 427 4 2 431 PRINT Akastor Group | Consolidated statement of financial position for the year ended December 31 Akastor Group | Consolidated statement of changes in equity for the year ended December 31 Note Dec 31, 2014 Restated1) Dec 31, 2013 Restated1) Dec 31, 2012 Remeasure- ment gain Total parent Amounts in NOK million Assets Non-current assets property, plant and equipment Investment property Deferred tax assets Intangible assets non-current interest-bearing receivables other non-current operating assets equity-accounted investees other investments Total non-current assets Current assets Current tax assets Inventories trade and other receivables Derivative financial instruments Current interest-bearing receivables Cash and cash equivalents Assets classified as held for sale Total current assets Total assets equity and liabilities Equity Issued capital treasury shares other capital paid in Reserves Retained earnings Total equity attributable to the equity holders of the parent company Non-controlling interests Total equity Non-current liabilities non-current borrowings employee benefits obligations Deferred tax liabilities other non-current liabilities Total non-current liabilities Current liabilities Current borrowings Current tax liabilities provisions trade and other payables Derivative financial instruments liabilities classified as held for sale Total current liabilities Total liabilities Total liabilities and equity 14 15 12 16 17 18 19 12 21, 37 22 32 17, 37 23 5, 37 24 37 25 27 12, 37 26 25 12 28 29 32 5, 37 6 469 707 214 3 122 131 691 264 347 11 945 43 1 785 7 178 2 199 205 1 075 - 12 485 24 430 162 (2) 1 534 742 6 942 9 378 - 9 378 4 720 473 483 285 5 961 308 97 395 6 429 1 861 - 9 090 15 051 24 430 9 457 358 600 8 242 159 162 440 645 20 063 106 2 419 17 586 1 544 511 2 345 3 367 27 878 47 941 455 (3) 1 534 192 11 036 13 214 161 13 375 7 420 748 2 057 356 10 581 3 896 38 872 17 409 834 936 23 985 34 566 47 941 10 041 - 570 6 884 672 168 283 569 19 187 68 2 360 16 524 441 421 1 214 - 21 028 40 215 455 (6) 1 534 (1 121) 10 961 11 823 157 11 980 6 683 805 1 828 415 9 731 1 008 37 1 173 16 012 274 - 18 504 28 235 40 215 1) Certain amounts shown here do not correspond to the 2012 and 2013 financial statements and reflect adjustments made, refer to Note 37. oslo, March 13, 2015 | Board of Directors of Akastor ASA Øyvind eriksen | Chairman lone Fønns Schrøder Kjell Inge Røkke Kathryn Moore Baker Sarah elizabeth Ryan Jannicke Sommer-ekelund Stig Willy Faraas Asbjørn Michailoff pettersen Frank ove Reite | Ceo Amounts in NOK million Note capital shares paid in earnings share Treasury capital Retained Hedging reserve1 translation reserve1 fined benefit obligations value reserve1) equity controlling Total holders interests equity Other Currency (loss) net de- fair company Non- equity as of January 1, 2013 Restatement Restated equity as of january 1, 2013 2013 profit for the period other comprehensive income Total comprehensive income Transactions with equity holders 24 24 8, 24 Dividend treasury shares employee share purchase program Total transactions with equity holders equity as of December 31, 2013 455 - (6) 1 534 10 961 - - (37) 144 - (1 157) (227) 119 11 823 157 11 980 - - - (37) - (37) 455 (6) 1 534 10 924 144 (1 157) (227) 119 11 786 157 11 943 - - - - - - - - - - - 3 - 3 - - - - - - 1 114 - - - 267 979 1 114 267 979 (1 082) 180 (100) - (1 002) - - - - - - - - - 18 18 - - - - - 1 114 10 1 124 49 1 313 (6) 1 307 49 2 427 4 2 431 - - - - (1 082) 183 - - (1 082) 183 (100) - (100) (999) - (999) 455 (3) 1 534 11 036 411 (178) (209) 168 13 214 161 13 375 2014 profit for the period other comprehensive income Total comprehensive income - - - Transactions with equity holders Demerger of new Aker Solutions Dividend treasury shares employee share purchase program Total transactions with equity holders equity as of December 31, 2014 24 24 8, 24 (293) - - - (293) - - - 2 - (1) - 1 - - - - - - - 2 482 - - - - 2 482 11 2 493 - (442) 929 (51) (168) 268 10 278 2 482 (442) 929 (51) (168) 2 750 21 2 771 (5 428) 388 (105) (1 115) (59) 26 - - - - - - (1) - - - - - - - (5 437) (1 115) (60) 26 (182) (5 619) - - - (1 115) (60) 26 - (6 576) 388 (105) (1) - (6 586) (182) (6 768) 162 (2) 1 534 6 942 357 646 (261) - 9 378 - 9 378 1) See note 24 Capital and reserves for more information. PRINT Akastor Group | Consolidated statement of cash flow for the year ended December 31 Amounts in NOK million Cash flow from operating activities profit for the period - continuing operations profit for the period - discontinued operations Profit for the period Adjustments for: Income tax expense net interest cost and unrealized currency (gain) loss (profit) loss on foreign currency forward contracts Depreciation, amortization and impairment (profit) loss on disposals and non-cash effects (profit) loss from equity-accounted investees Total adjustments Changes in operating assets Cash generated from operating activities Interest paid Interest received Income taxes paid Dividends received Net cash from operating activities Cash flow from investing activities Acquisition of subsidiaries, net of cash acquired Acquisition of property, plant and equipment payments for capitalized development proceeds from sale of subsidiaries, net of cash proceeds from sale of property, plant and equipment proceeds from sale of equity-accounted investments Acquisition of equity-accounted investments proceeds from other investments proceeds from repayment of interest-bearing receivables payment related to increase in interest-bearing receivables Net cash from investing activities Cash flow from financing activities proceeds from borrowings Repayment of borrowings Repurchase of treasury shares proceeds from employees share purchase program Contribution from non-controlling interests Dividends to shareholders Net cash from financing activities effect of exchange rate changes on cash and bank deposits Net increase (decrease) in cash and bank deposits Demerger of new Aker Solutions2) Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period of which is restricted cash Note 2014 Restated1) 2013 (1 387) 3 880 2 493 167 347 436 2 392 (2 956) 51 2 997 (1 578) 1 353 (696) 136 (312) 7 488 (126) (1 302) (639) 5 948 15 124 (11) 21 513 (42) 4 499 3 770 (7 963) (60) 26 6 (1 115) (5 336) 142 (206) (1 064) 2 345 1 075 39 (237) 1 362 1 125 502 1 054 (262) 1 872 (66) 24 4 249 (191) 4 058 (796) 149 (333) - 3 078 (1 136) (2 651) (821) - 39 20 - 29 293 (25) (4 252) 4 182 (901) (100) 183 - (1 082) 2 282 23 1 131 - 1 214 2 345 34 14, 15, 16 14 16 5 14, 15 24 24 24 23 1) Certain amounts shown here do not correspond to the 2013 financial statements and reflect adjustments made, refer to Note 37. 2) Refer to Note 5 for more information about the demerger. note 1 | Corporate information Akastor ASA (the Company) is a limited liability company incorporated and the consolidated financial statements of Akastor ASA and its subsidiaries domiciled in norway and whose shares are publicly traded. the registered (collectively, the group and separately as group companies) for the year office is located at Fjordalléen 16, oslo. the ultimate parent company is ended 31 December 2014 were approved by the board of directors and the Resourcec Group tRG AS. Ceo on 13 March 2015. the consolidated financial statements will be on 26 September, 2014, the demerger of Akastor was completed and Aker Solutions Holding ASA (“new Aker Solutions”), a subsidiary of the group is an oil-services investment company with a portfolio of Akastor ASA established for the purposes of the demerger, was listed on industrial holdings, real estate and other investments. Akastor is listed the oslo Stock exchange on September 29, 2014. At the same time Aker on the oslo Stock exchange under the ticker AKA. Information on the Solutions ASA changed name to Akastor ASA. group’s structure is provided in note 34. Information on other related authorised by the Annual General Meeting on 8 April 2015. party relationships of the group is provided in note 35. note 2 | basis for preparation Basis of accounting the consolidated financial statements have been prepared in accordance the estimates and underlying assumptions are reviewed on an ongoing with International Financial Reporting Standards (IFRS) as approved by basis. Revisions to accounting estimates are recognized in the period in the european union, their interpretations adopted by the International which the estimate is revised and in any future periods affected. Accounting Standards Board (IASB) and the additional requirements of the norwegian Accounting Act as of December 31, 2014. Demerger of Akastor Basis of measurement Several transactions occurred in 2014 in order to demerge Akastor and reorganize the Aker Solutions businesses under the ownership the consolidated financial statements have been prepared on the of Aker Solutions Holding ASA (renamed to Aker Solutions ASA). the historical cost basis except for the following material items, which are transactions primarily involved demergers of companies, transfer of measured on an alternative basis on each reporting date: shares in subsidiaries and sale of assets. unsettled balances are presented Derivative financial instruments are measured at fair value. financial statements. All transactions related to the restructuring were as interest-bearing payables and receivables to related parties in the ŸŸ ŸŸ ŸŸ Available-for-sale financial assets are measured at fair value. Contingent consideration assumed in business combinations are measured at fair value. ŸŸ net defined benefit (asset) liability is recognized at fair value of plan assets less the present value of the defined benefit obligation. Functional and presentation currency completed in 2014. See note 34 for overview of group companies in Akastor after the demerger. the demerger of Akastor is a transaction under common control outside the scope of IFRS 3 Business Combinations and IFRS 17 Distribution of non-cash assets to owners. Akastor has established the accounting policy to account for such transactions at book value and accordingly no gain is recognized in net profit from discontinued operations. these consolidated financial statements are presented in noK, which is In preparation of the continuing operations the following key allocations Akastor ASA’s functional currency. All financial information presented in between Akastor and new Aker Solutions were made up until the date of noK has been rounded to the nearest million (noK million), except when the demerger: otherwise stated. the subtotals and totals in some of the tables in these consolidated financial statements may not equal the sum of the amounts Corporate and other shared costs shown due to rounding. Continuing operations include direct expenses as well as allocations arising from certain shared expenses including office facilities, and management When the functional currency in a reporting unit is changed, the effect of fees covering costs related to corporate services provided centrally, such the change is accounted for prospectively. as tax, legal, treasury, compliance, business development, insurance, Use of estimates and judgements Allocations are made based upon an appropriate allocation method the preparation of financial statements in conformity with IFRS requires depending upon the nature of the costs. Headcount, square meters and management to make judgements, estimates and assumptions that affect revenues are some of the variables used to perform such allocations. staffing, risk management, It support and corporate accounting services. the application of policies and reported amounts of assets and liabilities, income and expenses. Although management believes these assumptions Allocation of finance costs to be reasonable, given historical experience, actual amounts and results Financial items from group finance arrangements have been allocated could differ from these estimates. the items involving a higher degree of based on capital employed. Akastor believes that while the basis for judgement or complexity, and items where assumptions and estimates are allocating such costs is reasonable for prior periods, the amounts may not material to the consolidated financial statements, are disclosed in note 4 be representative of the finance costs necessary for Akastor to operate as Accounting estimates and judgements. a separate stand-alone entity. PRINT Changes in accounting policies Interests in associates and jointly controlled entities are accounted for using expenses from continuing operations, down to the level of profit after except for the changes below, the group has consistently applied the ŸŸ Amendments to IAS 36 Impairment of Assets: Recoverable the equity method. they are initially recognized at cost, which includes taxes. When an operation is classified as a discontinued operation, the accounting policies set out in note 3 Accounting principles to all periods Amount Disclosures for non-Financial Assets transaction costs. Subsequent to initial recognition, the consolidated comparative income statement is re-presented as if the operation had presented in theses consolidated financial statements. the group adopted the following new standards and amendments to standards, including any consequential amendments to other standards, ŸŸ Amendments to IAS 39 Financial Instruments: Recognition and Measurement: novation of Derivatives and Continuation of Hedge Accounting financial statements include the group’s share of the profit and loss and been discontinued from the start of the comparative year. other comprehensive income of the equity-accounted investees. the group’s investment includes goodwill identified on acquisition, net of eliminations include inter-segment revenues and interests from any accumulated impairment losses. When the group’s share of losses discontinued operations only to the extent that these revenues represent with a date of initial application of January 1, 2014: ŸŸ Amendments to IAS 32 Financial Instruments: presentation - exceeds its interest in an equity-accounted investee, the carrying amount operations that will not be continued in future periods. offsetting Financial Assets and Financial liabilities of that interest, including any long-term investments, is reduced to zero, ŸŸ ŸŸ ŸŸ ŸŸ IFRS 10 Consolidated Financial Statements IFRS 11 Joint Arrangements IFRS 12 Disclosures of Interests in other entities none of these standards have materially impacted the group’s financial statements upon implementation and previous years have not been restated. However, adoption of IFRS 10 have affected the group’s financial statements indirectly through Aker ASA’s revised assessment that they Amendments to IFRS 10 Consolidated Financial Statements, have control of Kvaerner ASA, Akastor ASA and new Aker Solutions ASA IFRS 12 Disclosure of Interests in other entities and IAS 27 under the new standard. Following this change, Kvaerner and new Aker Separate Financial Statements: Investment entities Solutions ASA will be reported as a related party of Akastor as from 2014. note 3 | Accounting principles and further losses are not recognized except to the extent that the group the statement of cash flow includes the cash flow from discontinued incurred legal or constructive obligations or has made payments on behalf operations. Cash flows attributable to the operating, investing and of the investee. financing activities of discontinued operations are presented in the notes to the extent these represent cash flows with third parties. the purpose of the investment determines where the profits and losses arising from the investment is presented in the income statement. When Foreign currency entities are formed to share risk in executing a project or are closely Foreign currency transactions and balances related to Akastor’s operating activities, the share of the profit or loss is transactions in foreign currencies are translated at the exchange rate at reported as part of other income in operating profit. Share of the profit or the date of the transaction. Monetary assets and liabilities denominated loss on financial investments is reported as part of Financial items. in foreign currencies at the balance sheet date are translated to the functional currency at the exchange rate on that date. Foreign exchange Transactions eliminated on consolidation differences arising on translation are recognized in the income statement. Summary of significant accounting policies When the group has entered into put options with non-controlling Intra-group balances and transactions, and any unrealised gains and non-monetary assets and liabilities measured in terms of historical cost the principal accounting policies applied in the preparation of these shareholders on their shares in that subsidiary, the anticipated acquisition losses or income and expenses arising from intra-group transactions, are in a foreign currency are translated using the exchange rate on the date consolidated financial statements are set out below. these policies have method is used. the agreement is accounted for as if the put option had eliminated in preparing the consolidated financial statements. unrealised of the transaction. non-monetary assets and liabilities denominated been consistently applied to all the years presented, unless otherwise stated. already been exercised. If the put option expires unexercised, then the gains arising from transactions with associates and jointly controlled in foreign currencies that are stated at fair value are translated to the liability is derecognized and the non-controlling interest is recognized. entities are eliminated to the extent of the group’s interest in the entity. functional currency at the exchange rates on the date the fair value was Basis of consolidation Subsidiaries Acquisitions of non-controlling interests only to the extent that there is no evidence of impairment. unrealised losses are eliminated in the same way as unrealised gains, but determined. Subsidiaries are entities controlled by the group. the group controls Acquisitions of non-controlling interests are accounted for as transactions Investments in foreign operations an entity when it is exposed to, or has rights to, variable returns from with owners in their capacity as owners and therefore no goodwill is Assets held for sale or distribution Items included in the financial statements of each of the group’s entities its involvement with the entity and has the ability affect those returns recognized as a result. Adjustments to non-controlling interests arising non-current assets, or disposal groups comprising assets and liabilities, are measured using the currency of the primary economic environment through its power over the entity. the financial statements of subsidiaries from transactions that do not involve the loss of control are based on a that are expected to be recovered primarily through sale or distribution in which the entity operates. the results and financial position of all the are included in the consolidated financial statements from the date on proportionate amount of the net assets of the subsidiary. rather than through continuing use, are classified as held for sale or group entities that have a functional currency different from the group’s which control commences until the date of which control ceases. distribution. this condition is regarded as met only when the sale is highly presentation currency are translated into the presentation currency Business combinations on the loss of control, the group derecognizes the assets and liabilities of or distribution in its present condition. Management must be committed Business combinations are accounted for using the acquisition method as the subsidiary, any non-controlling interests and the other components of to the sale or distribution, which should be expected to qualify for ŸŸ Assets and liabilities, including goodwill and fair value of the acquisition date, which is the date of which control is transferred equity. Any resulting gain or loss is recognized in the income statement. recognition as a completed sale or distribution within one year from the adjustments, for each balance sheet presented are translated to the group. Any interest retained in the former subsidiary is measured at fair value date of classification. at the closing rate on the date of that balance sheet. Loss of control probable and the asset or disposal group is available for immediate sale as follows: ŸŸ ŸŸ ŸŸ the group measures goodwill at the acquisition date as: ŸŸ the fair value of the consideration transferred, plus the recognized amount of any non-controlling interests in the acquiree, plus when control is lost. Subsequently it is accounted for as an equity- accounted investee or as an available for sale financial asset depending on non-current assets and disposal groups classified as held for sale or the level of influence retained. distribution are measured at the lower of their carrying amount and fair value less costs to sell. property, plant and equipment and intangible assets once ŸŸ Income and expenses for each income statement are translated at average exchange rates for the year, calculated on the basis of 12 monthly rates. Investments in associates and jointly controlled entities classified as held for sale or distribution are not depreciated or amortized, but exchange differences arising from the translation of the net investment in the group’s interests in equity-accounted investees comprise interests in are considered in the overall impairment testing of the disposal group. foreign operations, and of related hedges, are included in comprehensive if the business combination is achieved in stages, the fair value associates and joint ventures. income as a currency translation reserve. these translation differences of the pre-existing equity interest in the acquiree, less the net recognized amount (generally at fair value) of the identifiable assets acquired and liabilities assumed. Associates are those entities in which the group has significant influence, or disposal groups are first classified as a held for sale or distribution. operations or when settlement is likely to occur in the near future. no reclassifications are made for years prior to the year non-current assets are reclassified to the income statement upon disposal of the related but not control or joint control, over the financial and operating policies. Significant influence is presumed to exist when the group holds between Discontinued operations exchange differences arising on a non-current monetary item where When the excess is negative, a bargain purchase gain is recognized 20 and 50 percent of the voting power of another entity. A joint venture A discontinued operation is a component of the group’s business that settlement in the near future is not probable forms part of the net immediately in the income statement. transaction costs, other than is an arrangement in which the group has joint control, whereby the represents a separate major line of business or geographical area of investment in that entity. Such exchange differences are recognized in those associated with the issue of debt or equity securities incurred in group has rights to the net assets of the arrangement, rather to its assets operations that has been disposed of or is held for sale or distribution, comprehensive income. connection with a business combination are expensed as incurred. and obligations for its liabilities. Jointly controlled entities are those or is a subsidiary acquired exclusively with a view to resale. Classification Any contingent consideration payable is measured at fair value at the contractual agreement requiring unanimous consent of the ventures for meets the criteria to be classified as held for sale, if earlier. Financial assets and liabilities in the group consists of investments acquisition date. Changes in the fair value of the contingent consideration strategic, financial and operating decisions. in other companies, trade and other receivables, interest-bearing from acquisition of a subsidiary or non-controlling interest for transactions will be recognized in other income as gains or losses. In the consolidated income statement income and expenses from receivables, cash and cash equivalents, trade and other payables and discontinued operations are reported separately from income and interest-bearing borrowings. entities over whose activities the group has joint control, established by as a discontinued operation occurs upon disposal or when the operation Financial assets, financial liabilities and equity PRINT the group initially recognizes borrowings and receivables on the date Share capital the relevant economic environment defined as the countries involved Lease income when they are originated. All other financial assets and financial liabilities ordinary shares are classified as equity. Repurchase of share capital is in the cross-border transaction. Changes in the fair value of separated Revenue from time charters and bareboat charters are recognized daily over are initially recognized on the trade date. recognized as a reduction in equity and is classified as treasury shares. embedded derivatives are recognized immediately in the income the term of the charter. the company does not recognize revenue during statement. All foreign currency exposure is hedged, so the hedging days that the vessel is off-hire. other rental income from operating leases, Other investments Derivative financial instruments instrument to the embedded derivative will also have corresponding mainly related to investment properties and office leases, is recognized as other investments include equity securities where the group has neither the group uses derivative financial instruments such as currency forward opposite fair value changes in the income statement. revenue on a straight-line basis over the term of the relevant lease. control nor significant influence, usually represented by less than 20 percent contracts and currency swaps to hedge its exposure to foreign exchange lease income is in included operating service revenue. of the voting power. the investments are categorised as available-for-sale risks arising from operational, financial and investment activities. these Financial income and expense financial assets and are recognized initially at fair value. Subsequent to initial derivative financial instruments are accounted for as cash flow hedges Financial income and expense includes interest income and expense on Other income recognition, they are measured at fair value and changes therein, other since future highly probable cash flows are hedged (rather than committed financial assets and liabilities, foreign exchange gains and losses, dividend Gains and losses resulting from acquisition and disposal of businesses than impairment losses, are recognized in other comprehensive income revenues and expenses). the group also has embedded foreign exchange income and gains and losses on derivatives. Interest income and expenses which do not represent discontinued operations are included in and presented in the fair value reserve in equity. When an investment is derivatives which have been separated from their ordinary commercial includes calculated interest using the effective interest method, in addition other income within operating profit. Such gains may result from the derecognized, the gain or loss accumulated in equity is reclassified to profit contracts. Derivative financial instruments are recognized initially at fair to discounting effects from assets and liabilities measured at fair value. remeasurement of a previously held interest in the acquired entity. and loss. Impairment losses are recognized in the income statement when value. Derivatives are subsequently measured at fair value, and changes in Gains and losses on derivatives include effects from derivatives that do Changes in the fair value of the contingent consideration from acquisition the decrease in value is significant or prolonged. fair value is accounted for as described below. not qualify for hedge accounting and embedded derivatives, in addition to of a subsidiary or non-controlling interest are recognized in other income the ineffective portion of qualifying hedges. as gains or losses. Investments in equity securities that do not have a quoted market price Cash flow hedges in an active market and whose fair value cannot be reliably measured, are Hedging of the exposure to variability in cash flows that is attributable measured at cost. to a particular risk or a highly probable future cash flow is defined as Revenue recognition Construction contracts Share of profit from associated companies and jointly controlled operations, to the extent that these investments are related to the group’s a cash flow hedge. the effective portion of changes in the fair value is Construction contract revenues are recognized using the percentage of operating activities, are included in other income within operating profit, Trade and other receivables recognized in other comprehensive income as a hedge reserve. All foreign completion method. Stage of completion is determined by the method as well as gains and losses related to the sale of operating assets. trade receivables are recognized at the original invoiced amount, less exchange exposure is hedged, of which about 80 percent qualifies for that measures reliably the work performed. Depending on the nature of an allowance made for doubtful receivables. other receivables are hedge accounting. the gain or loss relating to the ineffective portion of the contract, the two main methods used by Akastor to assess stage of Expenses recognized initially at fair value. trade and other receivables are valued at derivative hedging instruments is recognized immediately in the income completion are: Construction contracts amortized cost using the effective interest rate method. the interest rate statement within finance income and expense. Amounts accumulated in element is disregarded if insignificant, which is the case for the majority of hedge reserves are reclassified to the income statement in the periods the group’s trade receivables. when the hedged item is recognized in the income statement. Current interest-bearing receivables Hedge accounting is discontinued when the hedge no longer qualifies for ŸŸ ŸŸ technical completion, or contract costs incurred to date compared to estimated total contract costs. Contract costs include costs that relate directly to the specific contract and allocated costs that are attributable to general contract activity. Costs that cannot be attributed to contract activity are expensed. tender costs are capitalized when it is probable that the company will obtain the contract. All other bidding costs are expensed as incurred. See Current interest bearing receivables include bonds, securities and mutual hedge accounting. Disqualification occurs when the hedging instrument When the final outcome of a contract cannot be reliably estimated, note 4 Accounting estimates and judgements for further description of funds with short-term maturity. these assets are designated upon initial expires, is sold, terminated or exercised, or when a forecast transaction is contract revenue is recognized only to the extent of costs incurred that recognition of construction contract costs. recognition as at fair value through profit and loss. no longer expected or the hedge is no longer effective. When a hedge is are expected to be recoverable. the revenue recognized in one period Non-current interest-bearing receivables is recognized immediately in the income statement unless it relates to a to date effect of any changes to the estimated final outcome. losses on payments made under operating leases are recognized in the income Interest bearing receivables include loans to related parties and other future cash flow that is likely to occur, but don’t classify for hedge accounting, contracts are fully recognized when identified. statement on a straight-line basis over the term of the lease. Any lease receivables with fixed or determinable payments that are not quoted in which the accumulated hedge reserve remains in other comprehensive incentives received are recognized as an integral part of the total lease in an active market. Such financial assets are recognized initially at fair income until the hedged cash flow is recognized in income statement. Contract revenues include variation orders and incentive bonuses when it expense, over the term of the lease. disqualified the cumulative gain or loss that was deferred in the hedge reserve will be the revenues attributable to the period’s progress and the progress Lease payments value and subsequent measurement at amortized cost using the effective interest method, less any impairment losses. Net investment hedges is probable that they will result in revenue that can be measured reliably. Disputed amounts and claims are only recognized when negotiations Income tax Cash and cash equivalents to cash flow hedges. Gains or losses arising from the hedging instruments and the amounts can be measured reliably. options for additional assets deferred tax. Income tax is recognized in the income statement except Cash and cash equivalents include cash on hand, demand deposits held relating to the effective portions of the net investment hedges are are included in the contract when exercised by the buyer. In the rare to the extent that it relates to items recognized directly in equity or in A hedge of a net investment in a foreign operation is accounted for similarly have reached an advanced stage, customer acceptance is highly likely Income tax in the income statement for the year comprises current and at banks and other short-term highly liquid investments with original recognized in other comprehensive income as translation reserves. these circumstances that the option is a loss contract, the full loss is recognized comprehensive income. maturity of three months or less. translation reserves are reclassified to the income statement upon disposal when it is probable that the options will be exercised. Trade and other payables these net investments. Any ineffective portion is recognized immediately See note 4 Accounting estimates and judgements for further description or loss for the year, using tax rates enacted or substantially enacted at the trade payables are recognized at the original invoiced amount. other in the income statement within net financial items. Gains and losses of recognition of construction contract revenue. reporting date, and any adjustment to tax payable in respect of previous payables are recognized initially at fair value. trade and other payables accumulated in equity are included in the income statement when the years. Current tax payable also includes any tax liability arising from the are valued at amortized cost using the effective interest rate method. the foreign operation is partially disposed of or sold. Goods sold and services rendered declaration of dividends, recognized at the same time as the liability to of the hedged net investments, offsetting the translation differences from Current tax is the expected tax payable or receivable on the taxable income interest rate element is disregarded if it is insignificant, which is the case Revenue from the sale of goods is recognized in the income statement pay the related dividend. for the majority of the group’s trade payables. Embedded derivatives when the significant risks and rewards of ownership have been transferred An embedded derivative is any contract embedded in a host contract to the buyer, which is usually when goods are shipped to customers. Deferred tax is recognized in respect of temporary differences between Interest-bearing borrowings which meets the definition of a derivative. under certain conditions the Revenue from services rendered is recognized in the income statement the carrying amounts of assets and liabilities for financial reporting and the Interest-bearing borrowings are recognized initially at fair value less embedded derivative must be separated from its host contract and the in proportion to the stage of completion of the transaction at the balance amounts used for taxation purposes. Deferred tax is not recognized for: attributable transaction costs. Subsequent to initial recognition, interest- derivative is then to be recognized and measured as any other derivative in sheet date or is invoiced based on hours performed at agreed rates. the bearing borrowings are stated at amortized cost with any difference the financial statements. embedded derivatives must be separated when stage of completion is normally assessed based on the proportion of costs ŸŸ Goodwill not deductible for tax purposes between cost and redemption value being recognized in the income the settlement for a commercial contract is denominated in a currency incurred for work performed to date compared to the estimated total statement over the period of the borrowings on an effective interest basis. different from any of the major contract parties’ own functional currency, contract costs. no revenue is recognized if there is significant uncertainty or that the contract currency is not considered to be commonly used for regarding recovery of consideration due. ŸŸ the initial recognition of assets or liabilities that affect neither accounting nor taxable profit PRINT ŸŸ Differences relating to investments in subsidiaries to the Other financial assets Onerous contracts extent that they will not reverse in the foreseeable future. the recoverable amount of receivables carried at amortized cost are A provision for onerous contracts is recognized when the expected Goodwill is measured at cost less accumulated impairment losses. In calculated as the present value of estimated future cash flows, discounted benefits to be derived by the group from a contract are lower than the respect of equity-accounted investees, the carrying amount of goodwill Deferred tax is measured at the tax rates that are expected to be applied at the original effective interest rate (the effective interest rate computed unavoidable cost of meeting the obligations under the contract. the is included in the carrying amount of the investment, and any impairment to temporary differences when they reverse, based on the laws that have at initial recognition of the financial assets). Impairment losses are incurred provision is measured at the lower of the expected cost of terminating loss is allocated to the carrying amount of the equity-accounted investee been enacted or substantively enacted by the reporting date. only if there is objective evidence of impairment as a result of one or more the contract and the expected net cost of continuing with the contract. as a whole. events that occurred after the initial recognition of the asset (a loss event) Before a provision is established, the group recognizes any impairment Deferred tax assets and liabilities are offset if there is a legally enforceable and that loss event has an impact on the estimated future cash flows of loss on the assets associated with the contract. When the group disposes of an operation within a CGu or group of CGus right to offset current tax liabilities and assets, and they relate to the financial assets that can be reliably estimated. income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax Non-financial assets Property, plant and equipment Owned assets to which goodwill has been allocated, a portion of the goodwill is included in the carrying amount of the operation when determining the gain or loss on disposal. the portion of the goodwill allocated is measured based liabilities and assets on a net basis or their tax assets and liabilities will be the carrying amounts of the group’s assets, other than employee benefit property, plant and equipment are stated at cost less accumulated on the relative values of the operation disposed of and the portion of the realised simultaneously. assets, inventories, deferred tax assets and derivatives are reviewed depreciation and impairment losses. the cost of self-constructed assets CGu retained at the date of partial disposal, unless it can be demonstrated A deferred tax asset is recognized for unused tax losses, tax credits and indication of impairment. If an indication of impairment exists, the asset’s assets, production overheads and the estimated costs of dismantling and the operation disposed of. the same principle is used for allocation of deductible temporary differences, to the extent that it is probable that recoverable amount is estimated. Cash-generating units (CGu) containing removing the assets and restoring the site on which they are located. goodwill when the group reorganizes its businesses. at the end of each reporting period to determine whether there is any includes the cost of materials, direct labour, borrowing costs on qualifying that another method better reflects the goodwill associated with future taxable profits will be available against which they can be utilized. goodwill, assets that have an indefinite useful life and intangible assets Deferred tax assets are reviewed at each reporting date and are reduced that are not yet available for use are tested for impairment annually. If components of property, plant and equipment have different useful Research and development to the extent that it is no longer probable that the related tax benefit will lives, they are accounted for as separate components. expenditures on research activities undertaken with the prospect of be realised. the recoverable amount is the greater of fair value less costs to sell and obtaining new scientific or technical knowledge and understanding is value in use. In assessing value in use, the estimated future cash flows Subsequent costs recognized in the income statement as incurred. Construction work in progress are discounted to their present value using a post-tax discount rate that the group capitalizes the cost of a replacement part or a component of Construction work in progress represents the aggregate amount of costs reflects current market assessments of the time value of money and the property, plant and equipment when that cost is incurred if it is probable Development activities involve a plan or design for the production of incurred and recognized profits, less the sum of recognized losses and risks specific to the asset. For an asset that does not generate largely that the future economic benefits embodied with the item will flow to the new or substantially improved products or processes. Development progress billings. the presentation in the balance sheet of the construction independent cash inflows, the recoverable amount is determined for the group and the cost of the item can be measured reliably. All other costs expenditure is capitalized only if development costs can be measured work in progress depends on the financial status of the individual projects. CGu to which the asset belongs. are expensed as incurred. All projects with net amounts due from customers are summarised in the balance sheet and presented as an asset, and all projects with net An impairment loss is recognized whenever the carrying amount of an Depreciation reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the group intends to and has sufficient resources to complete development and to use or sell the amounts due to customers are summarised and presented as a liability in asset or its CGu exceeds its recoverable amount. Impairment losses are Depreciation is normally recognized on a straight-line basis over the asset. the expenditure capitalized include the cost of materials, direct the balance sheet. Advances are presented separately as such advances recognized in the income statement. estimated useful lives of property, plant and equipment. the production unit labour overhead costs that are directly attributable to preparing the asset represent payments from customers in excess of the work performed. method is used for depreciation in limited circumstances when appropriate. for it intended use and capitalized interest on qualifying assets. other Inventories goodwill and then to the other assets in the unit (group of units) on a pro Investment property expense as incurred. Inventories are stated at the lower of cost or net realisable value. net rata basis. realisable value is the estimated selling price in the ordinary course of Investment properties are properties held either to earn rental income or for capital appreciation, or for both. these properties are not used Capitalized development expenditure is measured at cost less accumulated business, less the estimated costs of completion and selling expenses. An impairment loss on goodwill is not reversed. An impairment loss on in production, deliveries of goods and services, or for administrative amortization and accumulated impairment losses. An impairment loss recognized in respect of CGu is allocated first to development expenditures are recognized in the income statement as an the cost of inventories is based on the first-in first-out principle and to determine the recoverable amount, and the change can be objectively principles as for property, plant and equipment (see description above). Other intangible assets includes expenditures incurred in acquiring the inventories and bringing related to an event occurring after the impairment was recognized. An Acquired intangible assets are measured at cost less accumulated other assets is reversed if there has been a change in the estimates used purposes. Investment properties are measured at cost applying the same them to their existing location and condition. In the case of manufactured impairment loss is reversed only to the extent that the asset’s carrying Financial leases amortization and impairment losses. inventories and work in progress, cost includes an appropriate share of amount does not exceed the carrying amount that would have been leases where the group assumes substantially all the risks and rewards of overheads based on normal operating capacity. determined, net of depreciation or amortization, if no impairment loss ownership are classified as finance leases. At the beginning of the leasing Subsequent expenditures Impairment Trade and other receivables had been recognized. Provisions period, finance leases are recognized at the lower of the fair value of the Subsequent expenditures on capitalized intangible assets are capitalized lease’s asset and the present value of the minimum lease payments. the only when they increase the future economic benefits embodied in the corresponding liability to the lessor is included in the statement of financial specific asset to which they relate. All other expenditures are expensed provision is made when there is objective evidence that the group will A provision is recognized in the balance sheet when the group has a position as other non-current liabilities except for first year instalment as incurred. be unable to recover balances in full. Balances are written off when the present obligation as a result of a past event that can be estimated reliably which is recognized as current liabilities. lease payments are apportioned probability of recovery is assessed as being remote. the impairment is and it is probable that the group will be required to settle the obligation. between finance charges and reduction of the lease obligation so as to Amortization recognized in financial items to the extent that it is caused by the insolvency of If the effect is material, provisions are determined by discounting the achieve a constant rate of interest of the remaining balance of the liability. Amortization is charged to the income statement on a straight-line basis the customer. expected future cash flows at a market based pre-tax rate that reflects leased assets are depreciated over the shorter of the lease term and over the estimated useful lives of intangible assets unless such lives are current market assessments of the time value of money and, where their useful lives unless it is reasonably certain that the group will obtain indefinite. Intangible assets are amortized from the date they are available Available-for-sale financial assets appropriate, the liability-specific risks. the unwinding of the discount is ownership by the end of the lease term for use. equity investments classified as available-for-sale are considered to recognized as a finance cost. be impaired when there is a significant (more than 20 percent) or prolonged (more than 6 months) decline in fair value of the investment Warranties Intangible assets Goodwill Employee benefits Defined contribution plans below its cost. Any subsequent increase in value on available-for-sale A provision for warranties is recognized when the underlying products or Goodwill that arises on the acquisition of subsidiaries is presented with obligations for contributions to defined contribution pension plans are assets is considered to be a revaluation and is recognized in other services are sold. the provision is based on historical warranty data and a intangible assets. For the measurement of goodwill at initial recognition, recognized as an expense in the income statement as incurred. comprehensive income. weighting of all possible outcomes against their associated probabilities. see Business combinations. PRINT Defined benefit plans New standards and interpretations not yet adopted set at one percent of the contract value, but can also be a higher or lower may result from expected taxable income in the near future, planned the group’s net obligation in respect of defined benefit pension plans is the following new standards, amendments to standards and amount following a specific evaluation of the actual circumstances for transactions or planned tax optimising measures. economic conditions may calculated separately for each plan by estimating the amount of future interpretations are effective for annual periods beginning after January 1, each contract. Both the general one percent provision and the evaluation change and lead to a different conclusion regarding recoverability, and such benefit that employees have earned in the current and prior periods; 2015; however the group has not applied the following new or amended of project specific circumstances are based on experience from earlier change may affect the results for each future reporting period. discounting that amount and deducting the fair value of any plan assets. standards expected to be of relevance in preparing these consolidated projects. Factors that could affect the estimated warranty cost include financial statements. the group’s quality initiatives and project execution model. Reference is tax authorities in different jurisdictions may challenge calculation of taxes the calculation of defined benefit obligations is performed annually by made to note 28 provisions for further information about provisions for payable from prior periods. Such processes may lead to changes to prior a qualified actuary using the projected unit credit method. the discount ŸŸ IFRS 15 Revenue Recognition was issued in May 2014. warranty expenditures on delivered projects. periods’ taxable income, resulting in changes to income tax expense in the rate is the yield at the balance sheet date on government bonds or high- the standard is effective from January 2017 pending eu quality corporate bonds with maturities consistent with the terms of the endorsement. the new standard is expected to significantly Financial lease period of change. During the period when tax authorities may challenge the taxable income, management is required to make estimates of the obligations. impact Akastor’s financial statements however the extent to the determination of whether an arrangement is (or contains) a lease is probability and size of possible tax adjustments. Such estimates may which the standard will impact Akastor’s revenue recognition based on the substance of the arrangement at the inception date. the change as additional information becomes known. Further details about Remeasurement of the net defined benefit liability, which comprise has not yet been assessed. arrangement is assessed for whether fulfilment of the arrangement is income taxes are included in note 12 tax. actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. the group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account ŸŸ IFRS 9 Financial instruments becomes mandatory for the group’s 2018 consolidated financial statements, pending eu approval. the new standard can change the classification and measurement of financial assets. the group does not plan to adopt this standard early and the extent of the impact has not been determined. dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly Fair value measurement of contingent and deferred consideration specified in an arrangement. Contingent and deferred consideration resulting from business combinations, is valued at fair value at the acquisition date as part of the Property, plant and equipment and intangible assets business combination. When the deferred and contingent consideration At every balance sheet date, the group considers whether there are meets the definition of a derivative and thus, a financial liability, it is indications of impairment on the book values of long-term assets. If such subsequently remeasured to fair value at each reporting date. the any changes in the net defined benefit liability (asset) during the period ŸŸ Amendment to IAS 28 becomes mandatory for the groups indications exist, a valuation is performed to assess whether or not the determination of the fair value is based on discounted cash flows. the as a result of contributions and benefit payments. net interest expense 2016 consolidated financial statements, pending eu approval. asset should be written down for impairment. Such valuations will often key assumptions take into consideration the probability of meeting each and other expenses related to defined benefit plans are recognized in the the amendment is dealing with the sale or contribution of have to be based on estimates of future results for a number of cash performance target and the discount factor. income statement. assets between an investor and its associate or joint venture. generating units. References are made to note 14 property, plant and the extent of the impact has not yet been determined. equipment and note 16 Intangible assets. Onerous contracts When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in the income statement. the group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs. note 4 | Accounting estimates and judgements Goodwill the group has entered into several non-cancellable leases for office space which may result in surplus lease space. An obligation for the discounted In accordance with the stated accounting policy, the group tests annually future payments, net of expected rental income, will in these cases be whether goodwill has suffered any impairment or more frequently if provided for. Key assumptions in determining the obligations are primarily impairment indicators are identified. the recoverable amounts of cash- related to expected market rental growth, void periods and risk-adjusted generating units have been determined based on value-in-use calculations. discount rates. these calculations require the use of estimates and are consistent with the market valuation of the group. Further details about goodwill and Pension benefits impairment reviews are included in note 16 Intangible assets. the present value of the pension obligations depends on a number estimates and judgements are continually reviewed and are based on met. even though management has extensive experience in assessing the historical experiences and expectations of future events. the resulting outcome of such negotiations, uncertainties exist. Income taxes of factors determined on the basis of actuarial assumptions. these assumptions include financial factors such as the discount rate, expected accounting estimates will, by definition, seldom accurately match actual the group is subject to income taxes in numerous jurisdictions. Significant salary growth, inflation and return on assets as well as demographical results, but are based on the best estimate at the time. estimates and Remaining project costs depend on productivity factors and the cost of judgement is required to determine the worldwide provision for income factors concerning mortality, employee turnover, disability and early assumptions that have a significant risk of causing material adjustments inputs. Weather conditions, the performance of subcontractors and others taxes. there are many transactions and calculations for which the ultimate retirement. Assumptions about all these factors are based on the to the carrying amounts of assets and liabilities within the next financial with an impact on schedules, commodity prices and currency rates can all tax determination is uncertain during the ordinary course of business. situation at the time the assessment is made. However, it is reasonably year are discussed below. affect cost estimates. experience, systematic use of the project execution provisions for anticipated tax audit issues are based on estimates of certain that such factors will change over the very long periods for which Revenue recognition risk that estimates may change significantly. A risk contingency is included model and focus on core competencies reduce, but do not eliminate, the eventual additional taxes. pension calculations are made. Any changes in these assumptions will affect the calculated pension obligations with immediate recognition in the percentage-of-completion method is used to account for construction in project cost based on the risk register that is prepared for every project. Income tax expense is calculated based on reported income in the other comprehensive income. Further information about the pension contracts. this method requires estimates of the final revenue and costs different legal entities. Deferred income tax expense is calculated based on obligations and the assumptions used are included in note 27 employee of the contract, as well as measurement of progress achieved to date as a progress measurement based on costs has an inherent risk related to the the differences between the assets’ carrying value for financial reporting benefits - pension. proportion of the total work to be performed. cost estimate as described above. In situations where cost is not seen to purposes and their respective tax basis that are considered temporary in properly reflect actual progress, alternative measures such as hours or nature. the total amount of income tax expense and allocation between Legal claims the main uncertainty when assessing contract revenue is related to physical progress are used to achieve more precise revenue recognition. current and deferred income tax requires management’s interpretation Given the scope of the group’s worldwide operations, group companies recoverable amounts from variation orders, claims and incentive payments the estimation uncertainty during the early stages of a contract is mitigated of complex tax laws and regulations in the many tax jurisdictions where are inevitably involved in legal disputes in the course of their activities. which are recognized when, in the group’s judgement, it is probable that by a policy of normally not recognizing revenue in excess of costs on large Akastor operates. they will result in revenue and are measurable. this assessment is adjusted lump sum projects before the contract reaches 20 percent completion. provisions have been made to cover the expected outcome of the disputes in so far as negative outcomes are likely and reliable estimates can be by management’s evaluation of liquidated damages to be imposed by However, management can on a project-by-project basis give approval of Valuation of deferred tax assets is dependent on management’s assessment made. However, the final outcome of these cases will always be subject to customers typically relating to contractual delivery terms. In many projects earlier recognition if cost estimates are certain, typically in situations of of future recoverability of the deferred benefit. expected recoverability uncertainties, and resulting liabilities may exceed recorded provisions. there are frequent changes in scope of work resulting in a number of repeat projects, proven technology or proven execution model. variation orders. normally the contracts with customers include procedures for presentation of and agreement of variation orders. At any point in time, Warranties there will be unapproved variation orders and claims included in the project A provision is made for expected warranty expenditures. the warranty revenue where recovery is assessed as probable and other criteria are period is normally two years. Based on experience, the provision is often PRINT note 5 | Disposal of subsidiaries and demerger of new Aker solutions Disposals and dermerger reported as discontinued operations Disposal of Mooring and Loading systems business the amounts in the income statement has been re-presented as on october 30, 2013, Akastor agreed to sell its mooring and loading discontinued operations. WIS was presented as held for sale in the balance systems business (MlS) to Cargotec. the unit, known for the pusnes sheet at December 31, 2013. brand name, provides mooring equipment, loading and offloading systems, as well as deck machinery for the global offshore and shipping markets. Demerger of New Aker Solutions the division employs about 370 people in europe, Asia and the Americas on September 26, 2014, the demerger of Aker Solutions was completed and has its main office in Arendal, norway. the transaction was completed and on September 29, 2014 Aker Solutions Holding ASA (“new Aker on January 30, 2014. Solutions”), a subsidiary of Akastor ASA established for the purposes of the demerger, was listed on the oslo Stock exchange. the new the amounts in the income statement has been re-presented as Aker Solutions includes activities in the following areas of operation: discontinued operations. MlS was presented as held for sale in the Subsea, umbilicals, Maintenance, Modifications and operations (MMo) balance sheet at December 31, 2013. and engineering. Disposal of Well-Intervention Services businesses the new Aker Solutions is presented as discontinued operations and on november 22, 2013, Akastor agreed to sell its well intervention held for distribution from July 16, 2014 and the amounts in the income services businesses (WIS) to eQt. the business provided services that statement have ben re-presented as discontinued operations. According optimize flows from oil reservoirs and its main markets were in the uK and to IFRS 5 no depreciations and amortizations shall be made from the time norway. the division had about 1,500 employees in europe, Asia, the uS the held for sale-criteria is met. no gain has been recognized as this is a and the Middle east. the transaction was completed on January 9, 2014. transaction under common control accounted for at book values. the agreement includes an earn-out provision where Akastor will receive 25 percent of any internal rate of return exceeding 12 percent a year on eQt’s equity investment. Combined results from discontinued operations Amounts in NOK million Revenue operating expenses Financial items Profit before tax tax expense Net profit from operating activities Gain on sale of discontinued operations tax expense on gain on sale of discontinued operations Net gain from discontinued operations Net profit from discontinued operations profit from discontinued operations attributable to owners of Akastor profit from continuing operations attributable to owners of Akastor earnings per share of discontinued operations Amounts in NOK Basic earnings per share from discontinued operations Diluted earnings per share from discontinued operations Combined cashflow from discontinued operations Amounts in NOK million net cash from operating activities net cash from investing activities net cash from financing activities effect on cashflow Disposal of other subsidiares Disposal of K2 Hotellbygg AS 2014 24 007 (22 432) (118) 1 457 (429) 1 028 2 852 - 2 852 3 880 3 867 (1 387) 2014 14.21 14.21 2014 589 4 574 142 5 305 2013 32 403 (30 538) (21) 1 844 (482) 1 362 - - - 1 362 1 351 (238) 2013 4.98 4.97 2013 3070 (2 168) (110) 792 gain of noK 113 million recognized in other income. the disposal does on June 4, 2014 Akastor sold the 93 percent shareholding in K2 not represent a separate major line of business, and is not presented as Hotellbygg AS. the consideration was noK 175 million and resultet in a discontinued operations. Cash effect from disposals and demerger Amounts in NOK million Consideration received, settled in cash Cash and cash equivalents disposed of Proceeds from disposal of subsidiaries, net of cash Cash demerger new Aker Solutions Net cash effect effect of all disposals and demerger on the financial position of Akastor Amounts in NOK million Intangible assets property, plant and equipment other non-current assets Current assets Cash non-current liabilities Current liabilities Net assets and liabilities note 6 | operating segments 6 204 (256) 5 948 (1 064) 4 884 (6 621) (5 177) (325) (16 833) (1 320) 5 610 16 942 (7 724) Basis for segmentation Measurement of segment performance Following the split of Aker Solutions, Akastor have five reporting segments Segment performance is measured by operating profit before which are the strategic business units of the group. the strategic business depreciation, amortization and impairment (eBItDA) and operating profit units are managed separately and offer different products and services (eBIt), as included in the internal management reports that are reviewed due to different market segments and different strategies for their by the group’s executive Management Group (the chief operating projects, products and services: decision maker). Segment profit, together with key financial information as described below, gives the Ceo relevant information in evaluating ŸŸ MH Wirth is a supplier of drilling systems and drilling lifecycle the results of the operating segments and is relevant in evaluating the services globally. the company offers a full range of drilling results of the segments relative to other entities operating within these equipment, drilling riser solutions and related products and industries. Inter-segment pricing is determined on an arm’s length basis. services for the drilling market, primarily the offshore sector ŸŸ AKoFS offshore is a global provider of vessel-based subsea well construction and intervention services to the oil and gas industry, covering all phases from conceptual development to project execution and offshore operations. the accounting policies of the reportable segments are the same as described in note 2 Basis of preparation and note 3 Accounting principles, except for hedge accounting. When contract revenues and contract costs are denominated in a foreign currency, the subsidiary hedges the exposure against Corporate treasury and hedge accounting is applied ŸŸ Fjords processing provides wellstream processing independently of whether the hedge qualify for hedge accounting in technology, equipment and expertise to the upstream oil and accordance with IFRS. the correction of the non-qualifying hedges to gas industry. the company delivers solutions for separation secure that the consolidated financial statements are in accordance with of oil and gas. ŸŸ Kop Surface products is a global supplier of flow control equipment to the oil and gas industry. the main products are valves, wellheads and trees for offshore and land-based surface production. IFRS is made as an adjustment at corporate level. this means that the group’s segment reporting reflect all hedges as qualifying even though they may not qualify in accordance with IFRS. Hedge transactions not qualifying for hedge accounting represent an accounting gain gain of noK 25 million to eBItDA (loss of noK 47 million ŸŸ Frontica Business Solutions provides a range of corporate in 2013) and a loss under financial items of noK 103 million (gain of noK services to companies in the oil services industry. 84 million in 2013). this is recognized as a group adjustment under Real Further, Akastor owns a portfolio of real estate assets, all in norway. other investments include mainly 76 percent in Step oiltools, 50 percent of DoF Information about reportable segments estate and other holdings. Deepwater AS, 100 percent in First Geo AS, 7.4 percent of the shares in the segment information in the tables in this note has been restated for ezra Holdings ltd and 93 percent of Aker pensjonskasse AS. these are prior periods. included in Real estate and other holdings. PRINT 2014 Amounts in NOK million Income statement frontica Business solutions AKOfs Offshore fjords Processing KOP surface Note MHWirth Real estate & other holdings elimina- tions Total 2013 Amounts in NOK million Note MHWirth Income statement frontica Business solutions AKOfs Offshore fjords Processing KOP surface Real estate &other holdings elimina- tions Total total external revenue and other income 10 634 4 868 1 542 2 317 1 119 952 - 21 432 total external revenue and other income Inter-segment revenue 47 885 - 4 - 23 (960) - Inter-segment revenue 9 384 108 4 713 967 906 2 2 001 5 871 2 572 - 18 448 22 (1 106) - Total operating revenue and other income 10 681 5 753 1 542 2 322 1 119 975 (960) 21 432 Total operating revenue and other income 9 493 5 680 908 2 007 873 594 (1 106) 18 448 Operating profit (loss) before depreciation, amortization and impairment Depreciation and amortization Impairment 14, 15, 16 14, 15, 16 Operating profit (loss) Profit (loss) from equity-accounted investees1) 1) NOK 75 million is recognized in Other income. 941 (332) (83) 526 - 315 (97) 175 (292) - (1 001) 218 (1 117) - - 52 (26) - 25 4 156 (260) (42) (4) (133) (76) 109 (469) - (55) - - - - - 1 380 (922) (1 164) (706) (51) Operating profit (loss) before depreciation, amortization and impairment Depreciation and amortization Impairment Operating profit (loss) Profit (loss) from equity-accounted investees 14, 15, 16 14, 15, 16 Assets Current operating assets non-current operating assets Operating assets Liabilities Current operating liabilities non-current operating liabilities Operating liabilities net current operating assets1) net capital employed2) Cash flow Cash flow from operating activities Acquisition of property, plant and equipment payments for capitalized development order intake (unaudited) order backlog (unaudited) employees incl. contracts 7 951 3 738 11 689 1 017 701 1 718 301 4 552 4 852 1 062 635 1 697 637 328 966 442 (206) 11 204 1 861 - 11 815 2 303 (206) 23 019 5 379 1 255 708 89 6 087 1 343 374 167 540 (73) (237) 374 4 312 297 (167) (110) - 8 196 2 620 1 356 (5) - 6 140 6 186 115 2 573 5 603 (52) (511) (233) 6 941 9 566 4 237 1 219 41 1 261 (157) 436 262 29 291 375 674 500 (206) 8 782 208 - 1 242 708 (206) 10 024 (58) 1 595 - - 2 422 12 995 34 (24) (37) 113 (22) (9) (326) (128) - - - - (101) (800) (280) 2 197 1 052 2 097 (1 369) 25 254 1 190 617 659 854 1 658 (324) 21 555 430 - 7 609 Assets Current operating assets non-current operating assets Operating assets Liabilities Current operating liabilities non-current operating liabilities Operating liabilities net current operating assets1) net capital employed2) Cash flow Cash flow from operating activities Acquisition of property, plant and equipment payments for capitalized development order intake (unaudited) order backlog (unaudited) employees incl. contracts 959 (217) - 742 3 5 889 3 108 8 997 287 (97) - 7 (280) (367) 190 (640) - - 75 (24) 1 52 - 88 (26) - 62 - (61) (107) (2) (170) (29) - - - - - 1 355 (751) (368) 235 (25) 910 544 451 4 068 1 128 483 737 302 983 (286) 9 811 2 747 - 11 251 1 454 4 518 1 611 1 038 3 730 (286) 21 062 4 123 1 159 851 79 4 974 1 238 666 205 871 1 767 (249) (216) 4 024 216 3 647 386 (478) (251) 180 (114) - (242) (607) - 9 511 5 766 52 13 004 87 1 722 4 011 1 454 127 1 178 449 24 1 202 (50) 409 (105) (16) (26) 1 959 1 255 628 22 471 288 567 96 (44) (15) 990 570 760 519 138 657 (286) 7 807 - (286) 1 319 9 127 464 3 073 - - 2 003 11 935 (455) (122) - - - - (141) (1 380) (292) 618 272 502 (884) 18 011 114 17 025 - 7 482 1) Net current operating assets (NCOA) is defined as accounts receivable, accruals, inventories, prepaid expenses including prepaid tax and other operating current assets less accounts payable, accrued expenses, advances from customers, payable tax and other operating current liabilities. 2) Net capital employed is defined as goodwill, intangible assets, fixed assets, investments, other non-current operating assets, deferred tax assets and NCOA less pension and deferred tax liabilities as well as other non-current operating liabilities. Reconciliations of information on reportable segments to IFRS measures Amounts in NOK million Assets total segment assets Demerger of new Aker Solutions and disposal of subsidiaries Cash and cash equivalents Short-term financial assets long-term receivables elimination of intra-group assets Consolidated assets Liabilities total segment liabilities Demerger of new Aker Solutions and disposal of subsidiaries Short-term interest-bearing liabilities other long-term liabilities elimination of intra-group liabilities Consolidated liabilities Note 2014 2013 23 225 21 348 - 23 864 1 075 2 345 205 131 511 159 (206) (286) 24 430 47 941 10 230 - 308 4 720 (206) 9 413 14 123 3 896 7 420 (286) 15 051 34 566 5 23 17 17 5 25 25 PRINT Other material items Amounts in NOK million total segments Demerger of new Aker Solutions and disposal of subsidiaries Consolidated totals Cash flow from operating activities 2014 (101) 2013 (141) 589 488 3 219 3 078 Acquisition of property, plant and equipment Payments for cap- italized development 2014 800 502 1 302 2013 1 380 1 271 2 651 2014 2013 280 292 359 639 529 821 Share purchase program for employees Akastor’s share purchase program in 2014 gave eligible employees the equal to 25 percent of their salary with a reduction of 25 percent on the opportunity to purchase shares of up to noK 60 000 with a reduction share price. In total 27 employees from three countries participated in the of 25 percent in addition to noK 1 500. to the extent possible under manager share purchase program. local law, the shares purchased by each employee were funded by a loan provided by the local employer company. the loan is repaid by salary All shares purchased under the programs described above are subject to deductions over a period of 12 months. In total 567 employees from nine a three year lock-up period under which the acquired shares may not be countries participated in the share purchase program. sold or otherwise disposed of. Major customers Geographical information Management was also invited to take part in a separate manager share See also note 36 Management remunerations for more details about Revenue from one customer to all segments represents approximately Geographical revenue is presented on the basis of the geographical program allowing eligible managers to purchase shares for an amount share purchase program for Akastor’s executive management. noK 4.2 billion (noK 4.3 billion in 2013) of the group’s total revenue. location of the selling entity. non-current segment assets and capital Revenue from another customer to the segments MHWirth and Fjords expenditures are based on the geographical location of the assets. no processing represents approximately noK 2.1 billion (noK 2.3 billion in single country has revenues or non-current assets higher than 10 percent 2013) of the group’s total revenue. of the group except norway. note 9 | operating leases Amounts in NOK million 2014 2013 2014 2013 2014 2013 Total non-cancellable operating lease commitments Operating revenue and other income Non-current assets Capital expenditure Group as lessee norway europe north America South America Asia Australia other Total 13 668 11 523 2 977 1 159 501 2 615 1 078 472 2 054 1 620 878 195 856 284 8 087 1 571 736 751 1 279 50 154 7 740 1 577 604 246 1 167 22 55 462 111 29 252 203 9 14 875 190 34 22 510 5 35 21 432 18 448 12 627 11 411 1 080 1 672 note 7 | operating revenue and other income Amounts in NOK million Construction revenue Service revenue product revenue other operating revenue Rental income from investment property Total operating revenue Decrease (increase) in contingent considerations from business combinations Gain on disposal of subsidiaries Deferred gain on disposal of real estate profit (loss) from equity-accounted investees Accounting gain (loss) on disposals of assets Total other income note 8 | salaries, wages and social security costs Amounts in NOK million Salaries and wages including holiday allowance Social security tax/national insurance contribution pension cost other employee costs salaries, wages and social security costs Note 2014 8 653 10 282 2 024 131 65 2013 7 450 8 916 1 852 139 30 21 155 18 388 103 113 71 4 (14) 277 35 - - - 25 60 15 5 18 18 27 4 200 3 928 528 165 211 549 148 194 5 104 4 819 Amounts in NOK million Contracts due within one year Contracts running from one to five years Contracts running for more than five years Total 1)The amounts in 2013 include discontinued operations 2014 729 2 174 602 3 505 20131) 1 366 3 603 2 761 7 730 Minimum sublease income to be received in the future amounts to noK 4 million (noK 32 million in 2013) and relates mainly to sublease of office buildings. lease and sublease payments recognized in the income statement Amounts in NOK million Minimum lease payments Contingent rents Sublease income Total 1)The amounts in 2013 are presented for continuing operations only 2014 1 141 - (3) 1 138 20131) 1 284 32 (5) 1 311 the group has operating lease costs for buildings that relate to rentals on a was acquired in February 2015. Skandi Santos lease contract runs for a large number of locations worldwide. the leases typically run for a period period of 5 years, with an option to renew 5 times of 1 year each. the of 12-15 years, with an option to renew the lease at market conditions. contract is in its first year of option. Vessel lease costs relate to operations in AKoFS offshore, and include the group also has operating lease costs related to It equipment, cars and AKoFS Seafarer and Skandi Santos for the full year and Aker Wayfarer inventory. these leases have an average life of 3-5 years with no renewal for nine months until the vessel was recognized as finance lease, refer to option included in the contracts. note 25 Borrowings for more information. the AKoFS Seafarer vessel Note 2014 2013 Contracts running from one to five years Group as lessor Total non-cancellable operating lease income Amounts in NOK million Contracts due within one year Contracts running for more than five years Total 1)The amounts in 2013 include discontinued operations 2014 799 2 928 1 958 5 685 20131) 655 347 343 1 345 Loans to employees are shown in note 17 Interest-bearing receivables. No guarantees are granted to any employee. Lease income recognized in the income statement Seafarer and Aker Wayfarer, investment properties, offices leases to Aker operating lease income relates mainly to the vessel Skandi Santos, AKoFS Solutions and to the rental business in Step oiltools. PRINT 2014 2013 (214) 8 (206) 482 1 (60) 49 - 472 266 (131) 2 (129) (55) 22 (25) 3 188 133 4 note 10 | other operating expenses other operating expenses amount to noK 2.2 billion in 2014 (noK (see note 9 operating leases), travelling expenses, audit fees and other 2.0 billion in 2013). the expenses include operating lease costs expenses mainly related to premises, electricity and maintenance. fees to KPMg Amounts in NOK million Audit other assurance services1) tax services other non-audit services Total Akastor AsA subsidiaries 2014 2013 2014 2013 2014 4 18 - 1 23 4 - - - 4 12 1 1 1 15 9 3 1 2 15 16 19 1 2 38 Total 2013 13 3 1 2 19 note 12 | tax Income tax expense Amounts in NOK million Current tax expense Current year Adjustments for prior years total current tax expense Deferred tax expense origination and reversal of temporary differences Change in tax rate Write down of tax loss and deferred tax assets Recognition of previously unrecognized tax losses 1) NOK 18 million relates to services provided related to the demerger of the group. The amount has been recharged to New Aker Solutions. tax effect on group contributions to companies in Aker Solutions note 11 | finance income and expenses Amounts in NOK million 2014 2013 Profit (loss) on foreign currency forward contracts Interest income on bank deposits measured at amortized cost net foreign exchange gain other finance income finance income Interest expense on financial liabilities measured at amortized cost Finance charges under finance leases Interest expense on financial liabilities measured at fair value net foreign exchange loss Impairment on available for sale assets other financial expenses finance expenses Net finance expenses recognized in profit and loss (372) 43 64 12 119 (341) (57) (8) (9) (97) (56) (568) (821) 84 37 5 5 47 (526) - (13) (26) - (18) (583) (452) See note 33 Financial instruments for information of the finance income and expense generating items. Foreign currency forward contracts Some foreign exchange hedge transactions do not qualify for hedge the loss in 2014 includes noK 269 million related to tender hedges that accounting under IFRS, primarily because a large number of internal hedge were stopped (0 in 2013) and a loss of noK 103 million related to hedges transactions are grouped and netted before external hedge transactions not qualifying for hedge accounting. are established. these derivatives are mainly foreign exchange forward Total deferred tax (expense) income Total tax (expense) income Effective tax rate the table below reconciles the reported income tax expense to the expected income tax expense according to the corporate income tax rate of 27 percent in norway. this is a change from the previous period from 28 percent due to a change in the corporate tax rate in norway Amounts in NOK million Profit (loss) before tax, continuing operations 2014 (1 653) 2013 (242) tax income (expense) using the company's domestic tax rate 446 27.0 % 68 28.0 % Tax effects of: permanent differences1) Prior year adjustments (current tax) prior year adjustments (deferred tax) previously unrecognized tax losses used to reduce payable tax previously unrecognized tax losses used to reduce deferred tax Deferred tax from write down (or reversal) of tax loss or deferred tax assets Change in tax rates2) Differences in tax rates from 27 percent (28 percent in 2013) effect of functional currency different from currency in tax reporting3) other Income tax expense (income), continuing operations (57) (3.4 %) 8 - (3) 49 (60) 1 (21) (87) (10) 266 0.5 % 0.0 % (0.2 %) 3.0 % (3.6 %) 0.1 % (1.3 %) (5.3 %) (0.6 %) 16.1 % (22) 2 (13) 5 3 (25) 22 (10) - (26) 4 (9.1 %) 0.8 % (5.4 %) 2.1 % 1.2 % (10.3 %) 9.1 % (4.1 %) 0.0 % (10.7 %) 0.2 % 1) Relates mainly to profit (loss) from equity accounted investees, profit (loss) recognized on various tax-exempted investments and impairment of goodwill. 2) Relates mainly to change in corporate income tax rate from 28 percent to 27 percent in Norway. 3) Relates to AKOFS Offshore which changed functional currency from NOK to USD during 2014 contracts. the corresponding contracts to the derivatives are calculated the exposure from foreign currency embedded derivatives is economically Recognized deferred tax assets and liabilities to have an equal, but opposite effect, and both the derivatives and the hedged, but cannot qualify for hedge accounting and is therefore included hedged items are reported as financial results. the net amount therefore in net foreign exchange gain/loss. Hedge accounting and embedded reflects the difference in timing between the non-qualifying hedging derivatives are explained in note 32 Derivative financial instruments. instrument and the future transaction (economically hedged item). Amounts in NOK million property, plant and equipment pensions projects under construction tax loss carry-forwards Intangible assets provisions Derivatives other Total before set offs Set off of tax Total Assets liabilities Net 2014 2013 85 135 - 448 31 204 12 126 1 041 (827) 214 56 244 - 807 - 282 66 304 1 759 (1 159) 600 2014 (453) - 2013 (610) (29) (552) (2 041) - - (133) (322) - (163) (9) - (201) (13) 2014 (368) 135 (552) 448 (102) 204 (151) 117 2013 (554) 215 (2 041) 807 (322) 282 (135) 291 (1 310) (3 216) (269) (1 457) 827 1 159 - - (483) (2 057) (269) (1 457) PRINT Change in net recognized deferred tax assets and liabilities Amounts in NOK million equipment Pensions Property, plant and Projects under construction Tax loss carry- forwards Intangible assets Balance as of january 1, 2013 Recognized in profit and loss Recognized in equity Additions through business combinations Currency translation differences Reclassification to held for sale1) Balance as of December 31, 2013 Demerger of new Aker Solutions2) Disposal of subsidiaries Recognized in profit and loss Recognized in equity Currency translation differences (522) (91) - 2 (1) 58 (554) 114 22 102 (13) (39) Balance as of December 31, 2014 (368) 1) Amount represent balances as of December 31, 2013 2) Amount represent balances as of January 1, 2014 223 12 (10) - 4 (14) 215 (137) - (8) 61 4 135 (1 828) (276) - (3) - 66 (2 041) 573 263 - (12) 2 (19) 807 1 509 (704) - (20) - - (552) - 297 (1) 49 448 (230) (19) - (80) (8) 15 (322) 202 - 31 1 (14) (102) Tax loss carry-forwards and unrecognized deferred tax assets Expiry date of unrecognized tax loss carry-forwards Amounts in NOK million expiry in 2018 expiry in 2019 and later Indefinite Total Provisions Derivatives Other Total 306 78 142 (1 258) 1 - - (6) (19) 282 (114) (96) 163 (61) - (106) - - (1) - (3) (13) (94) (9) 71 (135) 291 (1 457) (204) 75 (97) - (67) (38) - 50 (1) 758 22 472 9 - 87 - 39 14 (126) (73) 204 (151) 117 (269) 2014 2013 144 138 113 395 149 38 64 251 unrecognized other assets are noK 5 million in 2014 (noK 71 million in 2013). tax losses are recognized in the balance sheet to the extent that forecasts and realistic expectations about results show that Akastor will be able to use the tax losses before they expire. note 13 | earnings per share Akastor ASA holds 2 976 376 treasury shares at year end 2014 (1 955 611 shares in 2013). treasury shares are not included in the weighted average number of ordinary or diluted shares. Amounts in NOK million profit (loss) attributable to ordinary shares (noK million) profit (loss) attributable to ordinary shares from continuing operations (noK million) 2014 2 482 (1 398) Restated 2013 1 114 (248) Basic earnings per share the calculation of basic earnings per share is based on the profit (loss) attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding. Issued ordinary shares as of January 1 Weighted average number of issued ordinary shares for the year adjusted for treasury shares Basic earnings per share (NOK) Basic earnings per share for continuing operations (NOK) 2014 2013 274 000 000 274 000 000 271 830 726 271 162 152 9.13 (5.09) 4.11 (0.87) Diluted earnings per share ordinary shares outstanding after adjustment for the effect of rights to the calculation of diluted earnings per share is based on profit (loss) receive bonus shares in connection with the employee share purchase attributable to ordinary shareholders and a weighted average number of program and all dilutive potential ordinary shares. Amounts in NOK million 2014 2013 Weighted average number of issued ordinary shares for the year adjusted for treasury shares 271 830 726 271 162 152 expected effect of right to receive bonus shares Weighted average number of ordinary shares outstanding (diluted) for the year Diluted earnings per share (NOK) Diluted earnings per share for continuing operations (NOK) - 225 076 271 830 726 271 387 228 9.13 (5.09) 4.11 (0.87) note 14 | Property, plant and equipment the table below includes discontinued operations until these met the criteria to be classified as held for sale or distribution. Note Buildings and sites Vessels Machinery, equipment, software under construction Total Amounts in NOK million Historical cost Balance as of January 1, 2013 Additions through business combinations Additions1) transfer from assets under construction Disposals and scrapping Currency translation differences Reclassification to assets held for sale3) Balance as of December 31, 2013 Additions1,2) Financial lease Reclassification to investment properties transfer from assets under construction Disposals and scrapping Demerger of new Aker Solutions Currency translation differences Balance as of December 31, 2014 Accumulated depreciation and impairment Balance as of January 1, 2013 Depreciation for the year Impairment Disposals and scrapping Currency translation differences Reclassification to assets held for sale3) Balance as of December 31, 2013 Depreciation for the year4) Impairment Reclassification to investment properties Disposals and scrapping Currency translation differences Demerger of new Aker Solutions Balance as of December 31, 2014 Book value as of December 31, 2013 Book value as of December 31, 2014 of which financial lease as of December 31, 2013 of which financial lease as of December 31, 2014 1 951 13 260 299 (13) 38 (94) 3 433 426 - (2) - - 2 454 3 857 76 - (622) 105 (25) 124 974 (476) (110) - 61 (15) 26 2 900 - - (32) - 544 5 271 (273) (264) (5) 1 - - 5 (1 138) 5 35 15 5 15 5 6 945 80 963 968 (244) 321 (2 742) 6 291 384 - (214) 680 (104) (3 803) 345 3 579 (3 585) (889) (4) 156 (144) 1 416 1 674 14 003 17 913 (1 267) - 46 (43) 1 340 853 - (62) (785) (7) (529) 144 954 - - (361) - (19) - 110 2 562 - (259) 405 (2 879) 13 942 1 315 900 (898) - (168) (5 470) 1 157 10 778 (4 334) (1 263) (370) 218 (178) 1 442 (514) (541) (3 050) (380) (4 485) 32 - 136 24 (34) 148 (208) 1 940 766 - - (281) (690) - 53 (270) - (1 729) 3 316 3 542 889 (729) (59) 40 2 (96) 1 982 (1 910) 3 241 1 669 8 4 - - - - (82) - (978) (949) 176 79 (482) 2 130 (462) (4 309) 960 492 - - 9 457 6 469 8 893 1) Includes NOK 25 million of capitalized borrowing costs in 2014, of which NOK 8 million is related to discontinued operations (NOK 7 million in 2013). The average capitalization rate was 4.4 percent (6 percent in 2013) 2) Includes additions of NOK 509 million related to discontinued operations in 2014 (NOK 1 271 million in 2013), see note 5 for more information 3) Well Intervention Services and Mooring and Loading Services were classified as held for sale in 2013, see note 5 for more information 4) Includes depreciations amd impairment of NOK 234 million related to discontinued operations (NOK 644 million in 2013), see note 5 for more information PRINT Commitments two-year contract for the vessel, as well as a generally weaker market  that Investment property comprises a number of commercial properties that and other Holdings. the impairment is based on a revised business case By the end of December 2014 Akastor has entered into contractual has created uncertainty about the value of the vessel. In addition, noK 26 are primarily leased out to related parties. following the sale of MlS in 2014, refer to note 5 for more information commitments for the acquisition of property, plant and equipment million was charged as impairment related to Aker Wayfarer vessel based about the disposal. amounting to noK 163 million (noK 588 million in 2013), mainly related on the revised business case reflecting the lower activity in the subsea Akastor has reclassified property to Investment property following the to the new MHWirth plant under construction in Brazil. Akastor had also contraction market. demerger of the company as these properties were no longer used by the Disposals entered into contractual commitments related to two vessels in AKoFS group but leased out to third parties. on 21 May 2014 Akastor sold the shareholding in K2 Hotellbygg AS, refer offshore. Capital expenditure committments related to Aker Wayfarer of In 2013, AKoFS offshore booked an impairment of noK 361 million related to note 5 for more information about the disposal. noK 250 million will be payable during 2015 and 2016. In addition, Akastor to the investments in the Cat B rig. In 2012 Aker Solutions and Statoil Depreciation exercized the purchase option for the vessel AKoFS Seafarer early 2014 agreed that AKoFS offshore would build the so-called Category B (Cat estimates for useful life, depreciation method and residual values are Fair value and the transaction took place in February 2015 for a purchase price of B) rig and use it to provide Statoil with a range of well-intervention and reviewed annually. Assets are mainly depreciated on a straight-line basis Fair value of the investment properties is estimated to noK 968 million. A uSD 122.5 million, see note 38 Subsequent events. drilling services for an initial eight years, starting in 2015. the technology over their expected economic lives: discounted cash flow model has been used to assess the fair value (level Depreciation development needed to build the rig proved to be considerably more demanding than initially anticipated and the parties mutually agreed on Buildings technical installations 30 years 20 years estimates for useful life, depreciation method and residual values are June 24, 2013 to terminate the contract with immediate effect. reviewed annually. Assets are mainly depreciated on a straight-line basis over their expected economic lives as follows: Other impairment Impairment derived using an exit yield. In 2014, an impairment charge of noK 16 million was recognized related 3 in valuation hierarchy). the valuation model considers present value of net cash flows to be generated from the property. the expected net cash flows are discounted using risk-adjusted discount rates. terminal value is Machinery, equipment and software Buildings Sites Impairment 3 - 15 years 8 - 30 years no depreciation In 2014, an impairment charge of noK 49 million was recognized related to pusnes eiendom Invest in Arendal, which is included in Real estate the valuations were performed by an accredited independent valuer. to investments in engineerium at Fornebu, which is included in Real estate and other Holdings. the impairment is based on a revised business case for the use of engineerium following the demerger of the company. note 16 | intangible assets Impairment in AKOFS Offshore Security the table below includes discontinued operations until these met the criteria to be classified as held for sale or distribution. In 2014, an impairment charge of noK 664 million was recognized related See note 25 Borrowings for information about bank loans which are to investments in the AKoFS Seafarer vessel. the impairment is based on secured by property, plant and equipment. a revised business case after the cancelation in June by total in Angola of a note 15 | investment property Amounts in NOK million Historical cost Balance as of January 1, 2013 Balance as of December 31, 2013 Reclassification from property, plant and equipment Additions Disposals of subsidiaries Balance as of December 31, 2014 Accumulated depreciation and impairment Balance as of January 1, 2013 Depreciation for the year Balance as of December 31, 2013 Depreciation for the year Impairment Reclassification from property, plant and equipment Disposals and scrapping Balance as of December 31, 2014 Book value as of December 31, 2013 Book value as of December 31, 2014 Amounts in NOK million Rental income derived from investment properties Direct operating expenses (including repairs and maintenance) generating rental income Direct operating expenses (including repairs and maintenance) that did not generate rental income Profit (loss) arising from investment properties Note Investment Property 384 384 898 12 (384) 910 (11) (15) (26) (17) (16) (176) 32 (203) 358 707 2013 30 (15) - 15 14 14 2014 65 (52) (6) 7 Amounts in NOK million Balance as of January 1, 2013 Capitalized development1) Acquisition through business combinations Amortization for the year1) Impairment1) Currency translation differences Reclassification to asset held for sale Balance as of December 31, 2013 Capitalized development1) Amortization for the year1) Impairment1) Disposal Currency translation differences Demerger of new Aker Solutions Balance as of December 31, 2014 Note Development costs goodwill Other 5 1 060 804 - (144) (12) 70 (54) 1 724 607 (165) (103) (2) 42 (1 413) 690 5 553 - 724 - - 321 (653) 5 945 - - (300) 209 (3 832) 2 022 271 - 386 (67) - 47 (64) 573 33 (70) - 71 (197) 410 Total 6 884 804 1 110 (211) (12) 438 (771) 8 242 640 (235) (403) (2) 322 (5 442) 3 122 1) Includes capitalized development costs of NOK 360 million (NOK 517 million in 2013) and amortizations and impairment of NOK 75 million (NOK 110 million in 2013) related to discontinued operations, see note 5 for more information. Research and development costs developed for other parts of the former Aker Solutions. In addition, an noK 640 million has been capitalized in 2014 (noK 804 million in 2013) impairment of capitalized development costs of noK 22 million have related to development activities. In addition, research and development been recognized related to the close down of the Mining and Construction costs of noK 112 million have been expensed during the year because the business. criteria for capitalization was not met (noK 275 million in 2013). Amounts include new Aker Solutions until demerger. Impairment in AKOFS Offshore Amortization In 2014, impairments of noK 297 million related to goodwill and noK 14 million related to capitalized development costs have been recognized. Intangible assets with finite useful lives are amortized over the expected See more information about the goodwill impairment below. economic life, ranging between 5-10 years. Impairment Impairment in MHWirth Impairment test of goodwill Goodwill originates from a number of acquisitions. Management monitors goodwill impairment at the portfolio company level (segment) which is In 2014, an impairment charge of noK 61 million has been recognized, also considered to be the cash-generating unit (CGu) due to the level of mainly related to certain technologies in MHWirth that have been integration within the CGu’s. PRINT Allocation of goodwill by portfolio companies Amounts in NOK million MHWirth Frontica AKoFS offshore Fjords processing Kop Surface products Step oiltools1) First Geo1) new Aker Solutions Total 1) This portfolio company is aggregated into the reporting segment Real Estate and Other Holdings. 2014 1 207 179 145 313 98 60 20 - 2 022 2013 1 097 156 435 298 103 60 20 3 776 5 945 Impairment testing for cash-generating units containing goodwill on the future cash flow, budgets and strategic forecasts for the periods Recoverable amounts are based on value in use calculations. For all CGu’s 2015-2019 and an annual growth of 2 percent for subsequent periods. For except AKoFS offshore the calculations use cash flow projections based AKoFS offshore, see below. Weighted Average Cost of Capital (WACC) assumptions for impairment testing MHWirth Frontica AKoFS offshore1) Fjords processing Kop Surface products Step oiltools Post tax WACC Pre tax WACC 8.2 % 6.1 % 7.1 % 8.1 % 9.3 % 8.2 % 9.4 % 7.4 % 7.1 % 8.7 % 10.1 % 9.2 % 1) Pre tax WACC and post tax WACC for AKOFS Offshore are equal due to the assumption that both Skandi Aker and Skandi Santos will enter the tonnage tax regime in Norway in the near future. the risk free interest rate used in the discount rate is based on the 10 year goodwill has been re-tested for impairment as of 31 December 2014. the state treasury bond rate of 1.61 percent at the time of the impairment base case is showing that the estimated recoverable amount exceeds its testing. optimal debt leverage was estimated for each portfolio company. carrying amount by approximately noK 380 million. For all portfolio companies except AKoFS offshore, the recoverable the values assigned to key assumptions represent management’s amounts are higher than the carrying amounts and consequently the assessments of future trends in the business and are based on historical analysis indicates that no impairment is required. the key assumptions data from both external and internal sources. the cash flow projections used in the calculation of recoverable amounts are discount rates, terminal reflect vessel-specific rates as reflected in charter-agreements and, for value growth rates and eBItDA-margins. Reasonable changes to the key periods when the vessels are operating in the spot market, rates achieved in assumptions do not give grounds to impairment for any of these portfolio most recent charter agreements. companies. AKOFS Offshore the value-in-use analysis for AKoFS Seafarer has been made with different probability weighted scenarios covering the variation in day rates and In Q2 2014, an impairment loss of noK 301 million was recognized. the utilization. Management has identified that reasonable possible changes in impairment is a result of the revised business case for AKoFS Seafarer WACC as well as utilization and day rates related to AKoFS Seafarer vessel following the cancellation by total in Angola of a two-year contract as well could cause the carrying amount to exceed the recoverable amount. the as the market outlook in general for the two vessels AKoFS Seafarer and recoverable amount will be lower than book value if WACC is increased note 17 | interest-bearing receivables Current interest-bearing receivables Amounts in NOK million portfolio of bonds and certificates in Aker Insurance AS Convertible loan eZRA Holdings ltd Receivables Aker Solutions other1) Total 2014 91 - 63 51 205 2013 119 347 45 511 1) Includes loans to employees share purchase program NOK 2 million in 2014 (NOK 3 million in 2013). Average interest rate for loans to employees was 2.75 percent in 2014. the convertible loan to eZRA Holdings ltd was repaid in March 2014. Aker Insurance AS which is classified as financial assets at fair value through the current interest-bearing receivables are classified as financial assets at profit and loss. amortized cost. the only exception is portfolio of bonds and certificates in Non-current interest-bearing receivables Amounts in NOK million other receivable eZRA Holdings ltd loans to Aker DoF Deepwater AS other Total 2014 2013 46 82 3 131 76 83 - 159 See note 31 Financial risk management and exposures for information regarding credit risk management in the group. note 18 | equity-accounted investees equity-accounted investees include associated companies and joint associated companies and joint ventures and any guarantees provided on arrangements. Such investments are defined as related parties to Akastor. behalf of or from such entities. See note 35 Related parties for overview of transactions and balances with 2014 Amounts in NOK million Business office percentage of voting rights percentage held Share of profit (loss) reported in other income Share of profit (loss) reported in Financial items Impairment Book value 2013 Amounts in NOK million Business office percentage of voting rights percentage held DOf Deepwater As1) Kolon fjords Processing Co ltd 1,2 ) Other companies 5) Total Storebø, norway Gyeonggi, South Korea 50% 50% - (45) (110) 231 50% 50% 4 - - 15 - 39 (10) 18 4 (6) (120) 264 DOf Deepwater As1) Hinna Park Invest As 3,4) Other companies Total Storebø, norway oslo, norway 50% 50% (31) 386 25% 25% 2 25 4 29 (25) 440 Aker Wayfarer. by more than 1.4%. Sensitivities in day rates and utilization are both short Share of profit (loss) reported in Financial items term (in the spot market) and long term (in the lWI market). In addition, Book value Following the impairment loss recognized in Q2 2014, the recoverable timing for when the vessel enters the lWI market is critical (assumed 2017 amount was equal to the carrying amount. therefore, any adverse in base case for calculation of recoverable amount). movement in a key assumption would lead to further impairment. the 1) Joint venture 2) New joint venture agreement was entered into in 2014 together with two Korean companies. 3) Associated company 4) Sold in 2014 5) Gain on disposal and share of net profit from investments in K2 Eiendom AS and Hinna Park Invest AS totals NOK 38 million, see also description below PRINT summary of financial information for equity accounted investees (100 percent basis) the ezra share price had a significant reduction in 2014 resulting in an All other available-for-sale investments do not have an active market, impairment loss of noK 97 million recognized in financial items and noK and are measured at cost as this is considered to be the best estimate of 2014 Amounts in NOK million Current assets non-current assets Current liabilities non-current liabilities Net assets Akastor's share of net assets fair value uplift on acquisition / goodwill Akastor's carrying amount of the investment Revenue operating expenses net financial items profit (loss) before tax Income tax expense Profit (loss) for the year Total comprehensive income for the year 2013 Amounts in NOK million Current assets non-current assets Current liabilities non-current liabilities Net assets Akastor's share of net assets fair value uplift on acquisition / elimination of internal gain Akastor's carrying amount of the investment Revenue operating expenses net financial items profit (loss) before tax Income tax expense Profit (loss) for the year Total comprehensive income for the year DOf Deepwater As Kolon fjords Processing Co ltd 185 million is changed through other comprehensive income. Bonus fair value. shares of noK 8 million was distributed as dividends from the company. 151 1 697 (242) (1 157) 449 225 6 231 246 (152) (181) (87) (2) (89) (89) 110 5 (88) (4) 23 12 3 15 173 (165) 10 18 (14) 4 4 DOf Deepwater As Hinna Park Invest As 107 1 738 (133) (1 175) 537 269 118 269 230 (152) (118) (40) - (40) (40) 29 1 263 - (1 053) 239 60 (35) 25 98 (26) (58) 14 (7) 7 7 note 20 | Construction contracts Amounts in NOK million Construction revenue in the period Amounts due from customers for contract work Amounts due to customers for contract work Construction contracts in progress, net position Advances are presented as part of Amounts due to customers for contract work. Construction contracts in progress at the end of the reporting period Amounts in NOK million Aggregate amount of cost incurred and recognized profits (less losses) to date Advances from customers Retentions note 21 | inventories Amounts in NOK million Stock of raw materials Goods under production Finished goods Total Inventories carried at net realizable value Write-down of inventories in the period Reversal of write-down of inventories in the period Note 2014 7 22 29 8 653 2 325 (2 170) 155 2013 7 450 4 537 (4 835) (298) 2014 2013 3 525 43 107 591 - 4 113 113 2014 977 234 574 1 785 1 273 89 27 Restated1) 2013 1 300 414 705 2 419 882 129 - 1) Certain amounts shown here do not correspond to the 2013 financial statements and reflect adjustments made, refer to Note 37. Hinna Park Invest AS and K2 Eiendom AS the unrecognized gain amounts to noK 37 million in 2014 (noK Gain from sale of real estate from Aker Solutions to Hinna park Invest AS 108 million in 2013) and has been deducted from book value of the and K2 eiendom AS was recognized in 2012 (see note 10 other income). investments. For K2 eiendom AS, the deferred gain exceeds book value note 22 | trade and other receivables However, 25 percent of the total gain, representing Akastor ownership in of the investment and has been reported in trade and other payables by these companies, could not be recognized in the income statement until noK 6 million (noK 11 million in 2013). remaining shareholdings have been sold. In 2014 the shares held in Hinna park Invest AS were sold, as well as 8 percentage points of the shares held Guarantees on behalf of equity accounted investees in K2 eiendom AS, reducing ownership from 25 percent to 17 percent. Akastor ASA has issued financial guarantees in favor of financial the sale resulted in recognition of noK 71 million in deferred gain in institutions related to financing of the five vessels in DoF Deepwater AS. other income. liability is capped at 50 percent of drawn amount. the guarantee was noK 582 million as of December 31, 2014 (noK 560 million in 2013). note 19 | other investments Amounts in NOK million ezra Holdings ltd Aker pensjonskasse other equity securities Available-for-sale investments Investments at fair value through profit and loss Total other investments Note 2014 34, 35 222 120 5 347 - 347 2013 480 120 18 618 27 645 Amounts in NOK million trade receivables1) less provision for impairment of receivables Trade receivables, net Advances to suppliers Amount due to from customers for construction work prepaid expenses other receivables Total Note 20 2014 3 079 (81) 2 998 226 2 325 371 1 258 7 178 2013 6 464 (100) 6 364 621 4 537 513 5 551 17 586 1) Trade receivables are financial instruments and an impairment loss of NOK 53 million (NOK 47 million in 2013, of which NOK 32 million related to discontinued operations) was recognized in operating expenses. Book value of trade and other receivables is approximately equal to fair value. PRINT Aging of trade receivables Amounts in NOK million not overdue past due 0-30 days past due 31-90 days past due 91 days to one year past due more than one year Total 2014 1 804 509 348 380 38 2013 4 497 942 515 421 89 Dividends paid dividend per share (noK) total dividend paid (noK million) ordinary dividend per share proposed by the Board of Directors (noK)1) 1) The board of directors have proposed no dividend for 2014 2014 4.10 1 115 - 2013 4.00 1 082 4.10 3 079 6 464 Hedging reserve Currency translation reserve the hedging reserve relates to cash flow hedges of future revenues and the currency translation reserve includes exchange differences arising As at December 31, 2014, trade receivables of an initial value of noK 81 million (noK 100 million in 2013) were impaired and fully provided for. See below expenses against exchange rate fluctuations. the income statement from the translation of the net investment in foreign operations, for the movements in the provision for impairment of receivables. Amounts in NOK million Balance as of January 1 Demerger of new Aker Solutions new provisions utilized unused amounts reversed Currency translation differences Balance as of December 31 note 23 | Cash and cash equivalents Amounts in NOK million Restricted cash Cash pool Interest-bearing deposits Total 2014 100 (35) 53 (29) (17) 9 81 2014 39 499 537 1 075 2013 115 - 47 (16) (50) 4 100 2013 34 1 023 1 288 2 345 Additional undrawn committed non-current bank revolving credit facilities amounted to noK 1 billion, that together with cash and cash equivalents gives a total liquidity buffer of noK 2.1 billion. note 24 | Capital and reserves Share capital Share buy-back Akastor ASA has one class of shares, ordinary shares, with equal rights At the 2014 Annual General Meeting authorisation was given to repurchase for all shares. the holders of ordinary shares are entitled to receive up to 27.4 million shares, representing 10 percent of the share capital of dividends and are entitled to one vote per share at General Meetings. Akastor ASA. Akastor ASA increased the shareholdings with 1 020 765 total outstanding shares are 274 000 000 at par value noK 0.592 per treasury shares in 2014 and as of 31 December 2014 Akastor ASA holds 2 976 share (noK 1.66 in 2013). All issued shares are fully paid. 376 treasury shares representing 1.09 percent of total outstanding shares. summary of purchase and sale of treasury shares Amounts in NOK million treasury shares as of January 1, 2013 purchase Sale Treasury shares as of December 31, 2013 purchase Sale Treasury shares as of December 31, 2014 Number of shares Consideration 3 490 985 589 069 (2 124 443) 1 955 611 2 705 000 (1 684 235) 2 976 376 606 50 (183) 473 60 (33) 500 the group purchases treasury shares to meet the obligation under the employee share purchase program. effects of such instruments are recognized in accordance with the and foreign exchange gain or loss on loans defined as hedges or net progress of the underlying construction contract as part of revenues or investments, see note 11 Financial income and expenses. expenses as appropriate. the hedging reserve represents the value of such hedging instruments that are not yet recognized in the income statement. net investments have been hedged in 2014 with a loss of noK 38 million the underlying nature of a hedge is that a positive value on a hedging (loss of noK 9 million in 2013). Accumulated gain on net investment instrument exists to cover a negative value on the hedged position, see hedges from 2005 is negative noK 20 million (decreased from noK 18 in note 11 Financial income and expenses and note 32 Derivative financial 2013). the net investment hedge as of 31 December 2014 relates mainly instruments. to investments in the united States and Cyprus. Fair value reserve the fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognized or impaired. note 25 | borrowings Contractual terms of group’s interest-bearing loans and borrowings which Financial risk management and exposures. For more information related are measured at amortized cost. For more information about the group’s to the financial lease see note 35. exposure to interest rates, foreign currency and liquidity risk, see note 31 2014 Amounts in million Currency Nominal currency value Carrying amount (NOK) Interest rate1) fixed interest margin Interest coupon Maturity date Interest terms Revolving credit facility (noK 2 000 million) Total credit facility term loan Term loan noK 1 000 987 987 1.48% 1.60% 3.08% 03.06.19 IBoR + Margin2) noK 2 500 2 485 1.48% 1.40% 2.88% 03.06.17 IBoR 3M + variable margin Brazilian Development Bank eXIM loan BRl 25 Brazilian Development Bank eXIM loans finance lease obligation Total other loans Total borrowings Current borrowings non-current borrowings Total 6.10% - 6.10% Fixed, quarterly 2 485 70 70 1 376 110 5 028 308 4 720 5 028 1) The interest costs are calculated using either the last fixing rate known by year end (plus applicable margin) or the contractual fixed rate (when fixed rate debt). 2) The margin applicable to the facility is decided by a price grid based on the gearing ratio. Commitment fee is 40 percent of the margin. 3) The book value is calculated by reducing the nominal value of NOK 4 400 million by total issue costs related to the new financing of negative NOK 23 million. Accrued interest and issue costs related to the bonds are included by NOK 116 million. The book value of the bond with notional value of NOK 1 913 million also includes the mark-to-market value of a fair value hedging interest rate swap of NOK 7 million. PRINT 2013 Amounts in million Currency Nominal currency value Carrying amount (NOK) Interest rate1) fixed interest margin Interest coupon Maturity date Interest terms ISIn no 001050461.6 ISIn no 001050460.8 ISIn no 0010647431 ISIn no 0010661051 Total bonds3) Revolving credit facility (noK 6 000 million) Total credit facility term loan term loan term loan Term loan Brazilian Development Bank eXIM loan - Itau Brazilian Development Bank eXIM loan - HSBC Brazilian Development Bank eXIM loan - Itau Brazilian Development Bank eXIM loan - HSBC Brazilian Development Bank eXIM loans total other loans Total borrowings Current borrowings non-current borrowings Total noK noK noK noK 1 913 187 1 500 1 000 1 812 8,70% 2.00% 10,70% 26/06/14 Fixed, annual 187 1 498 1.65% 1.67% 6.75% 8.40% 26/06/14 Floating, 3M+fix margin 4.25% 5.92% 06/06/17 Floating, 3M+fix margin 1 002 1.68% 4.20% 5.88% 09/10/19 Floating, 3M+fix margin 4 499 noK 1 650 1 636 3.14% 0.00% 3.14% 01/06/16 IBoR + Margin2) 1 636 noK euR euR BRl BRl BRl BRl 750 270 130 145 50 155 50 755 1.70% 2.00% 3.70% 01/10/14 nIBoR 3M+fix margin 0.29% 0.22% 2 257 1 092 4 104 1.85% 1.50% 2.14% 13/11/15 IBoR 3M+variable margin 1.72% 13/05/14 IBoR 3M+variable margin 378 5.50% 0.00% 5.50% 23/07/16 Fixed, quarterly 131 5.50% 0.00% 5.50% 15/08/16 Fixed, quarterly 404 8.00% 0.00% 8.00% 15/08/15 Fixed, quarterly 131 8.00% 0.00% 8.00% 15/07/15 Fixed, quarterly 1 044 33 11 316 3 896 7 420 11 316 1) The interest costs are calculated using either the last fixing rate known by year end (plus applicable margin) or the contractual fixed rate (when fixed rate debt). 2) The margin applicable to the facility is decided by a price grid based on the gearing ratio. Commitment fee is 40 percent of the margin. 3) The book value is calculated by reducing the nominal value of NOK 4 400 million by total issue costs related to the new financing of negative NOK 23 million. Accrued interest and issue costs related to the bonds are included by NOK 116 million . The book value of the bond with notional value of NOK 1 913 million also includes the mark-to-market value of a fair value hedging interest rate swap of NOK 7 million. Amounts in NOK million less than one year Between one and five years More than five years Total Financial liabilities and the period in which they mature 2014 Present value of minimum lease payments 8 345 716 1 068 Interest 205 744 827 1 775 finance minimum lease payment 213 1 089 1 542 2 843 Amounts in NOK million Revolving credit facility (noK 2 000 million)2) term loan Brazilian Development Bank eXIM loans other loans Finance lease obligation Total other loans Total borrowings 2013 Amounts in NOK million ISIn no 001050461.6 ISIn no 001050460.8 ISIn no 0010647431 ISIn no 0010661051 Total Revolving credit facility (noK 6 000 million)2) term loan Brazilian Development Bank eXIM loans other loans Total other loans Total borrowings Carrying amount 987 2 485 70 110 1 376 5 028 5 028 Total undiscounted cash flow1) 6 months and less 6-12 months 1-2 years 2-5 years More than 5 years 1 139 2 680 86 110 2 843 6 858 6 858 1 015 36 2 33 106 1 193 1 193 15 36 2 77 106 237 237 31 72 4 - 251 358 358 77 2 536 78 - 838 3 529 3 529 - - - - 1 542 1 542 1 542 Carrying amount Total undiscounted cash flow1) 6 months and less 6-12 months 1-2 years 2-5 years More than 5 years 1 812 187 1 498 1 002 4 499 1 636 4 104 1 044 33 6 817 11 316 1 805 187 1 811 1 338 5 141 1 780 4 205 1 176 33 7 194 12 335 1 805 187 45 30 2 067 1 676 1 133 48 4 2 861 4 928 - - 44 29 73 - - 89 59 - - 1 633 176 148 1 809 - - - 1 044 1 044 26 52 774 2 298 35 3 577 6 838 2 933 26 - 516 15 557 - - - 5 5 911 3 081 2 366 1 049 1) The interest costs are calculated using either the last fixing rate known by year end (plus applicable margin) or the contractual fixed rate (when fixed rate debt). 2) NOK 1 000 million (NOK 1 650 million in 2013) corresponds to the repayment of the drawn portion of the available NOK 2 000 million (NOK 6 000 millon in 2013) credit facility. Bank debt (Norway) Finance lease obligation Mortgages and guarantee liabilities All facilities are provided by a bank syndicate consisting of high quality A financial lease obligation was recognized in 2014 following the re- the group has noK 20 million in mortgage liabilities, which is secured by pledges on property, plant and equipment with book values of noK 39 million. nordic and international banks. the terms and conditions include negotiation of the bareboat charter contract with Aker Ship lease 1 AS. restrictions which are customary for this kind of facility, including inter alia A lease obligation of noK 1 500 million was recognized in the accounts, negative pledge provisions and restrictions on acquisitions, disposals and of which noK 210 million presented as current liability representing the mergers. there are also certain changes of control provisions included. yearly lease payment. the non-current part of the lease obligation has the facility includes no dividend restrictions and is unsecured. been reduced by the remaining prepayment made in 2009 (reclassified the financial covenants are based on two sets of key financial ratios; a purchase option on three different dates. Refer to note 35 for more from non-current operating assets). the lease agreement includes gearing ratio based on net debt/equity and an interest coverage ratio information about this agreement. based on eBItDA/net finance costs. the financial covenants are tested on a quarterly basis. the margin applicable to the facility is based on a the finance lease liability is payable as follows as of December 31, 2014. price grid determined by the gearing ratio and level of utilization. See note 31 Capital management and exposures for more information regarding capital risk in the group. note 26 | other non-current liabilities Amounts in NOK million Contingent considerations from acquistions of subsidiaries in prior periods Deferred considerations from acquistions of subsidiaries in prior periods provision for onerous office lease obligations other liabilities Total 2014 44 - 157 84 285 2013 142 56 - 158 356 Deferred and contingent considerations Provision for onerous office leases Akastor has acquired subsidiaries and non-controlling interests where provision for onerous leases represents expectations related to future final consideration is deferred and can depend to a certain degree on sub-lease revenues to be generated from office lease obligations. future earnings in the acquired companies. the deferred and contingent considerations reported in other non-current liabilities as of December 31, 2014 relates mainly to the acquisition of Step oiltools (2011). PRINT note 27 | employee benefits - pension Akastor’s pension costs represent the future pension entitlement Compensation plan earned by employees in the financial year. In a defined contribution to ensure that the employees were treated fairly on the change over plan the company is responsible for paying an agreed contribution to to the new plan the company has introduced a compensation plan. the the employee’s pension assets. In such a plan this annual contribution is basis for deciding the compensation amount is the difference between also the cost. In a defined benefit plan it is the company’s responsibility calculated pension capital in the defined benefit plan and the value of the to provide a certain pension. the measurement of the cost and the defined benefit plan at the age of 67 years. the compensation amount will pension liability for such arrangements is subject to actuarial valuations. be adjusted annually in accordance with the adjustment of the employees’ Akastor has over a long time period gradually moved from defined benefit pensionable income, and accrued interest according to market interest. If arrangements to defined contribution plans. Consequently, the impact of the employee leaves the company voluntarily before the age of 67 years, the remaining defined benefit plans is gradually reduced. the compensation amount will be reduced. Pension plans in Norway AFP - early retirement arrangement the main pension arrangement in norway is a general pension plan AFp is an early retirement arrangement organized by norwegian organized by the norwegian State. this arrangement provides the main employers, the main labor union organization in norway (lo) and the general pension entitlement of all norwegians. All pension arrangements norwegian State. the “old AFp” arrangement was established to provide by employers, consequently represent limited additional pension pension between the age of 62 to 67 for employees who retired before entitlements. the general retirement age of 67. In a recent pension reform individual employees are given a choice of retirement age, but with lower pension norwegian employers are obliged to provide an employment pension with earlier retirement. estimated remaining employer contributions to plan, which can be organized as a defined benefit plan or as a defined cover the plan deficit have been provided for. contribution plan. the norwegian companies in Akastor have closed the earlier defined benefit plans in 2008 and are now providing defined the AFp scheme which was newly established in 2011 is not considered contribution plans for all of their employees under 61 years of age. to be a defined benefit compensation scheme for early retirement, but a Movement in net defined benefit liability Amounts in NOK million Balance as of January Demerger of new Aker Solutions and reclassifications1) Included in profit or loss Current service and administration cost Interest cost (income) Included in OCI - Remeasurements (loss) gain: Remeasurement loss (gain) arising from demographic assumptions Remeasurement loss (gain) arising from financial assumptions Remeasurement loss (gain) arising from experience adjustments Other Contributions paid into the plan Benefits paid by the plan other movements Balance as of December 31 Represented by: Gross defined benefit liability Fair value of pension assets Balance as of December 31 Defined contribution plan lifelong contribution plan. the scheme is classified as a multi-employer benefit scheme. Akastor has taken the position that the information 1) Amount represent balance as of January 1, 2014 the annual contribution expensed for the new defined contribution plan available at the date of the financial statements is not sufficient to reliably Plan assets was noK 125 million (noK 88 million in 2013). the estimated contributions measure the allocation of pension cost and net pension liability/asset in expected to be paid in 2015 is noK 132 million. accordance with a cost/benefit approach. Akastor has therefore elected Defined benefit plan to treat the scheme as a defined contribution plan in which the annual paid premiums to the AFp scheme are expensed in the income statement employees who were 58 years or older in 2008, when the change took as they are incurred. the total liability is not recognized. Based on the place, are still in the defined benefit plan. this is a funded plan and represent current financing model for AFp, the annual premiums are expected to most of the funded pension liability reported in the tables below. increase. When or if sufficient and reliable data is available and a liability can be reliably measured, the recognized liability could be significant. the estimated contributions expected to be paid to the norwegian plan during 2015 are noK 16 million. Pension plans outside Norway pensions plans outside norway are predominately defined contribution plans. Total pension cost continuing operations Amounts in NOK million Defined benefit plans Defined contribution plans Total Net employee defined benefit liability Amounts in NOK million Defined benefit plans norway Defined benefit plans Germany Defined benefit plans other countries Total Note 8 2014 33 132 165 2014 345 105 23 473 2013 33 115 148 2013 647 84 17 748 Amounts in NOK million Equity Securities oil & Gas Maritime transportation energy Infrastructure oilfield Services & equipment telecom Services Bonds Government Finance private and Government enterprise Municipalities Derivatives FX Forwards Fund/private equity FeRD private equity fund Ambolt AAM Absolute Return Fund DnB tMt Total plan assets at fair value Norwegian plan Plan assets outside Norway at fair value equity securities Debt securitites Plan assets outside Norway at fair value Total plan assets at fair value Note 5 2014 748 (341) 33 15 48 14 34 21 69 (27) (23) (1) (51) 473 809 (336) 473 2013 805 (50) 125 26 151 71 (40) (59) (28) (99) (43) 12 (130) 748 2 402 (1 654) 748 2014 2013 3 - - 2 1 6 7 19 44 141 212 - - - 1 2 2 5 36 4 8 8 14 70 29 32 353 1 106 1 520 (1) (1) 4 10 15 14 43 223 1 632 40 73 113 336 8 14 22 1 654 PRINT the equity portfolio is invested globally. the fair value of the equities is the contract at the reporting date taking into account the current market based on their quoted prices at the reporting date without any deduction conditions. Derivatives are only used for hedging purposes. for estimated future selling cost. the investment in bonds are done in the norwegian market and most of securities and where the fund value is based on quoted prices. the bonds are not listed on any exchange. the market value as at year end is based on official prices provided by the norwegian Securities Dealers Defined benefit obligation - actuarial assumptions Association. the Bond investment have on average a high credit rating. Most the group’s most significant defined benefit plans are in norway, Germany of the investments is in norwegian municipalities with a credit rating of AA. and uSA. the investment in fund/private equity is mainly funds that invests in listed the fair value of derivatives that are not exchange traded are estimated the following were the principal actuarial assumptions at the reporting at the amount that the company would receive or to pay to terminate date for the plans in these countries Discount rate Asset return Salary progression pension indexation Norway germany 2014 2.50% 2.50% 3.25% 2.50% 2013 4.10% 4.10% 3.75% 1.90% 2014 4.54% 4.54% N/A 1.75% 2013 4.89% 4.89% n/A 1.75% usA 2014 3.51% 3.51% N/A N/A 2013 4.25% 4.25% n/A n/A Mortality table K2013 K2013 RT 2005 g Rt 2005 G RP-2014 Total Dataset with scale MP-2014 2014 IRS Static Mortality table note 28 | Provisions Amounts in NOK million Balance as of January 1, 2014 Demerger of new Aker Solutions1) provisions made during the year provisions used during the year provisions reversed during the year Currency translation differences Balance as of December 31, 2014 expected timing of payment Within the next twelve months After the next twelve months Total 1) Amount represent balance as of January 1, 2014 Warranties Other 782 (517) 54 (59) (34) 16 242 122 120 242 90 (38) 152 (3) (51) 4 153 67 87 153 Total 872 (555) 206 (62) (85) 20 395 189 206 395 Warranties Other the provision for warranties relates mainly to the possibility that Akastor, other includes noK 62 million representing current part of onerous lease based on contractual agreements, needs to perform guarantee work provisions. non current part of onerous lease provisions is recognized in related to products and services delivered to customers. See note 4 other long term liabilities, see note 26. Accounting estimates and judgments for further description. the information below relates only to norwegian plans as these represent percent as the benefit obligation in Akastor consist mainly of pensioners the majority of the plans. and employees over 60 years. It should also be expected that fluctuations Amounts in NOK million in the discount rate would also lead to fluctuations in the pension trade creditors1) note 29 | trade and other payables the discount rate and other assumptions in 2014 and 2013 are based on indexations. the total effect of fluctuations in economic assumptions are the norwegian high quality corporate bond rate and recommendations consequently unlikely to be very significant. from the norwegian Accounting Standards Board. Generally, a one percent increase in the discount rate will lead to statistics and mortality tables. the current life expectancy underlying the approximately 10-15 percent decrease in service cost/projected benefit values of the defined benefit obligation at the reporting date are shown obligation. this is lower than an expected effect of approximately 20 below. Assumptions regarding future mortality have been based on published Years life expectancy of male pensioners life expectancy of female pensioners Sensitivity analysis 2014 21.3 24.4 2013 20.4 23.2 Amount due to customers for contract work and advances Accrued operating and financial costs other current liabilities2) Total Note 20 2014 1 506 2 170 1 951 802 6 429 2013 2 873 4 835 6 712 2 989 17 409 1) Trade creditors include NOK 8 million due after one year (NOK 119 million in 2013). 2) Other current liabilities include NOK 27 million related to deferred and contingent considerations assumed in business combinations (NOK 176 million in 2013). See note 26 Other non-current liabilities for further description. Book value of trade creditors and other current liabilities is approximately equal to fair value. note 30 | Capital management Funding policy Reasonably possible changes at the reporting date to one of the relevant affected the defined benefit obligation as of December 31, 2014 by the Akastors’ capital management is designed to ensure that the Group Liquidity planning actuarial assumptions, holding other assumptions constant, would have amounts shown below. has sufficient financial flexibility, short-term and long-term. one main Akastor has a strong focus on its liquidity situation in order to meet its Amounts in NOK million Discount rate (1% movement) Future salary growth (1% movement) Future pension growth (1% movement) Increase Decrease cash flow, secures the Groups strong, long-term creditworthiness, as well obligations long term. Akastors liquidity reserve per year end 2014 objective is to maintain a financial structure that, through solidity and short term working capital needs and to ensure solvency for its financial (55) 11 60 66 (10) (51) maximize value creation for its shareholder through: amounted to noK 2.1 billion and was beyond cash and cash equivalents, primarily composed of an undrawn committed credit facility. ŸŸ Investing in projects and business areas which will increase the company’s Return on Capital employed (RoCe) over time. Funding of operations the change in discount rate assumptions would affect plan assets in the income statement in next period as it would change the estimated asset return, but have no effect on pension assets as of year-end. ŸŸ optimizing the company’s capital structure to ensure both sufficient and timely funding over time to finance its activities at the lowest cost. Investment policy Akastors’ group funding policy implies that all operations shall meet their funding needs directly via Corporate treasury. this ensures optimal availability and transfer of cash within the group and better control of the company’s overall debt as well as cheaper funding for its operations. Akastors’ capital management is based on a rigorous investment selection Funding duration process which considers not only Akastors’ weighted average cost of Akastor emphasizes financial flexibility and steers its capital structure capital and strategic orientation but also external factors such as market accordingly to ensure a balance between liquidity risk and refinancing expectations and extrinsic risk factors. risk. In this perspective, loans and other external borrowings are to be renegotiated well in advance of their due date. PRINT Funding cost  the loan agreement) and finance cost. the reported ratios are well within at group level as hedges of currency risk on a gross basis. More than 80 Exposure to currency risk Akastor aims to have a diversified selection of funding sources in order to the requirements in the loan agreements. percent of the exposure value either qualify for hedge accounting or are estimated forecasted receipts and payments in the table below are reach the lowest possible cost of capital. these funding sources include: embedded derivatives. non-qualifying hedges are adjusted at group level calculated based on the group’s hedge transactions through the Corporate ŸŸ ŸŸ ŸŸ the use of banks based on syndicated credit facilities. the issue of debt instruments on the norwegian capital market. ŸŸ the company’s interest coverage ratio must not be less than 4.0 times, calculated from the consolidated eBItDA to note 32 Derivative financial instruments for information regarding the the currency exposure. the net exposure is managed by the Corporate accounting treatment of hedging and embedded derivatives. treasury department that is allowed to hold positions within an approved trading mandate. this mandate is closely monitored and reported on a the issuance of debt in the foreign capital market. consolidated net Finance Cost. Currency exposure from investments in foreign currencies are only daily basis to the management. Akastor has strict internal guidelines regarding key financial ratios: and included in the “unallocated” part of the segment reporting. See treasury department. these are considered to be the best estimate of As per end of 2014, the capital structure of Akastor was 100 percent from ŸŸ the company’s gearing ratio shall not exceed 1.0 times and bank debt. is calculated from the consolidated total borrowings to the consolidated equity. the group monitors capital on the basis of a gearing ratio (net debt/ equity) and interest coverage ratio (eBItDA/net finance cost). the ratios these guidelines aim at maintaining a strong financial position for are calculated from gross debt, including all interest-bearing liabilities as Akastor, complying with the company’s covenants on its existing debt and shown in note 33 Financial instruments, eBItDA (earnings before interest, maintaining sufficient external credit rating to ensure reliable access to tax, depreciation, amortization and adjusted for certain items as defined in capital over time. Gearing and interest coverage ratios at December 31 for term loan and credit facility1) Amounts in NOK million Gearing ratio net debt equity Net debt/equity2) Gross debt eBItDA gross debt/eBITDA3) Interest coverage eBItDA net finance cost eBITDA/Net finance cost 1) Net finance cost, net debt and EBITDA are adjusted for certain items as defined in the loan agreement 2) Net debt / equity introduced as covenant after refinancing in 2014. 3) Gross debt / EBITDA not defined as covenant in current finance agreements note 31 | financial risk management and exposures 2014 2013 3 155 9 378 0.34 11 875 4 285 2.8 1 380 4 285 167 8.2 664 6.5 hedged when specifically instructed by management. As of December 31, 2014, the group has one active net investment hedge related to its subsidiary Frontica Global employment limited. Amounts in million Bank Intercompany loans external loans usD (83) 406 - 2014 euR (56) (13) - gBP (17) (11) - Balance sheet exposure 323 (70) (28) estimated forecast receipts from customers estimated forecast payments to vendors Cash flow exposure forward exchange contracts Net exposure 1 669 (700) 969 (1 291) 1 75 (191) (116) 186 - 3 (14) (11) 39 - BRl - 160 - 160 459 (137) 323 (483) - usD (62) 178 2013 euR (52) (84) - (400) 116 (536) gBP (12) 36 - 24 4 016 169 184 (1 227) (515) 2 789 (346) (2 899) 6 883 1 (338) (154) 130 - BRl - (107) - (107) 95 (121) (26) 137 4 Sensitivity analysis to be reasonably possible at the end of the reporting period. the analysis A strengthening of euR, uSD, GBp and BRl against noK as of December assumes that all other variables, in particular interest rates, remain 31 would have affected the measurement of financial instruments constant and ignores any impact of forecast sales and purchases. Figures denominated in a foreign currency and increased (decreased) equity and in the table below only include the effect in income statement and equity income statement by the amounts shown below. this analysis is based for change in currency regarding financial instruments and do not include on foreign currency exchange rate variances that the group considered effect from operating cost and revenue. Amounts in NOK million uSD (15 percent weakening of noK) euR (15 percent weakening of noK) GBp (15 percent weakening of noK) BRl (15 percent weakening of noK) 2014 2013 Profit (loss) before tax equity Increase (decrease) Profit (loss) before tax equity Increase (decrease) (945) 87 19 (6) (909) 152 19 (60) (2 334) (2 445) 246 56 (11) 449 234 (11) Financial risks Currency risk A 15 percent strengthening of the noK against the above currencies as interest rate risk. Borrowings issued at fixed rates expose the group to the group is exposed to a variety of financial risks: currency risk, interest the group operates internationally and is exposed to currency risk of December 31 would have had the equal but opposite effect on the fair value interest rate risk. However, as these borrowings are measured at rate risk, price risk, credit risk, liquidity risk and capital risk. the market risks on commercial transactions, recognized assets and liabilities and above amounts, on the basis that all other variables remain constant. the amortized cost, interest rate variations do not effect profit and loss when affect the group’s income or the value of financial instruments held. the net investments in foreign operations. Commercial transactions and sensitivity analysis does not include effects on the consolidated result and held to maturity. objective of financial risk management is to manage and control financial recognized assets and liabilities are subject to currency risk when equity from changed exchange rates used for consolidation of foreign risk exposures and thereby increase the predictability of earnings and payments are denominated in a currency other than the respective subsidiaries. minimize potential adverse effects on the group’s financial performance. functional currency of the group company. the group’s exposure to As the group has no significant interest-bearing operating assets, operating income and operating cash flows are substantially independent Akastor group uses financial derivative instruments to hedge certain currency risk is primarily to uSD, euR, GBp and BRl but also several other the primary currency-related risk is the risk of reduced competitiveness of changes in market interest rates. external debt was not hedged at risk exposures and aims to apply hedge accounting whenever possible currencies.the Akastor policy requires business units to mitigate currency abroad in the case of a strengthened noK. this risk relates to future year end. in order to reduce the volatility resulting from the periodic mark-to- exposure in any project. Corporate treasury manages internal exposures commercial contracts and is not included in the sensitivity analysis above. market revaluation of financial instruments in the income statement. Risk by entering into forward contracts or currency options with the financial management is performed in every project. It is the responsibility of the market place. the Akastor group has a large number of contracts involving Interest rate risk An increase of 100 basis points in interest rates during 2014 would have increased (decreased) equity and profit and loss by the amounts shown on project managers, in cooperation with the central treasury department foreign currency exposures and the currency risk policy has been well- the group’s interest rate risk arises from non-current borrowings. the table below. this analysis assumes that all other variables, in particular (Corporate treasury), to identify, evaluate and hedge financial risks established for many years. Borrowings issued at variable rates expose the group to cash flow foreign currency rates, remain constant. under policies approved by the Board of Directors. the group has well- established principles for overall risk management, as well as policies for For segment reporting purposes, each business unit designates all the use of derivatives and financial investments. there has not been any currency hedge contracts with Corporate treasury as cash flow hedge, changes in these policies during the year. fair value hedge, net investment hedge or identified and seperated as an embedded derivative. external foreign exchange contracts are designated PRINT Effect of increase of 100 basis points in interest rates Management monitors rolling weekly and monthly forecasts of the group’s regarding capital expenditures and net operating assets, see note 6 Amounts in NOK million Cash and cash equivalents Interest rate swap non-current interest-bearing receivables Current interest-bearing receivables Borrowings Cash flow sensitivity (net) 2014 2013 Profit (loss) before tax equity1) Increase (decrease) Profit (loss) before tax equity1) Increase (decrease) 21 - 1 2 (69) (46) - - - - - - 16 (9) 3 4 (86) (72) - 97 - - - 97 1) Not including tax effect on hedge reserve or effects to equity that follow directly from the effects to profit and loss. A decrease of 100 basis points in interest rates during 2014 would have or counterparty to financial investments/instruments fail to meet had the equal but opposite effect on the above amounts, on the basis that contractual obligations, and arise principally from investment securities all other variables remain constant. and receivables. Investment securities and derivatives are only traded against approved banks. All approved banks are participants in the Akastor the group has provided the following guarantees on behalf of wholly to investment securities and derivatives is therefore considered to be owned subsidiaries as of December 31 (all obligations are per date of issue): insignificant. ŸŸ non-financial parent company guarantees related to project Assessment of credit risk related to customers and subcontractors is performance on behalf of group companies are noK 33.5 an important requirement in the bid phase and throughout the contract billion (noK 75.4 billion in 2013). period. Such assessments are based on credit ratings, income statement ŸŸ Financial parent company indemnity guarantees for fulfillment of lease obligations are noK 3.3 billion (noK 1.2 billion in 2013). and balance sheet reviews and using credit assessment tools available (e.g. Dun & Bradstreet and Credit Watch). Sales to customers are settled in cash. liquidity reserve on the basis of expected cash flow. For information operating segments. financial liabilities and the period in which they mature 2014 Amounts in NOK million Note Book value Total cash flow1) 6 months and less 6-12 months 1-2 years 2-5 years More than 5 years Borrowings other non-current liabilities net derivative financial instruments trade and other payables Financial lease Total financial liabilities Financial guarantees 2013 25 26 32 29 25 (5 028) (5 870) (305) (190) (285) 338 (378) 338 - - 1 008 (276) (6 429) (6 429) (4 822) (1 592) (1 376) 2 843 106 106 (381) (86) (393) (15) 251 (12 780) (9 496) (4 013) (1 952) (624) (2 811) (3 452) (1 542) (197) (95) - - 838 - - 1 542 (95) (7 229) (1 295) (308) (1 033) (1 354) (3 238) Total cash flow1) 6 months and less 6-12 months 1-2 years 2-5 years More than 5 years Borrowings other non-current liabilities net derivative financial instruments trade and other payables Total financial liabilities Financial guarantees 1) Nominal currency value including interest. 25 26 32 29 (11 316) (12 335) (4 927) (911) (3 081) (2 366) (1 049) (356) 710 (356) 710 - 313 - 166 (17 409) (17 409) (13 057) (4 352) (148) 259 - (142) (25) - (65) (3) - (28 371) (29 390) (17 671) (5 097) (2 970) (2 533) (1 117) (8 223) (1 141) (306) (1 255) (3 439) (2 082) Guarantee obligations loan syndicate and have investment grade ratings. Credit risk related Amounts in NOK million Note Book value Based on estimates of incurred losses in respect of trade and other the group policy for the purpose of optimizing availability and flexibility An important condition for the participants (business units) in such cash ŸŸ Financial guarantees including counter guarantees for bank/ receivables, the group establishes a provision for impairment losses. of cash within the group is to operate centrally managed cash pooling pooling arrangements is that the group as an owner of such pools is surety bonds and guarantees for pension obligations to provision for loss on debtors are based on individual assessments. arrangements. Such arrangements are either organized with a bank as financially viable and is able to prove its capability to service its obligations employees are noK 4 billion (noK 6.8 billion in 2013). provisions for loss on receivables were noK 81 million in 2014 (noK a service provider, or as a part of the operation of Corporate treasury. concerning repayment of any net deposits made by business units. ŸŸ Indemnity under financial agreements on behalf of Aker DoF Deepwater AS are noK 582 million (noK 560 million in 2013). 100 million in 2013). Revenues are mainly related to large and long- term projects closely followed up in terms of payments up front and in accordance with agreed milestones. normally, lack of payments is due to disagreements related to project deliveries and is solved together with Guarantee obligations on behalf of New Aker Solutions the customer or escalated to the local authority. note 32 | Derivative financial instruments If an obligation that arose prior to the completion of the demerger is not the Akastor group uses derivative financial instruments to hedge foreign project expenses are expected to impact profit and loss. the majority satisfied by the party to which the obligation has been allocated under the At the balance sheet date, there were no significant concentrations of exchange and interest rate exposures. In addition, there are embedded of project revenues are recognized in accordance with IAS 11 using the demerger plan, be it Akastor or new Aker Solutions, then the other party credit risk. the maximum exposure to credit risk at the reporting date foreign exchange forward derivatives separated from ordinary commercial percentage of completion method. this may result in different timing of will have secondary joint liability for such obligation. this statutory liability equals the book value of each category of financial assets, see carrying contracts. Further information regarding risk management policies in the cash flows related to project revenues and revenue recognition. is unlimited in time, but is limited in amount to the net value allocated to amounts in note 33 Financial instruments. the group does not hold group is available in note 31 Financial risk management and exposures. the non-defaulting party in the demerger. the guarantees listed above do collateral as security. not include obligations on behalf of new Aker Solutions. the table below presents the fair value of the derivative financial instruments used to price embedded derivatives as well as other derivative Instruments that do not qualify for hedge accounting include the external Price risk For further information, see note 10 Guarantees in the Akastor ASA’s the Akastor group hedging policy and the assumption that the projects the group as part of its risk mandate. As of December 31, 2014, these Akastor ASA provides parent company guarantees to group companies. instruments and a maturity analysis of the derivatives cash flows. Given instruments used by Group treasury to hedge the residual exposure of the group is exposed to fluctuations in market prices both in the accounts. investment portfolio used in the pension benefit plan and in the operating businesses related to individual contracts. Liquidity risk the investment portfolio is limited, and the group currently only holds the obligations associated with its financial liabilities. the group’s approach one investment in listed companies (ezra), see note 19 other investments. to managing liquidity is to ensure, as far as possible, that it will always have liquidity risk is the risk that the group will encounter difficulty in meeting sufficient liquidity reserves to meet its liabilities when due. the businesses may be exposed to changes in market price for raw materials, equipment and development in wages. this is managed in the prudent liquidity risk management includes maintaining sufficient cash, bid process by locking in committed prices from vendors as basis for the availability of funding from an adequate amount of committed credit offers to customers or through escalation clauses with customers. facilities and the ability to close out market positions. Due to the dynamic Credit risk nature of the underlying businesses, Corporate treasury maintains flexibility in funding by maintaining availability under committed credit Credit risk is the risk of financial losses to the group if customer lines, see note 25 Borrowings. are cash neutral, this table also indicates when the cash flows related to instruments only include currency forwards and FX swaps. PRINT Fair value of derivative financial instruments with maturity 2014 Amounts in NOK million Assets Cash flow hedges embedded derivatives in ordinary commercial contracts not hedge accounted Total forward foreign exchange contracts Total assets Liabilities Cash flow hedges net investment hedges embedded derivatives in ordinary commercial contracts not hedge accounted Total forward foreign exchange contracts Total liabilities Instruments at fair value Total undiscounted cash flow1) 6 months or less 6-12 months 1-2 years 2-5 years Over 5 years 1 621 520 58 2 199 2 199 (669) (39) (868) (285) (1 861) (1 861) 1 621 1 248 225 124 24 520 58 2 199 2 199 (669) (39) (868) (285) (1 861) (1 861) 520 58 1 826 1 826 (425) (31) (239) (124) (819) (819) - - 225 225 - - 124 124 (31) (213) - (8) - - 24 24 - - (377) (228) (24) (93) (501) (501) (68) (517) (517) - (24) (24) - - - - - - - - - - - 1) Cash flows from matured derivatives are translated to NOK using the exchange rates on the balance sheet date. 2013 Amounts in NOK million Assets Cash flow hedges Fair value hedges net investment hedges embedded derivatives in ordinary commercial contracts not hedge accounted Total forward foreign exchange contracts Cash flow hedges Fair value hedges Total interest rate instruments Total assets Liabilities Cash flow hedges net investment hedges embedded derivatives in ordinary commercial contracts not hedge accounted Total forward foreign exchange contracts Cash flow hedges Total interest rate instruments Total liabilities 6 months or less 6-12 months 1-2 years 2-5 years Over 5 years Instruments at fair value Total undiscounted cash flow1) 1 009 1 009 - 12 359 127 1 507 29 8 37 - 12 359 127 1 507 29 8 37 414 - 12 189 105 720 29 8 37 203 306 86 - - 20 16 - - 91 5 239 402 - - - - - - - - 59 - 145 - - - 1 544 1 544 757 239 402 145 (494) (21) (5) (270) (790) (44) (44) (834) (494) (21) (5) (270) (790) (44) (44) (298) (21) (5) (120) (444) - - (44) (59) (92) - - (22) (66) (7) (7) - - (84) (143) - - - - (44) (136) (34) (34) (834) (444) (73) (143) (170) - - - - - - - - - - - - - - - (3) (3) (3) embedded derivatives are foreign exchange derivatives separated from derivatives hedging the embedded derivatives are included in Forward construction contracts. the reason for separation is that the agreed foreign exchange contracts - not hedge accounted. payment is in a currency different from any of the major contract parties’ the hedged transactions in foreign currency that are subject to cash flow own functional currency, or that the contract currency is not considered hedge accounting are highly probable future transactions expected to to be commonly used for the relevant economic environment defined as occur at various dates during the next one to four years, depending on the countries involved in the cross-border transaction. the embedded progress in the projects. Gains and losses on forward foreign exchange derivatives represent currency exposures, which is hedged against contracts are recognized in comprehensive income and reported as external banks. Since the embedded derivatives are measured and hedging reserve in equity until they are recognized in the income classified in the same way as their hedging derivatives, they will have an statement in the period or periods during which the hedged transactions almost equal, opposite effect to profit and loss. In the table above, the affect the income statement. Unsettled cash flow hedges’ impact on profit and loss and equity (not adjusted for tax) 2014 Amounts in NOK million Forward exchange contracts Total 2013 Amounts in NOK million Interest rate swaps Forward exchange contracts Total fair value of all hedging instruments Recognized in profit and loss Deferred in equity (the hedging reserve) 194 194 90 90 104 104 fair value of all hedging instruments Recognized in profit and loss Deferred in equity (the hedging reserve) (44) 373 329 - 27 27 (44) 346 302 the value of the interest swaps is attributable to changes in the interest noK 346 million in 2013) that are currently recorded directly in the swap curve for norwegian kroner during the period from inception of the hedging reserve, will be reclassified to income statement over the next hedge to the balance sheet date. It excludes the accrued interest rates of years. the swaps accumulated during the period. Interest rate swaps the value of the hedge reserve is before tax to allow comparison with At 31 December, 2013 Akastor had one bond of noK 1 913 million (out the value of the hedging derivatives; this value does not include deferred of which noK 200 million bought back) with a fixed interest rate of 10.7 settlements related to matured instruments. percent. the bond was settled in 2014. Akastor also had interest rate swaps with floating interest with a notional value of noK 763 million hedging the the purpose of the hedging instrument is to secure a situation where fixed interest bonds. the hedged item and the hedging instrument together represent a predetermined value independent of fluctuations of exchange rates. Hedge accounting was applied using the cash flow hedge accounting model Revenue and expense on the underlying construction contracts are which means that gains and losses on interest rate swap from floating to recognized in the income statement in accordance with progress. fixed interest rates as of December 31, 2013 are recognized in the hedging Consequently, positive noK 90 million (positive noK 27 million in 2013) reserve in equity and was continuously released to the income statement of the value of the forward contracts have already affected the income as changes in fair value until the bond was repaid. this is achieved based on statement indirectly as revenues and expenses are recognized based on the periodic mark-to-market revaluation of the interest rate swaps whose updated forecasts and progress. the positive noK 104 million (positive fair value tend to zero upon maturity. note 33 | financial instruments 1) Cash flows from matured derivatives are translated to NOK using the exchange rates on the balance sheet date. the table below lists the group’s financial instruments, both assets and level 2 - fair values are based on price inputs other than quoted prices liabilities. Financial instruments measured at fair value are classified derived from observable market transactions in an active market for the group uses derivative financial instruments such as currency forward to foreign exchange variations in future cash flows are related to a few by the levels in the fair value hierarchy. All other financial instruments identical assets or liabilities. level 2 includes currency or interest contracts, currency options and interest rate swaps to hedge its exposure large projects. the currency exposure in these projects have been hedged are classified by the main group of instruments as defined in IAS 39. It derivatives and interest bonds, typically when the group uses forward to foreign exchange and interest rate risks arising from operational, financial back-to-back in order to meet the requirements for hedge accounting. does not include fair value information for financial assets and financial prices on foreign exchange rates or interest rates as inputs to valuation and investment activities. Derivative financial instruments are classified as they are either subject to hedge accounting or separated embedded liabilities not measured at fair value if the carrying amounts is a reasonable models. current assets or liabilities as they are a part of the operating cycle. derivatives. All other hedges are not designated as IAS 39 hedges and will approximation of fair value. For financial instruments measured at fair Foreign exchange derivatives are classified as cash flow hedges (hedges of highly probable future internal assumptions used in the absence of quoted prices from an active Corporate treasury hedges the group’s future transactions in foreign revenues and/or expenses). level 1 - fair values are based on prices quoted in an active market for market or other observable price inputs. have an effect on profit or loss. Hedges qualifying for hedge accounting value, the levels in the fair value hierarchy are as shown below. level 3 - Fair values are based on unobservable inputs, mainly based on currencies with external banks. Approximately 80 percent of the exposure identical assets or liabilities. PRINT Financial instruments as of December 31, 2014 Carrying amount Amounts in NOK million Note through P&l instruments receivables for sale liabilities fair value fair value - hedging loans and Available Other financial Cash and cash equivalents other investments - equity securities - Available-for-sale1) Forward foreign exchange contract non-current interest-bearing receivables other non-current operating assets trade and other receivables Current interest-bearing receivables - Bonds and certificates4) - Receivables financial assets Forward foreign exchange contracts non-current borrowings2) other non-current liabilities - Contingent consideration - other liabilities Credit facility and other current borrowings3) other current liabilities - trade and other payables - Deferred consideration - Contingent consideration financial liabilities fair value 23 19 32 17 22 17 17 32 25 26 26 25 29 29 29 - - - - - - 91 - 91 - - (44) - - - - - (44) - 1 075 - - 2 199 - - - - - 2 199 (1 861) - - - - - - - (1 861) - 131 691 7 178 - 114 9 189 - - - - - - - - - 347 - - - - - - 347 - - - - - - - - - Total 1 075 347 2 199 131 691 7 178 91 114 11 826 (1 861) - - - - - - - - - - (4 720) (4 720) - (241) (308) (44) (241) (308) (6 402) (7) (20) (11 698) (6 402) (7) (20) (13 603) Amounts in NOK million Note level 1 level 2 level 3 Total Cash and cash equivalents other investments - equity securities - Available-for-sale1) Forward foreign exchange contract non-current interest-bearing receivables other non-current operating assets trade and other receivables Current interest-bearing receivables - Bonds and certificates4) - Receivables financial assets Forward foreign exchange contracts non-current borrowings2) other non-current liabilities - Contingent consideration - other liabilities Credit facility and other current borrowings3) other current liabilities - trade and other payables - Deferred consideration - Contingent consideration financial liabilities 23 19 32 17 22 17 17 32 25 26 26 25 29 29 29 - 222 - - - - - - 222 - - - - - - - - - - - 2 199 - - - 91 - 2 290 (1 861) (4 748) - - (308) - - - (6 917) - 125 - - - - - - 125 - - (44) - - - - (20) (64) - 347 2 199 - - - 91 - 2 637 (1 861) (4 748) (44) - (308) - - (20) (6 981) Financial instruments as of December 31, 2013 Carrying amount Amounts in NOK million Note through P&l hedging instruments receivables for sale liabilities Total fair value fair value - loans and Available Other financial Cash and cash equivalents other investments - equity securities - Available-for-sale1) - equity securities - fair value in profit and loss Forward foreign exchange contract Interest rate instruments non-current interest-bearing receivables other non-current operating assets trade and other receivables Current interest-bearing receivables - Bonds and certificates4) - Receivables - Convertible loans financial assets Forward foreign exchange contracts Interest rate instruments non-current bonds and borrowings2) other non-current liabilities - Contingent consideration - Actuary estimated insurance provisions - other liabilities other current liabilities - trade and other payables - Deferred consideration Credit facility and other current borrowings3) financial liabilities fair value Amounts in NOK million Cash and cash equivalents other investments - equity securities - Available-for-sale1) - equity securities - fair value in profit and loss Forward foreign exchange contract Interest rate instruments non-current interest-bearing receivables other non-current operating assets trade and other receivables Current interest-bearing receivables - Bonds and certificates4) - Receivables - Convertible loans financial assets Forward foreign exchange contracts Interest rate instruments non-current bonds and borrowings2) other non-current liabilities - Contingent consideration - Actuary estimated insurance provisions - other liabilities other current liabilities - trade and other payables - Deferred consideration Credit facility and other current borrowings3) financial liabilities 23 19 19 32 32 17 22 17 17 17 32 32 25 26 26 26 29 26 25 - - 27 - - - - - 119 - - 146 - - - (142) (49) - - - - (191) - 2 345 - - - 1 507 37 - - - - - - 1 544 (790) (44) - - - - - - - (834) - - - - 159 162 17 659 - 45 347 20 717 - - - - - - 618 - - - - - - - - - 618 - - - - - - - - - - - - - - - - - - - - - - - - 2 345 618 27 1 507 37 159 162 17 659 119 45 347 23 025 (790) (44) (7 420) (7 420) - - (165) (142) (49) (165) (17 233) (176) (3 896) (28 890) (17 233) (176) (3 896) (29 915) Note level 1 level 2 level 3 23 19 19 32 32 17 22 17 17 32 32 25 26 26 26 29 26 25 - 480 - - - - - - - - - 480 - - - - - - - - - - - - 27 1 507 37 - - - 119 - - 1 690 (790) (44) (7 433) - - - - - (4 030) (12 297) - 138 - - - - - - - - - 138 - - - (142) (49) - - - - (191) Total - 618 27 1 507 37 - - - 119 - - 2 308 (790) (44) (7 433) (142) (49) - - - (4 030) (12 488) 1) Investments in level 3 in the hierarchy relate to equity securities with no active market. These investments are measured at cost since this is considered to be the best estimate of fair value. All available for sale investments are designated as such upon initial recognition. 2) Fair values are based on quoted prices for the bonds noted on the Oslo Stock Exchange. For new bonds, the notional amounts are considered as the best approximation of fair value. 3) For credit facilities and other short-term loans with floating interest, notional amounts are used as approximation of fair values. 4) Portfolio of bonds, obligations and certificates derived from observable market transactions in an active market for identical assets. there are no financial assets or liabilities held for trading PRINT note 34 | Group companies this note gives an overview of entities that are consolidated into Akastor group. For information about other investments in the group, refer to note 18 equity accounted investees and note 19 other investments. If not stated otherwise, ownership equals the percentage of voting shares. group companies as of December 31 group companies as of December 31 Company Akastor AsA former company name location Country Aker Solutions ASA Fornebu norway Aker Wirth Australia pty Aker Wirth GmbH Aker Drilling technologies India pvt ltd MHWirth Australia Argenton MHWirth pty ltd Mpo Austria Holding GmbH1) Austria Vienna Mpo Austria Services GmbH1) Vienna Austria MHWirth Canada Inc1) newfoundland Canada MHWirth offshore petroleum engineering (Shanghai) Co ltd Aker e&t (Shanghai) Co ltd Shanghai Managed pressure operations International limited (Cyprus) Managed pressure operations International limited limassol erkelenz MHWirth GmbH Mumbai MHWirth (India) pvt ltd Jakarta pt Managed pressure operations (Indonesia) MHWirth Sdn Bhd1,2) Kuala lumpur Malaysia Kristiansand S norway Drilltech AS Kristiansand S norway Managed pressure operations International AS Kristiansand S norway Maritime promeco AS norway Kristiansand MHWirth AS Step offshore AS3) norway Hvalstad Russia St petersburg MHWirth St. petersburg llC Singapore Managed pressure operations pte ltd (Singapore) Singapore MHWirth (Singapore) pte ltd Singapore Aker Solutions Drilling technologies (Singapore) pte ltd Singapore Singapore Singapore Mpo Research technologies pte ltd uK Aberdeen MHWirth uK ltd uAe Dubai MHWirth FZe uAe Dubai Managed pressure operations FZe (Dubai) MHWirth Inc1,4) uSA Houston uSA Houston Managed pressure operations llC (uSA - tX) China Cyprus Germany India Indonesia Aker MH uK ltd Aker MH FZe Aker Solutions St petersburg Co ltd Aker MH AS frontica Advantage Frontica pty ltd Frontica Global employment ltd Frontica Business Solutions Sdn Bhd Aker Advantage BV6) Frontica AS1) Frontica Business Solutions AS Frontica Advantage AS Frontica Advantage Group AS Frontica Advantage ltd Frontica Business Solutions ltd Frontica DC trustees ltd Frontica Advantage Inc Frontica Business Solutions Inc1,4) Aker Advantage pty ltd Aker Global employment ltd Aker Solutions Asia pacific Sdn Bhd Aker Business Services AS Aker Advantage AS Aker Advantage Group AS Aker Advantage ltd Aker Business Services ltd Aker Solutions DC trustees ltd Aker Advantage Inc Australia Cyprus Melbourne limassol Kuala lumpur Malaysia Gravenhage Fornebu Fornebu Bergen Fornebu london london london Houston Houston netherlands norway norway norway norway uK uK uK uSA uSA AKOfs Offshore AKoFS offshore Servicos de petroleo e Gas do Brazil ltda5) Aker oilfield Servicos de petroleo e Gas do Brasil ltda Rio de Janeiro Brazil Aker oilfield Services BV6) AKoFS 1 AS AKoFS 2 AS AKoFS 3 AS AKoFS 2 Services AS AKoFS offshore AS AKoFS offshore operations AS AKoFS 4 AS AKoFS Wayfarer AS Aker oilfield Services Singapore pte ltd6) Aker oilfield Services norway AS AKoFS Angola AS Aker oilfield Services AS Aker oilfield Services operations AS Subsea Africa AS Amsterdam oslo oslo oslo oslo oslo oslo oslo Fornebu Singapore netherlands norway norway norway norway norway norway norway norway Singapore fjords Processing Fjords process Systems pty ltd Fjords processing Canada Inc Aker Cool Sorption (Beijing) technology Co ltd Aker Midsund engineering s.r.o Cool Sorption A/S Aker operations ApS Fjords processing France SAS Fjords processing AS Aker process Systems pty ltd Aker Solutions oilfield Services Canada Inc Aker Solutions Denmark AS Aker process Systems SAS Aker process Systems AS Australia Welshpool newfoundland Canada Beijing prague Glostrup Glostrup Vincennes Cedex France norway Fornebu China Czech Republic Denmark Denmark Ownership (%) 2013 2014 Company former company name location Country Ownership (%) 2013 2014 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 100 100 98 100 100 100 100 100 - - - 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 - 100 100 100 100 100 - 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 98 100 100 100 100 Fjords processing International AS Midsund Bruk AS Aker Cool Sorption Siam ltd Aker process Systems ltd opus Maxim ltd opus plus ltd Fjords processing Inc1,4) KOP surface pt Kop Surface products Kop Surface products Sdn Bhd1) Kop Surface products nigeria ltd Kop Surface products pte ltd Kop Surface products (Services) pte ltd Real estate and other Holdings Real estate Akastor Real estate AS Borgenskogen AS Dvergsnestangen eiendom Invest AS egersund eiendom Invest AS1) Grunnavågen eiendom Invest AS pusnes eiendom AS Strendene eiendom AS tranby eiendom Invest AS tromsøruffen AS Ågotnes eiendom Invest AS First Geo First Geo AS Step Oiltools Step oiltools (Australia) pty ltd7) Step oiltools limited7) Step oiltools GmbH7) pt Step oiltools7) Step oiltools llp7) Step oiltools BV7) Step oiltools AS7) Step oiltools llC7) Step oiltools pte ltd7) Step oiltools (thailand) ltd7) Step oiltools (uK) ltd7) Step oiltools FZe7) Other companies Aker Solutions Belgium nV/SA Akastor Mauritius ltd Aker process BV Akastor AS Aker Insurance AS BtA technology AS1) AK pharmaceuticals llC AK Willfab Inc Aker process Systems International AS Aker Midsund AS Fornebu Midsund Rayong Aberdeen Guildford orkney Houston norway norway thailand uK uK uK uSA pt Aker Solutions Aker Solutions Ambico nigeria ltd Aker Solutions Singapore pte ltd Aker Solutions (Services) pte ltd AK eiendomsinvest AS Indonesia Jakarta Kuala lumpur Malaysia Ikoyi - lagos Singapore Singapore nigeria Singapore Singapore Fornebu Fornebu Fornebu Fornebu Fornebu Fornebu Fornebu Fornebu Fornebu Fornebu norway norway norway norway norway norway norway norway norway norway 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 - 49 100 100 100 100 100 - 100 100 100 100 100 100 Aker Geo AS Stavanger norway 100 100 Australia perth Grand Cayman Cayman Islands Bad Fallingbostel Germany Indonesia Jakarta Kazakhstan Aktau netherlands Amsterdam norway Stavanger Russia Moscow Singapore Singapore thailand Bangkok uK Aberdeen uAe Dubai Antwerp port louis Zoetermeer Fornebu Fornebu Fornebu Houston Williamsport Belgium Mauritius netherlands norway norway norway uSA uSA 76 76 76 76 76 76 76 76 76 76 76 76 100 100 100 100 100 100 100 100 76 76 76 76 76 76 76 76 76 76 76 76 100 100 100 100 100 - 100 100 Aker Solutions (Mauritius) ltd Aker Solutions AS Aker Kvaerner pharmaceuticals llC Aker Kvaerner Willfab Inc 1) New companies in 2014 2) Business was part of Aker Solutions Malaysia Sdn Bhd before the demerger 3) Merged into MHWirth AS 4) Business was part of Aker Solutions Inc before the demerger 5) The entity includes businesses in MHWirth, Frontica, Fjords Processing and AKOFS Offshore following a restructuring in 2014 6) Liquidated in 2014 7) Akastor applies the anticipated acquisition method, no non-controlling interest is recognized. Akastor has 100 percent voting rights. 8) Sold in 2014 PRINT the following companies have been disposed/demerged in 2014 Company location Country Ownership % 2013 Disposals1) Aker Qserv Sdn Bhd Aker pusnes AS Aker Well Service AS K2 Hotelbygg AS Aker Well Service llC Aker Qserv ltd Qserv pipeline & process ltd Woodfield Systems Co ltd extreme trading & Mechanical equipment llC Aker Well Service Inc Aker Kvaerner Gotech llC Aker porsgrunn AS Aker Solutions pusnes Korea ltd Demerger of Aker solutions1) Aker Solutions pty ltd Aker Solutions do Brasil ltda Aker Solutions Sdn Bhd Aker Solutions Asset Integrity and Management Canada Inc Aker Subsea (Shenzhen) Co. ltd Aker Solutions Congo SA Aker Solutions Cyprus ltd Aker powergas pvt ltd Aker powergas Subsea pvt ltd Aker engineering International Sdn Bhd Aker process Systems Asia pacific Sdn Bhd Aker Solutions India Sdn Bhd Aker Solutions Malaysia Sdn Bhd Aker Solutions umbilical Asia pacific Sdn Bhd phoenix polymers Malaysia ltd Aker Solutions de Mèxico Aker process engineering Services BV Aker Solutions BV Aker Solutions nigeria ltd Aker egersund AS Aker engineering & technology AS Aker Installation Fp AS Aker Insurance Services AS Aker operations AS Aker Solutions Contracting Kazakhstan AS Aker Solutions MMo AS Aker Subsea AS Aker Subsea Russia AS Ingeniør Harald Benestad AS enovate norway AS KB eDesign AS phaze technologies AS Aker process Gulf Company limited Aker Solutions AB Kvaerner Water AB Aker engineering & technology ltd Aker offshore partner ltd Aker Solutions Angola ltd Aker Subsea ltd enovate Systems ltd Aker Solutions uSA Corporation Aker Solutions Inc 1) Entities are referred to by company names before the disposals/demerger Kuala lumpur Arendal Stavanger oslo Muscat Aberdeen london Kent Abu Dhabi Houston Al-Khobar porsgrunn Busan Melbourne Curitiba Seria newfoundland Shenzhen point-noire limassol Mumbai Mumbai Kuala lumpur Shah Akam Kuala lumpur Kuala lumpur Kuala lumpur Kuala lumpur Mexico City Maastrichts Zoetermeer lagos State egersund Fornebu Fornebu Fornebu Stavanger Fornebu Stavanger Fornebu Fornebu lierskogen Hvalstad oslo lierskogen Al-Khobar Gothenburg Ørnskjøldsvik london london Maidenhead Maidenhead Aberdeen Houston Houston Malaysia norway norway norway oman uK uK uK uAe uSA Saudi Arabia norway South Korea Australia Brazil Brunei Canada China Congo Cyprus India India Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Mexico netherlands netherlands nigeria norway norway norway norway norway norway norway norway norway norway norway norway norway Saudi Arabia Sweden Sweden uK uK uK uK uK uSA uSA 100 100 100 93 70 100 100 100 49 100 51 100 100 100 100 100 100 100 100 100 68 68 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 82 100 100 82 100 100 100 100 100 100 100 95 100 100 note 35 | related parties Related party relationships are those involving control (either direct or the largest shareholder of Akastor, Aker Kvaerner Holding AS, is controlled indirect), joint control or significant influence. Related parties are in a by Aker ASA (70 percent) which in turn is controlled by Kjell Inge Røkke. position to enter into transactions with the company that would not be Aker ASA also controls 6 percent of the shares in Akastor directly. All entities undertaken between unrelated parties. All transactions in the Akastor which Kjell Inge Røkke controls are considered related parties to Akastor and group with related parties have been based on arm’s length terms. his family through tRG Holding AS and the Resource Group AS. Akastor ASA is a parent company with control of around 100 companies After implementation of IFRS 10, Kvaerner is considered to be a related around the world. these subsidiaries are listed in note 34 Group party of Akastor and is included as part of Aker entities. For the same companies. Any transactions between the parent company and the reason new Aker Solutions is also considered to be a related party from subsidiaries are shown line by line in the separate financial statements of the time of the demerger. new Aker Solutions is presented separately the parent company, and are eliminated in the group financial statements. from other Aker entities in 2014 due to the high level of transactions between the companies during 2014, including the post demerger Associated companies and jointly controlled companies are consolidated services. transactions and balances with new Aker Solutions have also using the equity method, see note 18 equity-accounted investees. Any been presented for comparative periods as if new Aker Solutions had transactions between the group and these entities are shown in the been a related party in all periods presented. table below. Remunerations and transactions with directors and executive officers are summarized in note 36 Management remunerations. Summary of transactions and balances with related parties 2014 Amounts in NOK million New Aker solutions entities Other Aker entities Associated companies joint ventures Total Income statement operating revenues operating costs net financial items Balance sheet - Assets (liabilities) trade receivables Interest-bearing receivables Finance lease (Aker Wayfarer) non-current assets (Aker Wayfarer) trade payables Interest-bearing payable Financial lease liability 2013 4 170 (310) (5) 476 63 - - (135) (82) - 426 (178) (57) 54 - 890 600 (2) - (1 376) - (82) - - - - - (19) - - - - 5 4 596 (570) (57) - 84 - - - - - 530 147 890 600 (156) (82) (1 376) Amounts in NOK million New Aker solutions entities Other Aker entities Associated companies joint ventures Total Income statement operating revenues operating costs net financial items Balance sheet - Assets (liabilities) trade receivables other non-current assets Group contribution, receivables Interest-bearing receivables trade payables Group contribution, payables Interest-bearing payable 4 313 (267) (8) 566 - 1 871 - (140) (129) (107) 295 (202) - 47 144 - - (19) - - - - 10 - - - 83 - - - 4 608 (555) 2 613 144 1 871 83 (204) (129) (107) - (86) - - - - - (45) - - PRINT Below is description of the most significant related party transactions and Akastor have provided parent company guarantees on behalf of Kvaerner Related party transactions with associated companies Aker pensjonskasse and Akastor’s share of paid-in equity was noK 120 balances in 2014. entities of noK 24 billion related to guarantees that were not transferred K2 Eiendom AS and Hinna Park Invest AS million at the end of 2014 (unchanged from 2013). Akastor premiums paid in connection with the demerger in 2011. the amount reflects obligations Akastor entered into twelve year lease agreement with both K2 eiendom AS to Aker pensjonskasse amounts to noK 14.1 million in 2014 (noK 12.7 Related party transactions with Aker entities per date of issue of the guarantees. Kvaerner pays a guarantee commission and Hinna park Invest AS for office buildings. Akastor had a shareholding of 25 million in 2013). New Aker Solutions on market terms and is liable to indemnify Akastor for any rightful claim percent in both these entities until end of 2014, when most of these shares Akastor have entered into a number of agreements and arrangements under the guarantee. were sold (17% shareholding in K2 eiendom AS remaining at 31 December even though Akastor owns 93.4 percent in Aker pensjonskasse the with new Aker Solutions, including: ŸŸ A main separation agreement addressing various separation issues between the new Aker Solutions Group and the Akastor Group following the completion of the Demerger. ŸŸ An agreement concerning ownership and licensing rights to intellectual property and know-how as well as several bilateral license agreements between new Aker Solutions and Akastor entities based on the principles and allocation of technology set out in the technology Agreement. ŸŸ Agreements for the provision of shared services from Frontica Business Solutions to members of the new Aker Solutions Group as well as agreements for real estate and lease agreements from Akastor Real estate and Frontica Business Solutions to members of the new Aker Solutions Group. the amount charged for these services are noK 4.0 billion (noK 3.8 billion in 2013). ŸŸ An agreement for provisioning of transitional services not covered by the Frontica Agreements by the Akastor Group to the new Aker Solutions Group. ŸŸ Various agreements addressing commercial separation issues between members of the new Aker Solutions Group and the Akastor Group, for example in relation to joint and shared initiatives, on-going, committed or contemplated projects, non-project specific cooperation and shared frame agreements as well as disputes. these agreements include an agreement between entities within the Subsea reporting segment of the new Aker Solutions Group and entities within the Fjords processing business unit of the Akastor Group regarding development of certain process technologies and an agreement between Subsea and MHWirth regarding the use and development of well control technologies. ŸŸ Guarantee obligations: If an obligation that arose prior to the completion of the demerger is not satisfied by the party to which the obligation has been allocated under the demerger plan, be it Akastor or new Aker Solutions, the other party will have secondary joint liability for such obligation. this statutory liability is unlimited in time, but is limited in amount to the net value allocated to the non-defaulting party in the demerger. A guarantee commission will only be charged in the event that a guarantee cannot be effectively transferred or novated to new Aker Solutions. Kvaerner Fornebuporten AS been included in the table above for the period until the demerger of Aker power to govern the financial and operating policies so as to obtain on January 30, 2015, Akastor entered into a long-term lease agreement Solutions took place, as this building is leased by Aker Solutions. benefits from the activities in this entity. 2014). the cost related to the lease agreement for Hinna park Invest AS has ownership does not constitute control since Akastor does not have the with Fornebuporten AS starting August 31, 2015 for headquarter offices at Fornebu. the duration of the contract is 10 years, with two additional five-year options. Aker ASA Other related parties Aker Pensjonskasse AS Grants to employee representative’s collective fund Aker ASA has signed an agreement with employee representatives Aker pensjonskasse was established by Aker ASA to manage the that regulate use of grants from Akastor ASA for activities related to retirement plan for employees and retirees in Akastor as well as related professional development. the grant in 2014 was noK 355 000 (noK Akastor is sponsoring employers of the uS pension plan Kvaerner Aker companies. Akastor holds 93.4 percent of the paid-in capital in 665 000 in 2013). Consolidated Retirement plan. the principal sponsor for the plan is Kvaerner u.S. Inc, a subsidiary of tH Global plc. Aker has provided a guarantee to the plan in the event that Akastor becomes liable for more than one third of the underfunded element of the plan. note 36 | management remunerations Board of directors Aker Ship Lease 1 AS (Ocean Yield) the board of directors were elected for two years at the extraordinary the fees in the table below represent what is recognized as expenses in In 2009 Aker Ship lease 1 AS and AKoFS offshore entered into a 10 year General Meeting 12 August 2014. the board of directors did not receive the income statement based on assumptions about fees to be approved bareboat charter contract for vessel Aker Wayfarer. In September 2014 any other fees than those listed in the table below in 2014 or 2013, at the general assembly in 2014 for 2013 rather than what has been paid AKoFS offshore was awarded a five year contract with petrobras to provide except for employee representatives who had market based salaries. the in the year. subsea intervention services offshore in Brazil for the Aker Wayfarer vessel members of the board of directors have no agreements that entitle them with a start in Q4 2016 with a five-year option extension. the vessel will be to any extraordinary remuneration. converted to become a deepwater subsea equipment support vessel. the vessel contract with Aker Shiplease 1 AS was renegotiated to include an extension of current bareboat contract by 7 years, financing of the topside and subsea equipment, and new purchase options on 3 different dates. As a result of this re-negotiation, the vessel contract is recognized as a finance lease and a lease obligation of noK 1 500 million was recognized in the accounts, of which noK 210 million is presented as current, representing the yearly lease payment to Aker Ship lease 1 AS. the non-current part of the lease obligation is reduced by the remaining prepayment made in 2009 (reclassified from non-current operating assets). noK 900 million was recognized as finance lease in property, plant and equipments and an additional noK 600 million was recognized in other non-current assets and represents the capex obligation in the contract. Det norske oljeselskap ASA new Aker Solutions (discontinued operations in Akastor group) delivers installation and maintenance services to Det norske oljeselskap at Alvheim, Bøyla and Vilje fields. Intellectual Property Holding AS new Aker Solutions (discontinued operations in Akastor group) has an 2014 Amounts in NOK Øyvind eriksen lone Fønss Schrøder Kjell Inge Røkke Kathryn Baker Sarah Ryan1) Jannicke Sommer-ekelund Stig Faraas Asbjørn Michailoff pettersen Anne Drinkwater1) Atle teigland Åsmund Knutsen Arild Håvik Hilde Karlsen Stuart Ferguson1) Koosum parsotam Kalyan1) Board meeting attendance Aker solutions extraordinary board meeting attendance Aker solutions Board Risk Commitee Aker solutions Audit Committee Aker solutions 7 of 7 7 of 7 6 of 7 2 of 2 2 of 2 1 of 2 7 of 7 1 of 2 Board fees Aker solutions 3 000 000 63 750 255 000 255 000 - 255 000 Board meeting attendance Akastor Audit Committee Akastor Board fees Akastor 3 of 3 2 of 3 3 of 3 3 of 3 3 of 3 3 of 3 3 of 3 3 of 3 300 000 38 750 85 000 85 000 21 250 85 000 85 000 85 000 85 000 21 250 85 000 7 of 7 6 of 7 7 of 7 5 of 7 5 of 7 7 of 7 7 of 7 2 of 2 2 of 2 2 of 2 2 of 2 2 of 2 2 of 2 2 of 2 15 000 116 250 255 000 63 750 127 500 15 000 26 250 15 000 127 500 127 500 127 500 330 000 255 000 agreement with Intellectual property Holding which holds all rights, titles and Total 71 250 243 750 5 115 000 81 250 895 000 interests in and to registered trademarks and domain names containing “Aker”. Related party transactions with joint ventures DOF Deepwater AS A loan of noK 84 million (noK 83 million in 2013) is given to the jointly controlled entity DoF Deepwater (nIBoR 12 months + 1.5 percent). 1) Board fees in 2014 and 2013 includes an allowance of NOK 12 500 per meeting per physical attendance for board members residing outside the Nordic countries. Frontica is a supplier of services to Kvaerner (shared services, recruitment Akastor ASA has issued financial guarantees in favor of financial and supply of technical and project administrative personnel). the amount institutions related to financing of the five vessels in Aker DoF Deepwater, charged for these services are noK 392 million (noK 295 million in 2013). refer to note 18. PRINT 2013 Amounts in NOK Øyvind eriksen Mikael lilius1) lone Fønss Schrøder Kjell Inge Røkke Anne Drinkwater1) Sarah Ryan1) Atle teigland Åsmund Knutsen Arild Håvik Hilde Karlsen Stuart Ferguson1) Koosum parsotam Kalyan1) nicoletta Giadrossi1) Total Board meeting attendance extraordinary board meeting attendance Board Risk Committee Audit Committee Board fees 10 of 10 3 of 3 10 of 10 7 of 10 10 of 10 8 of 10 10 of 10 10 of 10 9 of 10 8 of 10 10 of 10 7 of 7 3 of 3 1 of 1 0 of 0 1 of 1 1 of 1 1 of 1 1 of 1 1 of 1 1 of 1 1 of 1 1 of 1 1 of 1 1 of 1 0 of 0 85 000 45 000 103 333 45 000 80 000 45 000 85 000 51 667 6 000 000 220 000 332 500 332 500 457 500 509 586 166 250 166 250 166 250 166 250 520 000 162 500 170 000 215 000 325 000 9 369 586 1) Board fees in 2014 and 2013 includes an allowance of NOK 12 500 per meeting per physical attendance for board members residing outside the Nordic countries. Benefits According to policy in Aker, fees to directors employed in Aker companies the executive management participate in the standard employee, are paid to the Aker companies, not to the directors in person. therefore, pension and insurance plan applicable to all employees in the company, board fees for Øyvind eriksen were paid to Aker ASA. Board fee for Kjell see description in note 27 employee benefits - pension for norwegian Inge Røkke was paid to the Resource Group. the board fee for Øyvind members. no executive personnel in Akastor have performance based eriksen up until July 1, 2014 includes fee for his role as executive Chairman. pension plans and there are no current loans, prepayments or other forms The audit committee of credit from the company to its executive management. no members of the executive management are part of any option- or incentive programs Akastor has an audit committee comprising three of the directors, which other than what is described in this declaration. held 12 meetings in 2014. As of December 31, 2014, the audit committee comprises lone Fønss Schrøder (chairperson), Kathryn M. Baker and As the Ceo resides in Ålesund, the Ceo is entitled to reimbursement for Asbjørn Michailoff pettersen. accommodation in oslo as well as travel expenses between Ålesund and oslo. guidelines for remuneration to the members of the executive Performance based remuneration management of Akastor In addition to the fixed compensation set out above, the executive the main purpose of the executive remuneration is to encourage a strong management participates in a variable pay program. the objective of the and sustainable performance-based culture, which supports growth in program is to incentivise the management to contribute to sound financial shareholder value. the remuneration to the executive management in results for the company as well as executing leadership in accordance 2014 was performed in accordance with the guidelines of the company. with the company’s values and business ethics. the variable pay program the remuneration to the executive management shall be recommended potential is maximised to 2/3 of the annual base salary. by the Ceo and approved by the board of directors of Akastor ASA on an annual basis. the same principles for executive wage settlement will be the payments under the variable pay program are determined based on applied in 2015. three components with equal weight: As of 31 December 2014, the executive management of Akastor comprises the company’s Ceo, Frank o. Reite, CFo, leif H. Borge, and Investment Director, Karl erik Kjelstad. the company practice standard employment contracts and standard terms and conditions regarding notice period and ŸŸ ŸŸ ŸŸ Development of Akastor ASA’s share price Delivery of certain key financial targets for Akastor Delivery of personal performance objectives during the year severance pay for the Akastor management. the Ceo has a three months’ For the Ceo, payments under the variable pay program are determined notice period as a part of his employment contract. the CFo and the based on development of Akastor ASA’s share price alone. Since the Investment Director both have six months’ notice periods. variable pay program is partly linked to the development of the Akastor ASA share price, it requires approval by the general meeting and the Compensation to the executive management has a fixed element which guidelines will thereafter be binding. includes a base salary which pursuant to the company’s benchmarking is competitive with other investment companies. In addition, the executive the development of the company’s share price is an element of the management have variable remuneration, as further described below. All variable pay program as described above. the accrual related to the future variable pay shall be subject to a cap. share based payments of the variable pay is estimated on the basis of the share price at year-end. the accrual consists of variable pay programs for the three preceding years. Further, the executive management may be offered an additional Remuneration to members of the executive management variable pay arrangements going forward which differs from the ordinary the remuneration of the executive management for 2014 and 2013 is variable pay program described above. the variable pay arrangements shown in the table below. the salary figures for the remuneration for the offered to the executive management may in its entirety be linked to the executive management before the split of the company represents what development of the company’s share price. the executive management is paid out in the period rather than what is expensed in the year, except may from time to time be granted a discretionary variable pay. there was for leif Hejø Borge and Karl erik Kjelstad who continued in Akastor’s no discretionary pay expense in 2013 and 2014. executive management. For the executive management of Akastor the salary figures represent what has been expensed in the year. 2014 Amounts in NOK job title Period Base salary Variable pay2) Other benefits3,4) Total taxable remuneration earned/cost to company5) Pension benefit Akastor executive management Frank ove Reite leif Hejø Borge1,6) Karl erik Kjelstad6) Ceo CFo Investment director Aker solutions executive management Head of Subsea Alan Brunnen Head of Drilling technologies Roy Dyrseth Head of engineering Valborg lundegaard Head of process Systems David Merle Head of umbilicals tom Munkejord Head of Maintenance, Modifications tore Sjursen Åsmund Bøe nicoletta Giadrossi Sissel Anne lindland Mark Riding per Harald Kongelf luis Araujo erik Wiik Total and operations Chief technology officer Head of operations Chief HR officer Chief Strategic Marketing Regional president of norway Regional president of Brazil Regional president of north America 2013 Akastor executive management leif Hejø Borge1,6 ) Karl erik Kjelstad6) president & CFo Head of oilfield Services & Marine Assets Aker solutions executive management Head of Subsea Alan Brunnen Head of Drilling technologies thor Arne Håverstad Head of Drilling technologies Roy Dyrseth Head of engineering Valborg lundegaard Head of process Systems David Merle Head of umbilicals tove Røskaft Head of umbilicals tom Munkejord Head of Maintenance, Modifications tore Sjursen Wolfgang puennel Rolf leknes leif Haukom Åsmund Bøe nicoletta Giadrossi Sissel Anne lindland Mark Riding and operations Head of Well Intervention Services Head of Well Intervention Services Head of Mooring and loading Systems Chief technology officer Head of operations Chief HR officer Chief Strategic Marketing Chief operating officer and Regional Jul 1 - Dec 31 Jan 1 - Dec 31 Jan 1 - Dec 31 2 287 385 3 995 668 3 750 771 - 1 024 972 925 526 4 169 48 168 49 601 2 291 554 5 068 808 4 725 898 Jan 1 - Jun 30 Jan 1 - Jun 30 Jan 1 - Jun 30 Jan 1 - Jun 30 Jan 1 - Jun 30 Jan 1 - Jun 30 Jan 1 - Jun 30 Jan 1 - Jun 30 Jan 1 - Jun 30 Jan 1 - Jun 30 Jan 1 - Jun 30 Jan 1 - Jun 30 Jan 1 - Jun 30 1 840 190 1 086 784 1 197 676 1 217 077 1 232 325 1 302 201 1 282 952 901 983 922 298 1 188 966 1 465 491 2 049 992 1 292 795 1 019 375 116 604 1 589 701 1 135 174 2 175 895 1 885 034 1 194 941 3 284 229 878 926 967 929 1 525 179 2 010 359 572 217 4 847 28 186 29 196 433 319 24 890 25 178 210 315 79 044 27 024 408 554 28 409 194 611 165 948 2 864 412 1 231 574 2 816 573 2 785 570 3 433 110 3 212 413 2 688 208 4 265 255 1 828 248 2 565 449 3 019 079 4 254 961 2 030 960 40 970 154 558 141 551 251 631 62 388 126 583 51 750 90 989 104 201 62 081 64 206 64 042 79 185 115 201 64 411 149 145 27 014 553 20 306 061 1 761 458 49 082 073 1 622 892 Jan 1 - Dec 31 Jan 1 - Dec 31 3 825 418 3 159 676 1 112 244 1 290 210 57 482 38 606 4 995 144 4 488 492 138 648 127 831 Jan 1 - Dec 31 Jan 1 - Jun 30 Jul 1 - Dec 31 Jan 1 - Dec 31 May 7 - Dec 31 Jan 1 - Mar 31 Apr 1 - Dec 31 2 464 019 1 319 012 1 147 884 2 524 034 2 278 350 413 819 1 885 338 1 485 320 1 764 727 - 2 443 791 1 065 425 183 166 447 575 8 423 53 137 6 007 105 40 115 1 441 653 59 826 11 883 3 957 762 3 136 876 7 154 989 5 007 940 4 785 428 656 811 2 344 796 Jan 1 - Dec 31 Jan 1 - Jun 30 Jul 1 - Dec 31 2 757 219 1 631 352 1 092 336 3 000 610 312 730 - 27 636 6 667 9 105 5 785 465 1 950 749 1 101 441 Jan 1 - Dec 31 Jan 1 - Dec 31 Apr 1 - Dec 31 Jan 1 - Dec 31 Jan 1 - Dec 31 1 835 575 2 549 498 2 773 738 1 903 279 2 354 571 1 400 147 1 373 819 558 003 1 349 513 519 076 48 023 1 332 430 89 252 49 196 814 316 3 283 745 5 255 747 3 420 993 3 301 988 3 687 963 352 421 189 847 59 220 235 025 90 237 56 983 72 499 196 888 83 391 100 966 354 087 109 105 312 163 113 068 144 270 211 140 302 827 260 319 per Harald Kongelf luis Araujo erik Wiik Manager of norway Regional Manager of Brazil Regional manager of north America Jan 1 - Dec 31 Jan 1 - Dec 31 Jan 1 - Dec 31 3 025 421 3 174 175 2 488 654 1 884 454 3 414 686 2 405 076 39 481 476 339 147 560 4 949 356 7 065 200 5 041 290 Total 44 603 368 26 010 572 10 758 235 81 372 175 3 510 935 1) Includes accrued holiday allowances and temporary allowance for additional job responsibility for Leif Hejø Borge of NOK 500 000 in 2014 (NOK 1 000 000 in 2013) 2) Based on variable pay paid out during the year unless othervise stated. 3) Other benefits include insurance agreements, such as membership in the standard employee scheme and an additional executive group life and disability insurance with a maximum cover of NOK 4 036 340. The amount also includes housing costs, international salary compensation, children schooling costs and severance pay (see footnote 4). Sign on fee of NOK 6 000 000 is included for Roy Dyrseth in 2013. 4) Other benefits includes salary in notice period and severance pay for management where employment is terminated. 5) Pension benefits include the standard employee pension scheme, a pension compensation scheme (for transfer from benefit to contribution scheme), a disability pension scheme and certain management pension rights related to the wound up schemes and early retirement schemes. 6) Leif Hejø Borge was President and CFO in Aker Solutions in 2013 and first half 2014 (before the demerger). Karl-Erik Kjelstad was Head of Oilfield and Marine Assets in Aker Solutions in 2013 and first half 2014 (before the demerger). Both are as of December 31, 2014 part of the EMT group in Akastor. The amounts in the table are for the full year 2014 and 2013. PRINT Share purchase program for Akastor’s executive management team Furthermore, the board resolved that the Ceo could purchase up to In 2013 profits from discontinued operations were overstated by noK in previous years, primarily before 2013. the errors have been corrected the executive management were invited to participate in Akastor’s 100 000 additional treasury shares in 2014 at the price of 18.72 noK 126 million, mainly related to too high revenue accruals. In addition, a by restating each of the affected financial statement line items for the share purchase programs in 2014. the ordinary employee share per share (equivalent with the average share price for the first 20 days subsidiary in continuing operations has overstated book value of inventory prior period, as follows: note 37 | Correction of errors purchase program gave the executive management the opportunity to of trading following completion of the demerger of the Aker Solutions purchase shares of up to noK 60 000 with a reduction of 25 percent group on 29 September 2014, less a discount of 20 percent). in addition to noK 1 500 (funded by an employer loan, to be repaid by salary deductions over a period of 12 months), refer to note 8 Salaries, All shares purchased under the programs described above are subject wages and social security costs. to a three year lock-up period under which the acquired shares may not be sold or otherwise disposed of. Akastor also had a separate manager share program, with a potential to purchase shares for an amount equal to 25 percent of base salary with the executive management may also in 2015 be offered to take part a reduction of 25 percent on the share price. In terms of the executive in separate share purchase programs, such as programs with a higher management, the board resolved in 2014 that the Ceo could purchase maximum purchase amount that for other managers. up to 100 000 treasury shares yearly from the company under the manager share purchase program described above. the CFo and Directors’ and executive management’s shareholding Investment Director were authorized to buy up to 100 000 shares each the following number of shares were owned by the directors and the under the manager share purchase program for 2014. members of the executive management (and their related parties) as of December 31: Frank ove Reite leif Hejø Borge Karl erik Kjelstad lone Fønss Schrøder Kathryn Baker Sarah Ryan Jannicke Sommer-ekelund Stig Faraas Asbjørn Michailoff pettersen job title Ceo CFo Investment Director Director Director Director Director Director Director 2014 200 000 142 775 123 074 4 400 - - 252 - 3 050 20131) - 39 725 23 074 4 400 - - 252 - - the overview includes only direct ownership of Akastor shares and does not include Øyvind eriksen and Kjell Inge Røkke’s indirect ownership through their ownership in Aker ASA. Impact on consolidated income statement - increase (decrease) in profit Amounts in NOK million Materials, goods and services Income tax expense Profit from continuing operations profit from discontinued operations (net of income tax) Profit from the period Profit for the period attributable to: equity holders of the parent company non-controlling interests Profit from the period earnings per share (NOK) Basic earnings per share Diluted earnings per share earnings per share continuing operations (NOK) Basic earnings per share Diluted earnings per share Impact on consolidated statement of financial position - increase (decrease) in equity Amounts in NOK million Assets Inventories Current interest-bearing receivables Assets classified as held for sale Total assets equity and liabilities Equity Retained earnings Liabilities Deferred tax liabilities liabilities classified as held for sale Total liabilities and equity Dec 31, 2013 (73) (73) (70) (216) (179) (20) (17) (216) 2013 (22) 6 (16) (126) (142) (142) - (142) (0.52) (0.52) (0.06) (0.06) Dec 31, 2012 (51) - - (51) (37) (14) - (51) the error did not have an impact on the group’s statement of other comprehensive income or operating, investing and financing cash flows. note 38 | subsequent events Purchase of AKOFS Seafarer Restructuring the purchase of AKoFS Seafarer was executed in February 2015. A process in MHWirth has been initiated in February 2015, with an ambition Following the transaction, the vessel prevously named Skandi Aker has to reduce the global work force to give a reduction of approximately been re-named AKoFS Seafarer. the purchase price was uSD 122.5 500-750 people, both own employees and hired-ins. this will happen million, all financed with new bank debt. through downsizing and attrition. the restructuring cost in first half 2015 is estimated to be noK 100 million. PRINT 07. FInAnCIAlS AnD noteS AkAstor AsA Akastor ASA | Income statement Akastor ASA | Statement of financial position Akastor ASA | Statement of cash flow note 1 | Accounting principles note 2 | operating revenue and expenses note 3 | net financial items note 4 | tax note 5 | Investments note 6 | Shareholders’ equity note 7 | Receivables and borrowings from group companies note 8 | other non-current interest-bearing receivables note 9 | Borrowings note 10 | Guarantees note 11 | Financial risk management and financial instruments note 12 | Related parties note 13 | Shareholders 87 88 89 90 91 91 92 92 93 93 94 94 96 97 97 98 PRINT Akastor AsA | income statement for the year ended December 31 Amounts in NOK million operating revenue operating expenses Operating profit (loss) Income from investments in subsidiaries net financial items Profit (loss) before tax Income tax Profit (loss) for the period Profit (loss) for the period distributed as follows: proposed dividends other equity Profit (loss) for the period Note 2014 2013 Amounts in NOK million Note Dec 31, 2014 Dec 31, 2013 Akastor AsA | statement of financial position for the year ended December 31 2 2 5 3 4 27 (109) (82) - (38) (120) 40 (80) - (80) (80) 48 (131) (83) 2 896 13 2 826 1 2 827 1 115 1 712 2 827 Assets Deferred tax asset Investments non-current interest-bearing receivables from group companies other non-current interest-bearing receivables Total non-current assets Current interest-bearing receivables from group companies non-interest bearing receivables from group companies Financial assets other current receivables Cash in cash pool system Total current assets Total assets equity and liabilities Issued capital treasury shares Share premium reserve other paid in capital other equity Total equity non-current borrowings Total non-current liabilities Current borrowings Current borrowings from group companies provision for dividend non interest-bearing liabilities from group companies Financial liabilities other current liabilities Total current liabilities Total liabilities Total liabilities and equity 4 5 7 8 7 7 11 7 6 9 9 7 6 7 11 39 4 963 1 289 85 6 376 4 743 14 2 408 32 499 7 696 14 072 162 (2) 2 000 2 003 537 4 700 3 472 3 472 2 3 290 - 21 2 431 156 5 900 9 372 14 072 13 15 299 2 345 85 17 742 5 393 4 768 1 187 - 1 023 12 371 30 113 455 (3) 2 000 2 442 4 109 9 003 6 366 6 366 3 874 8 435 1 115 38 1 183 99 14 744 21 110 30 113 oslo, march 13, 2015 | board of Directors of Akastor AsA Øyvind eriksen | Chairman lone Fønns Schrøder Kjell Inge Røkke Kathryn Moore Baker Sarah elizabeth Ryan Jannicke Sommer-ekelund Stig Willy Faraas Asbjørn Michailoff pettersen Frank ove Reite | Ceo PRINT Akastor AsA | statement of cash flow for the year ended December 31 Amounts in NOK million Cash flows from operating activities profit (loss) before tax Changes in other net operating assets Net cash from operating activities Cash flows from investing activities payment related to increase in interest-bearing receivables Net cash from investing activities Cash flows from financing activities Demerger consideration proceeds from borrowings Repayment of borrowings Changes in borrowings from group companies Changes in borrowings to group companies proceeds from employees share purchase program Repurchase of treasury shares Dividends to shareholders Net cash from financing activities Net increase (decrease) in cash and bank deposits Cash in cash pool system at the beginning of the period Demerger to new Aker Solutions Cash in cash pool system at the end of the period1) 1) Unused credit facilities amounted to NOK 1 billion as of 31 December 2014 (NOK 4.4 billion in 2013). Note 2014 2013 presented in conformity with norwegian legislations and norwegian Cash in cash pool system is the parent company’s cash as well as net Akastor ASA is a company domiciled in norway. the accounts are Cash in cash pool system note 1 | Accounting principles (80) (468) (548) (29) (29) 3 000 3 500 (7 242) 6 390 (876) 33 (60) (1 115) 3 630 3 053 1 023 (3 577) 499 2 827 (2 573) 254 (25) (25) - 3 649 (231) 7 600 (9 812) 183 (50) (1 082) 257 486 536 - 1 023 9 6 6 6 7 generally accepted accounting principles. deposits from subsidiaries in the group cash pooling systems owned by the parent company. Correspondingly, the parent company’s current debt on September 26, 2014, the demerger of Akastor was completed and to group companies will include the same net deposits in the group’s cash Aker Solutions ASA (“new Aker Solutions”), a subsidiary of Akastor ASA pooling system. established for the purposes of the demerger, was listed on the oslo Stock exchange. At the same time Aker Solutions ASA changed name the cash flow statement is prepared according to the indirect method. to Akastor ASA. Share capital the demerger entailed a reorganization without change in ownership. Costs for purchase of own shares including transaction costs are accounted For accounting purpose, the continuity method is applied, cf. for directly against equity. Sale of own shares are performed according publication “Demerger” of the norwegian Accounting Standards Board. to stock-exchange quotations at the time of award and accounted for as Consequently, the book value of assets and liabilities transferred upon the increase in equity. demerger is recognized by Aker Solutions ASA. the effective date of the demerger is January 1, 2014, hence all transactions during 2014 related Foreign currency to assets, rights, obligations and liabilities that have been transferred to transactions in foreign currencies are translated at the exchange rate at Aker Solutions ASA in the demerger have for accounting purposes been the date of the transaction. Monetary assets and liabilities denominated allocated to Aker Solutions ASA in 2014. in foreign currencies at the balance sheet date are translated to the Revenue recognition Revenue is recognized when the service is delivered. operating revenue functional currency at the exchange rate on that date. Foreign exchange differences arising on translation are recognized in the income statement. is comprised mainly of income from parent company guarantees (pCG). Derivative financial instruments the pCGs are invoiced when the guarantee is issued and the income is Subsidiaries have entered into financial derivative agreements with distributed over the lifetime of the guarantee. Insurance commissions are the parent company to hedge their foreign exchange exposure. the recognized the year the insurance is established. parent company does not engage in hedging activities other than as a counterpart in financial derivative agreements with the subsidiaries. In the Investment in subsidiaries and associates parent company, derivatives from external banks are used to mitigate the Investments in subsidiaries and associates are accounted for using the foreign exchange exposure from the financial derivative agreements with cost method in the parent company accounts. the investments are valued the subsidiaries. at cost less impairment losses. Write-downs to fair value are recognized when the impairment is considered not to be temporary and reversed if Hedge accounting is performed at group level. Refer to note 3 in the the basis for the write-down is no longer present. Akastor consolidated accounts for description of hedge accounting at Dividends and other distributions are recognized as income the same group level. year as they are allocated from the subsidiary. If the dividend exceeds All financial assets and liabilities related to foreign exchange contracts are accumulated profits in the subsidiary after the acquisition, the payment is revalued at fair value in respect to exchange rate movements each period. treated as a reduction of the carrying value of the investment. Classification and valuation of balance sheet items Akastor also enters into interest swap agreements. the market value of Current assets and current liabilities include items due within one year or interest rate swaps classified as cash flow hedges (where the interest rate items that are part of the operating cycle. the rest is classified as non- of the debt is switched from floating- to fixed interest rate) is accounted In order to reduce the interest rate risk related to external borrowings, current assets/non-current debt. for directly against equity while the corresponding interest payments are reflected in the profit and loss to neutralise potential changes in interest Current assets are valued at the lowest of cost and fair value. Current debt levels. is valued at nominal value at the time of recognition. non-current debts are initially valued at transaction value less attribute fixed to floating interest rate) is accounted for through profit and loss. At transaction cost. Subsequent to initial recognition, interest-bearing long- the same time a corresponding adjustment to the carrying value of the the value of interest rate swaps classified as fair value hedges (from term debt is stated at amortized cost with any difference between cost borrowing accounted for. and redemption value being recognized in the income statement over the period of the borrowing on an effective interest basis. Tax trade receivables and other receivables are recognized at nominal in deferred tax. Deferred tax is calculated as 27 percent of temporary value less provision for expected losses. provision for expected losses is differences between accounting and tax values as well as any tax losses tax expense in the income statement comprises current tax and changes considered on an individual basis. carry forward at the year end. net deferred tax assets are recognized only to the extent it is probable that they will be utilized against future taxable profits. PRINT note 2 | operating revenue and expenses operating revenue comprises mainly noK 18 million in income from management team. Group management and corporate staff are employed parent company guarantees (noK 39 million in 2013) and noK 9 million in by other Akastors companies and costs for their services as well as other insurance commissions from Akastor companies (unchanged from 2013). parent company costs are charged to Akastor ASA. Remuneration to Income from parent company guarantees includes noK 8 million from and shareholding of managing director Frank ove Reite, is described in external companies (noK 9 million in 2013). note 36 Management remunerations in the consolidated accounts. there are no employees in Akastor ASA and hence no salary or pension related costs and also no loan or guarantees related to the executive note 4 | tax Amounts in NOK million Calculation of taxable income Profit (loss) before tax Group contribution without tax Write down internal loan permanent differences Change in timing differences Taxable income Fees to KPMG Amounts in NOK million Audit other assurance services1) other non-audit services Total 2014 2013 4 18 1 23 4 - - 4 1) NOK 18 million relates to services provided related to the demerger of the group. The amount has been recharged to New Aker Solutions. note 3 | net financial items Amounts in NOK million Interest income from group companies Interest expense to group companies Net interest group companies Interest income from related parties Net interest related parties Interest income Interest expense Net interest external loss on loans to group companies other financial expense Foreign exchange gain Foreign exchange loss Net other financial items Net financial items 2014 255 (27) 228 5 5 27 (298) (271) - (12) 324 (312) - (38) 2013 742 (23) 719 10 10 31 (693) (662) (68) (3) 344 (327) 14 13 Positive and (negative) timing differences unrealized gain(loss) on forward exchange contracts Interest rate swaps temporary differences loss carry-forward Basis for deferred tax Deferred tax in income statement Deferred tax in equity Deferred tax asset Tax expense origination and reversal of temporary differences in income statement payable tax Withholding tax paid Total tax in income statement note 5 | investments Amounts in NOK million Akastor AS1) AKoFS offshore AS2) Total investments in subsidiaries 2014 2013 (120) - - (32) 74 (78) (23) - (40) (82) (145) 39 - 39 41 - (1) 40 2 826 (2 896) 68 (6) (1) (9) 7 (44) - (9) (46) 1 12 13 3 - (2) 1 Registered office Fornebu, norway oslo, norway share capital 1 004 482 Number of shares held Percentage owner /voting share 1 10 378 306 100% 32.29% 2014 4 160 803 4 963 2013 14 496 803 15 299 1) The share capital of Akastor AS was decreased by NOK 2 496 million in 2014 as an effect of the demerger of the company. 2) The remaining 67.71 percent of the shares in AKOFS Offshore AS are held by Akastor AS. Accordingly, Akastor ASA owns 100 percent of the shares through direct and indirect ownership. The company has changed name from AKOFS Oilfield Services AS in 2014. Amounts in NOK million Group contributions Total income from investments in subsidiaries 2014 - - 2013 2 896 2 896 PRINT note 6 | shareholders’ equity Amounts in NOK million share capital Treasury shares share premium Other paid in capital Retained earnings equity as of january 1, 2013 Shares issued to employees through share program Share buy back profit (loss) for the period proposed dividend Cash flow hedge equity as of December 31, 2013 Shares issued to employees through share program1) Share buy back2) Demerger of new Aker Solutions profit (loss) for the period equity as of December 31, 2014 455 - - - - - 455 - - (293) - 162 (6) 4 (1) - - - (3) 1 (2) 2 - (2) 2 000 2 442 2 260 - - - - - - - - - - 179 (49) 2 827 (1 115) 7 - - - - - - 32 (59) (439) (3 465) (80) 537 2 000 2 003 2 000 2 442 4 109 9 003 Total 7 151 183 (50) 2 827 (1 115) 7 33 (61) (4 195) (80) 4 700 Akastor ASA is the owner of the cash pool system arrangements with the cash pool systems had a net balance of noK 499 million per December DnB, nordea and the Royal Bank of Scotland. the cash pool systems 31, 2014. this amount is reported in Akastor ASA’s accounts as short term cover a majority of the group geographically and assure good control borrowings from group companies and as cash in cash pool system. and access to the group’s cash. participation in the cash pool is vested in the Group policy and decided by each company’s board of directors and Akastor ASA is the group’s central treasury function and enters into confirmed by a statement of participation. the participants in the cash borrowings and deposit agreements with group companies. Deposits pool system are joint and severably liable and it is therefore important and borrowings are peformed at market terms and are dependent of the that Akastor as a group is financially viable and can repay deposits and group companies’ credit rating and the duration of the borrowings. carry out transactions. Any debit balance on a sub account can be set-off against any credit balance. A debit balance does hence represent a claim Akastor ASA has an obligation to fund Step oiltools B.V with an amount on Akastor ASA and a credit balance a borrowing from Akastor ASA. up to uSD 107 million (out of which uSD 90 million was drawn by end of 2014). Any loans under this agreement shall be repaid no later than December 31, 2017. 1) Akastor subsidiaries operate a share purchase program for employees. The subsidiaries purchase shares from Akastor ASA in order to settle obligations to the employees under the schemes. During 2014 a total of 1 684 235 shares were sold under the program. 2) During 2014 a total of 2 705 000 treasury shares have been acquired in the market. The number of treasury shares held by end of 2014 were 2 976 376 and are held for the purpose of being used for future awards under the share purchase program for employees, as settlement in future corporate acquisitions or for other purpose as decided by the board of directors. note 8 | other non-current interest-bearing receivables Amounts in NOK million loan to DoF Deepwater AS Stiftelsen Akastor Kompensasjonsordning on September 26, 2014, the demerger of Akastor was completed, refer to the share capital of Akastor ASA is divided into 274 000 000 shares Total other non-current interest-bearing receivables note 1. An allocation of the share capital was determined, after deducting the with a nominal value of noK 0.592. the shares can be freely traded. An value of Akastors treasury shares, such that 35 percent of the share capital overview of the company’s largest shareholders is to be found in note 13 2014 2013 83 2 85 83 2 85 was allocated to Akastor and 65 percent was allocated to Aker Solutions Shareholders. giving a split ratio of 35:65 percent. Following the demerger Aker Solutions ASA issued pro rata consideration shares to Akastors shareholders and was listed on the oslo Stock exchange on September 29, 2014. note 7 | receivables and borrowings from group companies Amounts in NOK million Group companies deposits in the cash pool system Group companies borrowings in the cash pool system Akastor ASA’s net borrowings in the cash pool system Cash in cash pool system Current interest-bearing receivables from group companies non-current interest-bearing receivables from group companies Current borrowings from group companies Other net interest-bearing receivables from group companies Current non interest-bearing receivables from group companies Current non interest-bearing borrowings from group companies Net non interest-bearing receivables from group companies Total net receivables from group companies All current receivables and borrowings are due within one year. note 9 | borrowings Contractual terms of group’s interest-bearing loans and borrowings which are measured at amortized cost. For more information about the group’s exposure to interest rates, foreign currency and liquidity risk, see note 11 Financial risk management and financial instruments. 2014 Amounts in million Currency Nominal currency value Carrying amount (NOK) Interest rate3) fixed interest margin Interest coupon Maturity date Interest terms 1.48% 1.60% 3.08% 03.06.19 IBoR + Margin2) 1.48% 1.40% 2.88% 03.06.17 IBoR 3M +variable margin Revolving credit facility (noK 2 000 million) noK 1 000 noK 2 500 Total credit facility term loan Total term loan Accrued interest Total borrowings Current borrowings non-current borrowings Total 987 987 2 485 2 485 2 3 472 2 3 472 3 474 2014 2 760 (280) 2013 6 503 (552) (1 981) (4 928) 499 1 023 4 743 1 289 5 393 2 345 (3 290) (8 435) 2 742 (697) 14 (21) (7) 3 234 4 768 (38) 4 730 5 056 PRINT 2013 Amounts in million ISIn no 001050461.6 Nominal currency value Carrying amount (NOK) Interest rate3) fixed interest margin Currency Interest coupon Maturity date Interest terms noK 1 913 1 812 8.70% 2.00% 10.70% 26.06.14 Fixed, annual ISIn no 001050460.8 noK 187 187 1.65% 6.75% 8.40% 26.06.14 ISIn no 0010647431 noK 1 500 1 498 1.67% 4.25% 5.92% 06.06.17 ISIn no 0010661051 Total bonds1) noK 1 000 Revolving credit facility (noK 6 000 million) noK 1 650 1 002 4 499 1 636 1 636 1.68% 4.20% 5.88% 09.10.19 3.14% 0.00% 3.14% 01.06.16 IBoR + Margin2) Floating, 3M+fix margin Floating, 3M+fix margin Floating, 3M+fix margin Total credit facility term loan term loan term loan Total term loan Total borrowings Current borrowings non-current borrowings Total noK 750 755 1.70% 2.00% 3.70% 01.10.14 euR 270 2 257 0.29% 1.85% 2.14% 13.11.15 0.22% 1.50% 1.72% 13.05.14 euR 130 1 092 4 104 10 240 3 874 6 366 10 240 nIBoR 3M+fix margin IBoR 3M +variable margin IBoR 3M +variable margin 1) The book value is calculated by reducing the nominal value of NOK 4 400 million by total issue costs related to the new financing of negative NOK 23 million. Accrued interest and issue costs related to the bonds are included by NOK 116 million . The book value of the bond with notional value of NOK 1 913 million also includes the mark-to-market value of a fair value hedging interest rate swap of NOK 7 million. 2) The margin applicable to the facility is decided by a price grid based on the gearing ratio. Commitment fee is 40 percent of the margin (35 percent in 2013). 3) The interest costs are calculated using either the last fixing rate known by year end (plus applicable margin) or the contractual fixed rate (when fixed rate debt). Bank debt All facilities are provided by a bank syndicate consisting of high quality the financial covenants are based on two sets of key financial ratios; a nordic and international banks. the terms and conditions include gearing ratio based on net debt/equity and an interest coverage ratio restrictions which are customary for this kind of facility, including inter alia based on eBItDA/net finance costs. the financial covenants are tested on negative pledge provisions and restrictions on acquisitions, disposals and a quarterly basis. the margin applicable to the facility is based on a price mergers. there are also certain changes of control provisions included. grid determined by the gearing ratio and level of utilization. See note 11 the facility includes no dividend restrictions and is unsecured. Financial risk management and exposures for more information regarding capital risk in the group. Financial liabilities and the period in which they mature 2014 Amounts in NOK million Total credit facility2) Term loan Accrued interest Total borrowings Carrying amount Total undiscounted cash flow1) 6 months and less 6-12 months 1-2 years 2-5 years 987 2 485 2 3 474 1 139 2 680 2 1 015 36 2 3 821 1 051 15 36 - 51 31 72 - 103 77 2 536 - 2 613 More than 5 years - - - - 2013 Amounts in NOK million ISIn no 001050461.6 ISIn no 001050460.8 ISIn no 0010647431 ISIn no 0010661051 total bond total credit facility2) term loan Carrying amount Total undiscounted cash flow1) 6-12 months 1-2 years 2-5 years 6 months and less 1 805 187 44 29 2 065 1 676 1 133 4 874 1 805 187 1 811 1 338 5 141 1 780 4 205 11 126 - - 44 29 73 26 774 873 - - 89 59 148 52 2 298 2 498 More than 5 years - - - 1 044 1 044 - - - - 1 633 176 1 809 26 - 1 835 1 044 1 812 187 1 498 1 002 4 499 1 636 4 104 total borrowings 10 240 1) The interest costs are calculated using either the last fixing rate known by year end (plus applicable margin) or the contractual fixed rate (when fixed rate debt). 2) NOK 1 000 million (NOK 1 650 million in 2013) corresponds to the repayment of the drawn portion of the available NOK 2 000 million (NOK 6 000 million in 2013) note 10 | Guarantees Amounts in NOK million parent company guarantees to group companies1) Guarantees on behalf of Kvaerner companies4) Guarantees on behalf of companies sold3) Counter guarantees for bank/surety bonds of Kvaerner companies Counter guarantees for bank/surety bonds sold Counter guarantees for bank/surety bonds2) Total guarantee liabilities Maturity of guarantee liabilities: 6 months and less 6-12 months 1-2 years 2-5 years 5 + years 2014 10 846 25 241 425 - - 3 959 40 471 14 213 413 18 041 7 347 457 2013 50 215 25 192 563 4 4 7 026 83 004 3 031 4 013 15 105 55 467 5 388 1) Parent Company Guarantees to support subsidiaries in contractual obligations towards clients. 2) Bank guarantees and surety bonds are issued on behalf of Akastor subsidiaries, and counter indemnified by Akastor ASA. 3) Guarantees to companies sold, Aker Solutions E&C Ltd, McGregor Pusnes AS (former Aker Pusnes AS) and Altus Invervention Limited (former Aker Qserv Ltd). 4) Kvaerner is related party to Akastor group. NOK 9.6 billion have been released during February 2015. Guarantees of NOK 8.7 billion reported in Akastor AS in 2013 has been moved to Akastor ASA. Guarantee obligations on behalf of New Aker Solutions will have secondary joint liability for such obligation. this statutory liability If an obligation that arose prior to the completion of the demerger is not is unlimited in time, but is limited in amount to the net value allocated to satisfied by the party to which the obligation has been allocated under the the non-defaulting party in the demerger. the guarantees listed above do demerger plan, be it Akastor or new Aker Solutions, then the other party not include obligations on behalf of new Aker Solutions. PRINT note 11 | financial risk management and financial instruments note 13 | shareholders 2014 2013 Assets liabilities Assets liabilities 2014 Company Note Nominee Number of shares held Ownership shareholders with more than 1 percent shareholding Currency risk and balance sheet hedging Amounts in NOK million Forward exchange contracts with group companies Forward exchange contracts with external counterparts Total 1 754 654 2 408 (850) (1 581) (2 431) 660 527 1 187 (679) (504) (1 183) Aksastor ASA have entered into forward exchange contracts with that are hedged directly represents about 80 percent of the total subsidiaries in 2014 with a total value of about noK 66 billion. large exposure but only a small number of the total contracts. these contracts contracts are hedged back-to-back with external banks, while minor have no significant impact on Akastor ASA’s income statement. contracts are hedged based on internal matching principles. Contracts All instruments are booked at fair value as per December 31. Interest rate risk Amounts in NOK million Interest rate swaps - cash flow and fair value hedge (against equity) Interest rate swaps - cash flow hedge (against equity) Total 2014 2013 Assets liabilities Assets liabilities - - - - - - 37 - 37 - (44) (44) Interest rate swaps are applied to achieve the internal policy that 30- subsidiaries and deposits with external banks. loss provisions are made 50 percent of the company’s gross external borrowing shall be at fixed in situations of negative equity and where the company is not expected interest rates, with duration matching the remaining duration of the to be able to fulfill it’s loan obligations from future earnings. external borrowing. Interest terms on the borrowing are described in note 9 deposits and forward contracts are done according to a list of approved Borrowings. the credit facility (nominal noK 2 billion) was drawn up to banks and primarily with banks were the company also has a borrowing noK 1 billion by end of the year (not hedged). relation. the existence of netting agreements between Akastor ASA and the relations banks reduces the credit risk. Hedge accounting is applied using the cash flow hedge accounting model which means that gains and losses on interest rate swaps from floating to Liquidity risk fixed interest rates are recognized in the hedging reserve in equity. As of liquidity risk relates to the risk that the company will not be able to meet December 31, 2014 Akastor had no interest swaps. its debt and guarantee obligations and is managed through maintaining Credit risk sufficient cash and available credit facilities. the development in the group’s and thereby Akastor ASA available liquidity is continuously Credit risk relates to loans to subsidiaries and associated companies, monitored through weekly and monthly cash forecasts, annual budgets overdraft in the group cash pool, hedging contracts, guarantees to and long term planning. note 12 | related parties transactions with subsidiaries and related parties are described on a line Akastor ASA’s agreement with Aker ASA regarding pension obligation in by line basis in the following notes: uS is described in the consolidated accounts note 34 Related parties. Transactions other services Financial items Investments Cash pool Receivables and borrowings Guarantees Foreign exchange contracts Info in note All transactions with related parties are performed at market rates and in accordance with the arm’s length principle. note 2 note 3 note 5 note 7 note 7, 8 note 10 note 11 Aker Kværner Holding AS euroclear Bank S.A./n.V.('BA') Goldman Sachs & Co Aker ASA State Street Bank & trust Co. JpMorgan Clearing Corp. Clearstream Banking S.A. Folketrygdfondet State Street Bank & trust Co. SIX SIS AG oDIn norge Akastor ASA 2013 Company Aker Kværner Holding AS Aker ASA Folketrygdfondet Danske Bank A/S State Street Bank & trust Co. Clearstream Banking S.A. Goldman Sachs & Co State Street Bank & trust Co. SIX SIS AG the Bank of new York Mellon SA the Bank of new York Mellon RBC Investor Services Bank JpMorgan Chase Bank State Street Bank & trust Co. X X X X X X X 110 333 615 29 298 800 23 800 654 17 331 762 15 251 004 5 614 319 5 369 997 3 992 444 3 774 066 3 697 815 3 333 506 2 976 376 40.27% 10.69% 8.69% 6.33% 5.57% 2.05% 1.96% 1.46% 1.38% 1.35% 1.22% 1.09% 6 Note Nominee Number of shares held Ownership 110 333 615 16 440 000 9 642 797 6 811 034 5 715 568 5 657 001 5 069 723 3 845 116 3 717 235 3 564 876 3 543 912 3 519 791 3 454 266 2 843 009 40.27% 6.00% 3.52% 2.49% 2.09% 2.06% 1.85% 1.40% 1.36% 1.30% 1.29% 1.28% 1.26% 1.04% X X X X X X X X X X PRINT 07. AuDItoRS RepoRt PRINT 08. BoARD oF DIReCtoRS Øyvind eriksen | Chairman sarah ryan | Director Øyvind eriksen is president and Ceo of Aker ASA and Chairman of Aker Solutions. Mr. eriksen holds a law degree from the university of oslo. He joined the norwegian law firm BA-HR in 1990, became a partner in 1996 and a director/chairman from 2003. Mr. eriksen is executive chairman of the board of Aker Kværner Holding AS and board member of several companies, including the Resource Group tRG AS, tRG Holding AS and Reitangruppen AS. Mr. eriksen holds no shares or stock options in Akastor directly; he has an ownership interest through his holding of 100 000 shares in Aker ASA and 0.20 percent of the shares in tRG Holding AS through a privately owned company. Mr. eriksen is a norwegian citizen and has been elected for the period 2014-2016. lone fønss schrøder | Deputy Chairman lone Fønss Schrøder has experience from board positions at the Danish shipping and oil group A.p. Møller-Maersk A/S. She is director and chairperson for the audit committee at Volvo pV, Valmet oy and nKt A/S, as well as a member of the board of directors and audit committee of Schneider electric in France. She is also vice chairman of Saxo Bank A/S in Denmark and senior advisor for Credit Suisse in london. Ms. Fønss Schrøder has a law degree from the university of Copenhagen and a Master of economics from Copenhagen Business School. As of December 31, 2014, she held 4 400 shares in the company and had no stock options. She is a Danish citizen and has been elected for the period 2014-2016. kjell inge røkke | Director Kjell Inge Røkke is Aker ASA’s main owner and has been a driving force in the development of Aker since the 1990s. In 1996, Mr. Røkke purchased enough Aker shares to become Aker’s largest shareholder and owns today 67.8 percent of Aker ASA through the Resource Group tRG AS, which he owns together with his wife. Mr. Røkke is chairman of the board of Aker ASA, Kværner ASA and deputy board member of Det norske oljeselskap ASA. As of December 31, 2014, he held no shares in Akastor, and had no stock options. Mr. Røkke is a norwegian citizen and he has been elected for the period 2014-2016. Sarah Ryan is director of investment management at earnest partners. Before joining earnest partners, she held various technical, operational and management positions at Schlumberger. She is a non-executive director of Woodside petroleum. Ms. Ryan holds a BSc in geology from the university of Melbourne, a BSc (Hons) in geophysics and a phD in petroleum geology and geophysics from the university of Adelaide. As of December 31, 2014, she held no shares in the company and had no stock options. Ms. Ryan is an Australian citizen. She has been elected for the period 2014-2016. Jannicke sommer-ekelund | elected by employees Jannicke Sommer-ekelund is Senior Consultant and lead Auditor for supply chain support at MHWirth. She joined Aker Solutions in 2006 and worked as a senior consultant in procurement in 2012 when she moved to her current role. As of December 31, 2014, she holds 252 shares in the company and no stock options. Ms. Sommer-ekelund is a norwegian citizen. She has been elected for the period 2014-2016. stig faraas | elected by employees Stig Faraas works as Vendor Invoice Senior Administrator at Frontica Business Solutions. He joined Aker Solutions in 1992. Mr.. Faraas holds a certificate in Surface treatment, security and safety. As of December 31, 2014, he held no shares in the company and had no stock options. Mr. Faraas is a norwegian citizen. He has been elected for the period 2014-2016. kathryn m. baker | Director Asbjørn michailoff Pettersen | elected by employees Kathryn M. Baker joined the nordic private equity firm Reiten & Co in 1999 as a partner. She previously worked as a management consultant at McKinsey & Company in oslo. Before moving to norway, she was a financial analyst at Morgan Stanley and an investor relations account executive at noonan/Russo Communications in new York. Ms. Baker currently sits on the boards of directors of Data Respons and StormGeo. She serves on the ethics committee for the norwegian private equity and Venture Capital Association (nVCA) where she previously served as chairman and board member. Ms. Baker holds a Bachelor’s degree in economics from Wellesley College and an MBA from the Amos tuck School of Business Administration at Dartmouth College. She holds no shares in the company Ms. Baker is an American citizen and has been elected for the period 2014-2016. Asbjørn pettersen currently works as package Responsible engineer in global projects at MHWirth. He began his career with the Aker group in 1983 when he joined Aker engineering where he held various positions until 1997. He joined Aker MH in 2007 after engagements with ABB environment, including as project leader for one of the first steam power plants in the norwegian sector of the north Sea, and at Ge Healthcare’s lindesnes plant. Mr. pettersen holds a BSc in mechanical engineering from trondheim College of engineering. As of December 31, 2014, he held 3 050 shares in the company and had no stock options. Mr. pettersen is a norwegian citizen. He has been elected for the period 2014-2016. PRINT 09. MAnAGeMent frank o reite | Chief executive officer Frank o. Reite joined Akastor from the norwegian investment management and advisory firm Converto which he cofounded in 2009 and where he was managing partner. Mr. Reite has earlier held a variety of executive positions in the Aker group, including overseeing and developing Aker investments in seafood and shipbuilding at Aker Seafoods, norway Seafoods, American Seafoods Company and Aker Yards. Mr. Reite also has experience from the banking industry and served as operating Director at paine & partners, a new York-based private equity firm. Mr. Reite is Chairman of Converto and of Havfisk ASA. He holds a B.A. in business administration from Handelshøyskolen. As of December 31, 2014, he held, through a privately-owned company, 200 000 shares in the company and had no stock options. Mr. Reite is a norwegian citizen. leif borge | Chief financial officer Before joining Akastor, leif Borge served as president and CFo of Aker Solutions which he joined in 2008. He was CFo of Aker Yards ASA in 2002-2008 after serving as CFo of Zenitel nV, Stento ASA and Vitana, a subsidiary of Rieber & Søn ASA in the Czech Republic. Mr. Borge is a graduate of the pacific lutheran university in Washington State. As of December 31, 2014, he held, through a privately owned company, 142 775 shares in the company, and had no stock options. Mr. Borge is a norwegian citizen. karl erik kjelstad | investment Director Karl erik Kjelstad has held a variety of executive positions in the Aker group which he joined in 1998. He was eVp at Aker Solutions from 2009 and earlier served as Senior partner and president of Maritime technologies at Aker ASA. He was president and Ceo of Aker Yards ASA in 2003-2007. Before joining Aker, Mr. Kjelstad was senior consultant at pA Consulting Group and in 1992-1996 held various management positions at the ttS Group. Mr. Kjelstad holds an MSc in marine engineering from the norwegian university of Science and technology (ntnu). As of December 31, 2014, he held, through a privately-owned company, 123 074 shares in the company and had no stock options. Mr. Kjelstad is a norwegian citizen. PRINT 10. CoMpAnY InFoRMAtIon reports on the internet Copyright and legal notice the quarterly and annual reports of Akastor are available on the internet. Akastor encourages its shareholders to subscribe to the company’s annual reports via the electronic delivery system of the norwegian Central Securities Depository (VpS). please note that VpS services (VpS Investortjenester) are designed primarily for norwegian shareholders. Subscribers to this service receive annual reports in pDF format by email. VpS distribution takes place at the same time as distribution of the printed version of Akastor’s annual report to shareholders who have requested it. Quarterly reports, which are generally only distributed electronically, are available on the company’s website and other sources. Shareholders who are unable to receive the electronic version of interim reports may subscribe to the printed version by contacting Akastor’s investor relations staff. Copyright in all published material including photographs, drawings and images in this publication remains vested in Akastor and third party contributors to this publication as appropriate. Accordingly, neither the whole nor any part of this publication can be reproduced in any form without express prior permission. Articles and opinions appearing in this publication do not necessarily represent the views of Akastor. While all steps have been taken to ensure the accuracy of the published contents, Akastor does not accept any responsibility for any errors or resulting loss or damage whatsoever caused and readers have the responsibility to thoroughly check these aspects for themselves. enquiries about reproduction of content from this publication should be directed to Akastor ASA. Contact Details Akastor ASA Frontica Business Solutions Real Estate Fjordalleén 16, 0250 oslo, norway portalbygget, plan 1e-F, Rolfsbuktveien 4, 1364 Fjordalleén 16, 0250 oslo, norway po Box 124, 1325 lysaker, norway Fornebu, norway po Box 124, 1325 lysaker, norway telephone: +47 21 52 58 00 po Box 222, 1326 lysaker, norway telephone: +47 21 52 58 00 akastor.com MHWirth telephone: +47 678 26 000 frontica.com First Geo Jåttåvågveien 10, 4020 Stavanger, norway Butangen 20, 4639 Kristiansand, norway KOP Surface Products po Box 289. 4066 Stavanger. norway po Box 413 lundsiden, 4604 Kristiansand, 77 Science park Drive #04-01/07 Cintech 3 telephone: +47 51 81 23 80 norway +47 38 05 70 00 mhwirth.com Singapore Science park, Singapore 118256 first-geo.com telephone: +65 6880 9740 kopsurfaceproducts.com Step Oiltools Maskinveien 9, Stavanger 4033, orway AKOFS Offshore Fjords Processing telephone: +47 957 28 476 Karenslyst Allé 57, 0277 oslo, norway Snarøyveien 36, 1364 Fornebu, norway stepoiltools.com p.o. Box 244, 0213 oslo, norway po Box 403, 1327 lysaker, norway telephone: +47 23 08 44 00 telephone: (+47) 67 83 77 00 akofsoffshore.com fjordsprocessing.com PRINT Design: tania Goffredo Photos and illustrations: Rolf estensen eivind Røhne Simon Kennedy Layout: tania Goffredo Print/Interactive PDF: tania Goffredo PRINT 

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