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
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Annual Report 2015 | This is Akastor
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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.
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Annual Report 2015 | This is Akastor
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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
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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:
MHWirth which provides drilling systems and
lifecycle services
Frontica, global provider of corporate and staffing
services
AKoFS offshore, a vessel-based subsea well
installation and intervention services provider
Fjords processing, which provides wellstream
processing technology and services
Kop Surface products, which delivers surface oil
and gas equipment
Step oiltools, a drilling waste management
company, of which Akastor owns 76 percent
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.
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Annual Report 2015 | BOD Report
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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:
Working against Corruption
Respecting Human Rights
Caring for Health & Safety
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:
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
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Kathryn M. baker | Director
Sarah Ryan | Director
Jannicke Sommer-ekelund | Director
Stig Faraas | Director
Asbjørn Michailoff pettersen | Director
Kristian Monsen Røkke | Ceo
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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.
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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:
election of the nomination committee and
stipulation of the nomination committee’s fees;
election of shareholder representatives to the
board of directors as well as stipulation of fees to
the board of directors;
election of the external auditor and stipulation of
the auditor’s fee;
Approval of the annual accounts and the board of
directors’ report, including distribution of dividend.
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
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.
net defined benefit (asset) liability is recognized at fair value
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
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
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.
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
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
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:
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.
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,
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
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
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.
Goodwill not deductible for tax purposes
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
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
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
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
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.
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
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
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
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
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
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
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
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.
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
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).
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
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
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:
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
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).
An agreement for provisioning of transitional services to and
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).
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
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
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:
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.
the company’s gearing ratio shall not exceed 1.0 times
and is calculated from the consolidated net debt to the
consolidated equity.
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
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Annual Report 2015 | Board of Directors
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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.
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Annual Report 2015 | Board of Directors
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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.
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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
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