Akastor ASA
Annual Report 2015

Plain-text annual report

2015 AnnuAl RepoRt Annual Report 2015 2 Key figures 2015 2014 Orders and results continuing operations (NOK million) Order backlog December 31 Order intake Operating revenues eBiTDA eBiTDA margin (percent) Net profit (loss) Net profit (loss) incl. discontinued operations Cash flow and financial position (NOK million) Cash flow from operating activities Borrowings equity ratio (percent) Share (NOK) share price December 31 Basic/Diluted earnings per share Employees (Full time equivalents) employees including contracts December 31 21 555 15 616 10 506 25 254 21 432 15 869 1 380 702 6.4 4.4 (1 387) (2 564) 2 493 (2 587) (603) 5 639 36.2 488 5 028 38.4 12.00 (9.54) 21.60 9.13 5 677 7 609 Health and Safety Lost Time incident frequency (per million worked hours) Total recordable incident frequency (per million worked hours) sick leave rate ( percent of worked hours) 0.66 1.32 2.6 0.65 1.62 2.7 Net capital employed noK million Kop Surface products 555 other holdings 661 Fjords processing 715 Revenue noK million 5 326 4 546 EBITDA noK million 3 693 3 678 3 952 552 MHWirth 4 729 AKoFS offshore 5 183 Frontica 244 NOK 12 087 million as of Dec 31, 2015 262 177 141 (169) Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q4 14 Q1 15 Q2 15 Q4 15 Q3 15 Annual Report 2015 3 tAble oF ContentS 01. ThIs Is AKA sTOR Akastor in brief Portfolio Companies 02. BOARD Of DIRE cTORs’ REpORT 03. DEclARATION By ThE B OARD Of DIREcTORs AND cEO 04. cORpORATE gOvERNANcE s TATEmENT 05. fINANcIAls AND NOTE s a. Akastor group b. Akastor AsA 06. AuDITORs REpORT 07. BOARD Of DIRE cTORs 08. mANAgEmENT 09. cOmpANy INfORmATION 4 4 5 7 15 16 25 25 78 90 92 94 95 Annual Report 2015 | This is Akastor 4 01. tHIS IS AKAStoR AKAsTOr iN Brief Akastor is a norway-based oil-services investment company with a portfolio of industrial holdings and other investments. the company has a flexible mandate for active ownership and long-term value creation. the portfolio comprises: drilling systems and lifecycle services supplier MHWirth; vessel-based subsea well construction and intervention services provider AKoFS offshore; process systems and services supplier Fjords processing; surface oil and gas equipment supplier Kop Surface products; corporate services provider Frontica; and other smaller sized holdings. the portfolio businesses are developed as stand- alone entities under the Akastor umbrella and represent the Company’s six reporting segments. Akastor operates globally and has a number of subsidiaries located in Australia, Canada, China, Germany, Indonesia, Malaysia, the netherlands, norway, Singapore, the united Kingdom, the united Arab emirates, and the united States, among others. 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. our aim is to maximize the value potential of each entity by clarifying the portfolio companies’ business models, capitalize on their market positions, and strengthen underdeveloped areas of value creation. Aker Kværner Holding AS, which is owned by Aker ASA and the norwegian government, is the largest shareholder of Akastor owning 40.27 percent of the shares. the Akastor shares are traded on the oslo Stock exchange under the ticker AKA. Akastor’s portfolio companies generated 2015 revenues of noK 15.9 billion, ebItDA of noK 702 million and employ 5 677 people worldwide. Akastor operates a lean corporate centre with 23 employees situated at Fornebu, bærum, norway. r o t s a k A s i s i h T Annual Report 2015 | This is Akastor 5 POrTfOLiO COmPANies MHWirth is a leading global provider of first-class drilling solutions and services designed to offer its customers with the safer, more efficient and reliable alternative. the company vision drives a commitment to quality and economic advantages to its customers and stakeholders. With a legacy founded more than a century ago, MHWirth has transformed into a brand reflective of the company strategy and ambitions. the company’s reputation is preserved through a combination of values, people and innovative technologies, proven by a strong track record and customer success stories. MHWirth has a global reach covering five continents with offices in more than 16 countries. Drawing upon global market experience, the company continues to seize opportunities through the established regional presence in the Americas, europe, Asia and West Africa. the company has 3 005 employees. MHWirth had revenues of noK 6.7 billion and a negative ebItDA of noK 176 million in 2015. Frontica is a leading provider of key corporate services re- quired for business growth. Frontica operates through two distinct business areas; Frontica Advantage offering compre- hensive staffing, recruitment and global mobility solutions, and Frontica business Solutions providing solutions within the It operations and business process outsourcing segments, hereunder information technology, procurement, finance, pay- roll, business consulting and administrative services. With 983 employees located in Asia, brazil, europe and north America, Frontica had revenues of noK 4.9 billion and ebItDA of noK 260 million in 2015. AKOFS Offshore is a provider of vessel-based subsea well construction and intervention services to the oil and gas industry. the company has a highly competent and diverse organization, covering all phases from conceptual development to project execution and offshore operations. the company currently operates three state-of-the-art vessels, the AKoFS Seafarer, the Skandi Santos and the Aker Wayfarer, which are designed to perform operations in up to 3 000 meters (9 800 feet) of water. the Skandi Santos began operating in 2010, the Aker Wayfarer in 2011 and the AKoFS Seafarer in 2013, making AKoFS offshore’s fleet one of the most modern of its kind. AKoFS offshore has the competence and equipment needed to provide superior offshore oilfield services to leading oil and gas producers and subsea service providers around the globe. AKoFS offshore had revenues of noK 718 million, ebItDA of noK 104 million in 2015 and employs approximately 90 people. Fjords Processing provides wellstream world-class processing technology, systems and services to the upstream oil and gas industry. the company delivers market-leading solutions for separation and treatment of oil and gas, based on innovative technology and extensive competence accumulated over the last 40 years. Fjords processing is one of the few companies in the industry that can offer complete processing systems for both onshore and offshore installations. With a comprehensive product portfolio, Fjords processing delivers unique solutions across all oil, gas and water treatment segments. the product range includes fluid stream separation, oil and gas processing, and water treatment. Market leading technology and expertise are combined to create tailored solutions to meet customer specifications and on-site conditions within this product range. Fjords processing is headquartered at Fornebu in norway and the company has 545 employees represented in 17 countries. Hence, Fjords processing is a global provider with local presence in the key oil and gas centres around the world. Fjords had revenues of noK 1.9 billion and ebItDA of 104 million in 2015. KOP Surface Products is a leading global supplier of surface wellheads, trees, valves and actuators to the oil and gas industry. Kop provides full life-of-field support to customers, including installation, maintenance, rental and refurbishment services. the client list includes some of the biggest names in the industry and the products and quality programs comply with the highest international standards. Revenue and ebItDA of Kop Surface products was 1.1 billion and 242 million (respectively) employing 682 people at year- end 2015. Real Estate and other holdings In addition to the portfolio companies, Akastor has invested in other smaller sized holdings which include 100 percent ownership of First Geo, a 76 percent stake in Step oiltools, 50 percent stake in DoF Deepwater and a 7.4 percent stake in ezra. Akastor Real estate divested eight properties to Aker in 2015 for a total value of noK 1.2 billion. Akastor Real estate also divested its 17 percent stake in a property in the oslo area for noK 30 million the first quarter of 2015. In addition, Akastor Real estate managed a subletting portfolio and a few development projects during 2015. Akastor Real estate and other holdings reported revenues of noK 1.2 billion and ebIDtA of noK 168 million in 2015. Annual Report 2015 | cEO letter 6 7 02. boARD oF DIReCtoRS’ RepoRt Akastor ASA (hereinafter referred to as Akastor) is an investment company based in norway with a portfolio of companies in the oilfield services sector. 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. the Akastor portfolio of companies had a total capital employed of noK 12.1 billion at the end of 2015. Akastor’s total revenue in 2015 decreased by 26 percent, whilst ebItDA was down 49 percent, mainly due to tougher market conditions for all portfolio companies during 2015. the order backlog amounted to noK 15.6 billion at the end of 2015 compared to noK 21.6 billion a year earlier. the order intake for 2015 was noK 10.5 billion. Company Overview Akastor, in its present form is a result of the split of the oilfield services company, now known as Aker Solutions ASA in 2014. In September 2014, the former Aker Solutions group was demerged, and Akastor and Aker Solutions became two separately listed entities. Akastor is primarily focused on the oilfield services sector. the portfolio in 2015 covers a range of industrial holdings in this sector, all in varying stages of maturity, including: ŸŸ MHWirth which provides drilling systems and lifecycle services ŸŸ Frontica, global provider of corporate and staffing services ŸŸ AKoFS offshore, a vessel-based subsea well installation and intervention services provider ŸŸ Fjords processing, which provides wellstream processing technology and services ŸŸ Kop Surface products, which delivers surface oil and gas equipment ŸŸ Step oiltools, a drilling waste management company, of which Akastor owns 76 percent ŸŸ First Geo, which delivers subsurface advice and products to e&p companies companies have separate boards, which consist of dedicated Akastor investment managers, and in some of the boards, external board representatives and employee representatives. this lays the foundation for close cooperation between Akastor, the portfolio companies and their employees. Akastor is based in norway, at Fornebu, just outside oslo, with a core team of 23 employees, working closely with the boards and management of its portfolio companies. Akastor’s portfolio companies have a total of 5 677 employees with presence in 35 countries by the end of 2015. 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 an active development of its portfolio companies as stand-alone businesses, while maintaining the flexibility to be opportunistic. Akastor works closely with the companies management to make decisions on business development, acquisitions and divestments to maximize the value of each company. each portfolio business develops and executes independent value creation plans in close cooperation with the Akastor investment team. As an owner, Akastor emphasizes understanding the portfolio companies markets and challenges in depth, in order to evaluate current valuation versus future potential. Akastor seeks to maximize value by combining strategic, operational and financial measures. Akastor plans to establish separate financing for each operational unit to increase the portfolio companies’ flexibility and independence. the business models of the portfolio companies are decentralized, but as part of the Akastor portfolio, all companies share a common foundation based on Akastor’s values and compliance structure. Akastor owns companies at varying stages of maturity, and will have to base future M&A decisions on independent plans for each company, developed in close cooperation with each company’s board of directors and management. Akastor Real estate divested all properties in 4Q 2015, as described in the section “the Akastor portfolio.” In addition, Akastor owns some financial investments such as shares in ezra Holdings ltd and DoF Deepwater AS. each Akastor portfolio company is organized as an independent business with its own dedicated management teams, fully responsible for all aspects of its operations. All portfolio Akastor will continue to own portfolio companies as long as Akastor 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. Akastor will either return excess cash to shareholders, or re-invest into its current portfolio, if such an investment can speed up the delivery of the value creation plans for the portfolio. t r o p e r ’ s r o t c e r i D f o d r a o B Annual Report 2015 | BOD Report 8 market Outlook Akastor’s portfolio companies all operate within the oilfield services industry. the market outlook for 2016 is affected by the sharp decline in oil prices seen last year. e&p companies’ increased focus on capital discipline and reduction of upstream investments are expected to persist throughout 2016. the oil and gas services segment observed significant delays and re- tendering through 2015, and the e&p companies are likely to postpone new developments and thus further prolong the current market downturn beyond 2016. Akastor’s order backlog was down 28 percent, or noK 5.9 billion by the end of 2015 compared to 2014. Akastor still expects the market conditions to be demanding for all its portfolio companies in 2016. Akastor has a strong liquidity buffer, giving the opportunity to provide support to the portfolio companies in case it is needed in periods with challenging markets. 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 Akastor will work closely with the portfolio companies to position them for growth in current and new markets. group financial Performance Akastor presents its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) as adopted by the european union. All amounts below refer to the consolidated financial statements for the group, unless otherwise stated. included the main portfolio companies in Akastor’s consolidated financial statements are the following: MHWirth, Frontica, AKoFS offshore, Fjords processing and Kop Surface products. In addition, Akastor has 100 percent ownership of First Geo AS, 76 percent shareholding in Step oiltools, 50 percent stake in DoF Deepwater AS and 7.4 percent shareholding in ezra Holdings ltd which are reported in the reporting segment Real estate and other holdings. income statement operating revenue and other income for 2015 decreased by 26 percent to noK 15.9 billion due to lower activity and weaker market conditions in the oil service industry in general, and in the offshore drilling market in particular. earnings before interest, tax, depreciation and amortization (ebItDA) decreased by 678 million to noK 702 million. earnings in 2015 were impacted by reduced revenues for MHWirth and low activity for the vessel AKoFS Seafarer in AKoFS offshore. net financial items ended at noK -691 million in 2015 compared to noK -947 million in the previous year. AKoFS Seafarer was impaired by noK 1 billion triggered by the weak market conditions which are expected to continue in the medium term. Further, an impairment of noK 0.5 billion was recognized related to the Mpo business in MHWirth, as financial performance has been challenging due to current industry conditions. the group had an operating loss of noK 2.2 billion, mainly due to the above-mentioned impairments. Several other non- recurring items impacted the results, including provisions related to onerous offices leases, gain from realization of the real estate portfolio in Real estate and other holdings, and restructuring costs in MHWirth. the pre-tax loss for the year was noK -2.9 billion, compared to a loss of noK -1.7 billion the previous year. the income tax benefit for 2015 was noK 286 million, on the same level as in 2014. the effective tax rate is influenced by several one-off items, such as impairment of deferred tax assets, mix of revenue generated in various jurisdictions, as well as tax effects from currency fluctuations in entities that are taxable in a currency other than the functional currency. earnings per share for continuing operations were negative noK 9.46 in 2015, compared with negative noK 5.09 a year earlier. the board of directors has resolved to propose to the annual general meeting that no dividend is distributed for 2015, in line with Akastor’s dividend policy. financial Position total assets of Akastor amounted to noK 20.5 billion as of December 31, 2015, compared with noK 24.4 billion at year-end 2014. the decrease reflects reduction in current operating assets of noK 1.6 billion, impairments of noK 1.8 billion as well as the disposal of real estate portfolio of noK 1.0 billion. total operating liabilities in the portfolio companies decreased by noK 1.8 billion, mainly explained by decreased activity level. Gross debt increased by noK 0.6 billion, which reflects net increased borrowings of noK 0.2 billion and exchange rate fluctuations in uSD. As of December 31, 2015, the interest coverage ratio was below the minimum level as defined in the loan agreement. borrowings of noK 3.6 billion, with maturity in 2017 and 2019, are therefore presented as current borrowings. on March 11, 2016, Akastor signed a new agreement with its bank syndicate on main terms and conditions to amend and extend its financing structure, including new covenant levels. Depreciation and amortization rose by noK 0.2 billion to noK 1.1 billion in the previous year. In addition, impairment losses of noK 1.8 billion were recognized in 2015. the vessel total equity amounted to noK 7.4 billion by the end of 2015, compared to noK 9.4 billion the year before. the equity ratio was 36 percent as of December 31, 2015, reduced from 38 percent in 2014. Annual Report 2015 | BOD Report9 Cash flow As of December 31, 2015, Akastor had cash of noK 0.6 billion, a reduction from noK 1.1 billion in 2014. the net cash flow from operating activities was noK -0.6 billion, and reflects an increase in working capital, cash out flow on hedges and interest costs. net cash flow from investing activities was by noK -0.2 billion compared to noK 4.5 billion in 2014. Disposals of business in 2015 were noK 1.2 billion, compared to noK 5.9 billion in 2014. the disposals in 2015 related to disposal of Akastor’s real estate portfolio. Investing activities also include capex investments of noK 1.6 billion compared to noK 1.9 billion in 2014. the capex investments in 2015 included the purchase of AKoFS Seafar- er vessel of uSD 122.5 million. no new business acquisitions were carried out in 2015, however noK 11 million was paid in deferred consideration on acquisitions in prior periods. net cash flow from financing activities amounted to noK 0.2 billion and reflected additional borrowings in 2015. going Concern As per December 31 2015, the interest covenant ratio was below the minimum level of 4.0 as defined in the loan agreements with its bank syndicate. on March 11 2016 new loan agreements were signed with the same banks, setting the interest covenant ratio on lower levels for the period Q4 2015 – Q1 2017. the board of directors confirms that the company is a going concern and that the 2015 financial statements have been prepared on a going concern basis. The Akastor Portfolio MHWirth MHWirth is a global provider of drilling solutions and services. MHWirth has activity in five continents with presence in 16 countries. At the end of 2015, the company employed 3 005 people whereas half of the workforce was employed in norway. the company’s business is divided in three core areas: large projects, Drilling equipment and Drilling lifecycle Services. MHWirth is the largest Akastor portfolio company by both sales and employees. Key figures Amounts in NOK million operating revenue and other income ebItDA ebIt CApeX nCoA net capital employed order intake order backlog employees (Fte) 2015 6 743 (176) (1 204) 385 2 252 4 729 3 521 5 750 3 005 2014 10 681 941 526 762 2 298 5 328 6 941 9 566 4 237 the revenue for 2015 of noK 6 743 million was down 37 percent from 2014 which is mainly driven by a reduction in large projects activity level which was impacted by the current downcycle in the offshore drilling market. ebItDA dropped from noK 941 million in 2014 to negative noK 176 million in 2015 which was driven by the reduction in activity level for large projects, restructuring cost and Managed pressure operations (Mpo) which had had a negative ebItDA of noK 219 million. An impairment related to Mpo of noK 488 million was charged to the results in 2015 as financial performance has been challenging due to current industry and operational conditions. MHWirth is currently evaluating strategic alternatives for Mpo. the Drilling lifecycle Services business continued with a high activity level throughout 2015 and only saw a modest reduction from 2014 activity levels. Activity levels were driven by a high level of spare parts sales and overhaul related work to operating rigs. Working capital (nCoA) ended at the same level as year-end 2014. A significant part of the noK 2.3 billion of working capital is tied up in the large projects business. the offshore drilling market slowed down significantly in 2015 resulting in a number of prospects and tenders being cancelled or delayed. no newbuild orders for high-end floaters were placed in 2015. this slow-down impacted MHWirth’s order intake, which ended down by 49 percent compared to 2014. the order backlog was reduced by 40 percent during the year. A significant portion of MHWirth’s backlog is for delivery of seven drilling packages to Jurong Shipyard in Singapore, for operations in brazil. Due to the financial uncertainty of Jurong’s client, Sete brazil, the reduced pace of progress will continue until a conclusion is reached on the brazil situation. In response to the market slowdown, MHWirth has throughout 2015, and into 2016, adjusted organizational capacity and has announced aggregated personnel reductions of approximately 2 300 people, corresponding to a reduction of around 54 percent compared to year-end 2014. the cost base is expected to be reduced by around noK 1.7 billion, with restructuring costs of noK 235 million recognized in 2015. MHWirth will continue to make necessary adjustments to its cost base in accordance with market conditions to ensure profitability of the company at lower activity levels. While making the adjustments necessary to face the current challenging market, MHWirth has also continued in 2015 to launch and progress a number of initiatives to increase efficiency and improve its competitive position for when the market picks up. this work includes product standardization, streamlining of processes, targeted strengthening of customer relations and improved organizational effectiveness. Frontica Frontica is a leading provider of key corporate services with operations in seven countries and business deliveries in over 30 countries around the world. the company operates through two distinct business areas; Frontica Advantage is offering comprehensive staffing, recruitment, outplacement and global mobility solutions. Frontica business Solutions is providing Annual Report 2015 | BOD Reportsolutions within It and business processes outsourcing, including information technology, procurement, finance, payroll, business consulting and administrative services. Key figures Amounts in NOK million operating revenue and other income ebItDA ebIt CApeX nCoA net capital employed order intake order backlog employees (Fte) 10 in dry-dock, from early March until mid-April 2015, the vessel then embarked on this extension period. the vessel has operated at close to full utilisation since the dry-dock period and continues to build on its strong track record in brazil. 2015 4 919 260 147 43 (303) 244 4 384 1 754 983 2014 5 753 315 218 110 (237) 374 8 196 2 620 1 356 Key figures Amounts in NOK million operating revenue and other income ebItDA ebIt CApeX nCo net capital employed order intake order backlog employees (Fte) 2015 781 104 2014 1 542 175 (1 288) (1 117) 1 057 69 5 183 305 6 430 91 5 63 4 374 6 140 6 186 115 Frontica had revenues of noK 4 919 million in 2015, down from noK 5 753 million in 2014 due to lower activity level within all service areas, with most significant effect within temporary staffing (Frontica Advantage). the ebItDA of noK 260 million is down noK 55 million compared with 2014. the ebItDA margin is 5.3 percent compared with 5.5 percent in 2014. the order backlog of noK 1.8 billion represents the estimated value of the fixed contracts and frame agreements for Frontica. In February 2016, Frontica signed a five-years contract with Aker Solutions, which will be included in the order backlog in the first of quarter 2016. Frontica is a strong contender in the corporate services industry and a market-leading staffing company in the oil and gas sector. through Frontica’s predictable and strong service platform, the company drives cost optimization and business improvements in key areas for its customers and enable them to focus on their core business. Due to the challenging market situation, Frontica will continue its effort to optimize costs and streamline service offerings in order to strengthen the company’s competitive position. Aker Wayfarer worked for the first ten months of 2015 off the coast of Germany and experienced full utilisation for the period. A new five-year contract (plus a five-year option) for Aker Wayfarer with petrobras was signed in 2014 with the vessel expected to be in operation from third quarter 2016. As with Skandi Santos, the vessel will perform subsea installation work offshore brazil, installing and testing of deepwater subsea X-mas trees and other production equipment. Following completion of the work offshore Germany, the Aker Wayfarer mobilised to a shipyard in norway for the first five years classing and preparation for the petrobras contract. the classing and conversion is currently being executed in accordance with the planned time and budget. the Wayfarer conversion investment of around noK 600 million is being financed through the vessel owner ocean Yield. In addition, investments of around noK 260 million will be made in order to prepare the vessel for the contract with petrobras. AKOFS Offshore AKoFS offshore is a provider of vessel-based subsea well installation 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 91 people. the company’s revenue decreased by 49 percent in 2015 to noK 781 million, and ebItDA decreased by noK 71 million to noK 104 million, mainly due to one vessel being idle most of the year. In addition to other cost saving measures, overall headcount in AKoFS has been reduced by over 20 percent since the end of 2014 in order to reduce cost. In 2015, Skandi Santos completed its first five-year contract with petrobras in brazil, and commenced the five-year extension of the contract with petrobras which was agreed in 2014. Following the execution of the first five year classing, the company’s results reflect that AKoFS Seafarer was idle most of 2015. the AKoFS Seafarer vessel was purchased by AKoFS offshore from DoF Subsea in February 2015 for uSD 122.5 million. However, in a period of challenging market conditions, further work has not been secured. In the third quarter a decision was made to reduce operating preparedness and thereby expenses to less than uSD 10 000 per day from the end of 2015. An impairment loss for the vessel of noK 1 billion was recognised in the third quarter due to the deterioration in market outlook. the vessel is currently lying idle in norway and will continue to be actively marketed for work in the subsea construction and service market as well as light Well Intervention. AKoFS offshore had an order intake of noK 0.3 billion for the full year of 2015, compared to noK 6.1 billion in 2014. 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 in 2014 while 2015 order intake was mainly related to Aker Wayfarer extensions for its work off the coast of Germany. Annual Report 2015 | BOD Reportlooking ahead, due to the current weak market conditions in the e&p sector, both the subsea construction fleet and offshore drill- ing segment are in structural oversupply. AKoFS offshore sees petrobras’ activity level declining in brazil, however installation of X-mas trees as well as related subsea production equipment will continue to be essential to brazilian oil and gas production. Market conditions can be affected by actions taken by petrobras, as a consequence of ongoing corruption investigations in brazil with respect to “lava Jato” as well as their planned reduction in offshore activity in the medium term. 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 bærum, norway, and had 545 employees at the end of 2015, with representation in 17 countries. Key figures Amounts in NOK million operating revenue and other income ebItDA ebIt CApeX nCoA net capital employed order intake order backlog employees (Fte) 2015 1 936 104 67 44 117 715 2 116 1 398 545 2014 2 322 52 25 62 (131) 463 2 197 1 190 617 11 Fjords processing is neither aware of, nor has been accused of any wrongful doings. nevertheless, the company, in cooperation with external advisors and Akastor, has initiated an internal investigation. KOP Surface Products Kop Surface products is a leading global supplier of surface wellheads and trees, providing engineering, manufacturing, installation and life-of-field support services to the oil and gas industry. As a one-stop solution provider, Kop Surface products develops solutions in cooperation with its customers, with focus not only on cost efficient products and tools, but also on optimization of jacket designs, drilling and operational cost. Kop Surface products offers a complete range of surface well- heads, x-mas trees, gate valves, actuators, casing heads, hangers and spools, tubing hangers, spools and adaptors, bushing and annulus seal, tees and crosses, tree caps and other miscellane- ous equipment and tools required for surface well completions. Kop Surface products has its headquarters in Singapore and its main manufacturing facility in batam, Indonesia which is comprised of a manufacturing plant, warehouse and office complex. Globally, Kop Surface products employed 682 people at year- end 2015. Key figures Amounts in NOK million operating revenue and other income 2015 1 131 242 177 31 240 555 553 149 682 2014 1 119 156 109 32 375 674 1 052 659 854 In 2015, Fjords processing increased its margins significantly and almost doubled its nominal ebItDA. the main reasons for the increased margins were better operational performance than in previous years and solid performance within its Major projects portfolio, as well as increased contribution from aftermarket services. order intake was good through 2015 with a book-to-bill of 1.2 for the year, giving Fjords processing a 17 percent (noK 207 million nominal) higher backlog as of December 2015 than the previous year. ebItDA ebIt CApeX nCoA net capital employed order intake order backlog employees (Fte) Despite a challenging market environment within oil and gas in general, Fjords processing remains positive due to a healthy backlog and a positive outlook on certain specific prospects as well as solid interest for its technology portfolio from the Middle-east region. Fjords processing will continue to focus on increasing its services business and expects a solid contribution from this segment also in 2016. However, certain other parts of Fjords processing’s business are expected to remain challenging, especially the onshore focused business in north America, and Fjords processing will continue its efforts to drive down cost through all parts of its operations to increase its competitive position in the market and mitigate effects of reduced demand. Fjords processing has initiated an internal investigation related to the ongoing corruption investigations in brazil (“lava Jato”). Worldwide installation and operational assistance for all Kop’s products are supported through its network of global service centres, located in Singapore, Malaysia, India, Indonesia, thailand, united Arab emirates, Vietnam and nigeria. As Kop Surface products has their functional currency in uSD, the foreign currency exchange development affects the finan- cial results in noK. In uSD terms revenue declined by 20 per cent in 2015, whereas ebItDA increased by 22 percent to an all-time high ebItDA and margin of uSD 30.1 million and 21.4 percent respectively. the margin expansion from 13.9 percent in 2014 was driven by improved execution and cost cutting in the supply chain and lowering of overhead costs by 15 percent. order intake was noK 553 million in 2015, giving a backlog of noK 149 million at the end of the year. Kop Surface products is exposed to the cyclicality in the oil and energy sector, seeing Annual Report 2015 | BOD Report12 softening in demand and increased competition and will need to have a continued strong focus on cost reduction in 2016, in order to maintain its competitive position. Real Estate and Other Holdings Akastor Real estate owned eight properties in norway with operating revenues of noK 76 million in 2015. All properties were divested to Aker in December 2015, for a total value of noK 1.2 billion. the company also held a 17 percent stake in a property in the oslo area, divested for noK 30 million in the first quarter 2015. In addition, Akastor Real estate managed a subletting portfolio and a few development projects. Akastor Real estate delivered an ebItDA of noK 219 million for 2015, including onerous lease provisions for unutilized office build- ings of noK -173 million and approximately noK 340 million in gain on sale of real estate. Key figures Amounts in NOK million operating revenue and other income ebItDA ebIt CApeX nCoA net capital employed order intake order backlog employees (Fte) 2015 1 190 168 (59) 99 (34) 661 679 412 372 2014 975 (260) (469) 128 (284) 1 443 2 097 1 658 430 the other holdings include a 76 percent stake in the drilling waste products and services company Step oiltools, 50 percent of DoF Deepwater AS which is a joint venture with DoF ASA that owns and operates five anchor handling tug supply (AHtS) vessels, a 7.4 percent stake in Singapore-based offshore support solutions provider ezra Holdings ltd, the geological services firm First Geo AS, and an investment in Aker pensjonskasse. the two businesses Step oiltools and First Geo delivered an ebItDA of noK 7 million in 2015. total ebItDA for Real estate and other holdings for the year was noK 168 million, including effects from hedges not qualifying for hedge accounting and holding costs in addition to the abovementioned. 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 noK million): Dividend other equity total allocated subsequent events 0 (1 461) (1 461) In 1Q 2016, Akastor reached an agreement with its bank syndicate on main terms and conditions to amend and extend its current bank facilities until July 2019. See note 38 for more information. In February 2016, another 300 people were downsized in the norwegian entities of MHWirth. Similar processes have also been initiated in other countries in which MHWirth operates. Restructuring costs are expected to be incurred during 2016. risk management Akastor comes from a long-standing tradition of industrial risk taking, but also risk mitigation. Akastor and its portfolio companies are exposed to various forms of market-, operational- and financial risks. the market situation for the oil services industry is currently challenging with low activity and a low oil price. on the operational side, sound project execution by the portfolio companies without cost overruns and securing new orders are substantial factors to our financial performance. Akastor is also exposed to various financial market risks as further detailed below. to some extent the portfolio companies are also exposed to legal, regulatory and political risks, i.e. political decisions on international sanctions that impact the supply and demand of our services as well as environmental regulations. Akastor and its portfolio companies also engage in mergers and acquisitions and other transactions that could expose the companies to financial and other non-operational risks, such as warranty claims and price adjustment mechanisms. Parent Company results and Allocation of Net Profit the parent company Akastor ASA is the ultimate parent company in the Akastor group and its business is the ownership of all companies and the management of the subsidiaries. Akastor ASA has outsourced all management functions to other companies within the group, mainly Akastor AS. However, assets and liabilities related to the Akastor treasury function are held by Akastor ASA. Akastor ASA has a net loss of noK 1 461 million in 2015, down from a loss of noK 80 million in 2014. the main reason for the increased loss is impairment losses recognized in 2015 related to interest-bearing receivables on group companies and shares in subsidiaries. to manage and mitigate risks within Akastor, risk evaluation is an integral part of all business activities. As owner, Akastor actively supervises risk management in its portfolio companies through participation on the board of directors of each portfolio company, and by defining a clear set of risk management and mitigation processes and procedures all portfolio companies must adhere to. the current and revised governing documents defined by Akastor were rolled out during the first half of 2015. Financial Risks Akastor is exposed to a variety of financial risks: currency risk, interest rate risk, tax risk, price risk, credit and counterparty risk, liquidity risk and capital risk including risks associated with access to and terms of financing. the financial risks affect the Annual Report 2015 | BOD Report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 Akastor’s financial performance. Akastor and its portfolio companies use 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 market- to-market revaluation of financial instruments in the income statement. Risk management is performed in every project. It is the responsibility of the project managers, in cooperation with Akastor treasury, to identify, evaluate and hedge financial risks under policies approved by the board of directors. Akastor has well-established principles for overall risk management, as well as policies for the use of derivatives and financial instruments. Integrity risks All Akastor portfolio companies use education and awareness training to manage and mitigate integrity risks. All new employees must complete a Code of Conduct e-learning program. All Akastor managers and office-based staff are required to participate in classroom 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. the requirement for all portfolio companies is to complete and report on the training within six months from employment or publication of a new training session. In 2015, the business ethics classroom training was updated and rolled-out and a complete set of e-learning modules on the Code of Conduct was published. Akastor has established a whistleblowing system in line with the company’s Governance policy. the whistleblowing channel is open for all external and internal stakeholders who wish to report a breach of the Code of Conduct, other internal guidelines or governing policies. Akastor employees are required to report breaches of the Code of Conduct, and Akastor encourages reporting of any concerns pertaining to compliance with law or ethical standards. Corporate responsibility Akastor’s operating model reflects the fact that each of the portfolio companies are independent companies 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 has played an important role, and maintaining these strong relations 13 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: ŸŸ Working against Corruption ŸŸ Respecting Human Rights ŸŸ Caring for Health & Safety ŸŸ Minimizing Impact on the environment All the portfolio companies are responsible for working systematically with these priorities and defining their own corporate responsibility strategies encompassing these priorities. 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 the portfolio companies. For in-depth reporting on each portfolio company’s corporate responsibility work, including their HSe work, refer to the Akastor Corporate Responsibility Report for 2015. the full report is available on our website www.akastor.com. responsibility to corporate Akastor’s commitment is aligned with the international principles of the un Global Compact, the universal Declaration of Human Rights, the implementation framework of the un Guiding principles for business and Human Rights, as well as the Ilo Declaration on Fundamental principles and Rights at Work. these international principles guide our company Code of Conduct and Integrity policy and provide the overall framework for our work with corporate responsibility. research, innovation and Technology Development noK 176 million was capitalized in 2015, compared to noK 640 million in 2014, related to development activities. In addition, research and development costs of noK 60 million were expensed during the year because the criteria for capitalization were not met (noK 112 million in 2014). All research, innovation and development initiatives are performed by the Akastor portfolio companies. Akastor ASA and Akastor AS performed no such activity in 2015. People and teams Akastor AS had a total of 23 employees as of December 31, 2015, where 46 percent of the employees are women. Akastor is committed to equal opportunity and non-discrimination. this commitment is described in Akastors Code of Conduct, as well as Akastor’s policies and agreements, and builds on a frame agreement signed with national and international trade unions in 2008. this agreement was renewed in 2014 and sets out fundamental labor rights and standards for general employment terms and employee relations, with specific focus Annual Report 2015 | BOD Report14 on non-discrimination. equal opportunities are fundamental for Akastor and its portfolio companies. in any of the portfolio companies, and the total recordable incident frequency was low. See figure below for details. Akastor and the portfolio companies had a total 5 677 people as of December 31 2015. the male/female ratio in the portfolio companies were as follows: mhWirth frontica fjords KOp AKOfs Female Male 18% 82% 61% 39% 29% 71% 15% 85% 14% 86% Whilst the male/female ratio is more balanced in Frontica, the other portfolio companies have a predominantly 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 ASA fulfils the requirements of the norwegian Companies Act with regards to gender representation on the board of directors, as four out of eight directors are women. Sick leave in Akastor AS as amounted to 1.5 percent of total working hours in 2015. Aggregated sick leave in the Akastor portfolio companies was 2.6 percent. there were no fatal injuries 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 (percent) * per million hours worked Corporate governance 1.2 1.8 - 3.1 - - - 1.3 - 1.5 1.7 - - - - - 4 1.8 1.2 1.5 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 included in this annual report and available on the company’s website www.akastor.com. Fornebu, March 15, 2016 | board of Directors of Akastor ASA Frank o. Reite | Chairman lone Fønss Schrøder | Deputy Chairman Øyvind eriksen | Director Kathryn M. baker | Director Sarah Ryan | Director Jannicke Sommer-ekelund | Director Stig Faraas | Director Asbjørn Michailoff pettersen | Director Kristian Monsen Røkke | Ceo Annual Report 2015 | BOD ReportAnnual Report 2015 | Declaration by the Board of Directors and cEO 15 03. 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 year ended on December 31, 2015. 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 the financial statements for 2015 for the Akastor group and its 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, 2015; the annual report provides a true and fair overview of the development, profit and financial position of the Akastor group and its parent company, as well as the most significant risks and uncertainties facing the group and the parent company. Fornebu, March 15, 2016 | board of Directors of Akastor ASA Frank o. Reite | Chairman lone Fønss Schrøder | Deputy Chairman Øyvind eriksen | Director O e C d n a Kathryn M. baker | Director Sarah Ryan | Director Jannicke Sommer-ekelund | Director Stig Faraas | Director Asbjørn Michailoff pettersen | Director Kristian Monsen Røkke | Ceo ’ s r o t c e r i D f o d r a o B e h t y b n o i t a r a c e D l 16 04. 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 of stock exchange listed companies may be found at 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 stakeholders. 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 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 12.1 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 provides cost efficient corporate services. 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 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, x-mas trees, valves and actuators. other holdings include the norwegian operation and wellsite geology services company First Geo AS, 76 percent of the shares in Step oiltools, 50 percent of DoF Deepwater and 7.4 percent of the shares in ezra Holdings ltd. 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 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. t n e m e t a t s e c n a n r e v o g e t a r o p r o C Annual Report 2015 | Corporate Governance Statement 17 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 ten corporate policies providing business practice guidance within a number of key areas, all of which were revised and re-issued during the first half of 2015. these policy documents express the overall position of the group with regard to for instance compliance, integrity and governance,. 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 the portfolio companies, capitalize on their market positions and promote 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 continue to own the portfolio companies as long as Akastor 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 gives a framework for what is acceptable behaviour that shall 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. Further information in respect of the corporate social responsibility work of Akastor and its portfolio of companies can be found in the separate Corporate Responsibility report published simultaneously as the company’s annual report for 2015. 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 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 www.akastor.com. 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, 2015 is noK 7 386 million, which represents an equity ratio of 36 percent. the management of financial risk is further described in the board of directors’ report. 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. 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. Annual Report 2015 | Corporate Governance Statement18 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 programmes and acquisitions of companies, and shall remain in effect until the next annual general meeting. the company’s annual general meeting on April 8, 2015 resolved to authorize the board to purchase treasury shares for four 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 and directors under share purchase programs (iii) purchase of treasury shares for the purpose of subsequent deletion of such shares and (iv) for the purpose of buy-back programs and initiatives for the company’s shares or for future investments within the company’s scope of operations. the authorizations (i), (ii) and (iv) were limited to ten percent of the share capital, while authorization (iii) were limited to twenty percent of the share capital, however so that the restrictions set out in the public limited liability Companies Act section 9-2 applies. the board’s authorizations to purchase treasury shares are valid for the period until the date of the annual general meeting of 2016, however in no circumstances beyond June 30, 2016. no shares were bought by the company in 2015 pursuant to the authorizations to the board of directors. As of December 31, 2015, the company holds 2 776 376 own shares. In addition, the annual general meeting in 2015 granted the board of directors the mandate to approve the distribution of dividends based on the company’s annual accounts for 2014 as set out in the public limited liability Companies Act § 8-2, second paragraph. the mandate is valid for the period until the date of the annual general meeting of 2016. 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. Share Purchase Programs the board of directors has resolved that going forward, share purchase programs will include Akastor ASA and Akastor AS only, and not the portfolio companies. the company has not carried out any standard share purchase programs for employees of Akastor ASA or Akastor AS in 2015. As announced in a stock exchange release on July 16, 2015, the board of directors of Akastor ASA resolved that Kristian Røkke, Chief executive officer of Akastor ASA (either personally or through his wholly-owned subsidiaries) could purchase up to 200 000 treasury shares yearly from the company under the regular share purchase program of Akastor. However, as there were no share purchase program in Akastor ASA or Akastor AS in 2015, no such share purchase was completed. Furthermore, the board resolved that Mr. Røkke could purchase up to 200 000 additional treasury shares on or about after 20 trading days following his employment in Akastor. the shares were bought by Mr. Røkke’s wholly owned subsidiary Riverrun Capital Management AS on September 7, 2015, at the price of 10.8055 noK per share (equivalent with the average share price for the first 20 days of trading following his first day of employment on August 10, 2015, less a discount of 20 percent. the shares are 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 Mr. Røkke were realized from treasury shares held by Akastor ASA. 4. equal Treatment of shareholders and Transactions with related Parties the company has only one class of shares, and all shares car- ry equal rights. existing shareholders shall have pre-emptive rights to subscribe for shares in the event of share capital in- creases, 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 oslo børs. As of December 31, 2015, Aker ASA holds 70 percent of the shares of Aker Kværner Holding AS which holds 40.27 per- cent of the shares of Akastor. As per the same date, Aker ASA directly held 23 331 762 shares of Akastor, equivalent to ~8.5 percent of the shares. proposition no. 88 (2006–2007) to Stortinget (the norwegian 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 Akas- tor 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 Akas- tor 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 vari- ous contexts. this complements and strengthens Akastor with- out 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 in- clude accounting information of Akastor. As of January 1, 2014, Aker ASA is deemed to have control of Akastor pursu- ant 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 Annual Report 2015 | Corporate Governance Statement19 has in the past received, and will going forward receive, unpub- lished 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 sub- sidiaries) 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 manage- ment team of Akastor are nevertheless conscious that all rela- tions 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 com- pany 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 proce- dure for the Chief executive officer and board of directors en- suring 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 directors and the Chief exec- utive officer shall not participate in the preparation, delibera- tion, or resolution of any matters that are of such special im- portance to themselves, or any of their related parties, so that the person 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 relat- ed 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 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 directors themselves, but often also in cooperation with internal and/or external legal counsel. 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 rela- tive terms, their ownership interests in Akastor. If grounds for legal incapacity is concluded, the relevant board member will, as a ground rule, prior to the relevant director, 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 state- ments 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 as well as stipulation of fees 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. Annual Report 2015 | Corporate Governance Statement20 the deadline for registering intended attendance is as close to the general meeting as possible, but not shorter than two 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 Directors 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 directors shall complement each other. As a consequence, the nomination committee 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 director 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 www.akastor.com. 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, Arild S. Frick and Georg Fr. Rabl. the members leif-Arne langøy, Arild S. Frick and Georg Fr. Rabl are elected up until the annual general meeting 2017, while Gerhard Heiberg is 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. Arild S. Frick is General Counsel of Aker ASA and managing director of Aker Kværner Holding AS. no members of the nomination committee are employed by, or directors 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 committee’s recommendations (relating to particularly 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. 8. Composition and independence of the Board of Directors 7. Nomination Committee the articles of association stipulate that the company shall Composition It has been agreed with the employees that the company shall have no corporate assembly. Hence, the board appoints Annual Report 2015 | Corporate Governance Statement21 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 chairman of the board of directors. the board of directors appoints its own deputy chairman. 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 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 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. As per December 31, 2015, the board of directors comprised eight directors, five of whom were elected by the shareholders and three of whom were elected by and amongst the employees. the company encourages the directors to hold shares in the company. the shareholdings of the directors as of December, 31 2015 is set out in note 37 to the consolidated annual statements in the annual report for 2015. In addition to Øyvind eriksen’s indirect ownership of shares in the company through Aker ASA, also the directors Frank o. Reite, lone Fønss Schrøder, Kathryn M. baker, 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 directors’ background and expertise is detailed in the annual report for 2015. the appointment of employee representatives to the board of directors is conducted as prescribed by the public limited liability Companies Act and the Representation Regulations. the board of directors has appointed a designated election committee charged with implementing the appointment of such employee representatives. Independence A majority of the directors elected by the shareholders are independent of the executive personnel and important business associates of Akastor ASA. 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 directors, the majority 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 and Chief executive officer, 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 directors 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 eight ordinary board meetings in 2015, and in addition, two extraordinary board meetings were held. 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, 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, the company. 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 directors. the audit committee currently comprise the directors lone Fønss Schrøder (chairman), Kathryn M. baker and Asbjørn Michailoff pettersen. the audit committee is independent from the management. Annual Report 2015 | Corporate Governance Statement22 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 in 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. 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 directors present. As of December 31, 2015, there are no other board committees than the audit committee. the board does not envisage appointing any further board committees in 2016. 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 governance, effective internal controls and proper risk 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, which is also 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 internal control systems. Akastor’s representatives on boards of directors in the portfolio companies 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, policies and procedures intended to ensure good business operations and provide unified and reliable financial reporting. 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, its although Akastor acts as an active driver through 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 Akastor financial reporting division reports to the Chief Financial officer and is responsible for the external reporting process and the internal management financial reporting process. this also includes assessing financial reporting risks and internal controls over financial reporting in the group. 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 Annual Report 2015 | Corporate Governance Statement23 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 2015 financial year, a clearing meeting was held in october 2015and January 2016. the main purpose is to ensure high-quality financial reporting. Such meetings focus on important items judgment, non-balance- sheet items, accounting for significant transactions, new or modified accounting principles and other topics relevant to the respective portfolio companies. the external auditor is present in the clearing meetings. involving estimation and Other Reporting In addition to the abovementioned financial reporting, there are regular business review and board meetings in the portfolio companies which ensure timely and high-quality 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 updates, 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 directors is provided in the note 37 to the consolidated financial statements for the group in the annual report for 2015. neither the directors, 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 remuneration 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 8, 2015. the board of director’s statement on the remuneration of executive personnel for 2015/2016 will be a separate item on the agenda for the annual general meeting on April 12, 2016. 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 communications and investor relations policy which covers, among other things, guidelines for the company’s contact with shareholders other than through general meetings. 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 investor relations 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 is available on www.akastor.com. 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. Aker ASA has undertaken to retain control of Aker Kværner Holding AS for a minimum of ten years from June 2007. Annual Report 2015 | Corporate Governance Statement24 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. 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 their independence. Annual Report 2015 | Corporate Governance Statement05. a. 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 note 2 note 3 note 4 | Corporate information | basis for preparation | Significant accounting policies | Significant accounting estimates and judgements performance of the year | Disposal of subsidiaries note 5 | operating segments note 6 | operating revenue and other income note 7 | Salaries, wages and social security costs note 8 note 9 | operating leases note 10 | other operating expenses note 11 | Finance income and expenses note 12 | Income tax note 13 | earnings per share Assets note 14 | property, plant and equipment note 15 | Investment property note 16 | Intangible assets note 17 | Impairment testing of goodwill note 18 | Interest-bearing receivables note 19 | equity-accounted investees note 20 | other investments note 21 | Construction contracts note 22 | Inventories note 23 | trade and other receivables note 24 | Cash and cash equivalents Equities and liabilities note 25 | Capital and reserves note 26 | borrowings note 27 | other non-current liabilities note 28 | employee benefits - pension note 29 | provisions note 30 | trade and other payables financial risk management note 31 | Capital management note 32 | Financial risk management and exposures note 33 | Derivative financial instruments note 34 | Financial instruments Other note 35 | Group companies note 36 | Related parties note 37 | Management remunerations note 38 | Subsequent events 25 26 27 28 29 30 31 31 32 38 40 41 44 44 44 45 46 46 48 49 50 51 52 53 54 55 55 55 56 56 57 58 60 60 63 63 64 65 67 69 71 73 75 77 p u o r g r o t s a k A | s e t o N d n a s l a c n a n f i i Annual Report 2015 | Financials and Notes Akastor group | Consolidated income statement 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 benefit (expense) profit (loss) from continuing operations profit (loss) from discontinued operations (net of income tax) profit (loss) for the period Profit (loss) for the period attributable to: equity holders of the parent company non-controlling interests profit (loss) for the period Note 6,7 6,7 8, 37 10 14,15,16 14,15,16 11 11 11 19 12 26 2015 2014 15 458 21 155 411 277 15 869 21 432 (8 542) (12 742) (4 785) (5 104) (1 841) (2 206) (15 168) (20 052) 702 1 380 (1 103) (922) (1 758) (1 164) (2 159) (706) 88 110 (750) (559) 44 (372) (73) (126) (2 851) (1 653) 286 266 (2 564) (1 387) (23) 3 880 (2 587) 2 493 (2 587) 2 482 - 11 (2 587) 2 493 Basic / diluted earnings (loss) per share (NOK) Basic / diluted earnings (loss) per share continuing operations (NOK) 13 13 (9.54) (9.46) 9.13 (5.09) Annual Report 2015 | Financials and Notes Akastor group | Consolidated statement of comprehensive income for the year ended December 31 Amounts in NOK million profit (loss) for the period Other comprehensive income 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 Deferred tax of monetary items as part of net investment Total items that may be reclassified subsequently to profit or loss, net of tax 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 28 Total other comprehensive income, net of tax Total comprehensive income (loss) for the period, net of tax Attributable to: equity holders of the parent company non-controlling interests Total comprehensive income (loss) for the period 27 Note 2015 2014 (2 587) 2 493 (172) (942) 59 58 (20) (75) 254 345 (99) (442) 20 - (168) 640 10 575 25 (8) 18 939 - 329 (70) 19 (51) 593 278 (1 994) 2 771 (1 994) 2 750 - 21 (1 994) 2 771 Annual Report 2015 | Financials and NotesAkastor group | Consolidated statement of financial position for the year ended December 31 Amounts in NOK million 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 tax assets Inventories trade and other receivables Derivative financial instruments Current interest-bearing receivables Cash and cash equivalents Total current assets Total assets Equity and liabilities Issued capital treasury shares other capital paid in Reserves Retained earnings Total equity attributable to the equity holders of the parent company Total equity non-current borrowings employee benefit obligations Deferred tax liabilities other non-current liabilities non-current provisions Total non-current liabilities Current borrowings Current tax liabilities provisions trade and other payables Derivative financial instruments Total current liabilities Total liabilities Total equity and liabilities 28 Note 2015 2014 14 15 12 16 18 19 20 12 22 23 33 18 24 25 25 26 28 12 27 29 26 12 29 30 33 6 480 6 469 - 468 2 785 84 478 177 261 10 732 2 1 464 5 959 1 746 72 563 9 805 707 214 3 122 131 691 264 347 11 945 43 1 785 7 178 2 199 205 1 075 12 485 20 537 24 430 162 (2) 1 534 1 335 4 357 7 386 7 386 1 583 434 51 74 341 2 483 4 054 89 553 4 443 1 528 10 667 13 150 162 (2) 1 534 742 6 942 9 378 9 378 4 720 473 483 128 157 5 961 308 97 395 6 429 1 861 9 090 15 051 20 537 24 430 Fornebu, March 15, 2016 | board of Directors of Akastor ASA Frank o. Reite | Chairman lone Fønss Schrøder | Deputy Chairman Øyvind eriksen | Director Kathryn M. baker | Director Sarah Ryan | Director Jannicke Sommer-ekelund | Director Stig Faraas | Director Asbjørn Michailoff pettersen | Director Kristian Monsen Røkke | Ceo Annual Report 2015 | Financials and Notes 29 Akastor group | Consolidated statement of changes in equity for the year ended December 31 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- Remeasure- ment gain Total parent equity as of January 1, 2014 2014 455 (3) 1 534 11 036 411 (178) (209) 168 13 214 161 13 375 profit for the period - - - 2 482 - - - - 2 482 11 2 493 other comprehensive income Total comprehensive income Demerger of Aker Solutions Dividend treasury shares employee share purchase programme Total transactions with equity holders Equity as of December 31, 2014 2015 profit (loss) for the period other comprehensive income Total comprehensive income treasury shares 25 Total transactions with equity holders Equity as of December 31, 2015 - - - - (442) 929 (51) (168) 268 10 279 - - - 2 482 (442) 929 (51) (168) 2 750 21 2 772 (293) - - - 25 25 25 2 - (1) - (5 428) 388 (105) (1) - (5 437) (182) (5 619) - - - (1 115) (59) 26 - - - - - - - - - - - - (1 115) (60) 26 - - - (1 115) (60) 26 (293) 1 - (6 576) 388 (105) (1) - (6 586) (182) (6 768) 162 (2) 1 534 6 942 357 646 (261) - 9 378 - 9 378 - - - - - - - - - - (2 587) - - - - (75) 650 18 - (2 587) (75) 650 18 - - - - 2 2 - - - - - - - - - - - (2 587) - (2 587) 593 - 593 (1 994) - (1 994) 2 2 - - 2 2 162 (2) 1 534 4 357 282 1 296 (243) - 7 386 - 7 386 1) See note 25 Capital and reserves for more information. Annual Report 2015 | Financials and Notes Akastor group | Consolidated statement of cash flow for the year ended December 31 Amounts in NOK million Cash flow from operating activities profit (loss) for the period - continuing operations profit (loss) for the period - discontinued operations profit (loss) for the period Adjustments for: Income tax expense (benefit) net interest cost and unrealized currency (income) 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 profit (loss) for the period after 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 programme 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 Aker Solutions 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 30 Note 2015 20141) (2 564) (1 387) (23) 3 880 (2 587) 2 493 (286) 167 582 347 (44) 436 14,15,16 2 861 2 392 (146) (2 956) 31 51 411 2 931 (411) (1 578) - 1 353 (477) (696) 36 136 (163) (312) - 7 (603) 488 (11) (126) (1 460) (1 302) (176) (639) 1 150 5 948 14 16 5 14,15 152 15 50 124 - (11) (110) 21 189 513 - (42) (216) 4 499 1 378 3 770 (1 193) (7 963) - (60) - 26 - 6 - (1 115) 185 (5 336) 121 142 (512) (206) 25 25 25 - (1 064) 1 075 2 345 24 563 1 075 58 39 1) The statement in 2014 included cash flows from discontinued operations prior to the disposal and demerger. Annual Report 2015 | Financials and Notes 31 Note 1 | Corporate information Akastor ASA is a limited liability company incorporated and domiciled the consolidated financial statements of Akastor ASA and its subsidiaries in norway and whose shares are publicly traded. the registered office (collectively referred as Akastor or the group, and separately as group is located at oksenøyveien 10, bærum. the largest shareholder is Aker companies) for the year ended December 31, 2015 were approved by the Kværner Holding AS and the ultimate parent company is the Resource board of directors and Ceo on March 15, 2016. the consolidated financial Group tRG AS. statements will be authorized by the Annual General Meeting on April 12, 2016. on September 26, 2014, the demerger of Akastor was completed and the group is an oil-services investment company with a portfolio of Aker Solutions Holding ASA (“Aker Solutions”), a subsidiary of Akastor industrial holdings and other investments. Akastor is listed on the oslo ASA established for the purposes of the demerger, was listed on the oslo Stock exchange under the ticker AKA. Information on the group’s structure Stock exchange on September 29, 2014. At the same time Aker Solutions is provided in note 35 Group companies. Information on other related party ASA changed name to Akastor ASA. relationships of the group is provided in note 36 Related parties. Note 2 | Basis for preparation Basis of accounting the consolidated financial statements have been prepared in accordance Akastor ASA’s functional currency. All financial information presented in with International Financial Reporting Standards (IFRS) as approved by noK has been rounded to the nearest million (noK million), except when the european union, their interpretations adopted by the International otherwise stated. the subtotals and totals in some of the tables in these Accounting Standards board (IASb) and the additional requirements of consolidated financial statements may not equal the sum of the amounts the norwegian Accounting Act as of December 31, 2015. shown due to rounding. Going concern basis of accounting When the functional currency in a reporting unit is changed, the effect of the consolidated financial statements have been prepared on a going the change is accounted for prospectively. concern basis, which assumes that the group will be able to meet the mandatory terms and conditions of the banking facilities as disclosed in Use of estimates and judgements note 26 borrowings. the preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect Akastor’s financing agreement with its bank syndicate had a covenant the application of policies and reported amounts of assets and liabilities, that Interest ratio coverage (ICR) should not be less than 4.0 calculated income and expenses. Although management believes these assumptions from the consolidated ebItDA to consolidated net Finance Cost. As to be reasonable, given historical experience, actual amounts and results of December 31, 2015, the ICR level was below 4.0. on March 11, could differ from these estimates. the items involving a higher degree of 2016, Akastor signed an agreement with its bank syndicate to amend judgement or complexity, and items where assumptions and estimates are and extend its financing structure, including new ICR ratios from Q4 material to the consolidated financial statements, are disclosed in note 4 2015. Management believes that the group will be able to meet its new Significant accounting estimates and judgements. funding requirements and to refinance or to repay its banking facilities as they fall due. As of December 31, 2015, the group has a liquidity the estimates and underlying assumptions are reviewed on an ongoing buffer of noK 2.6 billion, comprised by cash and cash equivalents of basis. Revisions to accounting estimates are recognized in the period in noK 0.6 billion and undrawn committed bank revolving credit facilities which the estimate is revised and in any future periods affected. of noK 2 billion. Basis of measurement the accounting policies adopted are consistent with those of the previous the consolidated financial statements have been prepared on the financial year. the following standards and interpretations were adopted historical cost basis except for the following material items, which are with effect from January 1, 2015, with no implementation impact on the measured on an alternative basis on each reporting date: Group’s consolidated financial statements: Adoption of new and revised standards and interpretations ŸŸ ŸŸ ŸŸ Derivative financial instruments are measured at fair value. 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 ŸŸ ŸŸ ŸŸ ŸŸ IFRIC Interpretation 21 levies Improvements to IFRSs – 2011-2013 cycle Amendments to IAS 19 Defined benefit plans: employee Contributions ( eu effective from February 1, 2015) Improvements to IFRSs – 2010-2012 cycle (eu effective of plan assets less the present value of the defined benefit from February 1, 2015) obligation. At the date of authorization of the group’s consolidated financial Functional and presentation currency statements, the following standards and interpretations were issued but the consolidated financial statements are presented in noK, which is not effective and could affect the Group: Annual Report 2015 | Financials and Notes32 IFRS 15 Revenue from Contracts with Customers (effective from IFRS 9 Financial Instruments (effective from January 1, 2018, but not January 1, 2018, but not approved by the EU) approved by the EU) the standard will supersede the current revenue recognition guidance the standard will replace IAS 39. the new standard for financial including IAS 18 Revenue, IAS 11 Construction contracts and the related instruments is not expected to significantly change the reported figures interpretations when it becomes effective. IFRS 15 introduces a new five- of the group. the following changes are expected to impact the reported step model that apples to revenue arising from contracts with customers. figures upon transition to IFRS 9: the analysis of the application of IFRS 15 is still ongoing, but the group does not anticipate significant impacts on its consolidated financial ŸŸ Around 80 percent of the group’s foreign currency hedges statements. based on preliminary assessments, the group has identified qualify for hedge accounting under the current IAS 39 the following main impact of implementing IFRS 15: standard. the percentage of qualifying hedges is expected ŸŸ Constraint of variable considerations: to include variable more aligned with risk management, including prospective considerations in the estimated contract revenue, the entity testing and less restrictive requirements on qualifying has to conclude that it is highly probably that a significant hedging instruments. this is expected to result in less foreign revenue reversal will not occur when the uncertainties currency effects reported under financial items. to increase under IFRS 9 as the hedge accounting model is related to the variability are resolved. the threshold of including variable considerations in revenue recognition is higher than the requirements under current standards. ŸŸ the effect of classification of financial instruments and the expected credit loss principle are not expected to have material impact on the financial reporting, but will be ŸŸ provision for loss making projects: the requirement in IAS assessed further. 37 for onerous contract will apply to all contracts in the scope of IFRS 15, including construction contracts which are currently in scope of IAS 11. IFRS 16 Leases (effective from January 1, 2019, but not approved by the EU) the standard was issued in January 2016 and replaces IAS 17. the new ŸŸ Disclosures: IFRS 15 requires more comprehensive disclosure standard requires companies to bring most of leases on-balance sheet, than the current disclosure required by IAS 18 and IAS 11. recognizing new assets and liabilities. the potential impacts on the financial positions of Akastor are under evaluation. Note 3 | significant accounting policies Summary of significant accounting policies When the excess is negative, a bargain purchase gain is recognized the principal accounting policies applied in the preparation of these immediately in the income statement. transaction costs, other than consolidated financial statements are set out below. these policies have those associated with the issue of debt or equity securities incurred in been consistently applied to all the years presented, unless otherwise stated. connection with a business combination are expensed as incurred. Basis of consolidation Subsidiaries Any contingent consideration payable is measured at fair value at the acquisition date. Changes in the fair value of the contingent consideration Subsidiaries are entities controlled by the group. the group controls from acquisition of a subsidiary or non-controlling interest for transactions an entity when it is exposed to, or has rights to, variable returns from will be recognized in other income as gain or loss, except for the obligation its involvement with the entity and has the ability affect those returns that is classified as equity. through its power over the entity. the financial statements of subsidiaries are included in the consolidated financial statements from the date on When the group has entered into put options with non-controlling which control commences until the date of which control ceases. shareholders on their shares in that subsidiary, the anticipated acquisition Business combinations method is used. the agreement is accounted for as if the put option had already been exercised. If the put option expires unexercised, then the business combinations are accounted for using the acquisition method liability is derecognized and the non-controlling interest is recognized. as of the acquisition date, which is the date when control is transferred to the group. Acquisitions of non-controlling interests 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 Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognized as a result. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary. if the business combination is achieved in stages, the fair Loss of control value of the pre-existing equity interest in the acquiree, less on the loss of control, the group derecognizes the assets and liabilities of the net recognized amount (generally at fair value) of the identifiable assets acquired and liabilities assumed. the subsidiary, any non-controlling interests and the other components of equity. Any resulting gain or loss is recognized in the income statement. ŸŸ ŸŸ ŸŸ Annual Report 2015 | Financials and Notes33 Any interest retained in the former subsidiary is measured at fair value non-current assets and disposal groups classified as held for sale or when control is lost. Subsequently it is accounted for as an equity- distribution are measured at the lower of their carrying amount and fair accounted investee or as an available for sale financial asset depending on value less costs to sell. property, plant and equipment and intangible the level of influence retained. assets once classified as held for sale or distribution are not depreciated or amortized, but are considered in the overall impairment testing of the Investments in associates and joint ventures disposal group. the group’s interests in equity-accounted investees comprise interests in associates and joint ventures. no reclassifications are made for years prior to the year non-current assets or disposal groups are first classified as a held for sale or distribution. Associates are those entities in which the group has significant influence, but not control or joint control, over the financial and operating policies. Discontinued operations Significant influence is presumed to exist when the group holds between A discontinued operation is a component of the group’s business that 20 and 50 percent of the voting power of another entity. A joint venture represents a separate major line of business or geographical area of is an arrangement in which the group has joint control, whereby the group operations that has been disposed of or is held for sale or distribution, has rights to the net assets of the arrangement, rather to its assets and or is a subsidiary acquired exclusively with a view to resale. Classification obligations for its liabilities. Joint control is established by contractual as a discontinued operation occurs upon disposal or when the operation agreement requiring unanimous consent of the ventures for strategic, meets the criteria to be classified as held for sale, if earlier. financial and operating decisions. In the consolidated income statement, income and expenses from Interests in associates and joint ventures are accounted for using the discontinued operations are reported separately from income and equity method. they are initially recognized at cost, which includes expenses from continuing operations, down to the level of profit after transaction costs. Subsequent to initial recognition, the consolidated taxes. When an operation is classified as a discontinued operation, the financial statements include the group’s share of the profit and loss and comparative income statement is restated as if the operation had been other comprehensive income of the equity-accounted investees. the discontinued from the start of the comparative year. group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. When the group’s share of losses the statement of cash flow includes the cash flow from discontinued exceeds its interest in an equity-accounted investee, the carrying amount operations. Cash flows attributable to the operating, investing and of that interest, including any long-term investments, is reduced to zero, financing activities of discontinued operations are presented in the notes and further losses are not recognized except to the extent that the group to the extent these represent cash flows with third parties. incurs legal or constructive obligations or has made payments on behalf of the investee. Foreign currency Foreign currency transactions and balances the purpose of the investment determines the presentation of the transactions in foreign currencies are translated at the exchange rate at group’s share of profits and losses of the equity-accounted investee in the date of the transaction. Monetary assets and liabilities denominated the income statement. When the entity is established to share risk in in foreign currencies at the reporting date are translated to the functional executing a project or is closely related to Akastor’s operating activities, currency at the exchange rate on that date. Foreign exchange differences the share of profit or loss is reported as part of other income in operating arising on translation are recognized in the income statement. non- profit. Share of the profit or loss of a financial investment is reported as monetary assets and liabilities measured in terms of historical cost in a part of Finance income and expenses. foreign currency are translated using the exchange rate on the date of the Transactions eliminated on consolidation currencies that are measured at fair value are translated to the functional Intra-group balances and transactions, and any unrealized gains and currency at the exchange rates on the date the fair value is determined. transaction. non-monetary assets and liabilities denominated in foreign losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. unrealized Investments in foreign operations gains arising from transactions with associates and joint ventures are Items included in the financial statements of each of the group’s entities are eliminated to the extent of the group’s interest in the entity. unrealized measured using the currency of the primary economic environment in which losses are eliminated in the same way as unrealized gains, but only to the the entity operates. the results and financial position of all the group entities extent that there is no evidence of impairment. that have a functional currency different from the group’s presentation currency are translated into the presentation currency as follows: Assets held for sale or distribution non-current assets, or disposal groups comprising assets and liabilities, ŸŸ Assets and liabilities, including goodwill and fair value that are expected to be recovered primarily through sale or distribution adjustments, are translated at the closing exchange rate at rather than through continuing use, are classified as held for sale or the reporting date. distribution. this condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale or distribution in its present condition. Management must be committed ŸŸ Income statements are translated at average exchange rate for the year, calculated on the basis of 12 monthly rates. to the sale or distribution, which should be expected to qualify for exchange differences arising from the translation of the net investment recognition as a completed sale or distribution within one year from the in foreign operations, and of related hedges, are included in other date of classification. comprehensive income as currency translation reserve. these translation Annual Report 2015 | Financials and Notes34 differences are reclassified to the income statement upon disposal of the Non-current interest-bearing receivables related operations or when settlement is likely to occur in the near future. Interest bearing receivables include loans to related parties and other receivables with fixed or determinable payments that are not quoted Monetary items that are receivable from or payable to a foreign operation in an active market. Such financial assets are recognized initially at fair are considered as part of the net investment in that foreign operation, value and subsequent measurement at amortized cost using the effective when the settlement is neither planned nor likely to occur in the interest method, less any impairment losses. foreseeable future. exchange differences arising from these monetary items are recognized in other comprehensive income. Cash and cash equivalents Current/non-current classification at banks and other short-term highly liquid investments with original Cash and cash equivalents include cash on hand, demand deposits held An asset is classified as current when it is expected to be realized or is maturity of three months or less. intended for sale or consumption in the group’s normal operating cycle, it is held primarily for the purpose of being traded, or it is expected/due Trade and other payables to be realized or settled within twelve months after the reporting date. trade payables are recognized at the original invoiced amount. other other assets are classified as non-current. payables are recognized initially at fair value. trade and other payables are valued at amortized cost using the effective interest rate method. the A liability is classified as current when it is expected to be settled in the interest rate element is disregarded if it is insignificant, which is the case group’s normal operating cycle, is held primarily for the purpose of being for the majority of the group’s trade payables. traded, the liability is due to be settled within twelve months after the reporting period, or if the group does not have an unconditional right Interest-bearing borrowings to defer settlement of the liability for at least twelve months after the Interest-bearing borrowings are recognized initially at fair value less reporting period. All other liabilities are classified as non-current. attributable transaction costs. Subsequent to initial recognition, interest- Financial assets, financial liabilities and equity between cost and redemption value being recognized in the income Financial assets and liabilities in the group consist of investments in other statement over the period of the borrowings on an effective interest basis. bearing borrowings are measured at amortized cost with any difference companies, trade and other receivables, interest-bearing receivables, cash and cash equivalents, trade and other payables and interest-bearing Share capital borrowing. ordinary shares are classified as equity. Repurchase of share capital is recognized as a reduction in equity and is classified as treasury shares. the group initially recognizes borrowings and receivables on the date when they are originated. All other financial assets and financial liabilities Derivative financial instruments are initially recognized on the trade date. the group uses derivative financial instruments such as currency forward Other investments contracts and currency swaps to hedge its exposure to foreign exchange risks arising from operational, financial and investment activities. these other investments include equity securities where the group has derivative financial instruments are accounted for as cash flow hedges neither control nor significant influence, usually represented by less than since future highly probable cash flows are hedged (rather than committed 20 percent of the voting power. the investments are categorized as revenues and expenses). the group also has embedded foreign exchange available-for-sale financial assets and are recognized initially at fair value. derivatives which have been separated from their ordinary commercial Subsequent to initial recognition, they are measured at fair value and contracts. Derivative financial instruments are recognized initially at fair changes therein, other than impairment losses, are recognized in other value. Derivatives are subsequently measured at fair value, and changes in comprehensive income and presented as part of fair value reserve. When fair value are accounted for as described below. an investment is derecognized, the gain or loss accumulated in other comprehensive income is reclassified to profit and loss. Impairment losses Cash flow hedge are recognized in the income statement when the decrease in fair value is Hedging of the exposure to variability in cash flows that is attributable significant or prolonged. Trade and other receivables to a particular risk or a highly probable future cash flow is defined as a cash flow hedge. the effective portion of changes in the fair value is recognized in other comprehensive income as a hedge reserve. All foreign trade receivables are recognized at the original invoiced amount, less exchange exposure is hedged, of which about 80 percent qualifies for an allowance made for doubtful receivables. other receivables are hedge accounting. the gain or loss relating to the ineffective portion of recognized initially at fair value. trade and other receivables are valued at derivative hedging instruments is recognized immediately in the income amortized cost using the effective interest rate method. the interest rate statement as finance income or expense. Amounts accumulated in hedge element is disregarded if insignificant, which is the case for the majority of reserves are reclassified to the income statement in the periods when the the group’s trade receivables. hedged item is recognized in the income statement. Current interest-bearing receivables Hedge accounting is discontinued when the hedge no longer qualifies for Current interest bearing receivables include bonds, securities and mutual hedge accounting. Disqualification occurs when the hedging instrument funds with short-term maturity. these assets are designated upon initial expires, is sold, terminated or exercised, or when a forecast transaction recognition as at fair value through profit and loss. is no longer expected or the hedge is no longer effective. When a hedge is disqualified, the cumulative gain or loss that was recognized in the Annual Report 2015 | Financials and Notes35 hedge reserve is recognized immediately in the income statement unless are expected to be recoverable. the revenue recognized in one period it relates to a future cash flow that is likely to occur, but don’t qualify for will be the revenues attributable to the period’s progress and adjustments hedge accounting, in which the accumulated hedge reserve remains in related to changes in the estimated final outcome, if any. losses on other comprehensive income until the hedged cash flow is recognized in contracts are fully recognized when identified. income statement. Net investment hedge Contract revenues include variation orders and incentive bonuses when it is probable that they will result in revenue that can be measured reliably. Hedge of net investment in a foreign operation is accounted for Disputed amounts and claims are only recognized when negotiations similarly to cash flow hedges. Gains or losses arising from the hedging have reached an advanced stage, customer acceptance is highly likely instruments relating to the effective portions of the net investment hedge and the amounts can be measured reliably. options for additional are recognized in other comprehensive income as currency translation assets are included in the contract when exercised by the buyer. In the reserves. these translation reserves are reclassified to the income rare circumstances where the option is a loss contract, the full loss is statement upon disposal of the hedged net investments, offsetting the recognized when it is probable that the options will be exercised. translation differences from these net investments. Any ineffective portion is recognized immediately in the income statement as finance income or See note 4 Significant accounting estimates and judgements for further expenses. Gains and losses accumulated in other comprehensive income description of recognition of construction contract revenue. are reclassified to the income statement when the foreign operation is partially disposed of or sold. Goods sold and services rendered Embedded derivatives Revenue from the sale of goods is recognized in the income statement 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 delivered to customers. which meets the definition of a derivative. under certain conditions the Revenue from services rendered is recognized in the income statement in embedded derivative must be separated from its host contract and the proportion to the stage of completion of the transaction at the reporting derivative is then to be recognized and measured as any other derivative in date or is invoiced based on hours performed at agreed rates. the stage the financial statements. embedded derivatives must be separated when of completion is normally assessed based on the proportion of costs the settlement for a commercial contract is denominated in a currency incurred for work performed to date compared to the estimated total 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. the relevant economic environment defined as the countries involved in the cross-border transaction. Changes in the fair value of separated Lease income embedded derivatives are recognized immediately in the income lease revenue from time charters and bareboat charters are recognized daily statement. All foreign currency exposure is hedged, so the hedging over the term of the charter. the company does not recognize revenue during instrument to the embedded derivative will also have corresponding days when the vessel is off-hire. other lease income from operating leases, opposite fair value changes in the income statement. mainly related to investment properties and office leases, is recognized as revenue on a straight-line basis over the term of the relevant lease. lease Finance income and expense income is in included in operating revenue as service revenue. Finance income and expense includes interest income and expense on financial assets and liabilities, foreign exchange gains and losses, dividend Other income income and gains and losses on derivatives. Interest income and expenses Gains and losses resulting from acquisition and disposal of businesses include calculated interest using the effective interest method, in addition which do not represent discontinued operations are included in to discounting effects from assets and liabilities measured at fair value. other income. Such gains may result from the remeasurement of a Gains and losses on derivatives include effects from derivatives that do previously held interest in the acquired entity. Changes in the fair value not qualify for hedge accounting and embedded derivatives, in addition to of the contingent consideration from acquisition of a subsidiary or non- the ineffective portion of qualifying hedges. controlling interest are recognized as part of other income. Revenue recognition Construction contracts Share of profit and loss from associated companies and joint ventures, to the extent that these investments are related to the group’s operating Construction contract revenues are recognized using the percentage of activities, are included in other income, as well as gains and losses related completion method. Stage of completion is determined by the method to the sale of operating assets. that measures reliably the work performed. Depending on the nature of the contract, the two main methods used by Akastor to assess stage of Expenses completion are: Construction contracts 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 note 4 When the final outcome of a contract cannot be reliably estimated, Significant accounting estimates and judgements for further description contract revenue is recognized only to the extent of costs incurred that of recognition of construction contract costs. Annual Report 2015 | Financials and Notes36 Lease payments realizable value is the estimated selling price in the ordinary course of lease payments made under operating leases are recognized in the business, less the estimated costs of completion and selling expenses. income statement on a straight-line basis over the term of the lease. Any lease incentives received are recognized as an integral part of the total the cost of inventories is based on the first-in first-out principle and lease expense, over the term of the lease. includes expenditures incurred in acquiring the inventories and bringing Income tax them to their present location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of Income tax recognized in the income statement comprises current and overheads based on normal operating capacity. deferred tax. Income tax is recognized in the income statement except to the extent that it relates to items recognized directly in equity or other Impairment comprehensive income. Trade and other receivables Current tax is the expected tax payable or receivable on the taxable income the group will be unable to recover receivables in full. Receivables are or loss for the year, using tax rates enacted or substantially enacted at the impaired when the probability of recovery is assessed as being remote. reporting date, and any adjustment to tax payable in respect of previous the impairment is recognized in financial items to the extent that years. Current tax payable also includes any tax liability arising from the impairment is caused by the insolvency of the customer. provision of doubtful debt is made when there is objective evidence that declaration of dividends, recognized at the same time as the liability to pay the related dividend. Available-for-sale financial assets Deferred tax is recognized in respect of temporary differences between impaired when there is a significant (more than 20 percent) or prolonged the carrying amounts of assets and liabilities for financial reporting and the (more than 6 months) decline in fair value of the investment below its cost. amounts used for taxation purposes. Deferred tax is not recognized for: Any subsequent increase in value on available-for-sale assets is considered equity investments classified as available-for-sale are considered to be to be a revaluation and is recognized in other comprehensive income. ŸŸ Goodwill not deductible for tax purposes ŸŸ ŸŸ the initial recognition of assets or liabilities that affects neither accounting nor taxable profit Other financial assets the recoverable amounts of receivables carried at amortized cost are calculated as the present value of estimated future cash flows, discounted temporary differences relating to investments in subsidiaries to at the original effective interest rate (the effective interest rate computed the extent that they will not reverse in the foreseeable future. at initial recognition of the financial assets). Impairment losses are recognized only if there is objective evidence of impairment as a result of Deferred tax is measured at the tax rates that are expected to be applied one or more events that occur after the initial recognition of the asset (a to temporary differences when they reverse, based on the laws that have loss event) and the loss event has an impact on the estimated future cash been enacted or substantively enacted by the reporting date. flows of the financial assets that can be reliably estimated. Deferred tax assets and liabilities are offset if there is a legally enforceable Non-financial assets right to offset current tax liabilities and assets, and they relate to income the carrying amounts of the group’s assets, other than employee benefit taxes levied by the same tax authority on the same taxable entity, or assets, inventories, deferred tax assets and derivatives are reviewed at on different taxable entities which intend either to settle current tax the end of each reporting period to determine whether there is any liabilities and assets on a net basis, or to realize the tax assets and settle indication of impairment. If an indication of impairment exists, the the liabilities simultaneously. asset’s recoverable amount is estimated. Cash-generating units (CGu) containing goodwill, intangible assets with an indefinite useful life Deferred tax assets are recognized for unused tax losses, tax credits and and intangible assets that are not yet available for use are tested for deductible temporary differences, to the extent that it is probable that impairment annually. future taxable profits will be available against which they can be utilized. Measurement of deferred tax assets are reviewed at each reporting date. the recoverable amount is the greater of fair value less costs to sell and Construction work in progress value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that Construction work in progress represents the aggregate amount of costs reflects current market assessments of the time value of money and the incurred and recognized profits, less the sum of recognized losses and risks specific to the asset. For an asset that does not generate largely progress billings. the presentation of construction work in progress in independent cash inflows, the recoverable amount is determined for the the statement of financial position depends on the financial status of the CGu to which the asset belongs. individual projects. All projects with net amounts due from customers are summarized and presented as an asset, and all projects with net amounts due An impairment loss is recognized whenever the carrying amount of an to customers are summarized and presented as a liability in the statement asset or a CGu exceeds its recoverable amount. Impairment losses are of financial position. Advances are presented separately as such advances recognized in the income statement. represent payments from customers in excess of the work performed. Inventories An impairment loss recognized in respect of CGu (or a group of CGus) containing goodwill is allocated first to goodwill and then to the other Inventories are stated at the lower of cost or net realizable value. net assets in the CGu(s) on a pro rata basis. Annual Report 2015 | Financials and Notes37 An impairment loss on goodwill is not reversed. An impairment loss on Depreciation other assets is reversed if there has been a change in the estimates used Depreciation is normally recognized on a straight-line basis over the to determine the recoverable amount, and the change can be objectively estimated useful lives of property, plant and equipment. the production unit related to an event occurring after the impairment is recognized. An method is used for depreciation in limited circumstances when appropriate. impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been Investment property determined, net of depreciation or amortization, if no impairment loss Investment properties are properties held either to earn rental income had been recognized. Provisions or for capital appreciation, or for both. these properties are not used in production, deliveries of goods and services, or for administrative purposes. Investment properties are measured at cost applying the same principles as A provision is recognized when the group has a present obligation as a for property, plant and equipment (see description above). result of a past event that can be estimated reliably and it is probable that the group will be required to settle the obligation. If the effect is material, Finance leases provisions are determined by discounting the expected future cash flows leases where the group assumes substantially all the risks and rewards of at a market based pre-tax rate that reflects current market assessments ownership are classified as finance leases. At the beginning of the leasing of the time value of money and, where appropriate, the liability-specific period, finance leases are recognized at the lower of the fair value of the risks. the unwinding of the discount is recognized as a finance cost. leased asset and the present value of the minimum lease payments. the Warranties corresponding liability to the lessor is included in the statement of financial position as other non-current liabilities except for first year instalment provision for warranties is recognized when the underlying products which is recognized as current liabilities. lease payments are apportioned or services are sold. the provision is based on historical warranty between finance charges and reduction of the lease obligation so as to data and a weighting of all possible outcomes against their associated achieve a constant rate of interest of the remaining balance of the liability. probabilities. Onerous contracts leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the group will obtain ownership by the end of the lease term. provision for onerous contracts is recognized when the expected benefits to be derived by the group from a contract are lower than the unavoidable Intangible assets costs of meeting the obligations under the contract. the provision is Goodwill measured at the lower of the expected cost of terminating the contract Goodwill that arises from the acquisition of subsidiaries is presented as and the expected net cost of continuing with the contract. before a intangible asset. For the measurement of goodwill at initial recognition, see provision is recognized, the group recognizes any impairment loss on the business combinations. assets associated with the contract. Restructuring Goodwill is measured at cost less accumulated impairment losses. In respect of equity-accounted investees, the carrying amount of goodwill A restructuring provision is recognized when the group has developed a is included in the carrying amount of the investment, and any impairment detailed formal plan for the restructuring and has raised a valid expectation loss is allocated to the carrying amount of the equity-accounted investee in those affected that the entity will carry out the restructuring by starting as a whole. to implement the plan or announcing its main features to those affected by it. the measurement of a restructuring provision includes only the direct When the group disposes of an operation within a CGu or group of CGus expenditures arising from the restructuring, which are those amounts that to which goodwill has been allocated, a portion of the goodwill is included are both necessarily entailed by the restructuring and not associated with in the carrying amount of the operation when determining the gain or the ongoing activities of the entity. loss on disposal. the portion of the goodwill allocated is measured based Property, plant and equipment on the relative values of the operation disposed of and the portion of the CGu retained at the date of partial disposal, unless it can be demonstrated property, plant and equipment are measured at cost less accumulated that another method better reflects the goodwill associated with depreciation and impairment losses. the cost of self-constructed assets the operation disposed of. the same principle is used for allocation of includes the cost of materials, direct labour, borrowing costs on qualifying goodwill when the group reorganizes its businesses. assets, production overheads and the estimated costs of dismantling and removing the assets and restoring the site on which they are located. Research and development If the components of property, plant and equipment have different useful obtaining new scientific or technical knowledge and understanding is lives, they are accounted for as separate components. recognized in the income statement as incurred. expenditures on research activities undertaken with the prospect of Subsequent costs Development activities involve a plan or design for the production of the group capitalizes the cost of a replacement part or a component of new or substantially improved products or processes. Development property, plant and equipment when that cost is incurred if it is probable expenditure is capitalized only if development costs can be measured that the future economic benefits embodied with the item will flow to the reliably, the product or process is technically and commercially feasible, group and the cost of the item can be measured reliably. All other costs future economic benefits are probable and the group intends to and are expensed as incurred. has sufficient resources to complete development and to use or sell Annual Report 2015 | Financials and Notes38 the asset. the capitalized expenditure includes cost of materials, direct Defined benefit plans labour overhead costs that are directly attributable to preparing the asset the group’s net obligation in respect of defined benefit pension plans for it intended use and capitalized interest on qualifying assets. other is calculated separately for each plan by estimating the amount of development expenditures are recognized in the income statement as an future benefit that employees have earned in the current and prior expense as incurred. periods; discounting that amount and deducting the fair value of any Capitalized development expenditure is measured at cost less accumulated plan assets. amortization and accumulated impairment losses. the calculation of defined benefit obligations is performed annually by Other intangible assets a qualified actuary using the projected unit credit method. the discount rate is the yield at the reporting date on government bonds or high-quality Acquired intangible assets are measured at cost less accumulated corporate bonds with maturities consistent with the terms of the obligations. amortization and impairment losses. Subsequent expenditures Remeasurement of the net defined benefit liability, which comprises actuarial gains and losses, the return on plan assets (excluding interest) Subsequent expenditures on intangible assets are capitalized only when and the effect of the asset ceiling (if any, excluding interest), are recognized they increase the future economic benefits embodied in the specific immediately in other comprehensive income. the group determines the asset to which they relate. All other expenditures are expensed as net interest expense (income) on the net defined benefit liability (asset) incurred. Amortization 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 any changes in the net Amortization is recognized in the income statement on a straight-line defined benefit liability (asset) during the period as a result of contributions basis over the estimated useful lives of intangible assets unless such and benefit payments. net interest expense and other expenses related to useful lives are indefinite. Intangible assets are amortized from the date defined benefit plans are recognized in the income statement. they are available for use. Employee benefits Defined contribution plans 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 obligations for contributions to defined contribution pension plans are group recognizes gains and losses on the settlement of a defined benefit recognized as an expense in the income statement as incurred. plan when the settlement occurs. Note 4 | significant accounting estimates and judgements 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. accounting estimates will, by definition, seldom accurately match actual results, but are based on the best estimate at the time. estimates and Remaining project costs depend on productivity factors and the cost of assumptions that have a significant risk of causing material adjustments to inputs. Weather conditions, the performance of subcontractors and others the carrying amounts of assets and liabilities within the next financial year with an impact on schedules, commodity prices and currency rates can are discussed below. Revenue recognition affect cost estimates. experience, systematic use of the project execution model and focus on core competencies reduce, but do not eliminate, the risk that estimates may change significantly. A risk contingency is included 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. contracts. this method requires estimates of the final revenue and costs 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 proportion of the total work to be performed. cost estimate as described above. In situations where cost does not seem to properly reflect actual progress, alternative measures such as hours or the main uncertainty when assessing contract revenue is related to physical progress are used to achieve more precise revenue recognition. recoverable amounts from variation orders, claims and incentive payments the estimation uncertainty during the early stages of a contract is mitigated 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 they will result in revenue and are measurable. this assessment is adjusted lump sum projects before the contract reaches 20 percent of completion. by management’s evaluation of liquidated damages to be imposed by However, management can on a project-by-project basis give approval of customers typically relating to contractual delivery terms. In many projects, earlier recognition if cost estimates are certain, typically in situations of 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 as one operating cycle. based on experience, Annual Report 2015 | Financials and Notes39 the provision is often estimated at one percent of the contract value, but Income tax expense is calculated based on reported income in the can also be a higher or lower amount following a specific evaluation of different legal entities. Deferred income tax expense is calculated based the actual circumstances for each contract. both the general one percent on the differences between the assets’ carrying amount for financial provision and the evaluation of project specific circumstances are based on reporting purposes and their respective tax basis that are considered experience from earlier projects. Factors that could affect the estimated temporary in nature. the total amount of income tax expense warranty cost include the group’s quality initiatives and project execution and allocation between current and deferred income tax requires model. Reference is made to note 29 provisions for further information management’s interpretation of complex tax laws and regulations in the about provisions for warranty expenditures on delivered projects. many tax jurisdictions where the group operates. Leases Valuation of deferred tax assets is dependent on management’s the determination of whether an arrangement is (or contains) a lease is assessment of future recoverability of the deferred tax benefit. expected based on the substance of the arrangement at the inception date. the recoverability may result from expected taxable income in the near future, arrangement is assessed for whether fulfilment of the arrangement is planned transactions or planned tax optimizing measures. economic dependent on the use of a specific asset or assets or the arrangement conditions may change and lead to a different conclusion regarding conveys a right to use the asset or assets, even if that right is not explicitly recoverability, and such change may affect the results for each future specified in an arrangement. reporting period. leases are classified as finance leases when the terms of the lease tax authorities in different jurisdictions may challenge calculation of transfer substantially all the risks and rewards incidental to ownership income taxes from prior periods. Such processes may lead to changes to to the lessee. All other leases are classified as operating leases. the prior periods’ taxable income, resulting in changes to income tax expense assessment for the classification of leases is based on the substance of in the period of change. During the period when tax authorities challenge the transactions and requires judgement. income tax calculations, management is required to make estimates of Impairment of non-financial assets change as additional information becomes known. Further details about Property, plant and equipment and intangible assets income taxes are included in note 12 Income tax. the probability and size of possible tax adjustments. Such estimates may the group has significant non-current assets recognized in the consolidated statement of financial position related to property, plant and Onerous contracts equipment and intangible assts. the value in use of some of these assets the group has entered into several non-cancellable lease contracts can be significantly impacted by changes of market conditions. the group for office premises which may result in vacant leased space. the group considers whether there are indications of impairment on the carrying recognizes a provision for such lease contracts when the leased property amounts of such non-current assets. If such indications exist, an impairment is or will be vacant during the non-cancellable lease period. the provision test is performed to assess whether or not the assets should be impaired. is made for the discounted future lease payments, net of expected the valuations, often determined by value-in-use calculations, will often sublease income, if any. Key assumptions in determining the provisions are have to be performed based on estimates of future cash flows discounted primarily related to expected sublease income, length of vacancy periods by an appropriate discount rate. Significant estimates and judgments and appropriate discount rates. Further information about provision for have to be made by the management, including determining appropriated onerous contracts is included in note 29 provisions. cash-generating units and discount rate, projections for future cash flows and assumptions of future market conditions. References are made to Pension benefits note 14 property, plant and equipment and note 16 Intangible assets. the present value of the pension obligations depends on a number Goodwill of factors determined on the basis of actuarial assumptions. these assumptions include financial factors such as the discount rate, expected the group performs impairment testing of goodwill annually or more salary growth, inflation and return on assets as well as demographical frequently if any impairment indicators are identified. the recoverable factors concerning mortality, employee turnover, disability and early amounts of cash-generating units to which goodwill is allocated have retirement. Assumptions about all these factors are based on the been determined based on value-in-use calculations. these calculations situation at the time the assessment is made. However, it is reasonably require management to estimate future cash flows expected to arise from certain that such factors will change over the very long periods for which these cash-generating units and an appropriate discount rate to reflect pension calculations are made. Any changes in these assumptions will the time value of the money. Key assumptions made by the management affect the calculated pension obligations with immediate recognition in include also assumptions for future market conditions, which require a other comprehensive income. Further information about the pension high degree of judgment. Further details about goodwill allocation and obligations and the assumptions used are included in note 28 employee impairment testing are included in note 17 Impairment testing of goodwill. benefits - pension. Income taxes Legal claims the group is subject to income taxes in numerous jurisdictions. Significant Given the scope of the group’s worldwide operations, group companies are judgement is required to determine the worldwide provision for income inevitably involved in legal disputes in the course of their business activities. taxes. there are many transactions and calculations for which the ultimate provisions have been made to cover the expected outcome of the disputes tax determination is uncertain during the ordinary course of business. to the extent negative outcomes are likely and reliable estimates can be provisions for anticipated tax audit issues are based on estimates of made. However, the final outcome of these cases is subject to uncertainties, eventual additional taxes. and resulting liabilities may exceed provisions recognized. Annual Report 2015 | Financials and Notes40 Note 5 | Disposal of subsidiaries In July 2015, Akastor sold its shareholding in pusnes eiendom Invest AS and in December 2015, Akastor sold its entire real estate portfolio comprising of eight properties to Aker Maritime Finance AS, a subsidiary of Aker ASA. the total consideration received was noK 1 156 million and resulted in a gain of noK 303 million recognized in other income. See also note 36 Related parties. the table below shows the effects on the consolidated statement of financial position from disposals of subsidiaries during 2015: Amounts in NOK million property, plant and equipment Investment property Intangible assets trade and other receivables Cash and cash equivalents Deferred tax liabilities other non-current liabilities trade and other payables other current liabilities Net assets and liabilities Consideration received, satisfied in cash Cash and cash equivalents disposed of cash inflows from disposal of subsidiaries, net of cash disposed of 2015 (314) (696) (16) (30) (6) 144 20 13 32 (854) 1 156 (6) 1 150 Disposals and demerger of subsidiaries in 2014 Demerger of Aker Solutions Disposal of Mooring and Loading systems business on September 26, 2014, the demerger of Aker Solutions was completed on october 30, 2013, Akastor agreed to sell its mooring and loading and on September 29, 2014, Aker Solutions Holding ASA (“Aker systems business (MlS) to Cargotec. the unit, known for the pusnes Solutions”), a subsidiary of Akastor ASA established for the purposes brand name, provides mooring equipment, loading and offloading of the demerger, was listed on the oslo Stock exchange. Aker Solutions systems, as well as deck machinery for the global offshore and shipping includes activities in the following areas of operation: Subsea, umbilicals, markets. the division employs about 370 people in europe, Asia and the Maintenance, Modifications and operations (MMo) and engineering. Americas and has its main office in Arendal, norway. the transaction was completed on January 30, 2014. the amounts in the income statement Aker Solutions was presented as discontinued operations and held for were presented as discontinued operations in 2014. distribution from July 16, 2014. According to IFRS 5, no depreciation and Disposal of Well-Intervention Services businesses were met. no gain was recognized upon disposal as this was a transaction on november 22, 2013, Akastor agreed to sell its well intervention under common control and accounted for at book values. amortization was recognized from the time when held-for-sale criteria services businesses (WIS) to eQt. the business provided services that optimize flows from oil reservoirs and its main markets were in the uK and Disposal of K2 Hotellbygg AS norway. the division had about 1,500 employees in europe, Asia, the uS on June 4, 2014, Akastor sold the 93 percent shareholding in K2 Hotellbygg and the Middle east. the transaction was completed on January 9, 2014. AS. the consideration was noK 175 million and resulted in a gain of noK the amounts in the income statement were presented as discontinued 113 million recognized in other income. operations in 2014. 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. Annual Report 2015 | Financials and Notesthe table below shows the effects on the consolidated statement of financial position from disposals and demerger of subsidiaries during 2014: 41 Amounts in NOK million property, plant and equipment Intangible assets other non-current assets Current assets Cash and cash equivalents non-current liabilities Current liabilities Net assets and liabilities Consideration received, satisfied in cash Cash and cash equivalents disposed of cash inflows from disposal of subsidiaries, net of cash disposed of Cash demerger of Aker Solutions Net cash effect Note 6 | Operating segments 2014 (5 177) (6 621) (325) (16 833) (1 320) 5 610 16 942 (7 724) 6 204 (256) 5 948 (1 064) 4 884 Basis for segmentation Measurement of segment performance Akastor has five reporting segments which are the strategic business units Segment performance is measured by operating profit before of the group. the strategic business units are managed separately and depreciation, amortization and impairment (ebItDA) and operating profit offer different products and services due to different market segments (ebIt), as included in the internal management reports that are reviewed and different strategies for their projects, products and services: by the group’s executive Management Group (the chief operating ŸŸ MHWirth is a supplier of drilling systems and drilling lifecycle as described below, gives the executive Management Group relevant services globally. the company offers a full range of drilling information in evaluating the results of the operating segments and is equipment, drilling riser solutions and related products and relevant in evaluating the results of the segments relative to other entities services for the drilling market, primarily the offshore sector. operating within these industries. Inter-segment pricing is determined on decision maker). Segment profit, together with key financial information 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. an arm’s length basis. the accounting policies of the reportable segments are the same as described in note 2 basis of preparation and note 3 Significant accounting principles, except for hedge accounting. When contract revenues and ŸŸ Fjords processing provides wellstream processing technology, contract costs are denominated in a foreign currency, the subsidiary equipment and expertise to the upstream oil and gas industry. hedges the exposure against Corporate treasury and hedge accounting is the company delivers solutions for separation of oil and gas. applied independently of whether the hedge qualify for hedge accounting 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. ŸŸ Frontica provides a range of corporate services to companies in the oil services industry. Further, Akastor owns other investments, mainly 76 percent in Step oiltools, 50 percent of DoF Deepwater AS, 100 percent in First Geo AS, 7.4 percent of the shares in ezra Holdings ltd and 93 percent of Aker pensjonskasse. these are included in “Real estate and other holdings”. In December 2015, Akastor sold its real estate portfolio. See note 5 Disposal of subsidiaries for more information about the divestment. in accordance with IFRS. the correction of the non-qualifying hedges to secure that the consolidated financial statements are in accordance with 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 of noK 53 million to ebItDA (gain of noK 25 million in 2014) and a gain under financial items of noK 44 million (loss of noK 103 million in 2014). this is recognized as a group adjustment under Real estate and other holdings. Annual Report 2015 | Financials and Notes42 Information about reportable segments Amounts in NOK million Note mhWirth frontica AKOfs Offshore fjords processing KOp surface products Real Estate & other holdings Elimina- tions Akastor group 2015 Income statement external revenue and other income 6 671 4 267 781 1 932 1 131 1 087 - 15 869 Inter-segment revenue 72 652 - 4 - 103 (832) - Total operating revenue and other income 6 743 4 919 781 1 936 1 131 1 190 (832) 15 869 Operating profit (loss) before depreciation, amortization and impairment (EBITDA) (176) 260 104 104 242 168 - 702 Depreciation and amortization 14,15,16 (423) (112) (355) (36) (57) (120) 14,15,16 (605) (1) (1 037) - (8) (1 204) 147 (1 288) 67 177 (107) (59) - (1 103) - (1 758) - (2 159) Impairment Operating profit (loss) Assets Current operating assets non-current operating assets Operating assets Liabilities Current operating liabilities non-current operating liabilities Operating liabilities 5 174 381 3 144 598 8 318 979 200 5 119 5 319 972 627 1 598 2 923 683 131 666 51 4 3 589 734 135 855 29 884 374 341 715 135 25 160 31 240 555 382 (58) 7 425 820 - 10 648 1 202 (58) 18 072 416 (58) 5 085 125 - 900 541 (58) 5 985 99 - 1 659 (34) - 2 340 661 - 12 087 Capital expenditure and R&D capitalization net current operating assets 1) net capital employed 1) 385 43 1 057 2 252 (303) 69 4 729 244 5 183 44 117 715 Cash flow from operating activities (338) 226 (193) (190) 400 (508) - (603) order intake (unaudited) order backlog (unaudited) employees incl. contracts 3 521 4 384 305 2 116 553 679 (1 052) 10 506 5 750 1 754 6 430 1 398 149 412 (277) 15 616 3 005 983 91 545 682 372 - 5 677 Amounts in NOK million Note mhWirth frontica AKOfs Offshore fjords processing KOp surface products Real Estate & other holdings Elimina- tions Akastor group 2014 Income statement external revenue and other income 10 634 4 868 1 542 2 317 1 119 952 - 21 432 Inter-segment revenue 47 885 - 4 - 23 (960) - Total operating revenue and other income 10 681 5 753 1 542 2 322 1 119 975 (960) 21 432 Operating profit (loss) before depreciation, amortization and impairment (EBITDA) Depreciation and amortization Impairment Operating profit (loss) Assets Current operating assets non-current operating assets Operating assets Liabilities Current operating liabilities non-current operating liabilities Operating liabilities 14,15,16 14,15,16 941 (332) (83) 315 175 52 156 (260) - 1 380 (97) (292) (26) (42) (133) - (922) - (1 001) - (4) 526 218 (1 117) 25 109 (76) (469) - (1 164) - (706) 5 972 1 017 229 1 005 637 349 (206) 9 005 3 738 701 4 552 635 328 1 861 - 11 815 9 710 1 718 4 780 1 640 966 2 210 (206) 20 819 3 674 1 255 167 1 137 708 89 167 41 262 29 633 (206) 208 - 4 382 1 343 333 1 178 291 841 (206) 6 921 1 242 8 163 Capital expenditure and R&D capitalization net current operating assets 1) net capital employed 1) 762 110 5 62 32 128 - 1 098 2 298 (237) 63 (131) 375 (284) - 2 084 5 328 374 4 374 463 674 1 443 - 12 656 Cash flow from operating activities (52) 297 (167) 34 113 (326) - (101) order intake (unaudited) order backlog (unaudited) employees incl. contracts 6 941 8 196 6 140 2 197 1 052 2 097 (1369) 25 254 9 566 2620 6 186 1 190 659 1 658 (324) 21 555 4 237 1 356 115 617 854 430 - 7 609 1) Definition of Net current operating assets and Net capital employed has been changed in 2015 and no longer includes hedge adjustments without cash effect. The amounts for prior year have been restated. Annual Report 2015 | Financials and Notes Reconciliations of information on reportable segments to IfRs measures Amounts in NOK million Assets total segment assets Derivative financial instruments Cash and cash equivalents Current interest-bearing receivables non-current interest-bearing receivables elimination of intra-group assets consolidated assets Liabilities total segment liabilities Derivative financial instruments Current borrowings non-current borrowings elimination of intra-group liabilities consolidated liabilities Major customers 43 Note 2015 2014 24 18 18 18 130 21 025 1 746 2 199 563 1 075 72 205 84 131 (58) (206) 20 537 24 430 6 043 8 369 1 528 1 861 26 4 054 308 26 1 583 4 720 (58) (206) 13 150 15 051 Revenue from one customer to all segments represents approximately noK 3.9 billion (noK 4.2 billion in 2014) of the group's total revenue. Geographical information Geographical revenue is presented on the basis of geographical location of the group companies selling to the customers. non-current segment assets and capital expenditures are based on the geographical location of the assets. norway and uK have revenues or non-current assets higher than 10 percent of the group. Amounts in NOK million norway uK other europe north America South America Asia Australia Middle east other Total Operating revenue and other income Non-current assets excluding deferred tax assets and financial instruments 2015 2014 8 010 2 039 1 062 1 202 440 1 991 936 13 705 1 906 1 334 1 145 502 1 866 879 168 64 22 32 15 869 21 432 2015 6 451 317 1 168 514 579 802 57 29 2014 7 511 309 1 254 465 513 1 124 25 11 2 9 919 - 11 211 Annual Report 2015 | Financials and Notes 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 1) profit (loss) from equity-accounted investees Accounting gain (loss) on disposals of assets Total other income 44 Note 2015 2014 21 5 877 9 585 7 434 10 282 1 683 1 092 405 131 15 60 65 15 458 21 155 47 103 5 303 113 37 71 19 5 4 20 (14) 411 277 1) Relates to deferred gain on sales of K2 Eiendom AS and Hinna Park Invest AS. See more information below. K2 Eiendom AS and Hinna Park Invest AS Gain from sale of real estate from Akastor (previously Aker Solutions) to Hinna park Invest AS and K2 eiendom AS was recognized in 2012. However, 25 percent of the total gain, representing Akastor’s ownership in these companies, could not be recognized in the income statement until the remaining shareholdings were sold. In 2014, Hinna park Invest AS was sold, as well as 8 percent of the shares held in K2 eiendom AS. the sales resulted in a deferred gain of noK 71 million recognized in other income. In 2015, the remaining ownership share of 17 percent in K2 eiendom AS was sold and a deferred gain of noK 37 million was recognized. 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 9 | Operating leases Group as lessee future minimum commitments under non-cancellable operating leases Amounts in NOK million Due within one year Due in one to five years Due in more than five years Total Note 2015 2014 28 3 861 4 200 487 135 303 528 165 211 4 785 5 104 2015 2014 678 729 1 756 2 174 567 602 3 001 3 505 Minimum sublease income to be received in the future amounts to noK 29 million (noK 4 million in 2014) and relates mainly to sublease of office buildings. lease and sublease payments recognized in the income statement Amounts in NOK million Minimum lease payments Sublease income Total 2015 2014 914 1 141 (2) (3) 912 1 138 Annual Report 2015 | Financials and Notes 45 the group has operating lease costs for buildings on a large number of each. the contract is in its second year of option. the AKoFS Seafarer locations worldwide. the leases typically run for a period of 12-15 years, vessel was acquired in February 2015 and Aker Wayfarer vessel was with an option to renew the lease at market conditions. recognized as finance lease as of September 2014. Vessel lease costs relate to operations in AKoFS offshore and include the group has also operating lease costs related to It equipment, cars and rental for Skandi Santos vessel in 2015. the Skandi Santos lease contract inventory. these leases have an average lease period of 3-5 years with no runs for a period of 5 years, with an option to renew five times of one year renewal options included in the contracts. Group as lessor future minimum lease income commitments under non-cancellable operating leases Amounts in NOK million Due within one year Due in one to five years Due in more than five years Total 2015 2014 965 799 4 903 2 928 403 1 958 6 272 5 685 Lease income recognized in the income statement operating lease income relates mainly to the vessels Skandi Santos and Aker Wayfarer, investment properties, offices leases to Aker Solutions and to the rental business in Step oiltools. operating lease income of noK 1 218 million is recognized in the income statement in 2015. Note 10 | Other operating expenses other operating expenses amount to noK 1.8 billion in 2015 (noK 2.2 billion in 2014). the expenses include operating lease costs ( see note 9 operating leases), travel expenses, audit fees and other expenses mainly related to premises, electricity and maintenance. Fees to the auditors the table below summarizes audit fees, as well as fees for audit related services, tax services and other services incurred by the group during 2015 and 2014. Amounts in NOK million Audit other assurance services1) tax services other non-audit services Total Akastor AsA subsidiaries Total 2015 2014 2015 2014 2015 2014 2 - - - 2 4 18 - 1 23 14 2 1 1 18 12 1 1 1 15 16 2 1 - 19 16 19 1 2 39 1) In 2014, NOK 18 million related to services provided during the demerger of the group. The amount was recharged to Aker Solutions. Annual Report 2015 | Financials and NotesNote 11 | finance income and expenses Amounts in NOK million profit (loss) on foreign currency forward contracts Equity accounted investees 1) 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 2) Interest expense on financial liabilities measured at fair value Impairment on available-for sale-assets 3) other financial expenses financial expenses Net finance expenses recognized in profit and loss 46 2015 44 (73) 14 46 27 88 (205) (279) (21) (202) (43) (750) (691) 2014 (372) (126) 43 55 12 110 (341) (57) (8) (97) (56) (559) (947) 1) See also note 19. 2) Aker Wayfarer vessel in AKOFS Offshore was recognized as finance lease as of September 2014. 3) Impairment loss on available-for-sale assets relates to the impairment loss of the group’s shareholdings in Ezra holdings due to significant and prolonged decline in fair value. See note 34 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 gain in 2015 relates to hedges not qualifying for hedge accounting. accounting under IFRS, primarily because a large number of internal hedge In 2014, the loss of noK 269 million related to terminated tender transactions are grouped and netted before external hedge transactions hedges and noK 103 million related to hedges not qualifying for hedge are established. these derivatives are mainly foreign exchange forward accounting. contracts. the corresponding contracts to the derivatives are calculated to have an equal, but opposite effect, and both the derivatives and the the exposure from foreign currency embedded derivatives is economically hedged items are reported as financial items. the net amount therefore hedged, but cannot qualify for hedge accounting and is therefore included reflects the difference in timing between the non-qualifying hedging in net foreign exchange gain/loss. Hedge accounting and embedded instrument and the future transaction (economically hedged item). derivatives are explained in note 33 Derivative financial instruments. Note 12 | income 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 Total deferred tax income (expense) Total tax income (expense) 2015 2014 (196) (214) - 8 (196) (206) 820 (23) 482 1 (314) (60) - 49 482 472 286 266 Annual Report 2015 | Financials and Notes47 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. Amounts in NOK million profit (loss) before tax, continuing operations 2015 (2 851) tax income (expense) using the company's domestic tax rate 770 27.0 % 2014 (1 653) 446 Tax effects of: Difference between local tax rate and norwegian tax rate of 27% permanent differences 1) 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 of tax loss or deferred tax assets 2) Change in tax rates 3) effect of functional currency different from currency in tax reporting 4) other Total tax income (expenses), continuing operations (67) (2.4 %) (21) 42 1.5 % (57) - 0.0 % 8 (7) (0.3 %) - - - (314) (23) (84) (29) 286 0.0 % 0.0 % (11.0 %) (0.8 %) (3.0 %) (1.0 %) (3) 49 (60) 1 (87) (10) 10.0 % 266 27.0 % (1.3 %) (3.4 %) 0.5 % 0.0 % (0.2 %) 3.0 % (3.6 %) 0.1 % (5.3 %) (0.6 %) 16.1 % 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 Managed Pressure Operations (MPO) and MHWirth Inc in MHWirth and Step Oiltools. 3) Relates mainly to change in corporate income tax rate from 27 percent to 25 percent in Norway effective as of January 1, 2016. 4) Relates to Norwegian legal entities in AKOFS Offshore which changed functional currency from NOK to USD during 2014. Recognized deferred tax assets and liabilities Amounts in NOK million property, plant and equipment pensions projects under construction Intangible assets provisions Derivatives other items tax loss carry-forwards Total before set offs Set-off of tax Assets liabilities Net 2015 68 122 2014 85 2015 2014 2015 2014 (205) (453) (137) (368) 135 - - 122 135 - - 35 31 198 204 89 12 179 126 829 448 (453) (146) (3) (264) (31) - (552) (453) (552) (133) (111) (102) - (163) 195 204 (175) (151) (9) 148 117 - 829 448 1 521 1 041 (1 103) (1 310) 418 (269) (1 053) (827) 1 053 827 - - Total deferred tax assets(liabilities) 468 214 (51) (483) 418 (269) Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available, against which the deductible temporary difference can be utilized. the deferred tax assets related to tax loss carry-forward are mainly related to the entities of the norwegian tax group where tax losses are without expiration and it is probable that taxable profit will be available in the future. Annual Report 2015 | Financials and Notes 48 change in net recognized deferred tax assets and liabilities Amounts in NOK million equipment pensions property, plant and projects under con- struction Intangible assets provi- sions Derivatives Other items Tax loss carry- forwards Total balance as of January 1, 2014 (554) 215 (2 041) (322) 282 (135) 291 807 (1 457) Demerge of Aker Solutions 114 (137) 1 509 202 (204) 75 (97) (704) Disposal of subsidiaries 22 - - - - - - - 758 22 Recognized in profit and loss 102 (8) (20) 31 87 (67) 50 297 472 Recognized in other comprehensive income (13) 61 - 1 - (38) (1) (1) 9 Currency translation differences (39) 4 - (14) 39 14 (126) 49 (73) Balance as of December 31, 2014 (368) 135 (552) (102) 204 (151) 117 448 (269) Disposal of subsidiaries 130 - - - - - - (2) 128 Recognized in profit and loss 135 (8) 99 5 (4) (63) 7 311 482 Recognized in other comprehensive income - (9) - - - 39 10 Currency translation differences (34) 3 - (14) (5) 1 12 - 73 40 36 Balance as of December 31, 2015 (137) 122 (453) (111) 195 (175) 148 829 418 Unrecognized tax loss carry-forwards and unrecognized deferred tax assets Deferred tax assets have not been recognized in respect of tax loss carry-forwards or deductible temporary differences when the group evaluates that it is not probable that future taxable profit will be available against which the group can utilize these benefit based on forecasts and realistic expectations. Amounts in NOK million expiry in 2018 expiry in 2019 and later Indefinite Total unrecognized other deferred tax assets are noK 63 million in 2015 (noK 5 million in 2014). 2015 2014 168 444 216 144 138 113 828 395 Note 13 | earnings per share Akastor ASA holds 2 776 376 treasury shares at year end 2015 (2 976 376 in 2014). treasury shares are not included in the weighted average number of ordinary shares. Amounts in NOK million profit (loss) attributable to ordinary shares profit (loss) attributable to ordinary shares from continuing operations 2015 (2 587) 2014 2 482 (2 564) (1 398) Basic/ diluted earnings per share the calculation of basic/diluted 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/ diluted earnings (loss) per share (NOK) Basic/ diluted earnings (loss) per share for continuing operations (NOK) 2015 2014 274 000 000 274 000 000 271 086 638 271 830 726 (9.54) (9.46) 9.13 (5.09) Annual Report 2015 | Financials and Notes 49 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. Amounts in NOK million Historical cost balance as of January 1, 2014 Additions 1) 2) Financial lease Note Buildings and land vessels machinery, equipment, software under construction Total 2 454 3 857 6 291 1 340 13 942 76 2 384 853 1 315 - 900 - - 900 Reclassification to investment properties (622) - (214) (62) (898) transfer from assets under construction 105 - 680 (785) - Disposals and scrapping Demerger of Aker Solutions Currency translation differences Balance as of December 31, 2014 Additions 1) Reclassifications 3) (25) (32) (104) (7) (168) (1 138) - (3 803) (529) (5 470) 124 544 345 144 1 157 974 5 271 3 579 954 10 778 9 1 032 15 397 1 454 - - 60 276 336 transfer from assets under construction 49 8 181 (239) - Disposal of subsidiaries Disposals and scrapping Currency translation differences Balance as of December 31, 2015 5 (291) - (83) - (374) (106) - (594) (507) (1 207) 26 1 133 241 (9) 1 390 661 7 444 3 399 872 12 376 Accumulated depreciation and impairment balance as of January 1, 2014 Depreciation for the year 4) Impairment (514) (541) (3 050) (380) (4 485) 32 (281) (729) - (978) - (690) (59) - (749) Reclassification to investment properties 136 - 40 - 176 Disposals and scrapping Demerger of Aker Solutions Currency translation differences Balance as of December 31, 2014 Depreciation for the year Impairment Reclassifications 3) Disposal of subsidiaries Disposals and scrapping Currency translation differences Balance as of December 31, 2015 24 53 2 - 79 148 - 1 982 - 2 130 (34) (270) (96) (82) (482) (208) (1 729) (1 910) (462) (4 309) (44) (342) (474) - (859) (9) (1 037) (169) (10) (1 225) - - (47) - (47) 5 43 - 16 - 60 39 - 534 496 1 069 (22) (382) (140) (40) (584) (200) (3 490) (2 190) (16) (5 896) Book value as of December 31, 2014 Book value as of December 31, 2015 766 3 542 1 669 492 6 469 461 3 954 1 208 856 6 480 of which financial lease as of December 31, 2014 of which financial lease as of December 31, 2015 - - 889 1 313 - - - 889 - 1 313 1) Includes NOK 23 million of capitalized borrowing costs in 2015 (NOK 25 million in 2014). The average capitalization rate is 6.8 percent ( same rate in 2014) 2) Includes additions of NOK 509 million related to discontinued operations in 2014. 3) Includes reclassifications from Other non-current operating assets (relating to Aker Wayfarer vessel) and Intangible assets. 4) Includes depreciations and impairment of NOK 234 million related to discontinued operations. Finance leased asset amounting to noK 16 million (noK 163 million in 2014), mainly related the vessel under finance lease relates to Aker Wayfarer that is under to the new MHWirth plant in brazil. In addition, Akastor has made capital lease contract with ocean Yield. please refer to note 36 Related parties expenditure commitments related to Aker Wayfarer vessel in AKoFS for more information of the agreement. offshore of noK 22 million as of December 31, 2015, of which noK Commitments 14 million will be capitalized on Vessels. In order to fulfil the committed contract for Aker Wayfarer, a further investment of approximately noK As of December 31, 2015, Akastor has entered into contractual 235 million is expected to be made in 2016, of which noK 164 million will commitments for the acquisition of property, plant and equipment be capitalized on Vessels. Annual Report 2015 | Financials and Notes 50 Depreciation Wayfarer vessel (noK 26 million). the impairment was based on a revised estimates for useful life, depreciation method and residual values are business case after the cancelation by total in Angola of a two-year reviewed annually. Assets are mainly depreciated on a straight-line basis contract for AKoFS Seafarer vessel, as well as a generally weaker market over their expected economic lives as follows: that created uncertainty about the value of the vessels. Machinery, equipment and software 3 - 15 years Other impairment Vessels buildings land Impairment Impairment in AKOFS Offshore 20 - 25 years In 2015, an impairment loss of noK 131 mill was recognized relating to 8 - 30 years fixed assets in Managed pressure operations (Mpo), reported in MHWirth. no depreciation the recoverable amount of Mpo was reassessed in light of challenging financial performance under current market conditions. See also note 17 for more information. In 2015, an impairment loss of noK 1 037 million (uSD 122 million) In 2014, an impairment charge of noK 49 million was recognized related to related to AKoFS Seafarer vessel was recognized. the impairment was investments in engineerium at Fornebu, which was included in Real estate triggered by the current weak market conditions which are expected to and other Holdings. the impairment was based on a revised business case continue in the short to medium term. See note 17 for more information for the use of engineerium following the demerger of the company. about impairment testing performed. Security In 2014, an impairment loss of noK 690 million was recognized in AKoFS no property, plant or equipment is held as security for borrowings in the offshore, related to AKoFS Seafarer vessel (noK 664 million) and Aker group. Note 15 | investment property Amounts in NOK million Historical cost balance as of January 1, 2014 Additions Reclassification from property, plant and equipment Disposals of subsidiaries Balance as of December 31, 2014 Additions Disposals of subsidiaries Balance as of December 31, 2015 Accumulated depreciation and impairment balance as of January 1, 2014 Depreciation for the year Impairment Reclassification from property, plant and equipment Disposals of subsidiaries Balance as of December 31, 2014 Depreciation for the year Disposals of subsidiaries Balance as of December 31, 2015 Book value as of December 31, 2014 Book value as of December 31, 2015 Note Investment property 5 5 384 12 898 (384) 910 29 (939) - (26) (17) (16) (176) 32 (203) (39) 242 - 707 - 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 do not generate rental income profit (loss) arising from investment properties 2015 2014 60 65 (44) (52) - (6) 16 7 Investment property comprises a number of commercial properties that as these properties were no longer used by the group but leased out to are primarily leased out to related parties. In 2014, Akastor reclassified third parties. property to Investment property following the demerger of the company Annual Report 2015 | Financials and NotesDepreciation Disposals of subsidiaries estimates for useful life, depreciation method and residual values are In 2015, Akastor sold its real estate portfolio including nine properties. reviewed annually. Assets are mainly depreciated on a straight-line basis please refer to note 5 and note 36 for more information about the 51 over their expected economic lives: buildings technical installations 30 years 20 years Note 16 | intangible assets Amounts in NOK million Historical cost balance as of January 1, 2014 Capitalized development 1) Disposal and scrapping Demerger of Aker Solutions Currency translation differences Balance as of December 31, 2014 Reclassification 2) Capitalized development Disposal and scrapping Currency translation differences Balance as of December 31, 2015 Accumulated amortization and impairment balance as of January 1, 2014 Amortisation for the year 1) Impairment for the year 1) Disposal and scrapping Demerger of Aker Solutions Currency translation differences Balance as of December 31, 2014 Reclassifications 2) Amortisation for the year Impairment for the year Disposal and scrapping Currency translation differences Balance as of December 31, 2015 disposal. In 2014, Akastor sold the shareholding in K2 Hotellbygg AS. Development costs goodwill Other Total 2 019 5 968 679 607 (151) - - 33 2 (1 586) (3 827) (224) 82 227 88 8 667 640 (150) (5 636) 397 971 2 369 578 3 918 (60) 169 (189) - - - - (60) 7 176 (6) (195) 33 173 72 277 923 2 542 652 4 117 (295) (23) (106) (424) (165) - (70) (235) (103) (300) - (403) 149 - (2) 147 173 (5) 26 195 (40) (19) (15) (75) (281) (347) (167) (795) 47 (146) - - (59) (96) (280) (157) - 47 (205) (533) 189 - 6 195 5 (26) (19) (39) (281) (653) (397) (1 331) Book value as of December 31, 2014 Book value as of December 31, 2015 690 2 022 410 3 122 642 1 889 254 2 785 1) Includes capitalized development costs of NOK 360 million and amortizations and impairment of NOK 75 million related to discontinued operations in 2014. 2) Includes reclassifications to Property, Plant and Equipment. Impairment loss of goodwill In 2014, an impairment loss of noK 61 million was mainly related to In 2015, the impairment loss of goodwill is mainly related to Managed certain technologies in MHWirth that have been developed for other parts pressure operations (Mpo) in MHWirth (noK 213 million), and Step of Aker Solutions. In addition, an impairment of capitalized development oiltools (noK 65 million). See note 17 for more information about goodwill costs of noK 22 million was recognized related to the close down of the impairment. Mining and Construction business. the impairment loss of goodwill in 2014 was mainly related to AKoFS Research and development costs offshore. noK 176 million has been capitalized in 2015 (noK 640 million in 2014) related to development activities. In addition, research and development Impairment loss of other intangible assets than goodwill costs of noK 60 million are expensed during the year because the criteria In 2015, an impairment loss of noK 245 million was recognized in for capitalization are not met (noK 112 million in 2014). MHWirth, mainly related to Managed pressure operations (Mpo) and other intangible assets that were no longer expected to be utilized in Amortization MHWirth. See note 17 for more information about impairment loss in Intangible assets all have finite useful lives and are amortized over the Mpo. expected economic life, ranging between 5-10 years. Annual Report 2015 | Financials and Notes 52 Note 17 | impairment testing of goodwill Goodwill originates from a number of acquisitions. For the purpose of As of December 31, 2015, goodwill of noK 213 million was reallocated impairment testing, goodwill has been allocated to the group’s CGus from MHWirth to Managed pressure operations (Mpo), as a result of the (portfolio companies) as shown in the table below, which represents the change of the level at which goodwill was monitored by the management. lowest level at which goodwill is monitored in management reporting. Amounts in NOK million MHWirth Managed pressure operations (Mpo) 1) Frontica AKoFS offshore Fjords processing Kop Surface products Step oiltools 1) 2) First Geo 2) 2015 2014 1 093 1 207 - n/a 203 179 145 145 327 313 103 98 - 60 18 20 Total goodwill 1) As of December 31, 2015, goodwill allocated to Managed Pressure Operations(MPO) and Step Oiltools was fully impaired. 2) This portfolio company is included in Real Estate and Other Holdings in segment reporting. 1 889 2 022 Impairment testing for cash-generating units containing significant goodwill the recoverable amounts of cash-generating units (portfolio companies) growth rate the group uses a constant growth rate not exceeding 2% are determined based on value-in-use calculations. Discounted cash (including inflation) for periods beyond the management’s forecast period flow models are applied to determine the value in use for the portfolio of five years. the growth rates used do not exceed the growth rates for companies with goodwill. For all portfolio companies except for AKoFS the industry in which the portfolio company operates. offshore, management has made cash flow projections based on budget and strategic forecast for the periods 2016-2020. beyond the explicit vessel-specific day rate For AKoFS offshore, the cash flow projections forecast period of five years, the cash flows are extrapolated using a reflect vessel-specific rates as reflected in charter-agreements and, for constant growth rate. For AKoFS offshore, the cash flow projections are periods when the vessels are operating in the spot market, rates achieved made for the periods equal to estimated useful life of the vessels. in most recent charter agreements. Key assumptions used in the calculation of value in use are discussed below. Discount rates are estimated based on Weighted Average Cost of Capital the values assigned to the key assumptions represent management’s (WACC) for the industry in which the portfolio company operates. the assessment of future trends in the relevant industries and have been risk free interest rates used in the discount rates are based on the 10 year based on historical data from both external and internal sources. state treasury bond rate at the time of the impairment testing. optimal EBITDA used in the value-in-use calculations represents the operating rates are further adjusted to reflect any additional short to medium term earnings before depreciation and amortization and is estimated based on market risk considering current industry conditions. debt leverage is estimated for each portfolio company. the discount the expected future performance of the existing businesses in their main markets. Assumptions are made regarding future market development and conditions, which requires a high degree of judgement. Discount rate assumptions used in impairment testing MHWirth Managed pressure operations (Mpo) 1) Frontica AKoFS offshore 2) Fjords processing Kop Surface products Step oiltools Discount rate after tax Discount rate before tax 2015 9.3 % 10.5 % 8.5 % 7.8 % 9.6 % 10.4 % 11.0 % 2014 8.2 % n/a 6.1 % 7.1 % 8.1 % 9.3 % 8.2 % 2015 11.1 % 11.8 % 11.1% 7.8 % 12.3% 11,9 % 12.1 % 2014 9.4 % n/a 7.4 % 7.1 % 8.7 % 10.1 % 9.2 % 1) MPO is part of the reportable segment MHWirth and the testing was performed at MHWirth in 2014. 2) Discount rate pre tax and Discount rate after tax for AKOFS Offshore are equal due to the assumption that both AKOFS Seafarer and Skandi Santos will enter the tonnage tax regime in Norway in the near future. Impairment loss recognized in 2015 impairment testing performed. An impairment loss of noK 213 million Due to challenging financial performance under current market conditions, and noK 65 million is recognized in Mpo and Step oiltools, respectively. goodwill allocated to Mpo and Step oiltools is fully impaired in 2015 after Further, a total impairment loss of noK 275 million is recognized in Annual Report 2015 | Financials and Notes53 Mpo related to property, plant and equipment and intangible assets, to the carrying amount and hence, any adverse change in key assumptions see note 14 and 16 for more information. Following the impairment, the may result in further impairment. recoverable amounts of Mpo and Step oiltools are equal to the carrying amounts. therefore, any adverse change in key assumptions may result in For the other portfolio companies containing goodwill, MHWirth, Frontica, further impairment. Fjords processing and Kop Surface products, the recoverable amounts are higher than the carrying amounts based on the value in use analysis In AKoFS offshore, an impairment testing was triggered by impairment and consequently no impairment loss is recognized. the group believes indicators in the third quarter of 2015 and an impairment loss of that no reasonably possible change in any of the key assumptions used for noK 1 037 million was recognized related to AKoFS Seafarer vessel impairment testing would cause the carrying amount of these portfolio (see also note 14 property, plant and equipment). the impairment was companies to exceed its recoverable amount. triggered by the current weak market conditions which are expected to continue in the short to medium term. the recoverable amount analysis Impairment loss recognized in 2014 for AKoFS Seafarer has been made with different probability weighted In Q2 2014, an impairment loss of noK 301 million was recognized in scenarios covering the variation in day rates and utilization. AKoFS offshore. the impairment was a result of the revised business case for AKoFS Seafarer following the cancellation by total in Angola of Following the impairment of AKoFS Seafarer vessel, no impairment a two-year contract as well as the market outlook in general for the two of goodwill is recognized in AKoFS offshore. However, the estimated vessels AKoFS Seafarer and Aker Wayfarer. recoverable amount of AKoFS offshore in a base case scenario is equal Note 18 | interest-bearing receivables current interest-bearing receivables Amounts in NOK million portfolio of bonds and certificates Mutual fund Receivable from eZRA Holdings ltd other receivables1) Total current interest-bearing receivables 2015 - 16 56 - 72 2014 91 - 48 66 205 1) Other receivables in 2014 related mainly to Aker Solutions. See also note 36 Related parties. Current interest-bearing receivables are classified as financial assets at amortized cost. the only exception was a portfolio of bonds and certificates in Aker Insurance AS which was classified as financial assets at fair value through profit and loss. Non-current interest-bearing receivables Amounts in NOK million Receivable from eZRA Holdings ltd Receivable from DoF Deepwater AS other receivables Total non-current interest-bearing receivables 2015 2014 - 82 2 84 46 82 3 131 See note 32 Financial risk management and exposures for information regarding credit risk management in the group. Annual Report 2015 | Financials and Notes54 Note 19 | equity-accounted investees equity-accounted investees include mainly joint ventures. Such investments overview of transactions and balances with joint ventures and associated are defined as related parties to Akastor. See note 36 Related parties for companies and any guarantees provided on behalf of or from such entities. Amounts in NOK million DOf Deepwater As 1) fjords processing Korea co ltd 2) Other companies3) Total business office 2015 percentage of voting rights and ownership Share of profit (loss) reported in other income Share of profit (loss) reported in Financial items Carrying amount of investments 2014 percentage of voting rights and ownership Share of profit (loss) reported in other income Share of profit (loss) reported in Financial items Impairment Carrying amount of investments Storebø, norway Gyeonggi, South Korea 50 % - (74) 157 50 % - (45) (110) 231 50 % 5 - 19 50 % 4 - - 15 - 1 1 - 39 (10) 18 5 (73) 177 4 (6) (120) 264 1) DOF Deepwater is a joint venture with DOF ASA, which owns and operates five anchor handling tug supply (AHTS) vessels. 2) Fjords Processing Korea Co Ltd is a joint venture with Kolon Energy Co Ltd. The company, previously Kolon Fjords Processing Co Ltd, changed name in 2015. 3) Share of profit in 2014 included gain on disposal and share of net profit from investments in K2 Eiendom AS and Hinna Park Invest AS amounting to NOK 38 million. Summary of financial information for significant equity-accounted investee (100 percent basis) DOf Deepwater As Amounts in NOK million Current assets - Cash and cash equivalents non-current assets Current liabilities - Current financial liabilities (excluding trade and other payables and provisions) non-current liabilities - non-current financial liabilities (excluding trade and other payables and provisions) Net assets (100%) Akastor's share of net assets (50%) excess value/goodwill on acquisitions Akastor's carrying amount of the investment Revenue Depreciation, amortization and impairment Interest expense Income tax expense profit (loss) for the year Total comprehensive income (loss) for the year Other equity-accounted investees 2015 149 32 1 604 (224) (120) (1 215) (1 215) 314 157 - 157 316 (133) (53) (1) (143) (143) 2014 151 35 1 697 (242) (157) (1 157) (1 157) 449 225 6 231 246 (58) (55) (2) (89) (89) the table below shows, in aggregate, the carrying amount and the group's share of total comprehensive income (loss) of other immaterial equity- accounted investees. Amounts in NOK million Akastor's carrying amount of investments Akastor's share of: profit (loss) for the year total comprehensive income (loss) for the year 2015 20 6 6 2014 33 43 43 Guarantees on behalf of equity accounted investees Akastor ASA has issued financial guarantees in favor of financial institutions related to financing of the five vessels in DoF Deepwater. the liability is capped at 50 percent of drawn amount. the guarantee is noK 589 million as of December 31, 2015 (noK 582 million in 2014).. Annual Report 2015 | Financials and NotesNote 20 | Other investments Amounts in NOK million ezra Holdings ltd Aker pensjonskasse other equity securities Available-for-sale investments Total other investments 55 Note 2015 2014 36 34 135 222 120 120 6 5 261 261 347 347 In 2015, additional shares for euR 12 million were acquired as part of the rights issue in ezra Holdings ltd. An impairment loss of noK 202 million was recognized related to Akastor’s investments in ezra Holdings due to significant and prolonged decline in fair value in 2015, see also note 11 Financial income and expenses. All other available-for-sale investments do not have an active market, and are measured at cost as this is considered to be the best estimate of fair value. Note 21 | 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 1) construction contracts in progress, net position 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 1) 1) Advances are presented as part of Amounts due to customers for contract work. Note 22 | inventories Amounts in NOK million Stock of raw materials Goods under production Finished goods Total inventories Inventories expensed in the period Write-down of inventories in the period Reversal of write-down of inventories in the period Note 2015 2014 7 5 877 9 585 23 30 1 402 2 325 (1 795) (2 170) (393) 155 2015 2014 3 583 3 525 520 591 2015 594 178 691 1 464 2014 977 234 574 1 785 (1 285) (121) (581) (89) 2 27 Annual Report 2015 | Financials and Notes Note 23 | Trade and other receivables Amounts in NOK million trade receivables1) less provision for impairment of receivables Trade receivables, net of provision Advances to suppliers Amount due to from customers for construction work prepaid expenses Accrued revenue other receivables Total trade and other receivables 56 Note 2015 3 169 (120) 3 049 203 21 1 402 178 377 751 5 959 2014 3 116 (118) 2 998 226 2 325 371 576 683 7 178 1) Trade receivables are financial instruments and an impairment loss of NOK 45 million (NOK 57 million in 2014) was recognized in operating expenses. book value of trade and other receivables is approximately equal to fair value. Aging of trade receivables Amounts in NOK million not overdue past due 0-30 days past due 31-90 days past due 91 days Total trade receivables past due 2015 1 440 509 397 823 3 169 2014 1 804 509 348 455 3 116 As of December 31, 2015, trade receivables of an initial value of noK 120 million (noK 118 million in 2014) are impaired and fully provided for. See below for the movements in the provision for impairment of receivables. Amounts in NOK million balance as of January 1 Demerger of Aker Solutions new provisions utilized unused amounts reversed Currency translation differences Balance as of December 31 Note 24 | Cash and cash equivalents Amounts in NOK million Restricted cash Cash pool Interest-bearing deposits Total cash and cash equivalents 2015 118 - 45 (47) (8) 13 120 2014 124 (35) 57 (29) (17) 18 118 2015 58 195 311 563 2014 39 499 537 1 075 Additional undrawn committed current bank revolving credit facilities amount to noK 2 billion, that together with cash and cash equivalents gives a total liquidity buffer of noK 2.6 billion as of December 31, 2015. See also note 26 borrowings. Annual Report 2015 | Financials and Notes 57 Note 25 | 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 authorization was given to for all shares. the holders of ordinary shares are entitled to receive repurchase up to 27.4 million shares, representing 10 percent of the share dividends and are entitled to one vote per share at General Meetings. capital of Akastor ASA. Akastor ASA decreased the shareholdings with total outstanding shares are 274 000 000 at par value noK 0.592 per 200 000 treasury shares in 2015 and as of December 31, 2015 Akastor share (noK 0.592 in 2014). All issued shares are fully paid. ASA holds 2 776 376 treasury shares representing 1.01 percent of total outstanding shares. summary of purchase and sale of treasury shares treasury shares as of January 1, 2014 purchase Sale Treasury shares as of December 31, 2014 Sale Treasury shares as of December 31, 2015 Number of shares 1 955 611 2 705 000 (1 684 235) 2 976 376 (200 000) 2 776 376 consideration ( NOK million) 473 60 (33) 500 (2) 498 the group purchases treasury shares to meet the obligation under employee share purchase programs. no programs were initiated in 2015. Dividends paid dividend per share (noK) total dividend paid (noK million) 2015 2014 - 4.10 - 1 115 the board of Directors has proposed no dividends for 2015. Currency translation reserve Hedging reserve the currency translation reserve includes exchange differences arising from the translation of the net investments in foreign operations, and the hedging reserve relates to cash flow hedges of future revenues and foreign exchange gain or loss on loans defined as net investment hedge or expenses against exchange rate fluctuations. the income statement part of net investments in foreign operations. effects of such instruments are recognized in accordance with the progress of the underlying construction contract as part of revenues net investments have been hedged in 2015 with a loss of noK 65 million or expenses as appropriate. the hedging reserve represents the value (loss of noK 94 million in 2014). Accumulated loss on net investment of such hedging instruments that are not yet recognized in the income hedges from 2005 is noK 141 million (loss of noK 76 million in 2014). statement. the underlying nature of a hedge is that a positive value on the net investment hedge as of December 31, 2015 relates to investments a hedging instrument exists to cover a negative value on the hedged in the united States, brazil, Mauritius and Cyprus. position, see note 11 Finance income and expenses and note 33 Derivative financial instruments. Fair value reserve the fair value reserve comprises the cumulative net changes in the fair value of available-for-sale financial assets until the investments are impaired or derecognized. Annual Report 2015 | Financials and Notes58 Note 26 | 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 36. exposure to interest rates, foreign currency and liquidity risk, see note 32 Amounts in million currency 2015 Revolving credit facility (noK 2 000 million) 3) term loan term loan bnDeS loan (brazil) ezra – secured financing noK noK uSD bRl SGD Finance lease obligation uSD/noK other loans Total borrowings Current borrowings non-current borrowings Total borrowings Nominal currency value carrying amount (NOK) Interest rate Interest margin Interest coupon maturity Interest terms - (10) 1.00 % 1.90 % 2.90 % July 2017 2) IboR + variable margin 1) 1.20 % 1.80 % 3.00 % July 2019 2) IboR 3M+fixed margin 0.48 % 1.60 % 2.08 % January 2017 2) IboR 3M+fixed margin 7.50 % 1.90 % 9.40 % May 2022 tJlp + fixed margin 4) 2.00 % 1.75 % 3.75 % March 2016 IboR 3M+fixed margin 2 500 125 103 25 2 491 1 096 230 156 1 645 29 5 637 4 054 1 583 5 637 Amounts in million currency Nominal currency value carrying amount (NOK) Interest rate Interest margin Interest coupon maturity Interest terms 2014 Revolving credit facility (noK 2 000 million) 3) term loan bnDeS loan (brazil) noK noK bRl 1 000 2 500 25 987 2 485 1.48 % 1.48 % 1.60 % 3.08 % July 2017 IboR + variable margin 1) 1.40 % 2.88 % July 2019 IboR 3M+fixed margin 70 6.10 % 0.00 % 6.10 % Fixed, quarterly Finance lease obligation uSD/noK other loans Total borrowings Current borrowings non-current borrowings Total borrowings 1 376 110 5 028 308 4 720 5 028 1) The margin applicable to the facility is decided by a price grid based on the gearing ratio and level of utilization. Commitment fee is 40 percent of the margin. 2) The maturity date reflects maturity date as defined in the loan agreements. See below for further description of covenant breach as of December 31, 2015. 3) Carrying amount of negative NOK 10 million in 2015 relates to issue costs. NOK 1 000 million in 2014 corresponded to the repayment of the drawn portion of the available NOK 2 000 million. 4) The loan in Brazil is allocated into three sub-credits. Interest terms disclosed above is for the sub-credit representing more than 90 percent of the total loan in Brazil. TJLP is the Brazilian Federal long term interest rate. Bank debt (Norway) tested on a quarterly basis. the interest ratio coverage should not be All facilities are provided by a bank syndicate consisting of high quality less than 4.0 calculated from the consolidated ebItDA to consolidated nordic and international banks. the terms and conditions include net Finance Cost. As of December 31, 2015, the ICR level was below the restrictions which are customary for this kind of facility, including inter alia minimum level and external borrowings of noK 3.6 billion, with maturity negative pledge provisions and restrictions on acquisitions, disposals and in 2017 and 2019, were therefore reclassified from non-current to current mergers. there are also certain changes of control provisions included. borrowings. See note 31 Capital management and exposures regarding the facility includes no dividend restrictions and is unsecured. capital risk in the group. the financial covenants are based on two sets of key financial ratios; a on March 11, 2016, Akastor signed a new agreement with its bank gearing ratio based on net debt/equity and an interest coverage ratio syndicate to amend and extend its financing structure, including new ICR- (ICR) based on ebItDA/net finance costs. the financial covenants are levels from Q4 2015 until Q1 2017. Annual Report 2015 | Financials and Notes 59 Borrowings under the new agreement: Revolving credit facility Revolving credit facility Revolving credit facility size margin uSD 422.5 million noK 2 000 million noK 362.5 million 1.65%-4.50% 1.65%-4.50% 1.65%-4.50% maturity July 2019 July 2019 June 2017 See also note 38 Subsequent events for more information about the refinancing. Finance lease obligation A financial lease obligation was recognized in 2014 following the re¬negotiation of the bareboat charter contract with Aker Ship lease 1 AS. the lease agreement includes purchase option on three different dates. the finance lease liability is payable as follows as of December 31, 2015: Amounts in NOK million less than one year between one and five years More than five years Total present value of minimum lease payments 269 419 957 1 645 Interest 28 1 258 577 1 863 future minimum lease payments 296 1 677 1 535 3 508 Financial liabilities and the period in which they mature Amounts in NOK million 2015 carrying amount Total undiscounted cash flow 1) 6 months and less 6-12 months 1-2 years 2-5 years more than 5 years Revolving credit facility (noK 2 000 million)2) (10) - - - - - - term loan (noK 2 500 million) 2) term loan (uSD 125 million) 2) bnDeS loan (brazil) Dnb - Singapore loan Finance lease obligation other loans Total borrowings 2014 2 491 1 096 230 156 1 645 29 5 637 2 512 2 512 - - - - 1 103 1 103 - - - - 282 25 25 94 123 14 157 157 - - - - 3 508 119 177 709 967 1 535 32 13 3 8 8 - 7 594 3 930 206 812 1 098 1 548 Revolving credit facility (noK 2 000 million) 987 1 139 1 015 15 31 77 - term loan (noK 2 500 million) bnDeS loan (brazil) Finance lease obligation other loans Total borrowings 2 485 70 1 376 110 5 028 2 680 36 36 72 2 536 - 86 2 2 4 78 - 2 843 106 106 251 838 1 542 110 33 77 - - - 6 858 1 193 237 358 3 529 1 542 1) The interest costs are calculated using the last fixing rate known by year end (plus applicable margin). 2) Maturity of the term loans in the table reflects that these loans will be refinanced in during Q1 2016. Annual Report 2015 | Financials and NotesNote 27 | Other non-current liabilities Amounts in NOK million Contingent considerations other liabilities Total other non-current liabilities 60 2015 - 74 74 2014 44 84 128 Contingent considerations Other liabilities Akastor has acquired subsidiaries and non-controlling interests where other liabilities relate mainly to liabilities related to leasehold improve- final consideration is deferred and can depend to a certain degree on ments and welfare fund. future earnings in the acquired companies. the contingent considerations reported in other non-current liabilities as of December 31, 2014 related mainly to the acquisition of Step oiltools in 2011 and was reversed in other income in 2015. Note 28 | 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 Government. this arrangement provides employers, the main labor union organization in norway (lo) and the the main general pension entitlement of all norwegians. All pension norwegian Government. the “old AFp” arrangement was established to arrangements by employers consequently represent limited additional provide pension between the age of 62 to 67 for employees who retired pension entitlements. before the general retirement age of 67. In a recent pension reform individual employees are given a choice of retirement age, but with norwegian employers are obliged to provide an employment pension lower pension with earlier retirement. estimated remaining employer plan, which can be organized as a defined benefit plan or as a defined contributions to 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 Defined contribution plan lifelong contribution plan. the scheme is classified as a multi-employer benefit scheme. Akastor has taken the position that the information the annual contribution expensed for the new defined contribution available at the date of the financial statements is not sufficient to reliably plan was noK 121 million (noK 125 million in 2014). the estimated measure the allocation of pension cost and net pension liability/asset in contributions expected to be paid in 2016 is noK 123 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 as they are incurred. the total liability is not recognized. based on the took place, are still in the defined benefit plan. this is a funded plan and current financing model for AFp, the annual premiums are expected to represents most of the funded pension liability reported in the tables increase. When or if sufficient and reliable data is available and a liability below. the estimated contributions expected to be paid to the norwegian can be reliably measured, the recognized liability could be significant. plan during 2016 are noK 14 million. Pension plans outside Norway pension plans outside norway are predominately defined contribution plans. Annual Report 2015 | Financials and Notespension cost Amounts in NOK million Defined benefit plans Defined contribution plans Total pension cost Net employee defined benefit obligations Amounts in NOK million Defined benefit plans norway Defined benefit plans Germany Defined benefit plans uS Defined benefit plans other countries Total employee benefit obligations movement in net defined benefit obligations Amounts in NOK million balance as of January 1 Current service and administration cost Interest cost (income) Total recognized in profit and loss Remeasurement loss (gain) arising from demographic assumptions Remeasurement loss (gain) arising from financial assumptions Remeasurement loss (gain) arising from experience adjustments total Remeasurement loss (gain) net defined benefit liability Currency translation differences Total recognized in other comprehensive income Demerger of Aker Solutions and reclassifications Contributions paid into the plan benefits paid by the plan Total other changes Balance as of December 31 Represented by: Gross defined benefit liability Fair value of pension assets Balance as of December 31 61 Note 8 2015 14 121 135 2014 33 132 165 2015 2014 236 103 69 25 434 2015 473 14 9 23 278 105 67 23 473 2014 748 33 15 48 3 14 (24) 34 (3) 21 (25) 69 26 2 (1) 68 - (341) (32) (31) (27) (23) (63) (391) 434 473 815 (380) 434 823 (350) 473 there has been a revaluation in the allocation of the gross value of pension obligation and pension asset in the 2014 figures. Annual Report 2015 | Financials and Notesplan assets Amounts in NOK million Plan assets at fair value Norwegian plan oil & Gas oilfield Services & equipment telecom Services equity securities Government Finance private and Government enterprise Municipalities bonds Ambolt AAM Absolute Return Fund Dnb tMt noRDeA Globale Aksjer Fund/private equity Total plan assets at fair value Norwegian plan Plan assets outside Norway at fair value equity securities Debt securities Total plan assets outside Norway at fair value Total plan assets at fair value 62 2015 2014 2 3 2 2 1 1 5 6 2 38 41 129 210 7 19 44 141 212 1 1 3 2 2 2 3 - 8 5 223 223 55 40 102 73 157 380 113 336 the equity portfolio is invested globally. the fair value of the equities is the investment in fund/private equity is mainly funds that invests in listed based on their quoted prices at the reporting date without any deduction securities and where the fund value is based on quoted prices. for estimated future selling cost. the investments in bonds are done in the norwegian market and most of the group’s most significant defined benefit plans are in norway, Germany the bonds are not listed on any exchange. the market value as at year end and uSA. the followings are the principal actuarial assumptions at the is based on official prices provided by the norwegian Securities Dealers reporting date for the plans in these countries. Defined benefit obligation - actuarial assumptions Association. the bond investments have on average a high credit rating. Most of the investments are in norwegian municipalities with a credit rating of AA. Discount rate Asset return Salary progression pension indexation Norway germany 2015 2.60 % 2.60 % 2.50 % 0.75 % 2014 2.50 % 2.50 % 3.25 % 1.25 % 2015 3.89 % 3.89 % n/a 1.75 % 2014 4.54 % 4.54 % n/a 1.75 % Mortality table K2013BE K2013be RT 2005 g Rt 2005 G usA 2015 3.81 % 3.81 % n/a n/a 2014 3.51 % 3.51 % n/a n/a Rp-2014 Adjusted to 2006 Total Dataset with scale mp-2015 Rp-2014 total Dataset with Scale Mp-2014 the information below relates only to norwegian plans as these represent in the pension indexations. the total effect of fluctuations in economic the majority of the plans. assumptions is consequently unlikely to be very significant. the discount rates and other assumptions in 2015 and 2014 are based Assumptions regarding future mortality have been based on published on the norwegian high quality corporate bond rate and recommendations statistics and mortality tables. the current life expectancy underlying the from the norwegian Accounting Standards board. It should be expected values of the defined benefit obligation at the reporting date is shown that fluctuations in the discount rates would also lead to fluctuations below. Years life expectancy of male pensioners life expectancy of female pensioners 2015 21.3 24.4 2014 21.3 24.4 As of December 31, 2015, the weighted-average duration of the defined benefit obligation was 10.4 years. Annual Report 2015 | Financials and Notes63 Sensitivity analysis Reasonably possible changes at the reporting date to one of the relevant affected the defined benefit obligation as of December 31, 2015 by the actuarial assumptions, holding other assumptions constant, would have amounts shown below. Amounts in NOK million Discount rate (1% movement) Future salary growth (1% movement) Future pension growth (1% movement) Increase Decrease (49) 57 8 (7) 54 (39) 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. Note 29 | Provisions Amounts in NOK million provision, current provision, non-current 2015 553 341 2014 395 157 Development of significant provisions Amounts in NOK million Warranties Restructuring Onerous lease provision Other Total balance as of January 1, 2015 Reclassification from other liabilities provisions made during the year provisions used during the year provisions reversed during the year unwind of discount Currency translation differences Balance as of December 31, 2015 Expected timing of payment Within the next twelve months After the next twelve months Total Warranties 242 1 67 (57) (48) - 1 207 - 220 - 227 55 194 (54) (96) - - 6 179 - 21 8 400 91 1 17 (1) (1) - 1 108 121 85 207 130 48 179 110 290 400 105 3 108 552 58 506 (209) (49) 21 15 894 467 427 894 the provision includes provision for vacant office premises after the the provision for warranties relates mainly to the possibility that Akastor, workforce reduction and is estimated based on the detailed restructuring based on contractual agreements, needs to perform guarantee work plans for the businesses and locations affected. related to products and services delivered to customers. See note 4 Significant accounting estimates and judgments for further descriptions. Onerous lease provision Restructuring provision for onerous leases represents provision for vacant properties where the group has committed to future lease payments under operating Restructuring mainly relates to significant workforce reduction and lease contracts. reorganization in MHWirth in 2015 due to the very challenging rig market. Note 30 | Trade and other payables Amounts in NOK million trade creditors 1) Amount due to customers for contract work and advances Accrued operating and financial costs other current liabilities Total trade and other payables 1) Trade creditors include NOK 19 million due after one year (NOK 8 million in 2014). book value of trade creditors and other current liabilities is approximately equal to fair value. Note 2015 2014 950 21 1 795 1 027 1 506 2 170 1 951 671 802 4 443 6 429 Annual Report 2015 | Financials and Notes 64 Note 31 | Capital management Akastor’s capital management is designed to ensure that the group Funding duration has sufficient financial flexibility, short-term and long-term. one main Akastor emphasizes financial flexibility and steers its capital structure objective is to maintain a financial structure that, through solidity and accordingly to limit its liquidity and refinancing risks. In this perspective, cash flow, secures the group’s strong, long-term creditworthiness, as well loans and other external borrowings are to be renegotiated well in advance maximize value creation for its shareholders through: of their due date and generally for periods of 3 to 5 years. See also note 26 borrowings and note 38 Subsequent events for more information ŸŸ Investing in projects and business areas which will increase about refinancing agreed in 2016. the company’s Return on Capital employed (RoCe) over time. Funding cost ŸŸ optimizing the company’s capital structure to ensure both sufficient and timely funding over time to finance its activities Akastor aims to have a diversified selection of funding sources in order to reach the lowest possible cost of capital. these funding sources might include: at the lowest cost. Investment policy Akastor’s capital management is based on a rigorous investment selection process which considers not only Akastor’s weighted average cost of ŸŸ ŸŸ ŸŸ the use of banks based on syndicated credit facilities. the issue of debt instruments on the norwegian capital market. the issuance of debt in the foreign capital market. capital and strategic orientation but also external factors such as market Ratios used in monitoring of capital expectations and extrinsic risk factors. Akastor monitors capital on the basis of a gearing ratio (net debt/equity) and Funding policy Liquidity planning interest coverage ratio (ebItDA/net finance costs). these ratios are similar to covenants as defined in loan agreements for revolving credit facility and term loans (see note 26 borrowings for details about these loans) and are Akastor has a strong focus on its liquidity situation in order to meet its shown below. other borrowings in the group have no covenants. short term working capital needs and to ensure solvency for its financial obligations long term. Akastor had a liquidity reserve per year end 2015 ŸŸ the company’s interest coverage ratio (ICR) must not be less of noK 2.6 billion and was beyond cash and cash equivalents, primarily than 4.0 times, calculated from the consolidated ebItDA to composed of an undrawn committed credit facility. See also note 26 consolidated net Finance Cost. borrowings and note 38 Subsequent events for more information about refinancing agreed in 2016. Funding of operations ŸŸ the company’s gearing ratio shall not exceed 1.0 times and is calculated from the consolidated total borrowings to the consolidated equity. Akastor’s group funding policy implies that all operations shall meet the ratios are calculated based on net debt including cash and all interest- their funding needs directly via Corporate treasury. this ensures optimal bearing liabilities as shown in note 34 Financial instruments, ebItDA availability and transfer of cash within the group and better control of the (earnings before interest, tax, depreciation, amortization and adjusted for company’s overall debt as well as cheaper funding for its operations. certain items as defined in the loan agreement) and net finance costs. covenants in existing borrowings as of December 31 Amounts in NOK million Gearing ratio net debt equity Net debt/Equity 1) Interest coverage ratio ebItDA net finance cost EBITDA/Net finance cost 1) 2015 2014 4 061 3 155 7 386 9 378 0.55 0.34 562 1 380 201 167 2.8 8.2 1) Net finance cost, net debt and EBITDA are adjusted for certain items as defined in the loan agreement As shown above, Akastor was below the threshold level of 4.0 for Interest ŸŸ the company’s interest coverage ratio (ICR), calculated from Coverage Ratio (ICR) covenant as of December 31, 2015. on March 11, the consolidated ebItDA to consolidated net Finance Cost, 2016, Akastor signed an agreement with its bank syndicate to amend and shall not be lower than 1.5 in Q4 2015, 0.7 in Q1-Q3 2016, extend its financing structure, including new ICR-levels from Q4 2015 3.0 in Q1 2017 and 4.0 from Q2 2017 onwards. until Q1 2017. the covenants under the new agreements are: Annual Report 2015 | Financials and Notes65 ŸŸ the company’s gearing ratio shall not exceed 1.0 times the covenants are monitored on a regular basis by the treasury and is calculated from the consolidated net debt to the department to ensure compliance with the loan agreements. on the consolidated equity. ŸŸ Minimum liquidity level shall exceed noK 750 million. basis of the new covenants and its forecasts, management believes that the risk of the new covenant being breached is low and that the group will continue as a going concern for the foreseeable future. See note 26 borrowings and note 38 Subsequent events for further information. Note 32 | financial risk management and exposures the group is exposed to a variety of financial risks: currency risk, interest market place. Akastor has a large number of contracts involving foreign rate risk, price risk, credit risk, liquidity risk and capital risk. the market risks currency exposures and the currency risk policy has been well-established affect the group’s income or the value of financial instruments held. the for many years. objective of financial risk management is to manage and control financial risk exposures and thereby increase the predictability of earnings and For segment reporting purposes, each business unit designates all minimize potential adverse effects on the group’s financial performance. currency hedge contracts with Corporate treasury as cash flow hedge, Akastor group uses financial derivative instruments to hedge certain fair value hedge, net investment hedge or identified and separated as an risk exposures and aims to apply hedge accounting whenever possible embedded derivative. external foreign exchange contracts are designated in order to reduce the volatility resulting from the periodic mark-to- at group level as hedges of currency risk on a gross basis. More than 80 market revaluation of financial instruments in the income statement. Risk percent of the exposure value either qualify for hedge accounting or are management is performed in every project. It is the responsibility of the embedded derivatives. non-qualifying hedges are adjusted at group level project managers, in cooperation with the central treasury department and included in the “unallocated” part of the segment reporting. See (Corporate treasury), to identify, evaluate and hedge financial risks note 33 Derivative financial instruments for information regarding the under policies approved by the board of Directors. the group has well- accounting treatment of hedging and embedded derivatives. established principles for overall risk management, as well as policies for the use of derivatives and financial investments. there have not been any Currency exposures from investments in foreign currencies are only changes in these policies during the year. hedged when specifically instructed by management. As of December 31, 2015, the group has one active net investment hedge related to its Currency risk subsidiary Frontica Global employment limited. the group operates internationally and is exposed to currency risk on commercial transactions, recognized assets and liabilities and Exposure to currency risk net investments in foreign operations. Commercial transactions and estimated forecasted receipts and payments in the table below are recognized assets and liabilities are subject to currency risk when calculated based on the group’s hedge transactions through the Corporate payments are denominated in a currency other than the respective treasury department. these are considered to be the best estimate of functional currency of the group company. the group’s exposure to the currency exposure. the net exposure is managed by the Corporate currency risk is primarily to uSD, euR, Gbp and bRl but also several other treasury department that is allowed to hold positions within an approved currencies. Akastor’s policy requires business units to mitigate currency trading mandate. this mandate is closely monitored and reported on a exposure in any project. Corporate treasury manages internal exposures daily basis to the management. by entering into forward contracts or currency options with the financial Amounts in million bank Intercompany loans external loans 2015 2014 usD EuR gBp BRl uSD euR Gbp bRl (106) (23) (27) - (83) (56) (17) - 571 (41) (15) 136 406 (13) (11) 160 (125) - - - - - - - Balance sheet exposure 341 (63) (42) 136 323 (70) (28) 160 estimated forecast receipts from customers 1 086 22 3 365 1 669 75 3 459 estimated forecast payments to vendors (471) (72) (12) (15) (700) (191) (14) (137) cash flow exposure 615 (50) (9) 350 969 (116) (11) 323 forward exchange contracts (952) 113 50 (350) (1 291) 186 39 (483) Net exposure 4 - - 136 1 - - - 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. Annual Report 2015 | Financials and Notes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) 66 2015 2014 profit (loss) before tax Equity Increase (decrease) profit (loss) before tax equity Increase (decrease) (529) (448) 56 17 91 23 (36) (36) (945) 87 19 (6) (909) 152 19 (60) A 15 percent strengthening of the noK against the above currencies as interest rate risk. borrowings issued at fixed rates expose the group to 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 above amounts, on the basis that all other variables remain constant. the amortized cost, interest rate variations do not affect profit and loss when sensitivity analysis does not include effects on the consolidated result and held to maturity. equity from changed exchange rates used for consolidation of foreign subsidiaries. As the group has no significant interest-bearing operating assets, operating income and operating cash flows are substantially independent the primary currency-related risk is the risk of reduced competitiveness of changes in market interest rates. external debt was not hedged at abroad in the case of a strengthened noK. this risk relates to future year end. commercial contracts and is not included in the sensitivity analysis above. Interest rate risk An increase of 100 basis points in interest rates during 2015 would have increased (decreased) equity and profit and loss by the amounts shown on the group’s interest rate risk arises from interest-bearing borrowings. the table below. this analysis assumes that all other variables, in particular borrowings issued at variable rates expose the group to cash flow foreign currency rates, remain constant. Effect of increase of 100 basis points in interest rates on profit (loss) before tax Amounts in NOK million Cash and cash equivalents non-current interest-bearing receivables Current interest-bearing receivables borrowings cash flow sensitivity (net) 2015 9 1 1 (52) (41) 2014 21 1 2 (69) (46) A decrease of 100 basis points in interest rates during 2015 would have Price risk had the equal but opposite effect on the above amounts, on the basis that the group is exposed to fluctuations in market prices both in the all other variables remain constant. there are no effects on equity as there investment portfolio used in the pension benefit plan and in the operating are no interest swaps. Guarantee obligations businesses related to individual contracts. the investment portfolio is limited, and the group currently only holds one the group has provided the following guarantees on behalf of wholly investment in listed companies (ezra), see note 20 other investments. owned subsidiaries as of December 31 (all obligations are per date of issue): the businesses may be exposed to changes in market price for raw materials, equipment and development in wages. this is managed in the ŸŸ Financial guarantees related to project performance on bid process by locking in committed prices from vendors as basis for behalf of group companies are noK 24.0 billion (noK 33.5 offers to customers or through escalation clauses with customers. billion in 2014). ŸŸ Financial parent company indemnity guarantees for fulfillment of lease obligations are noK 4.4 billion (noK 3.3 billion in 2014). Financial guarantees including counter guarantees for bank/ surety bonds and guarantees for pension obligations to employees are noK 3.5 billion (noK 4.0 billion in 2014). Credit risk Credit risk is the risk of financial losses to the group if customer or counterparty to financial investments/instruments fails to meet contractual obligations, and arise principally from investment securities and receivables. Investment securities and derivatives are only traded against approved banks. All approved banks are participants in the Akastor loan syndicate and have investment grade ratings. Credit risk related to investment securities ŸŸ Indemnity under financial agreements on behalf of DoF and derivatives is therefore considered to be insignificant. Deepwater AS is noK 589 million (noK 582 million in 2014). Although guarantees are financial instruments, they are considered contingent obligations and the notional amounts are not included in our financial statements. Assessment of credit risk related to customers and subcontractors is an important requirement in the bid phase and throughout the contract period. Such assessments are based on credit ratings, income statement and balance sheet reviews and using credit assessment tools available (e.g. Dun & bradstreet and Credit Watch). Sales to customers are settled in cash. Annual Report 2015 | Financials and Notes 67 based on estimates of incurred losses in respect of trade and other to managing liquidity is to ensure, as far as possible, that it will always have receivables, the group establishes a provision for impairment losses. sufficient liquidity reserves to meet its liabilities when due. provisions for loss on debtors are based on individual assessments. provisions for loss on receivables were noK 120 million in 2015 (noK prudent liquidity risk management includes maintaining sufficient cash, 118 million in 2014). Revenues are mainly related to large and long¬ the availability of funding from an adequate amount of committed credit term projects closely followed up in terms of payments up front and in facilities and the ability to close out market positions. Due to the dynamic accordance with agreed milestones. normally, lack of payments is due to nature of the underlying businesses, Corporate treasury maintains flexibility disagreements related to project deliveries and is solved together with the in funding by maintaining availability under committed credit lines. customer or escalated to the local authority. At the reporting date, there were no significant concentrations of credit risk. of cash within the group is to operate centrally managed cash pooling the maximum exposure to credit risk at the reporting date equals the book arrangements. Such arrangements are either organized with a bank as value of each category of financial assets, see carrying amounts in note 34 a service provider, or as a part of the operation of Corporate treasury. Financial instruments. the group does not hold collateral as security. An important condition for the participants (business units) in such Akastor ASA provides parent company guarantees to group companies. pools is financially viable and is able to prove its capability to service its cash pooling arrangements is that the group as an owner of such the group policy for the purpose of optimizing availability and flexibility Liquidity risk obligations concerning repayment of any net deposits made by business units. Management monitors rolling weekly and monthly forecasts of the liquidity risk is the risk that the group will encounter difficulty in meeting group’s liquidity reserve on the basis of expected cash flow. the obligations associated with its financial liabilities. the group’s approach financial liabilities and the period in which they mature Amounts in NOK million 2015 borrowings excl. financial lease 2) Financial lease other non-current liabilities net derivative financial instruments trade and other payables Total financial liabilities Financial guarantees 3) 2014 borrowings excl. financial lease Financial lease other non-current liabilities net derivative financial instruments trade and other payables Total financial liabilities Financial guarantees 3) Note Book value Total cash flow 1) 6 months and less 6-12 months 1-2 years 2-5 years more than 5 years 26 26 27 33 30 26 26 27 33 30 3 992 4 086 3 811 28 102 131 14 1 645 3 508 119 177 709 967 1 535 74 74 - - 24 24 25 (218) (218) 207 (313) (83) (29) - 4 443 4 443 3 336 1 107 - - - 9 936 11 892 7 472 1 000 754 1 093 1 573 7 885 864 822 1 572 482 4 145 3 652 1 376 128 (338) 6 429 4 015 2 843 128 (338) 6 429 1 087 106 - 364 4822 131 106 - (528) 1592 11 247 13 077 6 379 1 301 107 251 34 (107) 15 301 2 690 838 65 (68) - - 1542 29 - - 3 525 1 571 7 229 1 295 308 1 033 1 354 3 238 1) Nominal currency value including interest. 2) Maturity of the term loans in the table reflects that these loans will be refinanced in during 1Q 2016. See note 26 Borrowings for more information. 3) Financial guarantees are not recognized on the consolidated balance sheet. The undiscounted cash flows potentially payable under financial guarantees are classified on the basis of expiry date. Note 33 | Derivative financial instruments Akastor uses derivative financial instruments to hedge foreign exchange and expenses are expected to impact profit and loss. the majority of project interest rate exposures. In addition, there are embedded foreign exchange revenues are recognized in accordance with IAS 11 using the percentage of forward derivatives separated from ordinary commercial contracts. Further completion method. this may result in different timing of cash flows related information regarding risk management policies in the group is available in to project revenues and revenue recognition. note 32 Financial risk management and exposures. the table below presents the fair value of the derivative financial instruments used to price embedded derivatives as well as other derivative instruments and a maturity analysis of the derivatives cash flows. Given instruments used by Corporate treasury to hedge the residual exposure Akastor’s hedging policy and the assumption that the projects are cash of the group as part of its risk mandate. As of December 31, 2015, these neutral, this table also indicates when the cash flows related to project instruments only include currency forwards. Instruments that do not qualify for hedge accounting include the external Annual Report 2015 | Financials and Notes 68 fair value of derivative financial instruments with maturity Amounts in NOK million 2015 Assets Cash flow hedges embedded derivatives in ordinary commercial contracts Instruments at fair value Total cash flow 1) 6 months or less 6-12 months 1-2 years 2-5 years 2) 411 707 411 707 223 148 40 - 459 176 43 29 not hedge accounted 29 29 29 - - - Fair value adjustments to hedged assets 3) 600 600 593 6 1 - Total forward foreign exchange contracts, assets 1 746 1 746 1 304 330 84 29 Liabilities Cash flow hedges net investment hedges (496) (496) (487) (8) (1) - (17) (17) (17) - - - embedded derivatives in ordinary commercial contracts (1) (1) (1) - - - not hedge accounted (234) (234) (234) - - - Fair value adjustments to hedged liabilities (781) (781) (772) (9) - - Total forward foreign exchange contracts, liabilities (1 528) (1 528) (1 510) (17) (1) - 2014 Assets Cash flow hedges 567 567 205 embedded derivatives in ordinary commercial contracts 1 105 1 105 not hedge accounted Fair value adjustments to hedged assets 3) 57 57 470 470 334 57 434 Total forward foreign exchange contracts, assets 2 199 2 199 1 030 221 468 - 3 692 121 255 - 33 410 Liabilities Cash flow hedges net investment hedges (357) (357) (132) (18) (207) (39) (39) (31) - (8) embedded derivatives in ordinary commercial contracts (2) (2) (2) - - not hedge accounted (285) (285) (124) (93) (68) 20 49 - - 68 - - - - Fair value adjustments to hedged liabilities 1) (1 176) (1 176) (1 104) (53) (19) - Total forward foreign exchange contracts, liabilities (1 861) (1 861) (1 394) (164) (303) - 1) Cash flows from matured derivatives are translated to NOK using the exchange rates on the balance sheet date. 2) No derivatives with maturity later than five years. 3) Fair value of settled derivatives not yet booked in the income statement are recognized in balance sheet and will be reclassified to the income statement over the next years as the projects progress. the group uses derivative financial instruments such as currency forward payment is in a currency different from any of the major contract parties’ contracts, currency options and interest rate swaps to hedge its exposure own functional currency, or that the contract currency is not considered to foreign exchange and interest rate risks arising from operational, financial to be commonly used for the relevant economic environment defined as and investment activities. Derivative financial instruments are classified as the countries involved in the cross-border transaction. the embedded current assets or liabilities as they are a part of the operating cycle. derivatives represent currency exposures, which is hedged against Foreign exchange derivatives external banks. Since the embedded derivatives are measured and classified in the same way as their hedging derivatives, they will have an Corporate treasury hedges the group’s future transactions in foreign almost equal, opposite effect to profit and loss. In the table above, the currencies with external banks. Approximately 80 percent of the exposure derivatives hedging the embedded derivatives are included in Forward to foreign exchange variations in future cash flows are related to a few large foreign exchange contracts - not hedge accounted. projects. the currency exposure in these projects has been hedged back- to-back in order to meet the requirements for hedge accounting. they are the hedged transactions in foreign currency that are subject to cash flow either subject to hedge accounting or separated embedded derivatives. All hedge accounting are highly probable future transactions expected to other hedges are not designated as IAS 39 hedges and will have an effect on occur at various dates during the next one to four years, depending on profit or loss. Hedges qualifying for hedge accounting are classified as cash progress in the projects. Gains and losses on forward foreign exchange flow hedges (hedges of highly probable future revenues and/or expenses). contracts are recognized in comprehensive income and reported as embedded derivatives are foreign exchange derivatives separated from statement in the period or periods during which the hedged transactions construction contracts. the reason for separation is that the agreed affect the income statement. hedging reserve in equity until they are recognized in the income Annual Report 2015 | Financials and Notes69 unsettled cash flow hedges’ impact on profit and loss and equity (not adjusted for tax) Amounts in NOK million Forward exchange contracts (cash flow hedges) 2015 2014 fair value of all hedging instruments Recognized in profit and loss Deferred in equity (the hedge reserve) Fair value of all hedging instruments Recognized in profit and loss Deferred in equity (the hedge reserve) (85) (104) 19 210 100 110 the value of the hedge reserve is before tax to allow comparison with recognized in the income statement in accordance with progress. the value of the hedging derivatives; this value does not include deferred Consequently, negative noK 104 million (positive noK 100 million in settlements related to matured instruments. 2014) of the value of the forward contracts have already affected the the purpose of the hedging instrument is to secure a situation where based on updated forecasts and progress. the positive noK 19 million the hedged item and the hedging instrument together represent a (positive noK 110 million in 2014) that are currently recorded directly predetermined value independent of fluctuations of exchange rates. in the hedging reserve, will be reclassified to income statement over the Revenue and expense on the underlying construction contracts are next years. income statement indirectly as revenues and expenses are recognized Note 34 | financial instruments 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 by derived from observable market transactions in an active market for the levels in the fair value hierarchy. All other financial instruments are identical assets or liabilities. level 2 includes currency or interest classified by the main group of instruments as defined in IAS 39. It does derivatives and interest bonds, typically when the group uses forward not include fair value information for financial assets and financial liabilities prices on foreign exchange rates or interest rates as inputs to valuation not measured at fair value if the carrying amounts are a reasonable models. approximation of fair value. For financial instruments measured at fair value, the levels in the fair value hierarchy are as shown below. level 3 - Fair values are based on unobservable inputs, mainly based on internal assumptions used in the absence of quoted prices from an active level 1 - fair values are based on prices quoted in an active market for market or other observable price inputs. identical assets or liabilities. Amounts in NOK million Type of instrument Book value level in fair value hierarchy financial instruments measured at fair value 2015 Cash and cash equivalents other investments - equity securities: - Available-for-sale Shares ezra Holding ltd 1) - Available-for-sale other 1) loans and receivables 563 Available for sale 141 Available for sale 120 Derivative financial instruments Fair value - hedging instruments 1 746 non-current interest-bearing receivables loans and receivables 84 other non-current operating assets: level 1 level 3 level 2 141 120 1 746 - Contingent and deferred consideration Fair value through p&l 67 level 3 67 - other non-current operating assets loans and receivables 411 trade and other receivables loans and receivables 5 959 Current interest-bearing receivables loans and receivables 72 Total financial assets Derivative financial instruments non-current borrowings 2) other non-current liabilities Current borrowings 3) other current liabilities: - trade and other payables - Deferred consideration - Contingent consideration Total financial liabilities 9 162 Fair value - hedging instruments (1 528) other financial liabilities (1 583) other financial liabilities (74) level 2 level 2 2 074 (1 528) (1 583) other financial liabilities (4 054) level 2 (4 076) other financial liabilities (4 429) other financial liabilities (8) Fair value through p&l (6) level 3 (11 682) (6) (7 193) Annual Report 2015 | Financials and Notes 70 Amounts in NOK million Type of instrument Book value level in fair value hierarchy financial instruments measured at fair value 2014 Cash and cash equivalents other investments - equity securities: - Available-for-sale Shares ezra Holding ltd 1) - Available-for-sale other 1) loans and receivables 1 075 Available for sale 222 Available for sale 125 Derivative financial instruments Fair value - hedging instruments 2 199 non-current interest-bearing receivables loans and receivables 131 other non-current operating assets level 1 level 3 level 2 222 125 2 199 - Contingent and deferred consideration Fair value through p&l 90 level 3 90 - other non-current operating assets loans and receivables 601 trade and other receivables Current interest-bearing receivables - bonds and certificates 3) - Receivables Total financial assets Derivative financial instruments non-current borrowings 2) other non-current liabilities - Contingent consideration - other liabilities Current borrowings 3) other current liabilities - trade and other payables - Deferred consideration - Contingent consideration Total financial liabilities loans and receivables 7 178 Fair value - hedging instruments 91 level 2 91 loans and receivables 114 11 826 Fair value - hedging instruments (1 861) other financial liabilities (4 720) level 2 level 2 Fair value through p&l (37) level 3 other financial liabilities (91) other financial liabilities (308) level 2 other financial liabilities (6 402) other financial liabilities (7) Fair value through p&l (20) level 3 (13 446) 2 727 (1 861) (4 748) (37) - (308) - - (20) (6 974) 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) For credit facilities and other short-term loans with floating interest, notional amounts are used as approximation of fair values. 3) 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. Reconciliation of level 3 assets and liabilities Amounts in NOK million balance as of January 1, 2014 net gain (loss) in the income statement Assumed in disposal of business Balance as of December 31, 2014 Settlements net gain (loss) in the income statement Balance as of December 31, 2015 Assets liabilities - - 90 90 - (23) 67 (143) 87 - (56) 4 47 (6) the assets and liabilities reported as level 3 in the fair value hierarchy the credit exposure on the level 3 asset is limited to the amount relate to contingent considerations from business acquisitions and recognized and due to the nature of the arrangement the credit risk is not disposals where the final amounts to be paid or received depend on considered to be significant. future earnings in the acquired and disposed companies. the recognized amounts are determined based on recent forecasts and strategy figures for these entities, thus the final realized values are sensitive to the above inputs as driven by market conditions. Annual Report 2015 | Financials and Notes Note 35 | 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 19 equity-accounted investees and note 20 other investments. If not stated otherwise, ownership equals share of voting rights. 71 group companies as of December 31 company Akastor AsA mhWirth MHWirth pty ltd Mpo Austria Holding GmbH Mpo Austria Services GmbH 1) MHWirth Canada Inc MHWirth offshore petroleum engineering (Shanghai) Co ltd Managed pressure operations International limited (Cyprus) MHWirth GmbH MHWirth (India) pvt ltd pt Managed pressure operations (Indonesia) MHWirth Sdn bhd Drilltech AS Managed pressure operations International AS Maritime promeco AS MHWirth AS MHWirth St. petersburg llC 1) Managed pressure operations pte ltd (Singapore) MHWirth (Singapore) pte ltd Mpo Research technologies pte ltd MHWirth uK ltd MHWirth FZe Managed pressure operations FZe (Dubai) MHWirth Inc Managed pressure operations llC (uSA - tX) MHWirth Gas & oil- Field equipment & Services llC 13) frontica Frontica Advantage pty ltd 2) Frontica Global employment ltd Frontica business Solutions Sdn bhd Frontica Group AS 3) 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 Inc AKOfs Offshore 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 AKoFS Angola limited fjords processing Fjords process Australia pty ltd 5) Fjords processing Canada Inc Aker Cool Sorption (beijing) technology Co ltd Aker Midsund engineering s.r.o Cool Sorption A/S Fjords processing France SAS Fjords processing 1 AS 6) Fjords processing AS Fjords processing International AS Midsund bruk 1 AS Midsund bruk AS Aker Cool Sorption Siam ltd Fjords process uK ltd 7) location Fornebu Argenton Vienna Vienna newfoundland Shanghai limassol erkelenz Mumbai Jakarta Kuala lumpur Kristiansand Kristiansand Kristiansand Kristiansand St petersburg Singapore Singapore Singapore Aberdeen Dubai Dubai Houston Houston Abu Dhabi Melbourne limassol Kuala lumpur Fornebu Fornebu bergen Fornebu london london london Houston Houston oslo oslo oslo oslo oslo oslo oslo Fornebu luanda country norway Australia Austria Austria Canada China Cyprus Germany India Indonesia Malaysia norway norway norway norway Russia Singapore Singapore Singapore uK uAe uAe uSA uSA uAe Australia Cyprus Malaysia norway norway norway norway uK uK uK uSA uSA norway norway norway norway norway norway norway norway Angola Welshpool newfoundland beijing prague Glostrup Vincennes Cedex Fornebu Fornebu Fornebu Midsund Midsund Rayong Aberdeen Australia Canada China Czech Republic Denmark France norway norway norway norway norway thailand uK Ownership (%) 2015 2014 100 100 - 100 100 100 100 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 49 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 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 49 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 98 100 100 - 100 100 0 100 100 100 Annual Report 2015 | Financials and Notesgroup companies as of December 31 (cont.) company opus Maxim ltd opus plus ltd Fjords processing Inc pt Aker Solution e & C Indonesia Fjords processing Columbia SAS 6) KOp surface products pt Kop Surface products Kop Surface products Sdn bhd Kop Surface products nigeria ltd Kop Surface products Singapore pte ltd 8) Kop Surface products (Services) pte ltd Kop Surface products (Services) uK ltd 6) Real Estate and other holdings Akastor Real estate AS borgeskogen 69 AS 9) Dvergsnestangen eiendom Invest AS 9) egersund eiendom Invest AS 9) Grunnavågen eiendom Invest AS 9) pusnes eiendom AS 9) Strendene eiendom AS 9) tranby eiendom Invest AS 9) tromsøruffen AS Ågotnes eiendom Invest AS 9) first geo First Geo AS step Oiltools 10) Step oiltools (Australia) pty ltd Step oiltools limited Step oiltools GmbH pt Step oiltools Step oiltools llp Step oiltools bV Step oiltools AS Step oiltools (Myanmar) ltd Step oiltools Services llC Step oiltools (M) Sdn bhd Step oiltools llC Step oiltools pte ltd Step oiltools (thailand) ltd Step oiltools (uK) ltd Step oiltools FZe Other companies Zoetermeer process belgium nV/SA 11) Akastor Mauritius ltd AK operações do brasil ltda 4) Zoetermeer process bV 12) Aker operations ApS 1) Akastor AS Aker Insurance AS 1) btA technology AS AK pharmaceuticals llC AK Willfab Inc 72 Ownership (%) 2015 100 100 100 100 100 100 100 100 100 100 100 100 - - - - - - - 100 - 100 76 76 76 76 76 76 76 76 51 76 76 76 76 76 76 100 100 100 100 - 100 - 100 100 100 2014 100 100 100 100 - 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 76 76 76 76 76 76 76 76 51 76 76 76 76 76 76 100 100 100 100 100 100 100 100 100 100 location Guildford orkney Houston Jakarta bogota Jakarta Kuala lumpur Ikoyi - lagos Singapore Singapore Aberdeen Fornebu Fornebu Fornebu Fornebu Fornebu Fornebu Fornebu Fornebu Fornebu Fornebu country uK uK uSA Indonesia Columbia Indonesia Malaysia nigeria Singapore Singapore uK norway norway norway norway norway norway norway norway norway norway Stavanger norway perth Grand Cayman bad Fallingbostel Jakarta Aktau Amsterdam Stavanger Yangon Muscat Kuala lumpur Moscow Singapore bangkok Aberdeen Dubai Antwerp port louis Rio de Janeiro Zoetermeer Glostrup Fornebu Fornebu Fornebu Houston Williamsport Australia Cayman Islands Germany Indonesia Kazakhstan netherlands norway Myanmar oman Malaysia Russia Singapore thailand uK uAe belgium Mauritius brazil netherlands Denmark norway norway norway uSA uSA 1) Liquidated in 2015 2) Changed name from Advantage Frontica Pty Ltd 3) Changed name from Frontica AS 4) Changed name from AKOFS Offshore Servicos de Petroleo e Gas do Brazil Ltda. The company includes businesses in MHWirth, Frontica Business Solutions, Fjords Processing and AKOFS Offshore 5) Changed name from Fjords Process Systems Pty Ltd 6) New companies in 2015 7) Changed name from Aker Process Systems Ltd 8) Changed name from KOP Surface Products Pte Ltd 9) Sold in 2015 10) No non-controlling interest is recognized due to applying the anticipated acquisition method 11) Changed name from Aker Solutions Belgium NV/SA 12) Changed name from Aker Process BV 13) Share of voting rights is 100% Annual Report 2015 | Financials and Notes73 Note 36 | related parties Related party relationships are those involving control (either direct or Remunerations and transactions with directors and executive officers are indirect), joint control or significant influence. Related parties are in a summarized in note 37 Management remunerations. position to enter into transactions with the company that would not be undertaken between unrelated parties. All transactions with related parties the largest shareholder of Akastor, Aker Kværner Holding AS, is controlled in Akastor have been based on arm’s length terms. by Aker ASA (70 percent) which in turn is controlled by Kjell Inge Røkke Akastor ASA is a parent company with control of around 90 companies the Chief executive officer of Akastor, Kristian Monsen Røkke, is a board around the world. these subsidiaries are listed in note 35 Group companies. member of tRG Holding AS. Aker ASA also holds 8.5 percent of the shares Any transactions between the parent company and the subsidiaries in Akastor ASA directly. All entities controlled by Aker ASA are considered are shown line by line in the separate financial statements of the parent related parties to Akastor, referred as “Aker entities”. and his family through tRG Holding AS and the Resource Group tRG AS. company, and are eliminated in the consolidated financial statements. Joint ventures and associates are consolidated using the equity method, party of Akastor as part of “Aker entities”. For the same reason Aker see note 19 equity-accounted investees. transactions between the group Solutions is also considered to be a related party as part of “Aker entities” and these entities are shown in the table below. from the time of the demerger in September 2014. After implementation of IFRS 10, Kvaerner is considered to be a related summary of transactions and balances with related parties Amounts in NOK million Income statement operating revenues other income operating costs net financial items Assets (liabilities) trade receivables 2015 Aker entities Joint ventures Total Aker entities 2014 Joint ventures and Associates total 4 222 310 (288) (279) - 4 222 4 596 - 4 596 - 310 - - - - (288) (488) (82) (570) 4 (275) (62) 5 (57) 154 - 154 530 - 530 Interest-bearing receivables - 82 82 63 84 147 ppe under finance lease ( Aker Wayfarer) non-current assets under finance lease (Aker Wayfarer) trade payables Financial lease liability (Aker Wayfarer) Interest-bearing liability 1 313 410 (51) (1 645) - 1 313 890 - 890 - - 410 600 - 600 (51) (137) (19) (156) - (1 645) (1 376) - (1 376) - - - (82) - (82) below are descriptions of significant related party transactions in 2015. Related party transactions with Aker entities ŸŸ An agreement concerning ownership and licensing rights Aker Solutions to intellectual property and know-how as well as several Akastor has entered into a number of agreements and arrangements with bilateral license agreements between Aker Solutions and Aker Solutions, including: ŸŸ Agreements for the provision of shared services from Frontica Akastor entities based on the principles and allocation of technology set out in the technology Agreement. to subsidiaries of Aker Solutions as well as agreements for ŸŸ A main separation agreement addressing various separation real estate and lease agreements from Akastor Real estate issues between Aker Solutions and Akastor following the AS to subsidiaries of Aker Solutions. the amount charged for completion of the demerger in 2014. these services are noK 3.6 billion (noK 4.0 billion in 2014). ŸŸ An agreement for provisioning of transitional services to and ŸŸ In February 2016, Frontica signed a five year contract with from Aker Solutions following the demerger in 2014, which Aker Solutions to deliver staffing services, It services and are not covered by Frontica’s agreements. consultancy projects as well as business support services within HR, finance and procurement. the contract value of outsourcing services (Ito and bpo) is estimated to be between noK 1-1.25 billion annually and staffing services with an estimated value of additional noK 1 billion annually (depending on volume). ŸŸ Various agreements addressing commercial separation issues between subsidiaries of Aker Solutions and Akastor, 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 Annual Report 2015 | Financials and Notes74 entities within the Subsea reporting segment of Aker Aker Ship Lease 1 AS (Ocean Yield) Solutions and entities within Fjords processing of Akastor In 2009 Aker Ship lease 1 AS and AKoFS offshore entered into a 10 regarding development of certain process technologies and year bareboat charter contract for vessel Aker Wayfarer. In September an agreement between Subsea and MHWirth regarding the 2014, AKoFS offshore was awarded a five year contract with petrobras use and development of well control technologies. to provide subsea intervention services offshore in brazil for the Aker 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 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 Aker Solutions. Kvaerner Wayfarer vessel with a start in Q4 2016 with a five-year option extension. the vessel will be converted to 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 the finance lease obligation as of December 31, 2015 amounts to noK 1 645 million, of which noK 269 million is presented as current liability, representing the lease payment to Aker Ship lease 1 AS in the next twelve months. Vessel under finance lease amounts to noK 1 313 million as of December 31, 2015 and an additional noK 410 million is recognized in other non-current assets and Frontica is a supplier of services to Kvaerner (shared services, recruitment represents the capex obligation in the contract. the increase of carrying and supply of technical and project administrative personnel). the amount amounts of finance lease assets and liabilities is due to the change of charged for these services are noK 312 million (noK 392 million in 2014). functional currency of Aker Wayfarer from noK to uSD as of January 1, 2015. Akastor has provided parent company guarantees on behalf of Kvaerner entities of noK 12.2 billion related to guarantees that were not Related party transactions with joint ventures transferred in connection with the demerger in 2011. the amount reflects DOF Deepwater AS obligations per date of issue of the guarantees. Kvaerner pays a guarantee A loan of noK 82 million (noK 84 million in 2014) is given to the joint commission on market terms and is liable to indemnify Akastor for any venture DoF Deepwater (nIboR 12 months + 1.5 percent). Akastor ASA rightful claim under the guarantee. has issued financial guarantees in favor of financial institutions related to financing of the five vessels in DoF Deepwater, refer to note 19. Aker Maritime Finance AS In December 2015, Akastor sold its real estate portfolio comprising of Other related parties eight properties to Aker Maritime Finance AS, a wholly owned subsidiary Aker Pensjonskasse of Aker ASA. the consideration was noK 1 174 million and a gain of noK Aker pensjonskasse was established by Aker ASA to manage the 310 million was recognized as other income. Following the divestment, retirement plan for employees and retirees in Akastor as well as related MHWirth AS and Midsund bruk AS, wholly owned subsidiaries of Akastor, Aker companies. Akastor holds 93.4 percent of the paid-in capital in Aker entered into long-term lease agreements with subsidiaries of Aker pensjonskasse and Akastor’s share of paid-in equity was noK 120 million Maritime Finance AS for properties in Dvergsnestangen and Midsund. the at the end of 2015 (unchanged from 2014). Akastor’s premium paid to lease period is 19 years starting october 1, 2015, with options for renewal. Aker pensjonskasse amounts to noK 15 million in 2015 (noK 14 million AK Wilfab Inc, a wholly owned subsidiary of Akastor, is together with in 2014). Aker Solutions Inc and Aker Maritime Finance AS sponsoring the uS even though Akastor owns 93.4 percent in Aker pensjonskasse, the pension plan named the Kvaerner Consolidated Retirement plan. Aker ownership does not constitute control since Akastor does not have the Maritime Finance AS holds two thirds of the liability of the sponsors for power to govern the financial and operating policies so as to obtain the underfunded element of the plan, while the ultimate liability for the benefits from the activities in this entity. remaining one third lies with Akastor. Fornebuporten AS Aker ASA has signed an agreement with employee representatives on January 30, 2015, Akastor entered into a long-term lease agreement that regulate use of grants from Akastor ASA for activities related to with Fornebuporten AS, an associate of Aker ASA, starting August 31, professional development. the grant in 2015 was noK 595 000 (noK Grants to employee representative’s collective fund 2015 for headquarter offices at Fornebu. the duration of the contract is 335 000 in 2014). 10 years, with two additional five-year options. Annual Report 2015 | Financials and Notes75 Note 37 | management remunerations Board of directors the board of directors did not receive any other fees than those listed in the fees in the table below represent what is recognized as expenses in the table below in 2015 or 2014, except for employee representatives the income statement based on assumptions about fees to be approved who had market based salaries. the members of the board of directors at the general assembly in 2015 for 2014 rather than what has been paid have no agreements that entitle them to any extraordinary remuneration. in the year. Amounts in NOK 2015 Kjell Inge Røkke Frank ove Reite Øyvind eriksen lone Fønss Schrøder Kathryn baker Sarah Ryan 1) Jannicke Sommer-ekelund Stig Faraas Asbjørn Michailoff pettersen Total Amounts in NOK 2014 Øyvind eriksen lone Fønss Schrøder Kjell Inge Røkke Kathryn baker Sarah Ryan 1) Jannicke Sommer-ekelund Stig Faraas Asbjørn Michailoff pettersen Anne Drinkwater1) Atle teigland Åsmund Knutsen Arild Håvik Hilde Karlsen Stuart Ferguson1) Koosum parsotam Kalyan1) Total Board meeting attendance Extraordinary board meeting attendance Audit committee attendance Audit committee Board fees 2 of 6 2 of 2 7 of 8 8 of 8 8 of 8 8 of 8 8 of 8 8 of 8 8 of 8 1 of 2 1 of 2 1 of 2 2 of 2 2 of 2 2 of 2 2 of 2 2 of 2 7 of 7 205 000 7 of 7 115 000 7 of 7 115 000 255 000 150 000 535 000 440 000 340 000 445 600 170 000 170 000 170 000 435 000 2 675 600 Aker solutions Akastor Board meeting attendance Extraordi- nary board meeting attendance Board Risk committee Audit committee Board fees Board meeting attendance Audit committee Board fees 7 of 7 7 of 7 6 of 7 2 of 2 2 of 2 1 of 2 7 of 7 1 of 2 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 3 000 000 63 750 255 000 255 000 - 255 000 3 of 3 2 of 3 3 of 3 3 of 3 3 of 3 3 of 3 3 of 3 3 of 3 38 750 21 250 21 250 300 000 85 000 85 000 85 000 85 000 42 500 42 500 42 500 15 000 116 250 255 000 15 000 26 250 15 000 71 250 63 750 127 500 127 500 127 500 127 500 330 000 255 000 243 750 5 115 000 81 250 767 500 1) Board fees in 2015 and 2014 includes an allowance of NOK 12 500 per meeting per physical attendance for board members residing outside the Nordic countries According to policy in Aker, fees to directors employed in Aker companies Guidelines for remuneration to the members of the executive are paid to the Aker companies, not to the directors in person. therefore, management of Akastor board fees for Øyvind eriksen were paid to Aker ASA. board fee for the main purpose of the executive remuneration is to encourage a strong Kjell Inge Røkke was paid to the Resource Group AS. the board fee for and sustainable performance-based culture, which supports growth in Øyvind eriksen up until July 1, 2014 includes fee for his role as executive shareholder value. As of December 31, 2015, the executive management of Chairman. Audit Committee Akastor comprises the company’s Ceo, Kristian Monsen Røkke, CFo leif H. borge, Investment Director paal e. Johnsen and Investment Director Karl erik Kjelstad. the company practices standard employment contracts Akastor has an audit committee comprising three of the directors, which and standard terms and conditions regarding notice period and severance held 7 meetings in 2015. As of December 31, 2015, the audit committee pay for the Akastor management. Kristian Monsen Røkke and paal e. comprises lone Fønss Schrøder (chairman), Kathryn M. baker and Asbjørn Johnsen have three months’ notice period as a part of their employment Michailoff pettersen. contracts, while borge and Kjelstad both have six months’ notice periods. Annual Report 2015 | Financials and Notes 76 Compensation to the executive management has a fixed element which the salary figures for the remuneration for the executive management includes a base salary which pursuant to the company’s benchmarking is before the demerger in 2014 represents what is paid out in the period competitive with other investment companies. In addition, the executive rather than what is expensed in the year, except for leif Hejø borge and management has variable remuneration, as further described below. All Karl erik Kjelstad who continued in Akastor’s executive management. For variable pay shall be subject to a cap. the executive management of Akastor, the salary figures represent what has been expensed in the year. Amounts in NOK Job title period Base salary 1) variable pay 7) Other benefits 2),3) Total taxable remuneration pension benefit earned/cost to company 4) 2015 Ceo Frank ove Reite Kristian Monsen Røkke Ceo leif Hejø borge 6) CFo Karl erik Kjelstad 6) Investment director Investment director paal e. Johnsen Total 1 Jan - 9 Aug 1 Aug - 31 Dec 1 Jan - 31 Dec 1 Jan - 31 Dec 18 May - 31 Dec 2 519 166 1 540 735 3 446 646 3 581 353 1 947 355 13 035 255 - 914 708 1 331 143 1 524 044 426 888 4 196 784 30 446 3 291 21 848 29 920 7 861 93 366 2 549 612 2 458 733 4 799 638 5 135 317 2 382 104 17 325 404 45 765 33 963 136 592 133 189 41 214 390 722 Job title period Base salary 1) variable pay 7) Other benefits 2),3) Total taxable remuneration pension benefit earned/cost to company 4) Ceo CFo Investment director 1 Jul - 31 Dec 1 Jan - 31 Dec 1 Jan - 31 Dec 2 287 385 3 995 668 3 750 771 - 1 219 887 1 320 161 4 169 48 168 49 601 2 291 554 5 263 723 5 120 533 40 970 154 558 141 551 1 Jan - 30 Jun 1 Jan - 30 Jun 1 Jan - 30 Jun 1 Jan - 30 Jun 1 Jan - 30 Jun Head of Subsea Head of Drilling technologies Head of engineering Head of process Systems Head of umbilicals Head of Maintenance, 1 Jan - 30 Jun Modifications and operations 1 Jan - 30 Jun Chief technology officer 1 Jan - 30 Jun Head of operations 1 Jan - 30 Jun Chief HR officer 1 Jan - 30 Jun Chief Strategic Marketing 1 Jan - 30 Jun Regional president of norway Regional president of brazil 1 Jan - 30 Jun Regional president of north America 1 Jan - 30 Jun 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 27 014 553 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 20 895 611 4 847 28 186 29 196 433 319 24 890 2 864 411 1 231 574 2 816 573 2 785 570 3 433 110 25 178 210 315 79 044 27 024 408 554 28 409 194 611 165 948 1 761 458 3 212 413 2 688 208 4 265 255 1 828 248 2 565 449 3 019 079 4 254 961 2 030 960 49 671 622 251 631 62 388 126 583 51 750 90 989 104 201 62 081 64 206 64 042 79 185 115 201 64 411 149 145 1 622 892 Amounts in NOK 2014 Akastor Frank ove Reite leif Hejø borge 1),5) 6) Karl erik Kjelstad 5) 6) Aker solutions Alan brunnen Roy Dyrseth Valborg lundegaard David Merle tom Munkejord tore Sjursen Åsmund bøe nicoletta Giadrossi Sissel Anne lindland Mark Riding per Harald Kongelf luis Araujo erik Wiik Total 1) Includes accrued holiday allowances and temporary allowance for additional job responsibility for Leif Hejø Borge of NOK 500 000 in 2014 2) Other benefits include insurance agreements, such as membership in the standard employee scheme and an additional executive group life and disability insurance. The amount also includes housing costs, international salary compensation, children schooling costs and severance pay (see footnote 4). 3) Other benefits include salary in notice period and severance pay for management where employment is terminated. 4) 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. 5) Leif Hejø Borge was President and CFO in Aker Solutions in first half 2014 (before the demerger). Karl-Erik Kjelstad was Head of Oilfield and Marine Assets in first half 2014 (before the demerger). Both were as of December 31, 2014 part of the management team in Akastor. The amounts in the 2014 table were for the full year. 6) Variable pay includes deferred variable payments from previous years, which are paid out on the condition of continued employment 7) See below for further description of principles for performance based remuneration. Annual Report 2015 | Financials and Notes 77 Benefits development of the Akastor ASA share price, it requires approval by the the executive management participates in the standard employee, general meeting and the guidelines will thereafter be binding. pension and insurance plan applicable to all employees in the company. no executive personnel in Akastor has performance based pension plans Further, the executive management may be offered additional variable pay and there are no current loans, prepayments or other forms of credit from arrangements going forward which differs from the ordinary variable pay the company to its executive management. no members of the executive program described above. the variable pay arrangements offered to the management are part of any option- or incentive programs other than executive management may in its entirety be linked to the development of what is described in this declaration. the company’s share price. the executive management may from time to time be granted a discretionary variable pay. there was no discretionary Performance based remuneration pay expense in 2014 or 2015. In addition to the fixed compensation set out above, the executive management participates in a variable pay program. the objective of the Share purchase program for Akastor’s executive management team program is to incentivize the management to contribute to sound financial the company has not carried out any standard share purchase programs results for the company as well as executing leadership in accordance for employees in 2015. However, the board resolved that Mr. Røkke could with the company’s values and business ethics. the variable pay program purchase up to 200 000 additional treasury shares on or about after 20 potential is maximized to 100 percent of the annual base salary. the trading days following his employment in Akastor. the shares were bought payments under the variable pay program are determined based on three by Mr. Røkke’s wholly owned subsidiary Riverrun Capital Management AS components: on September 7, 2015, at the price of noK 10.8055 per share (equivalent with the average share price for the first 20 days of trading following ŸŸ ŸŸ ŸŸ Development of Akastor ASA’s share price his first day of employment on August 10, 2015, less a discount of 20 Delivery of certain key financial and operational targets for Akastor Delivery of personal performance objectives during the year percent). the shares are subject to a three-year lock-up period under which the acquired shares may not be sold or otherwise disposed of. Directors’ and executive management’s shareholding For the Ceo, payments under the variable pay program are determined the following number of shares is owned by the directors and the based on development of Akastor ASA’s share price alone. Since the members of the executive management (and their related parties) as of variable pay program for the executive management is partly linked to the December 31: Kristian Monsen Røkke leif Hejø borge Karl erik Kjelstad paal e. Johnsen Frank ove Reite lone Fønss Schrøder Kathryn baker Sarah Ryan Jannicke Sommer-ekelund Stig Faraas Asbjørn Michailoff pettersen Job title Ceo CFo Investment Director Investment Director Chairman Deputy Chairman Director Director Director Director Director 2015 200 000 142 775 123 074 - 200 000 4 400 - - 839 - 3 050 2014 - 142 775 123 074 - 200 000 4 400 - - 252 - 3 050 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. Note 38 | subsequent events Refinancing Restructuring on March 11, 2016, Akastor ASA signed an agreement with its bank In February 2016, another 300 people were downsized in the norwegian syndicate to amend and extend its current bank facilities until July 2019. entities of MHWirth. Similar processes have also been initiated in other the existing bank facilities, maturing 2017, will be replaced by a uSD countries in which MHWirth operates. Restructuring costs are expected 422.5 million reducing revolver facility (Facility A), maturing in July 2019. to be incurred during 2016. In addition, Akastor has reached an agreement with Dnb, nordea and Seb for a new noK 362.5 million revolving facility (Facility C) to mature in June 2017. the existing noK 2.0 billion revolving facility (Facility b) is still maturing on July 2019. Annual Report 2015 | Financials and Notes05.b. FInAnCIAlS AnD noteS AKAsTOr AsA Akastor ASA | Income statement Akastor ASA | Statement of financial position Akastor ASA | Statement of cash flow | Accounting principles note 1 | operating revenue and expenses note 2 | net financial items note 3 | tax note 4 | Investments in group companies note 5 | Shareholders’ equity note 6 | Receivables and borrowings from group companies note 7 | other non-current interest-bearing receivables note 8 note 9 | borrowings note 10 | Guarantees note 11 | Financial risk management and financial instruments note 12 | Related parties note 13 | Shareholders note 14 | Subsequent events 78 79 80 81 82 83 83 84 84 84 85 85 86 87 88 88 89 89 A s A r o t s a k A | s e t o N d n a s l a c n a n f i i Annual Report 2015 | Financials and Notes Akastor AsA | income statement for the year ended December 31 Amounts in NOK million operating revenue operating expenses Operating profit (loss) net financial items profit (loss) before tax Income tax benefit (expense) profit (loss) for the period Profit (loss) for the period distributed as follows other equity profit (loss) for the period 79 Note 2015 2 2 3 4 16 (67) (52) (1 386) (1 437) (23) (1 461) (1 461) (1 461) 2014 27 (109) (82) (38) (120) 40 (80) (80) (80) Annual Report 2015 | Financials and Notes Akastor AsA | statement of financial position for the year ended December 31 Amounts in NOK million Assets Deferred tax asset Investments in group companies non-current interest-bearing receivables on group companies other non-current interest-bearing receivables Total non-current assets Current interest-bearing receivables on group companies other receivables on 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, external Total non-current liabilities Current borrowings, external Current borrowings from group companies Group contribution, payable other liabilities to group companies Financial liabilities other current liabilities Total current liabilities Total liabilities Total equity and liabilities 80 Note 2015 2014 4 5 7 8 7 11 7 6 9 9 7 31 39 4 754 4 963 2 021 1 289 84 85 6 890 6 376 4 150 4 743 - 14 1 939 2 408 38 32 195 499 6 322 7 696 13 212 14 072 162 162 (2) (2) 2 000 2 000 2 003 2 003 (923) 537 3 241 4 700 3 577 3 472 3 577 3 472 10 2 4 183 3 290 42 - 55 21 11 2 032 2 431 72 156 5 903 5 900 9 971 9 372 13 212 14 072 Fornebu, March 15, 2016 | board of Directors of Akastor ASA Frank o. Reite | Chairman lone Fønss Schrøder | Deputy Chairman Øyvind eriksen | Director Kathryn M. baker | Director Sarah Ryan | Director Jannicke Sommer-ekelund | Director Stig Faraas | Director Asbjørn Michailoff pettersen | Director Kristian Monsen Røkke | Ceo Annual Report 2015 | Financials and Notes Akastor AsA | statement of cash flow for the year ended December 31 Amounts in NOK million profit before tax Adjustment for impairment Changes in other net operating assets Net cash from operating activities payment related to increase in interest-bearing receivables Net cash from investing 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 of Aker Solutions cash in cash pool system at the end of the period 1) 1) Unused credit facilities amounted to NOK 2 billion as of December 31, 2015 (NOK 1 billion in 2014). 81 Note 2015 2014 (1 461) (80) 1 505 - 165 (468) 209 (548) 29 (29) 29 (29) - 3 000 1 178 3 500 (1 000) (7 242) 215 6 390 (937) (876) 2 33 - (60) - (1 115) (543) 3 630 (304) 3 053 499 1 023 - (3 577) 7 195 499 Annual Report 2015 | Financials and Notes 82 Note 1 | Accounting principles Akastor ASA ( the parent company) is a company domiciled in norway. Cash in cash pool system the financial statements are presented in conformity with norwegian Cash in cash pool system is the parent company’s cash as well as net legislations and norwegian generally accepted accounting principles. deposits from subsidiaries in the group’s cash pooling systems owned by 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 the parent company. Correspondingly, the parent company’s current debt Aker Solutions ASA (“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 to the statement of cash flow is prepared according to the indirect method. Akastor ASA. the demerger entailed a reorganization without change in ownership. For accounting purpose, the continuity method was applied, cf. Share capital publication “Demerger” of the norwegian Accounting Standards board. Costs for purchase of own shares including transaction costs are accounted Consequently, the book value of assets and liabilities transferred upon the for directly against equity. Sales of own shares are performed according demerger was recognized by Aker Solutions ASA. the effective date of to stock-exchange quotations at the time of award and accounted for as the demerger was January 1, 2014, hence all transactions during 2014 increase in equity. related to assets, rights, obligations and liabilities that were transferred to Aker Solutions ASA in the demerger were, for accounting purposes, Foreign currency allocated to Aker Solutions ASA in 2014. transactions in foreign currencies are translated at the exchange rate at Revenue recognition the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional Revenue is recognized when the service is delivered. operating revenue currency at the exchange rate on that date. Foreign exchange differences is comprised mainly of income from parent company guarantees (pCG). arising on translation are recognized in the income statement. the pCGs are invoiced when the guarantee is issued and the income is distributed over the lifetime of the guarantee. Insurance commissions are Derivative financial instruments recognized the year the insurance is established. Subsidiaries have entered into financial derivative agreements with the parent company to hedge their foreign exchange exposure. the Investments in subsidiaries and associates parent company does not engage in hedging activities other than as a Investments in subsidiaries and associates are accounted for using the cost counterparty in financial derivative agreements with the subsidiaries. In method in the parent company’s accounts. the investments are valued the parent company, derivatives from external banks are used to mitigate at cost less impairment losses. Write-downs to fair value are recognized the foreign exchange exposure from the financial derivative agreements when the impairment is considered not to be temporary and reversed if with the subsidiaries. the basis for the impairment is no longer present. Dividends and other distributions are recognized as income the same consolidated financial statements for description of hedge accounting at Hedge accounting is performed at group level. Refer to note 3 in Akastor’s year as they are allocated from the subsidiary. If the dividend exceeds group level. accumulated profits in the subsidiary after the acquisition, the payment is treated as a reduction of the carrying amount of the investment. All financial assets and liabilities related to foreign exchange contracts are revalued at fair value in respect to exchange rates at reporting date. Classification and valuation of balance sheet items Current assets and current liabilities include items due within one year or In order to reduce the interest rate risk related to external borrowings, items that are part of the operating cycle. the rest is classified as non- Akastor also enters into interest swap agreements. the market value of current assets or non-current liabilities. interest rate swaps classified as cash flow hedges (where the interest rate of the debt is switched from floating- to fixed interest rate) is Current assets are valued at the lowest of cost and fair value. Current accounted for directly against equity while the corresponding interest liabilities are valued at nominal value at the time of recognition. payments are reflected in the profit and loss to neutralize potential non-current debts are initially valued at transaction value less attribute transaction cost. Subsequent to initial recognition, interest-bearing non- the value of interest rate swaps classified as fair value hedges (from current debt is stated at amortized cost with any difference between cost fixed to floating interest rate) is accounted for through profit and loss. At and redemption value being recognized in the income statement over the the same time a corresponding adjustment to the carrying value of the changes in interest levels. period of the borrowing on an effective interest basis. non-current debt is borrowing is accounted for. presented as current if a loan covenant breach exists. If a covenant waiver is approved subsequently and before the approval of financial statements, Tax the debt is presented as non-current debt. tax expense in the income statement comprises current tax and changes in deferred tax. Deferred tax is calculated as 25 percent of temporary differences trade receivables and other receivables are recognized at nominal between accounting and tax values as well as any tax losses carry-forward at value less provision for expected losses. provision for expected losses is the year end. net deferred tax assets are recognized only to the extent it is considered on an individual basis. probable that they will be utilized against future taxable profits. Annual Report 2015 | Financials and Notes83 Note 2 | Operating revenue and expenses operating revenue comprises mainly noK 12 million in income from there are no employees in Akastor ASA and hence no salary or pension parent company guarantees (noK 18 million in 2014) and noK 4 million related costs and also no loan or guarantees related to the executive in insurance commissions from group companies (noK 9 million in 2014). management team. Group management and corporate staff are employed Income from parent company guarantees includes noK 0.1 million from by other Akastor companies and costs for their services as well as other external companies (noK 8 million in 2014). parent company costs are charged to Akastor ASA. Remuneration to and shareholding of managing director is described in note 37 Management remunerations in Akastor’s consolidated financial statements. fees to the auditors Amounts in NOK million Audit other assurance services 1) other non-audit services Total 2015 2014 2 - - 2 4 18 1 23 1) NOK 18 million in 2014 related to services provided related to the demerger of the group. The amount was recharged to 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 Impairment of loans to group companies Impairment of shares other financial income other financial expense Foreign exchange gain Foreign exchange loss Net other financial items Net financial items Note 2015 336 (8) 328 4 4 12 (211) (199) 7 5 (1 265) (240) 19 (1) 261 (294) (1 519) (1 386) 2014 255 (27) 228 5 5 27 (298) (271) - - - (12) 324 (312) - (38) Annual Report 2015 | Financials and NotesNote 4 | Tax Amounts in NOK million Calculation of taxable income profit (loss) before tax Impairment of internal loans and shares in subsidiaries permanent differences Changes in timing differences Generated (utilized) tax loss Taxable income Taxable (deductible) temporary differences unrealized gain(loss) on forward exchange contracts other temporary differences tax loss carry-forward Basis for deferred tax tax rate Deferred tax assets Tax expense origination and reversal of temporary differences in income statement Withholding tax paid tax on group contribution Total tax in income statement Note 5 | investments in group companies 84 2015 2014 (1 437) 1 505 (4) (120) - (32) 60 74 (123) 78 - - (93) (30) - (123) 25% (23) (40) (82) (145) 27% 31 39 (8) 41 (4) (1) (11) - (23) 40 Amounts in NOK million Registered office share capital Number of shares held percentage owner- / voting share Akastor AS AKoFS offshore AS 1) Fornebu, norway oslo, norway 1 004 482 1 10 378 306 100.00% 32.29% Total investments in subsidiaries 2015 4 191 563 2014 4 160 803 4 754 4 963 1) 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 shares were impaired by NOK 240 million in 2015, as a result of the vessel impairment in AKOFS Offshore AS. Note 6 | shareholders’ equity Amounts in NOK million equity as of January 1, 2014 Shares issued to employees through share program 1) Share buy back Demerger of Aker Solutions profit (loss) for the period Equity as of December 31, 2014 profit (loss) for the period Equity as of December 31, 2015 share capital 455 - - (293) - 162 - 162 Own shares share premium Other paid in capital Retained earnings 2 000 2 442 4 109 - - - - - - 32 (59) (439) (3 465) (80) 537 (2) 2 000 2 003 (3) 1 (2) 2 Total 9 003 33 (61) (4 195) (80) 4 700 - - - (2) 2 000 2 003 (1 461) (923) (1 461 ) 3 241 1) Akastor operates a share purchase programme 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. Annual Report 2015 | Financials and Notes85 on September 28, 2014, the demerger of Akastor was completed, refer the share capital of Akastor ASA is divided into 274 000 000 shares with to note 1 Accounting principles. An allocation of the share capital was a nominal value of noK 0.592. the shares can be freely traded. An overview determined, after deducting the value of Akastor’s treasury shares, such of the company’s largest shareholders is to be found in note 13 Shareholders. that 35 percent of the share capital was allocated to Akastor and 65 percent was allocated to Aker Solutions giving a split ratio of 35:65 percent. the number of own shares held by the end of 2015 are 2 776 376 and Following the demerger, Aker Solutions ASA issued pro rata consideration are held for the purpose of being used for future awards under any share shares to Akastor’s shareholders and was listed on the oslo Stock exchange purchase program for employees, as settlement in future corporate on September 29, 2014. acquisitions or for other purpose as decided by the board of directors. 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 on group companies non-current interest-bearing receivables on group companies Current borrowings from group companies Net interest-bearing receivables on group companies 2015 2014 3 102 2 760 (410) (280) (2 497) (1 981) 195 499 4 150 4 743 2 021 1 289 (4 183) (3 290) 1 988 2 742 Interest-bearing receivables on and borrowings from group Cash pool arrangement companies Akastor ASA is the owner of the cash pool system arrangements with Akastor ASA is the group’s central treasury function and enters into Dnb, nordea and the Royal bank of Scotland. the cash pool systems borrowings and deposit agreements with group companies. Deposits and cover a majority of the group geographically and assure good control borrowings are done at market terms and are dependent of the group and access to the group’s cash. participation in the cash pool is vested in companies’ credit rating and the duration of the borrowings. the group’s policy and decided by each company’s board of directors and In 2015, an impairment of noK 1.3 billion is recognized related to interest- pool system are jointly and severally liable and it is therefore important bearing receivables on group companies. the impairment is mainly related that Akastor as a group is financially viable and can repay deposits and to receivables on Step oiltools, MHWirth Inc and Mpo. 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 All current receivables and borrowings are due within one year. on Akastor ASA and a credit balance a borrowing from Akastor ASA. confirmed by a statement of participation. the participants in the cash Akastor ASA has an obligation to fund Step oiltools b.V with an amount the cash pool systems were showing a net balance of noK 195 million up to uSD 107 million (out of which uSD 95 million was drawn by end per December 31, 2015. this amount is reported in Akastor ASA’s of 2015). Any loans under this agreement shall be repaid no later than accounts as short term borrowings from group companies and as cash December 31, 2017. in cash pool system. Note 8 | Other non-current interest-bearing receivables Amounts in NOK million loan to DoF Deepwater AS (related party to Akastor) Stiftelsen Akastor Kompensasjonsordning Total other non-current interest-bearing receivables 2015 2014 82 83 2 2 84 85 Annual Report 2015 | Financials and Notes86 Note 9 | Borrowings Amounts in million currency 2015 Nominal currency value carrying amount (NOK) Interest rate Interest margin Interest coupon maturity Interest terms Revolving credit facility (noK 2 000 million) 3) noK - (10) 1.00 % 1.90 % 2.90 % July 2017 2) IboR + variable margin 1) term loan term loan Accrued interest Total borrowings Current borrowings non-current borrowings Total borrowings noK 2 500 2 491 1.20 % 1.80 % 3.00 % July 2019 2) IboR 3M+fixed margin uSD 125 1 096 0.48 % 1.60 % 2.08 % January 2017 2) IboR 3M+fixed margin 10 3 587 10 3 577 3 587 Amounts in million currency 2014 Nominal currency value carrying amount (NOK) Interest rate Interest margin Interest coupon maturity Interest terms Revolving credit facility (noK 2 000 million)3) noK 1 000 987 1.48% 1.60% 3.08% July 2017 IboR + variable margin 1) term loan Accrued interest Total borrowings Current borrowings non-current borrowings Total borrowings noK 2 500 2 485 1.48% 1.40% 2.88% July 2019 IboR 3M+fixed margin 2 3 474 2 3 472 3 474 1) The margin applicable to the facility is decided by a price grid based on the gearing ratio and level of utilization. Commitment fee is 40 percent of the margin. 2) The maturity date reflects maturity date as defined in the loan agreements. See below for further description of covenant breach as of December 31, 2015. 3) Carrying amount of negative NOK 10 million in 2015 relates to issue costs. NOK 1 000 million in 2014 corresponds to the repayment of the drawn portion of the available NOK 2 000 million. All facilities are provided by a bank syndicate consisting of high quality (ICR) based on ebItDA/net finance costs. the financial covenants are nordic and international banks. the terms and conditions include tested on a quarterly basis. the gearing ratio should not be higher than restrictions which are customary for this kind of facility, including inter alia 1 and the interest ratio coverage should not be less than 4.0 calculated negative pledge provisions and restrictions on acquisitions, disposals and from the consolidated ebItDA to consolidated net Finance Cost. As of mergers. there are also certain changes of control provisions included. December 31, 2015, the ICR level was below the minimum level. on March the facility includes no dividend restrictions and is unsecured. 11, 2016, Akastor signed an agreement with its bank syndicate to amend and extend its financing structure, including new ICR-levels from Q4 2015 the financial covenants are based on two sets of key financial ratios; a until Q1 2017. gearing ratio based on net debt/equity and an interest coverage ratio Borrowings under the new agreement: Revolving credit facility Revolving credit facility Revolving credit facility size margin maturity uSD 422.5 million noK 2 000 million noK 362.5 million 1.65%-4.50% 1.65%-4.50% 1.65%-4.50% July 2019 July 2019 June 2017 Annual Report 2015 | Financials and Notes 87 The covenants under the new agreements are: ŸŸ the company’s interest coverage ratio (ICR), calculated from the covenants are monitored on a regular basis by the treasury department to ensure compliance with the loan agreements. on the basis the consolidated ebItDA to consolidated net Finance Cost, of the new covenants and its forecasts, management believes that the shall not be lower than 1.5 in Q4 2015, 0.7 in Q1-Q3 2016, risk of the new covenant being breached is low and that the group will 3.0 in Q1 2017 and 4.0 from Q2 2017 onwards. continue as a going concern for the foreseeable future. ŸŸ the company’s gearing ratio shall not exceed 1.0 times and is calculated from the consolidated net debt to the consolidated equity. ŸŸ Minimum liquidity level shall exceed noK 750 million financial liabilities and the period in which they mature Amounts in NOK million 2015 carrying amount Total undiscounted cash flow 1) 6 months and less 6-12 months 1-2 years 2-5 years Revolving credit facility (noK 2 000 million) (10 ) - - term loan (noK 2 500 million) 2) 2 491 2 512 2 512 term loan (uSD 125 million) 2) 1 096 1 103 1 103 10 10 10 3 587 3 625 3 625 - - - - - - - - - - - - - - - Accrued interest Total borrowings 2014 Revolving credit facility (noK 2 000 million) 987 1 139 1 015 15 31 77 term loan (noK 2 500 million) 2 485 2 680 36 36 72 2 536 Accrued interest Total borrowings 2 2 2 3 474 3 821 1 053 - 51 - 103 - 2 613 1) The interest costs are calculated using the last fixing rate known by year end (plus applicable margin). 2) Maturity of the term loans in the table reflects that these loans will be refinanced in during Q1 2016. Note 10 | guarantees Amounts in NOK million parent Company Guarantees to group companies 1) Guarantees on behalf of Kvaerner companies Counter guarantees for bank/surety bonds 2) Guarantees on behalf of companies sold 3) Total guarantee liabilities Maturity of guarantee liabilities: 6 months and less 6-12 months 1-2 years 2-5 years 5 years and more 2015 14 356 12 194 3 462 425 30 436 8 009 9 343 3 259 5 681 4 145 2014 10 846 25 241 3 959 425 40 471 14 213 413 18 041 7 347 457 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 Intervention Limited (former Aker Qserv Ltd). Although guarantees are financial instruments, they are considered contingent obligations and the notional amounts are not included in the financial statements. Annual Report 2015 | Financials and Notes88 Note 11 | financial risk management and financial instruments Akastor ASA has entered into forward exchange contracts with but only a small number of the total contracts. these contracts have no subsidiaries in 2015 with a total value of about noK 34.4 billion. large significant impact on Akastor ASA’s income statement. contracts are hedged back-to-back with external banks, while minor contracts are hedged based on internal matching principles. Contracts All instruments are measured at fair value as of December 31. that are hedged directly represent about 80 percent of the total exposure Amounts in NOK million Forward exchange contracts with group companies Forward exchange contracts with external counterparts Total 2015 2014 Assets liabilities Assets liabilities 1 430 509 1 939 (1 420) (612) (2 032) 1 754 654 2 408 (850) (1 581) (2 431) Interest rate risk external deposits and forward contracts are done according to a list of borrowings are issued at variable rates and Akastor ASA is exposed to approved banks and primarily with banks with which the company also cash flow interest rate risk. external debt was not hedged at year end. have a borrowing relationship. the existence of netting agreements between Akastor ASA and the relations banks reduces the credit risk. Interest-bearing borrowings to group companies reflect the cost of external borrowing, reducing the interest risk exposure for Akastor ASA. Liquidity risk Credit risk liquidity risk relates to the risk that the company will not be able to meet its debt and guarantee obligations and are managed through Credit risk relates to loans to subsidiaries and associated companies, maintaining sufficient cash and available credit facilities. the development overdraft in the group’s cash pool, hedging contracts, guarantees to in the group’s and thereby Akastor ASA’s available liquidity is continuously subsidiaries and deposits with external banks. loans to subsidiaries are monitored through weekly and monthly cash forecasts, annual budgets assessed by the internal credit committee. loss provisions are recognized and long term planning. in situations of negative equity and when the company is not expected to be able to fulfil its loan obligations from future earnings. noK 1.3 billion was impaired in 2015, see also note 7 Receivables and borrowings from group companies. 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 are described in note 36 Related parties in the consolidated financial Transactions other services Financial items Investments Cash pool Receivables and borrowings Guarantees Foreign exchange contracts Info in note note 2 note 3 note 5 note 7 note 7, 8 note 10 note 11 statements. All transactions with related parties are done at market rates and in accordance with the arm’s lengths principle. Annual Report 2015 | Financials and Notes89 Note Nominee Number of shares held Ownership X X X X X X X X X X X 110 333 615 54 603 407 30 067 853 23 331 762 7 840 060 4 830 268 3 691 900 2 776 376 110 333 615 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 % 19.93 % 10.97 % 8.52 % 2.86 % 1.76 % 1.35 % 1.01 % 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 6 Note 13 | shareholders shareholders with more than 1 percent shareholding company 2015 Aker Kværner Holding AS Goldman Sachs & Co euroclear bank S.A./n.V.('bA') Aker ASA oDIn norge Morgan Stanley & Co SIX SIS AG Akastor ASA 2014 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 Note 14 | subsequent events Refinancing on March 11, 2016, Akastor ASA signed an agreement with its bank syndicate to amend and extend its current bank facilities until July 2019. See note 9 borrowings for more information about the terms under the new agreement. Annual Report 2015 | Financials and NotesAnnual Report 2015 | Auditors report 90 06. AuDItoRS RepoRt t r o p e r s r o t i d u A Annual Report 2015 | Auditors report 91 Annual Report 2015 | Board of Directors 92 07. boARD oF DIReCtoRS frank O. reite | Chairman Frank o. Reite (born 1970) first joined Aker in 1995, and became CFo in Aker ASA in August 2015. He holds a b.A. in business administration from Handelshøyskolen bI in oslo. Mr. Reite came from the position of president & Ceo of Akastor, and has previously held a variety of executive positions in the Aker group, including overseeing and developing Aker’s investments in Converto Capital Fund AS, Havfisk ASA, norway Seafoods Group AS and Aker Yards ASA. Mr. Reite also has experience from banking and served as operating Director at paine & partners, a new York-based private equity firm. Mr. Reite is chairman of Havfisk ASA and of Akastor ASA. Mr. Reite holds no shares in Aker ASA, and has no stock options. Mr. Reite is a norwegian citizen and has been elected for the period 2015-2017. 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. She is 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 of economics from Copenhagen business School. As of December 31, 2015, 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. Øyvind eriksen | Director Øyvind eriksen (born 1964) joined Aker ASA in January 2009. Mr. eriksen holds a law degree from the university of oslo. He joined the norwegian law firm bA-HR in 1990, where he became a partner in 1996 and a director/chairman from 2003. At bA-HR, Mr. eriksen worked closely with Aker and Aker’s main shareholder, Kjell Inge Røkke. Mr. eriksen is chairman of Aker Solutions ASA and Aker Kværner Holding AS, and a director of several companies, including the Resource Group tRG AS, tRG Holding AS and Reitangruppen AS. As of December 2015, Mr. eriksen holds no shares or stock options in Akastor directly; he has an ownership interest through his holding of 144 911 shares in Aker ASA, through erøy AS. erøy AS also owns 100 000 b-shares (0.2 percent) in tRG Holding AS, the largest shareholder in Aker ASA. Mr. eriksen is a norwegian citizen and has been elected for the period 2014-2016. Kathryn m. Baker | Director Kathryn M. baker currently serves on the executive board of the Central bank of norway (norges bank), where she is also a member of the audit and ownership committees. other board positions include Catena Media plc and Agasti Holding ASA. Ms. baker also serves on the european Advisory board of the tuck School of business, the Advisory board of DlA piper norway and the ethics Committee of the norwegian private equity and Venture Capital Association (nVCA), where she previously served as Chairman. previous board positions include Data Respons ASA, bW Gas ASA, bertel o. Steen Invest AS and SafeRoad AS. Ms. baker was a partner at the norwegian private equity firm Reiten & Co for 15 years. prior to that, she was a management consultant at McKinsey and Company in oslo and a financial analyst at Morgan Stanley in new York. Ms. baker holds a bachelor degree in economics from Wellesley College and an MbA from the Amos tuck School of business 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. s r o t c e r i D f o d r a o B Annual Report 2015 | Board of Directors 93 sarah ryan | Director Sarah Ryan is energy Advisor to earnest partners, a uS investment management firm, and a non- executive director of Woodside petroleum. Dr Ryan was investment director and equity analyst with earnest partners, and previous to that held various senior management, technical and operational roles with Schlumberger. Dr Ryan was also non-executive director of Aker Solutions. 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, 2015, 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 | Director Jannicke Sommer-ekelund is Senior Consultant and lead Auditor for supply chain support at MHWirth. Ms. Sommer-ekelund joined Aker Solutions in 2006 and worked as a senior consultant in procurement until 2012 when she moved to her current role. She holds exams in Mechanical engineering and personnel Management and organizational Development from the technology Agder Maritime College. Her background is from mechanical engineering, fabrication and supply chain in marine industry, onshore and offshore. Jannicke was a crew member on board the Mt/ polytrader in 1980 when the second cargo from the Statfjord A loading buoy was picked up and delivered to Mongstad. As of December 31, 2015, she holds 839 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 | Director Stig Faraas works as SAp Masterdata Administrator at Frontica. He joined Aker Solutions in 1992. Mr. Faraas holds a certificate of apprenticeship in office and administration, Surface treatment and Security and Safety. As of December 31, 2015, 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 2014-2017. Asbjørn michailoff Pettersen | Director 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 the 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, 2015, 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. Annual Report 2015 | management 94 08. MAnAGeMent Kristian røkke | Chief executive Officer Kristian Røkke joined Akastor ASA in August 2015 and has experience in offshore service and shipbuilding from several companies in the Aker group. He has spent the past eight years at Aker philadelphia Shipyard, most recently as Chairman of the board and previously as president & Ceo. before then, Mr. Røkke served as SVp operations and has held other production management positions at AKpS. Mr. Røkke will continue as Chairman of Aker philadelphia Shipyard ASA and as a board member of tRG Holding AS, American Shipping Company ASA and philly tankers AS. Mr. Røkke holds an MbA from the Wharton School, university of pennsylvania and is both a norwegian and united States citizen. As of December 31, 2015, Mr. Røkke holds, through a privately owned company, 200 000 shares in Akastor ASA. 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, 2015, 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 | executive Vice President – 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, 2015, he held, through a privately owned company, 123 074 shares in the company and had no stock options. Mr. Kjelstad is a norwegian citizen. Paal e. Johnsen | executive Vice President – investment Director paal e. Johnsen joined Akastor from a senior position within Investment banking at Dnb bank ASA. From 2009 to 2014, he was Ceo of an investment company and held several board position in both public and private companies across several industries. From 1996 to 2008, Mr. Johnsen held several executive positions in Carnegie Investment banking, both on equity research and investment banking. Mr. Johnsen holds a Master of Science (MSc) in economics and business Administration from the norwegian School of economics. As of December 31, 2015, he held no shares in the company and had no stock options. Mr. Johnsen is a norwegian citizen. t n e m e g a n a m Annual Report 2015 | company information 95 09. 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 Akastor ASA oksenøyveien 10, 1366 lysaker, norway po box 124, 1325 lysaker, norway +47 21 52 58 00 akastor.com MHWirth butangen 20, 4639 Kristiansand, norway po box 413 lundsiden, 4604 Kristiansand, norway +47 38 05 70 00 mhwirth.com AKOFS Offshore Karenslyst Allé 57, 0277 oslo, norway po box 244, 0213 oslo, norway +47 23 08 44 00 akofsoffshore.com Frontica Snarøyveien 36, 1364, Fornebu, norway po box 222, 1326 lysaker, norway +47 67 82 60 00 frontica.com KOP Surface Products 77 Science park Drive #04-01/07 Cintech 3 Singapore Science park, Singapore 118256 +65 68 80 97 40 kopsurfaceproducts.com Fjords Processing Snarøyveien 36, 1364, Fornebu, norway po box 403, 1327 lysaker, norway +47 67 83 77 00 fjordsprocessing.com First Geo Jåttåvågveien 10, 4020 Stavanger, norway po box 289, 4066 Stavanger, norway +47 51 81 23 80 first-geo.com Step Oiltools Maskinveien 9, 4033 Stavanger, norway +47 95 72 84 76 stepoiltools.com Design and layout: tania Goffredo | Photography: Front/back cover and pages 2&3, Rolf estensen n o i t a m r o f n i y n a p m o C 

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