2016
ANNUAL
REPORT
2
Annual Report 2016
TABLE OF CONTENTS
01. THIS IS AKASTOR
02. BOARD OF DIRECTORS' REPORT
03. DECLARATION BY THE BOARD
OF DIRECTORS AND CEO
04. CORPORATE GOVERNANCE STATEMENT
05. FINANCIALS AND NOTES
a. Akastor Group
b. Akastor ASA
06. AUDITORS REPORT
4
6
13
14
23
23
80
92
07. ALTERNATIVE PERFORMANCE MEASURES 99
08. BOARD OF DIRECTORS
09. MANAGEMENT
10. COMPANY INFORMATION
101
103
104
Annual Report 2016
3
KEY FIGURES (CONTINUING)
Results and orders (NOK million)
Total revenue and other income
EBITDA
EBITDA margin (percent)
Net profit (loss)
Net profit (loss) incl discontinued operations
Cash flow from operating activities
Borrowings
Equity ratio (percent)
Order intake
Order backlog December 31
Share (NOK)
Share price December 31
Basic/Diluted earnings per share
Employees (Full time equivalents)
2016
2015
5 310
69
1.3
(2 017)
(1 282)
(56)
3 054
43
3 907
7 753
9 983
567
5.7
(1 844)
(2 587)
(289)
5 637
36
5 368
12 702
16.2
(4.73)
12.0
(9.54)
Employees including hired-ins per December 31
2 702
4 069
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)
1.2
1.9
2.8
0.7
1.6
2.4
Net capital employed
NOK million
Revenue
NOK million
EBITDA
NOK million
Other
104
KOP Surface
396
MHWirth
3 200
3000
2500
2000
1500
1000
500
0
AKOFS
Offshore
4 378
Total
8 078
2 544
1 353
1 392
1 370
1 196
495
500
400
300
200
100
0
Q4 15
Q1 16
Q2 16
Q3 16
Q4 16
Q4 15
-100
-200
166
91
(48)
(140)
Q1 16
Q2 16
Q3 16
Q4 16
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Annual Report 2016 | This is Akastor
01. THIS IS AKASTOR
Akastor ASA, hereinafter referred to as Akastor, was the
surviving entity in the demerger of Aker Solutions in September
2014. Akastor is a Norway-based oil-services investment
company with a portfolio of industrial holdings, real estate and
other investments. The company has a flexible mandate for
active ownership and long-term value creation.
Business Model
Per 31 December 2016, the portfolio comprises: drilling
systems and lifecycle services supplier MHWirth; vessel-based
subsea well construction and intervention services provider
AKOFS Offshore; surface oil and gas equipment supplier KOP
Surface Products; and other smaller sized holdings. The
portfolio businesses are developed as stand-alone entities
under the Akastor umbrella and represent the Company’s four
reporting segments. Akastor operates globally and has a
number of subsidiaries located worldwide.
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. The aim is to maximize
value potential of each entity by clarifying the portfolio
companies’ business models, capitalize on their market
positions, and strengthen underdeveloped areas of value
creation.
Highlights During the Year
In 2016, Akastor carried out several transactions. In July,
Managed Pressure Operations was sold to AF Global. In
November, Akastor and Mitsui/MOL created a joint venture,
Avium Subsea, with 50/50 ownership between AKOFS
Offshore AS ("AKOFS") and Mitsui/MOL. Later in November,
Akastor sold Frontica Business Solutions to Cognizant. Further,
Akastor sold Fjords Processing to National Oilwell Varco in
December 2016. Akastor also announced the merger of
Frontica Advantage and NES Global Talent in 2016. Initially,
Akastor received a 15.2% ownership position in the combined
entity with potential to increase its ownership depending on
the growth of Advantage over the next three years. The
transaction was closed in January 2017.
Holding and Earnings
Aker Kværner Holding AS, which is owned 70 percent by Aker
ASA and 30 percent by the Norwegian government, is the
largest shareholder of Akastor owning 40.27 percent of the
shares. Aker ASA also has a direct shareholding in Akastor of
8.5 percent. Akastor shares are traded on the Oslo Stock
Exchange under the ticker AKA.
Akastor’s portfolio companies generated 2016 revenues of
NOK 5.3 billion, EBITDA of NOK 69 million and employ 2 702
people worldwide. Akastor operates a corporate centre with
22 employees situated at Fornebu, Norway.
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Annual Report 2016 | This is Akastor
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Current Portfolio
MHWirth
MHWirth is a leading global provider of first-class drilling
solutions and services. The company’s knowledge and
technologies span from reservoir to production and through
the life of the field.
With a legacy founded more than a century ago, MHWirth’s
reputation is preserved through a combination of values,
people and innovative technologies. The company vision drives
a strong commitment to quality and yielding economic
advantages for its customers and stakeholders.
Today, MHWirth has a strong regional presence covering five
continents with offices in more than 16 countries. Proven by a
respected track record and a vast collection of customer
success stories, MHWirth’s 1 700 dedicated professionals
consistently strive to enhance customer satisfaction and form
meaningful collaborations. MHWirth had revenues of NOK 3.5
billion and an EBITDA of NOK 71 million in 2016.
AKOFS Offshore
AKOFS Offshore is a provider of vessel-based subsea well
construction and intervention services to the oil and gas
industry. The company has a 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 offshore oilfield services to leading oil and gas
producers and subsea service providers around the globe.
AKOFS offshore had revenues of NOK 835 million, EBITDA of
NOK 316 million in 2016 and employs 113 people.
In November 2016 AKOFS Offshore entered into a 50/50 joint
venture with Mitsui O.S.K. Lines, Ltd (MOL) and Mitsui & Co.,
Ltd. (Mitsui) to create Avium Subsea AS.
Avium Subsea AS has acquired the high-end subsea vessel
Skandi Santos, which is on hire and operated by AKOFS
Offshore on contract to Brazil’s national oil company, Petrobras.
KOP Surface Products
KOP Surface Products is an international supplier of surface
wellheads, trees, valves and actuators to the oil and gas
industry. KOP has been providing engineering, manufacturing,
installation and life-of field support services customized to its
customers’ needs since 1934. As a one-stop solutions provider,
KOP develops reliable and cost-effective products and
solutions in cooperation with its customers, with focus not
only on products and tools, but also on optimization of jacket
design, drilling and operational cost. KOP has grown rapidly in
recent years by expanding its footprint and market share on a
global scale. The company is headquartered in Singapore and
with its main manufacturing operations in Batam, Indonesia.
Highly qualified employees provides worldwide installation and
operational assistance for all products through a global
network of service centres. KOP had revenues of NOK 335
million and EBIDTA of negative NOK 22 million in 2016,
employs 488 people.
Other Holdings
In addition to the portfolio companies, Akastor has invested in
other smaller sized holdings which include 100 percent
ownership of First Geo and Cool Sorption, a 76 percent stake
in STEP Oiltools and a 50 percent stake in DOF Deepwater.
Other holdings reported revenues of NOK 674 million and
EBITDA of NOK negative NOK 296 million in 2016.
6
Annual Report 2016 | BOD Report
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 with a flexible mandate
for active ownership and long-term value creation. Aker
Kværner Holding AS, which is 70 percent owned by Aker ASA
and 30 percent by the Norwegian government, is the largest
shareholder of Akastor with a shareholding of 40.27 percent.
Aker ASA also has a direct shareholding in Akastor of 8.5
percent. The shares of Akastor are traded on the Oslo Stock
Exchange under the ticker AKA. The Akastor portfolio of
companies had a total net capital employed of NOK 8.1 billion
at the end of 2016.
Highlights 2016
In 2016, Akastor announced and concluded several transactions,
releasing approximately NOK 2.6 billion in cash. At the end of
the year, the company had reduced its net debt by NOK 2.5
billion to NOK 2.6 billion, and had a liquidity reserve including
bank facilities of approximately NOK 3.1 billion. During 2016,
Akastor sold the portfolio companies Frontica Business
Solutions, Fjords Processing and Managed Pressure Operations
(MPO). In January 2017, the transaction involving Frontica
Advantage was completed. Following the above mentioned
transactions, these operations have been classified as
discontinued operations and excluded from the group’s key
figures. The figures and operations referred to in this report
are related to continuing operations and historical comparative
figures have been restated accordingly. Net profit from these
discontinued operations ended at NOK 734 million.
Akastor’s total revenue from continuing operations was NOK 5.3
billion in 2016, a decrease of 47 percent from 2015. EBITDA
ended at NOK 69 million, down 88 percent from 2015. The
decline is mainly due to tougher market conditions for all portfolio
companies during 2016. The order backlog amounted to NOK 7.8
billion at the end of 2016 compared to NOK 12.7 billion a year
earlier. The order intake for 2016 was NOK 3.9 billion.
Company Overview
Akastor is primarily focused on the oilfield services sector. The
portfolio in 2016 covers a range of industrial holdings in this
sector, all in varying stages of maturity, including:
MHWirth, which provides drilling systems and lifecycle
services.
AKOFS Offshore, a vessel-based subsea well instal-
lation and intervention services provider.
KOP Surface Products, which delivers surface oil and
gas equipment.
Step Oiltools, a drilling waste management company, in
which Akastor owns 76 percent.
First Geo, which delivers subsurface advice and pro-
ducts to E&P companies.
Cool Sorption, a supplier of vapour recovery units and
systems.
In addition, Akastor owns a number of financial investments
such as a 50 percent stake in DOF Deepwater AS, which are
reported in the reporting segment Other Holdings. Following
the divestment of Frontica Advantage in January 2017, Akastor
also has a minority holding of 15.2 percent of NES Global Talent
(see note 37 Subsequent events in the consolidated accounts).
Each Akastor portfolio company is organized as an independent
business with its own dedicated management team, which
together with the company’s board, is fully responsible for all
aspects of its operations. All portfolio companies have separate
boards of directors, 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, with a team of 22
employees, working closely with the boards and management
of its portfolio companies.
Akastor’s portfolio companies have a total of 2 702 employees
with presence in 27 countries at year end 2016.
Strategy
Akastor is an investment company, advocating an independent
approach for each portfolio company to optimize
its
development potential. Akastor aims to create long-term value
for its shareholders through active development of its portfolio
companies as stand-alone businesses, while maintaining the
flexibility to be opportunistic. Akastor works closely with each
portfolio company’s management to make decisions on
business development, acquisitions and divestments to
maximize the value of the company. Each portfolio company
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.
The business models of the portfolio companies are
decentralized, but as part of the Akastor portfolio, all
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companies share a common foundation based on Akastor’s
values and compliance structure.
Capital discipline is a key focus. Akastor will only pursue new
investments generating returns above the cost of equity.
Market Outlook
All of Akastor’s portfolio companies operate in the oilfield
services industry. The market outlook for 2017 is affected by
reduced levels of E&P spending seen in recent years. While
Akastor is positive toward the longer-term outlook for the oil
and gas sector, Akastor still expects market conditions to be
demanding for all its portfolio companies in 2017, and will as an
active owner work closely with the portfolio companies to
position them for growth in current and new markets.
Akastor’s order backlog was down 39 percent, or NOK 5 billion,
at year end 2016 compared to 2015. Akastor has a sufficient
liquidity reserve, 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 continue to focus on adjusting its businesses to the
current market conditions.
Group Financial Performance
Akastor presents its consolidated financial statements in
accordance with
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.
the
Income Statement
Operating revenue and other income for 2016 decreased by
47 percent to NOK 5.3 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,
(EBITDA)
tax, depreciation and amortization
decreased by 498 million to NOK 69 million. Earnings in 2016
were impacted by reduced revenues for MHWirth and KOP
Surface Products. EBITDA was also impacted by onerous
offices leases in “Other holdings”, a gain from realization of
Skandi Santos vessel in AKOFS Offshore and restructuring
costs in MHWirth.
Depreciation and amortization was NOK 746 million in 2016,
compared to NOK 829 million in the previous year. In addition,
impairment losses of NOK 473 million were recognized in
2016. The vessel AKOFS Seafarer was impaired by NOK 118
million, mainly triggered by an increase in the applied discount
rate used in impairment testing. Further, an impairment of
NOK 299 million was recognized related to the plant of
MHWirth in Brazil and planned closing of a manufacturing
plant in Malaysia. The impairment was triggered by current
weak market conditions for project related work which are
expected to continue in the short to medium term.
The group had an operating loss of NOK 1.2 billion. Net financial
items ended at NOK -1 174 million in 2016 compared to NOK
-678 million in the previous year and includes an impairment of
the shareholding in DOF Deepwater AS of NOK 214 million,
impairment of receivable from EZRA Holding Ltd. of NOK 56
million as well as hedge loss from projects in MHWirth that no
longer meet requirements for hedge accounting due to
cancellation risk. The pre-tax loss for the year was NOK 2.3
billion, compared to a loss of NOK 2.2 billion the previous year.
The income tax benefit for 2016 was NOK 307 million,
compared to a tax benefit of NOK 351 in 2015. The effective
tax rate of 13 percent is influenced by several 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 7.44 in 2016, compared with negative NOK 6.80 a year
earlier. Profit from discontinued operations ended at NOK
734 million, giving earnings per share for discontinued
operations of NOK 2.71 compared with negative NOK 2.74 in
2015.
The board of directors has resolved to propose to the annual
general meeting that no dividend is distributed for 2016.
Financial Position
Total assets of Akastor amounted to NOK 12.9 billion as of
December 31, 2016, compared with NOK 20.5 billion at year-
end 2015. The decrease reflects reduction in current operating
assets of NOK 2.0 billion, impairments of NOK 0.5 billion as
well as sale of assets of NOK 2.7 billion as result of divestments.
Total operating liabilities in portfolio companies decreased by
NOK 0.6 billion, mainly explained by decreased activity levels.
Gross debt decreased by NOK 2.6 billion as a result of
divestments carried out during the year as well as reduction in
net working capital (NCOA).
Total equity amounted to NOK 5.6 billion at yearend 2016,
compared to NOK 7.4 billion the year before. The equity ratio
was 43 percent as of December 31, 2016, increased from 36
percent in 2015.
Cash Flow
As of December 31, 2016, Akastor had cash of NOK 487 million,
a reduction from NOK 563 million in 2015. The net cash flow
from operating activities for all operations was NOK -129
million, and reflects changes in working capital of NOK 508
million offset by negative effects from interest costs, financial
leases and paid tax.
Net cash flow from investing activities was NOK 2.7 billion
compared to negative NOK 216 million in 2015. Net cash
Annual Report 2016 | BOD Report 8
proceeds from divestments of businesses in 2016 were NOK
2.4 billion, compared to NOK 1.2 billion in 2015. In addition, sale
of fixed assets increased cash by NOK 667 million, mainly
related to the sale of Skandi Santos topside equipment to
Avium Subsea, in which AKOFS Offshore owns 50%. Investing
activities also include capex investments of NOK 153 million
compared to NOK 1.5 billion in 2015. No new business
acquisitions were carried out in 2016.
Net cash flow from financing activities amounted to negative
NOK 2.6 billion and reflected reduced borrowings in 2016.
Going Concern
As of December 31, 2016, the interest coverage ratio (ICR) was
below the minimum level of 1.5 as defined in the bank facility
agreement dated March 11, 2016. NOK 1.2 billion of the debt
will mature in July 2019, and was therefore reclassified from
non-current to current borrowings
in the consolidated
accounts. On March 1, 2017, Akastor signed an agreement with
its bank syndicate to i) replace its ICR covenant with a nominal
EBITDA amount until Q2 2018; and ii) to be allowed to use the
existing Revolving Credit Facilities to make acquisitions under
certain conditions. The board of directors confirms that the
company is a going concern and that the 2016 financial
statements have been prepared on a going concern basis.
The Akastor Portfolio
MHWirth
MHWirth is a global provider of drilling solutions, engineering,
projects, equipment and services. MHWirth has activity on five
continents with presence in 15 countries. At year-end 2016,
the company employed 1 738 people; 47% of the workforce
was employed in Norway. The company’s business is divided in
four core areas: Large Projects, Engineering Services, 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 and R&D capitalization
NCOA
Net capital employed
Order intake
Order backlog
Employees ex discontinued (FTE)
2016
3 548
71
(552)
36
1 091
3 200
2 936
1 481
1 738
2015
6 527
18
(349)
360
2 133
4 285
3 475
5 654
2 894
The revenue for 2016 of NOK 3 548 million was down 46
percent from 2015 which is mainly driven by reduction in
Large Projects activity level which was impacted by the
current down cycle in the offshore drilling market with no new
orders in 2016. Also the Drilling Lifecycle Services business
experienced reduced activity level throughout 2016 and saw a
total revenue reduction of NOK 1 013 million from 2015
activity levels. Activity level was driven by reduced level of
spare parts sales and overhaul related work to operating rigs
which started with 62 active rigs in the first quarter and ended
with 49 active full package rigs in the fourth quarter of 2016.
The EBITDA increased from NOK 18 million in 2015 to NOK 71
million in 2016. The improved profitability was driven by
in contribution
reduced
margins in all segments. Total restructuring cost of NOK 220
million was included in the result.
indirect cost and
improvement
Working capital (NCOA) was reduced by NOK 1 043 million
compared to the level at year-end 2015 and ended at NOK 1
091 million. The main driver of the reduction was collection of
receivables from customers. A significant part of the working
capital is tied up in inventory.
The offshore drilling market has continued to decline in 2016,
which has impacted both number of rigs in operation as well as
new build orders. MHWirth has not signed any new build orders
for high-end floaters or jack-ups during 2016. Overall order
intake was down 16 percent from 2015 and the order backlog
was reduced by 74 percent during the year. In the second
quarter of 2016, MHWirth decided to remove the remaining
backlog (NOK 3 554 million) for three of the seven drilling
packages to Jurong Shipyard in Singapore due to the financial
uncertainty of Jurong’s client, Sete Brazil. At the end of 2016,
MHWirth has NOK 886 million (unaudited) in backlog related
to the remaining four drilling packages to Jurong.
In response to the market slowdown, MHWirth has throughout
2016 reduced organizational capacity by approximately 1 150
employees, corresponding to a reduction of around 40 percent
compared to year-end 2015. In 2016, it was decided to close
down the sites in Port Klang, Malaysia (manufacturing and
Drilling Lifecycle Services for the Riser product line) and Okpo,
South Korea (Large Projects administration). Both sites will be
closed mid-2017. As a result of the workforce reduction and
close-downs, MHWirth has recognized restructuring costs of
NOK 220 million in 2016. The indirect cost base is reduced by
around NOK 630 million. 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.
In addition to making adjustments to the organization and cost
base to face lower activity levels, MHWirth has in 2016 also
been through a strategy update in response to the market
conditions and customer priorities. The updated strategy has
set a clear direction for MHWirth in relation to markets and
customers, product offering and technology, Drilling Lifecycle
Services offerings and operational improvements.
AKOFS Offshore
AKOFS Offshore is a provider of vessel-based subsea well
installation and intervention services to the oil and gas industry.
The companycovers all phases of the value chain from
conceptual development to project execution and offshore
Annual Report 2016 | BOD Report 9
operations. AKOFS Offshore operates three specialized
offshore vessels, Skandi Santos, Aker Wayfarer and AKOFS
Seafarer, employing 113 people (FTE, incl. hired-ins).
The company’s revenue increased by 7 percent in 2016 to NOK
835 million, and EBITDA increased by NOK 212 million to NOK
316 million, mainly due to the sale of the Skandi Santos topside
equipment to a new joint venture as described below.
During 2016, the company created a 50/50 joint venture with
Mitsui & Co. Ltd. and Mitsui O.S.K. Lines Ltd., which acquired
both the Skandi Santos hull from DOF Subsea Rederi AS and
the Skandi Santos topside equipment from AKOFS Offshore.
The joint venture has a lease agreement with AKOFS Offshore
corresponding to the remaining Skandi Santos contract
duration between AKOFS Offshore and Petrobras. As a result
of the transaction, AKOFS Offshore realized a cash gain of
NOK 542 million (USD 66 million), net of investments in the
joint venture, and an accounting gain of approximately NOK
172 million (USD 20 million).
Skandi Santos continued in its second year of the five-year
extension of the contract with Petrobras in Brazil for subsea
equipment installation work. The vessel has operated at close
to full utilisation and continues to build on its strong track
record in Brazil.
Key Figures
Amounts in NOK million
Operating revenue and Other income
EBITDA
EBIT
CAPEX and R&D capitalization
NCOA
Net capital employed
Order intake
Order backlog
Employees ex discontinued (FTE)
2016
835
316
2015
781
104
(134)
(1 288)
108
121
4 378
106
5 900
113
1 057
69
5 183
305
6 430
91
Aker Wayfarer completed its conversion project according to
plan, including the five-year special periodical survey in the
third quarter 2016 in preparation for the 5+5 year contract
with Petrobras in Brazil. The vessel is currently on stand-by in
Norway as per agreement with Petrobras. With regards to the
5+5 year contract for the Aker Wayfarer vessel, AKOFS
Offshore reached an agreement with Petrobras for an
extended contract period (approximately 1 year). The contract
is effective with a reduced day-rate until commencement of
operations, which is expected to take place in the fourth
quarterly of 2017. Operating expenses for the vessel while on
stand-by are at a lower level than while in operation. AKOFS
Offshore and Petrobras have further agreed to certain contract
amendments for both the Aker Wayfarer contract and the
Skandi Santos contract, including more robust downtime
provisions. The contract rate and duration for Skandi Santos
remains unchanged.
The company‘s results reflect that AKOFS Seafarer was idle
parts of 2016, and operating expenses for the vessel have
been kept at a minimal level as planned. In the fourth quarter,
an impairment loss of NOK 118 million related to AKOFS
Seafarer was recognized mainly as a result of increased
discount rate used in the impairment testing. The vessel is
currently being marketed for work in the subsea construction
and service market as well as for Light Well Intervention.
AKOFS Offshore had an order intake of NOK 106 million for
the full year of 2016, compared to NOK 305 million in 2015.
Looking ahead, due to the current weak market conditions in
the E&P sector, both the subsea construction fleet and
offshore drilling segment are in structural oversupply. Decline
in Petrobras’ activity level in Brazil seems to have levelled out,
with an indication of stable to a gradual increase over the
coming years. Installation of x-mas trees as well as related
subsea production equipment will continue to be essential to
Brazilian oil and gas production.
KOP Surface Products
KOP Surface Products is a supplier of surface wellheads and
trees, providing engineering, manufacturing, and installation
and life-of-field support services to the oil and gas industry.
KOP Surface Products offers a complete range of surface
wellheads, 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
miscellaneous 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 488 people at year-
end 2016.
Key Figures
Amounts in NOK million
Operating revenue and Other income
EBITDA
EBIT
CAPEX and R&D capitalization
NCOA
Net capital employed
Order intake
Order backlog
Employees ex discontinued (FTE)
2016
335
(22)
(80)
13
119
396
321
133
488
2015
1 131
242
177
31
240
555
553
149
682
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, Qatar, Saudi Arabia, Vietnam
and Nigeria.
Annual Report 2016 | BOD Report 10
As KOP Surface Products has their functional currency in USD,
the foreign currency exchange development affects the
financial results in NOK. In USD terms revenue declined by 72
percent in 2016, whereas cost discipline limited the EBITDA
loss to USD 2.6 million (NOK 22 million). Order intake was
NOK 321 million in 2016, giving a backlog of NOK 133 million at
year end. KOP Surface Products is exposed to the cyclicality in
the oil and energy sector, seeing softening in demand and
increased competition, and will need to have a continued
strong focus on cost reduction in 2017, in order to maintain its
competitive position.
Other Holdings
Other holdings mainly include a 100 percent ownership of First
Geo and Cool Sorption, 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,
and an investment in Aker Pensjonskasse.
Key Figures
Amounts in NOK million
Operating revenue and Other income
EBITDA
EBIT
CAPEX and R&D capitalization
NCOA
Net capital employed
Order intake
Order backlog
Employees ex discontinued (FTE)
2016
674
(296)
(385)
5
(258)
104
621
224
363
2015
1 769
203
(57)
99
(20)
694
1 270
448
402
Total EBITDA for Other holdings for the year was a loss of
NOK 296 million. The three businesses Step Oiltools, First
Geo and Cool Sorption delivered an EBITDA of negative NOK
38 million in 2016. The negative result can also be explained
by relatively high corporate costs due to high M&A activities
in 2016, and an onerous office lease provision of NOK 110
million.
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 had total assets of NOK
10.2 billion at December 31, 2016, primarily consisting of
investment in group companies of NOK 5.4 billion and interest-
bearing receivables on group companies of NOK 3.3 billion.
Total liabilities amounts to NOK 6.2 billion including external
borrowings of NOK 1.2 billion and borrowings from group
companies of NOK 4.5 billion. Akastor ASA has a net profit of
NOK 790 million in 2016, including net interest income of NOK
71 million, income of NOK 1.0 billion from investments in
subsidiaries and impairment of receivables on NOK 356 million.
The parent company’s dividend policy states that Akastor’s
shareholders shall receive a competitive return on their
investment either through cash dividends or increases in the
share price, or both. 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.
The board thereby proposes the following allocation of net
profit (amounts in NOK million):
Dividends:
To other equity:
Total allocated:
Subsequent Events
0
790
790
On January 6, 2017, Akastor completed the transaction to join
Frontica’s staffing business (Frontica Advantage) into NES
Global Talent to create a combined company as a global
provider in staffing services to the oil and gas industry. Initially
Akastor is holding a 15.2 percent economic ownership position
in the combined entity with potential to increase its ownership
depending on the growth in business with Aker controlled
entities over the next three years. The estimated accounting
gain is approximately NOK 385 million to be recognized in the
first quarter of 2017.
On March 1, 2017, Akastor signed an agreement with its bank
syndicate to i) replace its ICR covenant with a nominal EBITDA
amount until Q2 2018; and ii) to be allowed to use the existing
RCF to make acquisitions for up to NOK 1.0 billion under
certain conditions.
Risk Management
Akastor and each of its portfolio companies are exposed to
various forms of market, operational and financial risks that
may affect the companies’ performance, their ability to meet
strategic goals and the companies’ reputations. The market
situation for the oil services industry is very challenging with
low activity and weak market conditions, and market
developments may lead to further cost adjustments and
changes in the valuation of the Akastor portfolio’s assets and
liabilities (which could include further restructuring costs,
onerous leases, impairments etc. and increased credit risk
impacting the valuation of trade and
interest-bearing
receivables). On the operational side, sound project execution
by the portfolio companies without cost overruns as well as
securing new orders are key factors affecting the companies’
financial performance. Results also depend on costs, both the
portfolio companies’ own costs and those charged by suppliers.
Akastor and its portfolio companies are also exposed to
financial risk under performance guarantees and financial
guarantees issued, and financial market risks as further detailed
below.
Annual Report 2016 | BOD Report In addition, the portfolio companies, through their business
activities within their respective sectors and countries, are also
exposed to legal/compliance and regulatory/political risks, e.g.
political decisions on international sanctions that impact
supply and demand of the services offered by the portfolio
companies, as well as environmental regulations. As an
investment company, Akastor and its portfolio companies
from time to time engage in mergers and acquisitions and
other transactions that could expose the companies to
financial and other non-operational risks, such as warranty and
indemnity claims and price adjustment mechanisms. To
manage and mitigate risks within Akastor, risk evaluation is an
integral part of all business activities. As an 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 that all
portfolio companies must adhere to. The current and revised
governing documents defined by Akastor were rolled out
during the first half of 2016.
Financial Risks
Akastor is exposed to a variety of financial market risks:
currency risk, interest rate risk, tax risk, price risk, credit and
counterparty risk, liquidity risk and capital risk as well as risks
associated with access to and terms of financing. The financial
risks affect the group’s income and the value of any 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 aim to apply hedge
accounting whenever possible in order to reduce the volatility
resulting from the periodic market-to-market revaluation of
financial
income statement. Risk
the
is the
management
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.
in every project.
is performed
instruments
in
It
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.
11
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 which operate
different business models and therefore face different corporate
responsibility risks and expectations from stakeholders. As a
holding company, Akastor is responsible for setting the overall
corporate responsibility priorities and providing the appropriate
risk management framework and policies applicable for all
holdings in the portfolio. In turn, each portfolio company is
responsible for defining their own corporate responsibility
strategy with relevant activities and, where necessary, supporting
policies.
Akastor is also responsible for the maintenance and development
of industrial relations and collaboration with unions. Historically,
good industrial relations have played an important role, and
maintaining these strong relations have proven to be one of the
success criteria in developing the company over the years. This
work will thus continue in Akastor going forward.
Within the corporate responsibility efforts, Akastor is focused
on the environmental, social and governance areas that build
financial and non-financial value in the portfolio companies.
Akastor’s corporate responsibility strategy is based on four main
priorities: working against corruption, respecting human rights,
caring for health and safety and minimizing adverse 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 Akastor and its portfolio company’s
corporate responsibility work, including their HSE work, refer to
the Akastor Corporate Responsibility Report for 2016. The full
report is available on our website www.akastor.com.
Research, Innovation and Technology Development
NOK 49 million was capitalized in 2016, compared to NOK 176
million in 2015, related to development activities. In addition,
research and development costs of NOK 62 million were
expensed during the year because the criteria for capitalization
were not met (NOK 60 million in 2015).
Annual Report 2016 | BOD Report 12
All research,
initiatives are
innovation and development
performed by the Akastor portfolio companies. Akastor ASA
and Akastor AS performed no such activity in 2016.
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.
People and Teams
Akastor AS had a total of 22 employees as of December 31,
2016, of which 57 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 labour rights and
standards for general employment terms and employee
relations, with specific focus on non-discrimination. Equal
opportunities are fundamental for Akastor and its portfolio
companies.
Akastor and the portfolio companies had a total of 2 702
employees as of December 31, 2016. The male/female ratio in
the portfolio companies were as follows:
Female
Male
MHWirth
AKOFS
18%
82%
15%
85%
KOP
16%
84%
Whilst the male/female ratio is more balanced in Akastor AS,
the portfolio companies have a predominantly male workforce.
All portfolio companies regularly assess whether they live up
to the principle of equal pay for equal work and no significant
differences have been identified. Each portfolio company
promotes equal opportunities by setting specific requirements
for diversity in recruitment and people development, and by
Sick leave in Akastor AS amounted to 0.9 percent of total
working hours in 2016. Aggregated sick leave in the Akastor
portfolio companies was 2.8 percent. There were no fatal
injuries in any of the portfolio companies, and the total
recordable incident frequency was low. See figure below for
details.
MHWirth
AKOFS
KOP
Lost time incident Frequency (LTIF) *
Total Recordable Incident Frequency *
Fatalities incl subcontractors
Sick leave (percent)
1.3
2.1
0.0
3.7
0.0
2.6
0.0
1.2
0.0
0.0
0.0
1.1
* Per million hours worked. Includes subcontractors
Corporate Governance
Corporate governance is a framework of values, responsibilities
and governing documents to control the business and ensure
sustainable value creation for shareholders over time. It is the
responsibility of the board of directors of Akastor to ensure
that the company implements sound corporate governance.
The audit committee supports the board of directors in
safeguarding that the company has internal procedures and
systems
in place to ensure that corporate governance
processes are effective. Akastor’s corporate governance
principles are based on the Norwegian Code of Practice for
Corporate Governance and are included in this annual report
and available on the company’s website www.akastor.com.
Fornebu, March 7, 2017 | 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
Stian Sjølund | Director
Asbjørn Michailoff Pettersen | Director
Kristian Monsen Røkke | CEO
Annual Report 2016 | BOD Report Annual Report 2016 | Declaration by the Board of Directors and CEO
13
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, 2016. 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 2016 for 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, 2016.
The annual report provides a true and fair overview of the development, profit and financial position of Akastor group
and its parent company, as well as the most significant risks and uncertainties facing the group and the parent company.
Fornebu, March 7, 2017 | 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
Stian Sjølund | Director
Asbjørn Michailoff Pettersen | Director
Kristian Monsen Røkke | CEO
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Annual Report 2016 | Corporate Governance Statement
04. CORPORATE GOVERNANCE STATEMENT
– AKASTOR ASA
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.
Governance Structure
Akastor is an oil-services investment company with a portfolio
of companies in the oilfield services industry. The company
has a flexible mandate for active ownership and long-term
value creation. During 2016 several transactions were
concluded, including the divestments of Managed Pressure
Operations, Frontica Business Solutions and Fjords Processing
in addition to the creation of a joint venture between AKOFS
Offshore and Mitsui. In January 2017, the combination of
Frontica Advantage and NES Global Talent was completed.
The current portfolio consists of MHWirth, AKOFS Offshore,
KOP Surface Products and Other Holdings (as detailed below)
with a total capital employed value of approximately NOK 8.1
billion. MHWirth is a leading supplier of drilling systems and
drilling lifecycle services globally. AKOFS Offshore is a global
provider of vessel based subsea well construction and
intervention services to the oil and gas industry. KOP Surface
Products offers a complete range of products for offshore
and
including surface
wellheads, Christmas trees, valves and actuators. Other
holdings
include the Norwegian operation and wellsite
geology services company First Geo AS, the Danish Cool
Sorption A/S which is a leading provider of vapour recovery
technology for the downstream oil & gas segment, 76 percent
of the shares in STEP Oiltools, 50 percent of DOF Deepwater
and 15.2 percent of the staffing service provider NES Global
Talent.
land-based surface production,
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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15
It is the responsibility of the board of directors of Akastor ASA
to ensure that Akastor and its portfolio of companies
implements sound corporate governance. The board of
directors evaluates this corporate governance statement on
an annual basis. The board’s audit committee also evaluates
the corporate governance statement as well as other key
policies and procedures pertaining to compliance and
governance. Compliance with, and implementation of these
corporate governance guidelines are continuously evaluated
by the board and said committee; inter alia by way of the board
being the decisive body for the company’s defined management
and reporting structure, which include regular reporting.
Policies and Procedures
Akastor has a total of 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 and
updated on an annual basis. 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 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 develop
the business models of the portfolio companies, capitalize on
their market positions and promote aftersales services for the
equipment and systems delivered. The current investments
are within the oilfield services sector, but the company has a
flexible mandate for active ownership and long-term value
creation.
Akastor has an opportunistic approach and will continue to
own the portfolio companies as long as Akastor creates more
value than alternative owners.
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 December 17, 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. Akastor also aligns with the
principles of the UN Global Compact, the United Nations
Convention against Corruption, the Universal Declaration of
Human Rights, the UN Guiding Principles for Business and
Human Rights and the ILO Declaration on Fundamental
Principles and Rights at Work. These international principles
guide our Code of Conduct and Integrity Policy and provide
the overall framework for the corporate responsibility efforts
in the Akastor group.
information
Further
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
2016.
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.
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.
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 at www.akastor.com.
Corporate Responsibility
Akastor takes an active approach to corporate responsibility.
Corporate responsibility in Akastor is about making robust
business decisions, with minimum risk to reputation, brand and
the future sustainability of our business. The main focus of
3. Equity and Dividends
Equity
The management and the board regularly monitor that the
group’s equity and liquidity are appropriate for its objectives,
Annual Report 2016 | Corporate Governance Statement 16
strategy and risk profile. The book equity of the group as per
December 31, 2016 is NOK 5 580 million, which represents an
equity ratio of 43 percent. The management of financial risk is
further described in the annual report.
Share Purchase Programs
Share purchase programs in Akastor include Akastor ASA and
Akastor AS (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 2016.
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, the aim is that Akastor’s shareholders shall receive
a competitive return on their investment either through cash
dividends or increases in the share price, or both. The company
does not intend to distribute regular or annual dividends, but
will consider dividends on an ongoing basis taking into
consideration the company’s M&A activities, expected cash
flow, capital expenditure plans, financing requirements and
appropriate financial flexibility.
Authorizations for the Board of Directors
Proposals from the board of directors for future authorisations
for share capital increases, share buy-backs or similar shall be
for defined purposes, such as share purchase programmes and
acquisitions of companies, and shall remain in effect until the
next annual general meeting.
The company’s annual general meeting on April 12, 2016
resolved to authorize the board to purchase treasury shares
for three purposes for utilization, all of which were subject to
separate voting under the general meeting: (i) purchase of
treasury shares to be used as transaction currency
in
connection with acquisitions, mergers, demergers and other
transactions, (ii) purchase of treasury shares to be sold and/or
transferred to employees and directors under share purchase
programs and (iii) purchase of treasury shares for the purpose
of investment or for subsequent sale or deletion of such
shares. The authorizations were all limited to ten percent of
the share capital. The board’s authorizations to purchase
treasury shares are valid for the period until the date of the
annual general meeting of 2017, however in no circumstances
beyond June 30, 2017. No shares were bought by the company
in 2016 pursuant to the authorizations to the board of directors.
As of December 31, 2016, the company holds 2 776 376 own
shares.
In addition, the annual general meeting in 2016 granted the
board of directors the mandate to approve the distribution of
dividends based on the company’s annual accounts for 2015 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 2017.
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 of shares in the company for the purposes of capital
increases.
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 2016, no such share purchase was completed.
4. Equal Treatment of Shareholders and Transactions
with Related Parties
The company has only one class of shares, and all shares carry
equal rights. Existing shareholders shall have pre-emptive
rights to subscribe for shares in the event of share capital
increases, unless otherwise indicated by special circumstances.
If the pre-emptive rights of existing shareholders are waived in
respect of a share capital increase, the reasons for such waiver
shall be explained by the board of directors. Transactions in
own shares are effected via Oslo Børs.
As of December 31, 2016, Aker ASA holds 70 percent of the
shares of Aker Kværner Holding AS which holds 40.27 percent
of the shares of Akastor. As per the same date, Aker ASA
directly held 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
Akastor that Aker ASA assumes the role of an active owner
and is actively involved in matters of importance to Akastor
and to all shareholders. The cooperation with Aker ASA offers
Akastor access to special know-how and resources within
strategy, transactions and funding. Moreover, Aker ASA offers
network and negotiation resources from which Akastor
benefits in various contexts. This complements and strengthens
Akastor without curtailing the autonomy of the group. It may
be necessary to offer Aker ASA special access to commercial
information
in connection with such cooperation. Any
information disclosed to Aker ASA’s representatives in such a
context will be disclosed in compliance with applicable laws.
Applicable accounting standards and regulations require Aker
ASA to prepare its consolidated financial statements to include
accounting information of Akastor. As of January 1, 2014, Aker
ASA is deemed to have control of Akastor pursuant to the
revised accounting standard
is thus
consolidated as a subsidiary in Aker ASA’s accounts from this
date. Subsequently, Aker Solutions ASA and Kværner ASA are
IFRS 10. Akastor
Annual Report 2016 | Corporate Governance Statement 17
deemed as related parties to Akastor for accounting purposes.
In order to comply with these accounting standards, Aker ASA
has in the past received, and will going forward receive,
information of Akastor. Such
unpublished accounting
distribution of unpublished accounting
information from
Akastor to Aker ASA is executed under strict confidentiality
and in accordance with applicable regulations on handling of
inside information.
Aker ASA, Kværner ASA and Aker Solutions ASA (or their
subsidiaries) are however not deemed, within the meaning of
the Public Limited Liability Companies Act, to be a related
party of Akastor. The board of directors and the executive
management team of Akastor are nevertheless conscious that
all relations with these companies shall be premised on
commercial terms and structured in line with arm’s length
principles.
In the event of any material transactions between the company
and shareholders, directors, senior executives, or related
parties thereof, which do not form part of the ordinary course
of the company’s business, the board of directors shall arrange
for an independent assessment. The same shall, generally
speaking, apply to the relationship between Akastor and Aker
ASA related companies.
Akastor has prepared guidelines as part of its rules of procedure
for the Chief Executive Officer and board of directors ensuring
that directors and the Chief Executive Officer notify the board
of directors if they have any material direct or indirect personal
interest in any agreement concluded by the group. The
guidelines stipulate that the directors and the Chief Executive
Officer shall not participate in the preparation, deliberation, or
resolution of any matters that are of such special importance
to themselves, or any of their related parties, so that the
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
related party transactions, directors of Akastor should be
cautious in participating in the consideration of issues where a
potential conflict of interest or conflict of role may arise,
undermining the confidence in the decision process. Such
person may not participate in board discussions of more than
one company that is part of the same 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
relative 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
statements contains information on the most significant
transactions between Akastor and companies within the Aker
ASA group.
5. Freely Negotiable Shares
The shares are listed on the Oslo Børs and are freely
transferable. No transferability restrictions are laid down in the
articles of association.
6. General Meetings
Attendance, Agenda and Voting
The company encourages shareholders to attend the general
meetings. It is also the intention to have representatives of the
board of directors as well as the chairman of the nomination
committee and the company’s auditor to attend the general
meetings. Notices convening general meetings, including
comprehensive documentation relating to the items on the
agenda, including the recommendation of the nomination
committee, are made available on the company’s website no
later than 21 days prior to the general meeting. The articles of
association of the company stipulate that documents
pertaining to matters to be deliberated by the general meeting
shall only be made available on the company’s website, and not
normally be sent physically by post to the shareholders unless
required by statute.
The following matters are typically decided at the annual
general meeting, in accordance with the articles of association
of Akastor ASA and Norwegian background law:
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;
Annual Report 2016 | Corporate Governance Statement 18
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; and
other matters which, by law or under the articles of
association, are the business of the annual general
meeting.
The deadline for registering intended attendance is as close to
the general meeting as possible, but not shorter than 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 general meetings
significantly.
the preparations
for
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
introduction of such
arrangements on an on-going basis in view of; inter alia, the
security and ease of use offered by available systems.
the
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 Oslo Børs, www.
newsweb.no (ticker: AKA), and at www.akastor.com.
7. Nomination Committee
The articles of association stipulate that the company shall
have a nomination committee. The nomination committee shall
have no less than three members, who shall normally serve for
a term of two years. The current members of the nomination
committee are Leif-Arne Langøy (chairman), Gerhard Heiberg,
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 2018. 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.
Annual Report 2016 | Corporate Governance Statement 19
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
Composition
It has been agreed with the employees that the company shall
have no corporate assembly. Hence, the board appoints its
own chairman, cf. the Public Limited Liability Companies Act
section 6-1(2), unless the chairman is appointed by the general
meeting. The proposal of the nomination committee will
normally include a proposed candidate for appointment as
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, 2016, 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 2016 will be set out in the «Salaries, wages,
and social security costs» note to the consolidated annual
statements in the annual report for 2016. In addition to Øyvind
Eriksen’s indirect ownership of shares in the company through
Aker ASA, also the chairman Frank O. Reite and the directors
Lone Fønss Schrøder, Kathryn M. Baker, Sarah Ryan, Jannicke
Sommer-Ekelund and Asbjørn Michailoff Pettersen are
currently shareholders in Akastor ASA. The board composition,
including information about the directors’ background and
expertise will be detailed in the annual report for 2016.
The appointment of employee representatives to the board of
directors is conducted as prescribed by the Public Limited
Companies Act and the Representation Regulations. The
board of directors has appointed a designated 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 or in relation to M&A
transactions. 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 and
one extraordinary board meeting in 2016. The aggregate
attendance rate at the board meetings was 86.1 percent.
The Matters Discussed by the Board of Directors
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
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
itself
Annual Report 2016 | Corporate Governance Statement 20
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.
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
at www.akastor.com.
Audit Committee
Akastor will have an audit committee comprising two to four
of the directors. The audit committee currently comprises the
directors Lone Fønss Schrøder (chairman), Kathryn M. Baker
and Asbjørn Michailoff Pettersen. The audit committee is
independent from the management.
At least one of the members of the audit committee shall have
either formal qualifications within accounting or auditing, or
relevant experience and skills within the same. Both members
Fønss Schrøder and Baker have such relevant experience and
skills. The audit committee has a mandate and a working
method that complies with statutory requirements. The audit
committee mandate forms an integrated part of the rules of
procedures for the board of directors. The committee will
participate, on behalf of the board of directors, in the quality
assurance of guidelines, policies, and other governing
instruments 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, 2016, there are no other
board committees than the audit committee. The board does
not envisage appointing any further board committees in
2017.
10. Risk Management and Internal Control
Governing Principles
The board of directors shall ensure that Akastor has sound
internal control and systems for risk management that are
appropriate in relation to the extent and nature of the
company’s activities. The audit committee supports the board
of directors in safeguarding that the company has internal
procedures and systems that ensure good corporate
internal controls and proper risk
governance, effective
management, particularly in relation to financial reporting. The
Chief Financial Officer reports directly to the audit committee
on matters relating to financial reporting, financial risks and
internal controls.
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 portfolio
companies, pursuant to which the Akastor Chief Executive
Officer delegates authority to the boards and Chief Executive
Officers 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
in the underlying portfolio companies,
primarily occurs
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,
the
competitive situation and strategic issues. These meetings
provide a solid foundation for Akastor’s assessment of its
overall financial and operational risk.
risk management, market conditions,
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.
Annual Report 2016 | Corporate Governance Statement 21
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
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 2016 financial year, clearing
meetings with the portfolio companies were held in October
2016 and January 2017. The main purpose is to ensure high-
quality financial reporting. Such meetings focus on important
items involving estimation and 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.
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 will be provided
in note 36 Management
remunerations to the consolidated financial statements for the
group in the annual report for 2016. 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 12, 2016. The board of director’s statement on
the remuneration of executive personnel for 2016/2017 will be
a separate item on the agenda for the annual general meeting
on April 6, 2017.
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, either by a physical meeting or by a
conference call and webcast, and these presentations are
broadcasted on the internet. The financial calendar of the
company is available at www.akastor.com.
Annual Report 2016 | Corporate Governance Statement 22
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. 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.
The auditor’s fees relating to auditing are subject to approval
by the the general meeting.
The external auditor has issued a statement to the chair of the
audit committee confirming their independence.
Annual Report 2016 | Corporate Governance Statement Annual Report 2016 | Financials and Notes
23
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 | Corporate information
Note 2 | Basis for preparation
Note 3 | Significant accounting principles
Note 4 | Significant accounting estimates and judgements
Performance of the year
Note 5 | Discontinued operations
Note 6 | Operating segments
Note 7 | Operating revenue and other income
Note 8 | Salaries, wages and social security costs
Note 9 | Operating leases
Note 10 | Other operating expenses
Note 11 | Finance income and expenses
Note 12 | Income tax
Note 13 | Earnings per share
Assets
Note 14 | Property, plant and equipment
Note 15 | Intangible assets
Note 16 | Impairment testing of goodwill
Note 17 | Interest-bearing receivables
Note 18 | Equity-accounted investees
Note 19 | Other investments
Note 20 | Construction contracts
Note 21 | Inventories
Note 22 | Trade and other receivables
Note 23 | Cash and cash equivalents
Equities and liabilities
Note 24 | Capital and reserves
Note 25 | Borrowings
Note 26 | Other non-current liabilities
Note 27 | Employee benefits – pension
Note 28 | Provisions
Note 29 | Trade and other payables
Financial risk management
Note 30 | Capital management
Note 31 | Financial risk management and exposures
Note 32 | Derivative financial instruments
Note 33 | Financial instruments
Other
Note 34 | Group companies
Note 35 | Related parties
Note 36 | Management remunerations
Note 37 | Subsequent events
24
25
26
27
28
29
29
31
37
39
41
44
44
44
45
46
46
48
49
51
52
53
53
54
55
55
55
56
56
57
59
59
59
63
63
64
67
70
72
74
77
79
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
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F
i
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24
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
Basic/diluted earnings (loss) per share (NOK)
Basic/diluted earnings (loss) per share continuing operations (NOK)
*) See note 5.
Note
6, 7
6, 7
8, 36
10
14, 15
14, 15
11
11
11
11, 18
12
5
13
13
2016
5 140
170
5 310
(2 115)
(2 304)
(823)
(5 241)
69
(746)
(473)
(1 151)
40
(710)
(289)
(214)
2015
Restated *)
9 580
403
9 983
(4 908)
(3 205)
(1 303)
(9 416)
567
(829)
(1 256)
(1 518)
87
(742)
50
(73)
(2 324)
(2 195)
307
(2 017)
734
(1 282)
351
(1 844)
(743)
(2 587)
(1 282)
(2 587)
(4.73)
(7.44)
(9.54)
(6.80)
Annual Report 2016 | 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
Currency translation differences – foreign operations
Currency translation differences, reclassification to income statement upon disposal
Deferred tax of currency translation differences – foreign operations
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
27
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
25
Note
2016
2015
(1 282)
(2 587)
180
(44)
(537)
134
(267)
(81)
(105)
(35)
(488)
(40)
4
(36)
(172)
59
58
(20)
(75)
640
-
10
575
25
(8)
18
(524)
593
(1 806)
(1 994)
(1 806)
(1 994)
Annual Report 2016 | Financials and Notes
26
Akastor Group | Consolidated statement of financial position
For the year ended December 31
Amounts in NOK million
Assets
Property, plant and equipment
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
Assets classified as held for sale
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
Liabilities classified as held for sale
Total current liabilities
Total liabilities
Total equity and liabilities
Note
2016
2015
14
12
15
17
18
19
21
22
32
17
23
5
24
24
25
27
12
26
28
25
28
29
32
5
5 198
600
1 731
51
104
93
121
6 480
468
2 785
84
478
177
261
7 897
10 732
65
1 086
2 829
269
15
487
212
4 964
12 861
162
(2)
1 534
811
3 075
5 580
5 580
1 494
380
15
112
333
2 334
1 560
63
354
2 492
301
177
4 947
7 281
12 861
2
1 464
5 959
1 746
72
563
-
9 805
20 537
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
20 537
Fornebu, March 7, 2017 | 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
Stian Sjølund | Director
Asbjørn Michailoff Pettersen | Director
Kristian Monsen Røkke | CEO
Annual Report 2016 | Financials and Notes 27
Akastor Group | Consolidated statement of changes in equity
Share
capital
Treasury
shares
Other
capital
paid in
Retained
earnings
Hedging
reserve 1)
Currency
translation
reserve 1)
Remeasure-
ment gain
(loss) net
defined benefit
obligations
Total
parent
company
equity
holders
Total
equity
Amounts in NOK million
Note
2015
Equity as of January 1, 2015
162
(2)
1 534
Profit for the period
Other comprehensive income
Total comprehensive income
Treasury shares
24
Total transactions with equity
holders
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6 942
(2 587)
-
(2 587)
2
2
357
-
(75)
(75)
-
-
646
-
650
650
-
-
(261)
9 378
9 378
-
18
18
-
-
(2 587)
(2 587)
593
593
(1 994)
(1 994)
2
2
2
2
Equity as of December 31, 2015
162
(2)
1 534
4 357
282
1 296
(243)
7 386
7 386
2016
Profit (loss) for the period
Other comprehensive income
Total comprehensive income
-
-
-
-
-
-
-
-
-
Equity as of December 31, 2016
162
(2)
1 534
1) See note 24 Capital and reserves for more information.
(1 282)
-
(1 282)
3 075
-
(267)
(267)
15
-
(220)
(220)
1 075
-
(1 282)
(1 282)
(36)
(36)
(524)
(524)
(1 806)
(1 806)
(278)
5 580
5 580
Annual Report 2016 | Financials and Notes
28
Akastor Group | Consolidated statement of cash flow
For the year ended December 31
Amounts in NOK million
Note
2016
2015
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 disposal of subsidiaries
(Profit) loss on disposal of assets
(Profit) loss from equity-accounted investees
Other non-cash effects
Profit (loss) for the period after adjustments
Changes in operating assets
Cash generated from operating activities
Interest paid
Interest received
Income taxes paid
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/capital contribution to equity-accounted investments
Proceeds from (acquisition of) other investments
Proceeds from repayment of interest-bearing receivables
Net cash from investing activities
Cash flow from financing activities
Proceeds from borrowings
Repayment of borrowings
Net cash from financing activities
Effect of exchange rate changes on cash and bank deposits
Net increase (decrease) in cash and bank deposits
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Of which is classified as held-for-sale
Of which is restricted cash
The statement included cash flows from discontinued operations prior to the disposal.
(2 017)
734
(1 282)
(1 844)
(743)
(2 587)
(176)
504
289
1 558
(968)
(170)
210
85
49
508
559
(599)
32
(121)
(129)
(7)
(153)
(49)
2 382
667
-
(231)
112
-
2 720
421
(3 045)
(2 624)
11
(22)
563
540
53
9
(286)
582
(44)
2 861
(303)
(19)
31
176
411
(411)
-
(477)
36
(163)
(603)
(11)
(1 460)
(176)
1 150
152
50
-
(110)
189
(216)
1 378
(1 193)
185
121
(512)
1 075
563
-
58
14, 15
18
14
15
5
14, 15
23
5
Annual Report 2016 | Financials and Notes
29
Note 1 | Corporate information
Akastor ASA is a limited liability company incorporated and domiciled in
board of directors and CEO on March 7, 2017. The consolidated financial
Norway and whose shares are publicly traded. The registered office is
statements will be authorized by the Annual General Meeting on April 6,
located at Oksenøyveien 10, Bærum, Norway. The largest shareholder
2017.
is Aker Kværner Holding AS and the ultimate parent company is The
Resource Group TRG AS.
The group is an oil-services investment company with a portfolio of
industrial holdings and other investments. Akastor is listed on the Oslo
The consolidated financial statements of Akastor ASA and its subsidiaries
Stock Exchange under the ticker AKA. Information on the group’s structure
(collectively referred as Akastor or the group, and separately as group
is provided in note 34 Group companies. Information on other related
companies) for the year ended December 31, 2016 were approved by the
party relationships of the group is provided in note 35 Related parties.
Note 2 | Basis for preparation
Basis of accounting
Functional and presentation currency
The consolidated financial statements have been prepared in accordance
The consolidated financial statements are presented in NOK, which is
with International Financial Reporting Standards (IFRS) as approved by
Akastor ASA’s functional currency. All financial information presented in
the European Union, their interpretations adopted by the International
NOK has been rounded to the nearest million (NOK million), except when
Accounting Standards Board (IASB) and the additional requirements of
otherwise stated. The subtotals and totals in some of the tables in these
the Norwegian Accounting Act as of December 31, 2016.
consolidated financial statements may not equal the sum of the amounts
Going concern basis of accounting
shown due to rounding.
The consolidated financial statements have been prepared on a going
When the functional currency in a reporting unit is changed, the effect of
concern basis, which assumes that the group will be able to meet the
the change is accounted for prospectively.
mandatory terms and conditions of the banking facilities as disclosed in
note 25 Borrowings.
Use of estimates and judgements
The preparation of financial statements in conformity with IFRS requires
Akastor’s existing bank financing agreement has a covenant that interest
management to make judgements, estimates and assumptions that affect
coverage ratio (ICR) should not be less than 1.5 in the fourth quarter of
the application of policies and reported amounts of assets and liabilities,
2016, calculated from the consolidated EBITDA to consolidated Net
income and expenses. Although management believes these assumptions
Interest Cost. As of December 31, 2016, the ICR was below the minimum
to be reasonable, given historical experience, actual amounts and results
level. Borrowings of NOK 1.2 billion, with maturity in 2019, were therefore
could differ from these estimates. The items involving a higher degree of
reclassified from non-current to current borrowings. On March 1, 2017,
judgement or complexity, and items where assumptions and estimates are
Akastor signed an agreement with its bank syndicate to amend covenants
material to the consolidated financial statements, are disclosed in note 4
and some terms and conditions to provide greater flexibility in the
Significant accounting estimates and judgements.
financing. Management believes that the group will be able to meet its new
funding requirements and to refinance or to repay its banking facilities as
The estimates and underlying assumptions are reviewed on an ongoing
they fall due. As of December 31, 2016, the group has a liquidity reserve of
basis. Revisions to accounting estimates are recognized in the period in
NOK 3.1 billion, comprised by cash and cash equivalents of NOK 0.5 billion
which the estimate is revised and in any future periods affected.
and undrawn committed bank revolving credit facilities of NOK 2.6 billion.
Basis of measurement
The accounting policies adopted are consistent with those of the previous
The consolidated financial statements have been prepared on the historical
financial year. The following standards and interpretations were adopted
cost basis except for the following material items, which are measured on
with effect from January 1, 2016, with no implementation impact on the
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.
Annual Improvements to IFRSs 2012–2014 Cycle
Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities:
Applying the Consolidation Exception
Contingent consideration assumed in business combinations are
measured at fair value.
Amendments to IAS 27: Equity Method in Separate Financial
Net defined benefit (asset) liability is recognized at fair value
of plan assets less the present value of the defined benefit
Amendments to IAS 1: Disclosure Initiative
Statements
obligation.
Annual Report 2016 | Financials and Notes 30
Amendments to IAS 16 and IAS 38: Clarification of Acceptable
IFRS 9 Financial Instruments (effective from January 1, 2018)
Methods of Depreciation and Amortization
The standard will replace IAS 39 Financial Instruments Recognition and
Measurement. The standard includes revised guidance on classification
Amendments to IFRS 11: Accounting for Acquisitions of Interests
and measurement of financial instruments, including a new expected
in Joint Operations
credit loss model for calculating impairment on financial assets, and new
general hedge accounting requirements.
At the date of authorization of the group’s consolidated financial
statements, the following standards and interpretations were issued but
The actual impact of adopting IFRS 9 on the group’s consolidated financial
not yet effective and could affect the group:
statements in 2018 is not known and cannot be reliably estimated because
it will be dependent on the financial instrumnets that the group holds and
IFRS 15 Revenue from Contracts with Customers (effective from
economic conditions at that time as well as judgments that it will make
January 1, 2018), including Clarifications to IFRS 15 Revenue from
in the future. The group has performed a preliminary assessment of the
Contracts with Customers (not approved by EU)
potential impact of adoption of IFRS 9 and a more detailed review of hedge
The standard will supersede the current revenue recognition guidance
accounting implications in particular will be carried out in 2017. Based on
including IAS 18 Revenue, IAS 11 Construction contracts and the related
preliminary assessments, the group does not anticipate significant impacts
interpretations when it becomes effective. IFRS 15 introduces a new five-
on its consolidated financial statements of initial application of the new
step model that apples to revenue arising from contracts with customers.
standard.
The group has initiated an implementation process to systematically
The following changes are expected to impact the reported figures upon
analyze and evaluate the application impact. The analysis of the application
transition to IFRS 9:
of IFRS 15 is still ongoing and more detailed review of existing customer
contracts will be carried out in 2017. Based on preliminary assessments,
Around 80 percent of the group’s foreign currency hedges qualify
the group does not anticipate significant impacts on its consolidated
for hedge accounting under the current standard. The percentage
financial statements of initial application of the new standard. However,
of qualifying hedges is expected to increase under IFRS 9 as the
the group has identified the following main impact of implementing IFRS
hedge accounting model is more aligned with risk management,
15:
The construction contracts currently in the scope of IAS 11 will be
foreign currency effects reported under financial items. There is
reassessed according to IFRS 15 to evaluate whether the revenue
also a possible change in timing of recognition of currency effects
from such contracts shall be recognized over time or at a point
related to the settlement of embedded derivatives. The change
in time. The group does not anticipate significant changes in
is not expected to have material impact on net profit, however
revenue recognition due to implementation of IFRS 15.
assessment is on-going.
including prospective testing and less restrictive requirements on
qualifying hedging instruments. This is expected to result in less
For revenue that is to be recognized over time, the group will
The effect of classification of financial instruments and the
assess an appropriate method of measuring progress according
expected credit loss principle are not expected to have material
to IFRS 15. The group does not anticipate significant changes in
impact on the financial reporting, following the group’s customer
the measurement of progress due to implementation of the new
portfolio.
standard.
Disclosures: IFRS 9 requires more comprehensive disclosure than
Constraint of variable considerations: To
include variable
the current disclosure requirements.
considerations in the estimated contract revenue, the entity
has to conclude that it is highly probably that a significant
IFRS 16 Leases (effective from January 1, 2019, but not approved by the EU)
revenue reversal will not occur when the uncertainties related
The standard was issued in January 2016 and replaces IAS 17 Leases and
to the variability are resolved. The threshold of including
the related interpretations.
variable considerations in revenue recognition is higher than
the requirements under current standards. The group does not
The new standard introduces a single, on-balance sheet lease
anticipate significant changes in the measurement of revenue
accounting model for lessees, with optional exemptions for short-
due to implementation of the new standard.
term leases and leases of low value items. A lessee recognizes
Disclosures: IFRS 15 requires more comprehensive disclosure
asset and a lease liability representing its obligation to make lease
than the current disclosure required by IAS 18 and IAS 11.
payments.
a right-of-use asset representing its right to use the underlying
On transition to IFRS 15, the group plans to apply the new standard
Lessor accounting remains similar to current standard.
retrospectively with the cumulative effect of initial application recognized
as an adjustment to the opening balance of retained earnings as of January
The group has started an initial assessment of the potential impact on its
1, 2018. Under this transition method, the new standard will be applied
consolidated financial statements and has identified the following main
retrospectively only to contracts that are not completed by January 1,
impact:
2018, and the comparable information presented will not be restated.
Annual Report 2016 | Financials and Notes 31
The group anticipates that new assets and liabilities will be
The group does not anticipate significant impact for the group’s
recognized for its operating lease agreements where the group
finance leases.
is a lessee. In addition, the nature and timing of expenses related
to these leases will change when the straight-line operating lease
The group has not yet determined on the transition approach to apply
expenses will be replaced by depreciation charge for lease assets
IFRS 16, or quantified the impact on its consolidated financial statements.
and interest expenses for lease liabilities under IFRS 16.
The assessment of potential impact of implementation will be continued
in 2017.
Note 3 | Significant accounting policies
Summary of significant accounting policies
Acquisitions of non-controlling interests
The principal accounting policies applied in the preparation of these
Acquisitions of non-controlling interests are accounted for as transactions
consolidated financial statements are set out below. These policies have
with owners in their capacity as owners and therefore no goodwill is
been consistently applied to all the years presented, unless otherwise stated.
recognized as a result. Adjustments to non-controlling interests arising
Basis of consolidation
Subsidiaries
from transactions that do not involve the loss of control are based on a
proportionate amount of the net assets of the subsidiary.
Subsidiaries are entities controlled by the group. The group controls
Loss of control
an entity when it is exposed to, or has rights to, variable returns from
On the loss of control, the group derecognizes the assets and liabilities of
its involvement with the entity and has the ability affect those returns
the subsidiary, any non-controlling interests and the other components of
through its power over the entity. The financial statements of subsidiaries
equity. Any resulting gain or loss is recognized in the income statement.
are included in the consolidated financial statements from the date on
Any interest retained in the former subsidiary is measured at fair value
which control commences until the date of which control ceases.
when control is lost. Subsequently it is accounted for as an equity-
accounted investee or as an available-for-sale financial asset depending
Business combinations
on the level of influence retained.
Business combinations are accounted for using the acquisition method as
of the acquisition date, which is the date when control is transferred to
Any contingent consideration receivable is measured at fair value at the
the group.
disposal date. Changes in the fair value of the contingent consideration
from divestment of a subsidiary for transactions will be recognized in
The group measures goodwill at the acquisition date as:
Other income as gain or loss.
the fair value of the consideration transferred, plus
Investments in joint ventures
The group’s interests in equity-accounted investees comprise interests in
the recognized amount of any non-controlling interests in the
joint ventures.
acquiree, plus
if the business combination is achieved in stages, the fair value of
whereby the group has rights to the net assets of the arrangement, rather
the pre-existing equity interest in the acquiree, less
to its assets and obligations for its liabilities. Joint control is established by
contractual agreement requiring unanimous consent of the ventures for
A joint venture is an arrangement in which the group has joint control,
the net recognized amount (generally at fair value) of the
strategic, financial and operating decisions.
identifiable assets acquired and liabilities assumed.
Transaction costs, other than those associated with the issue of debt or
They are initially recognized at cost, which includes transaction costs.
equity securities incurred in connection with a business combination are
Subsequent to initial recognition, the consolidated financial statements
Interests in joint ventures are accounted for using the equity method.
expensed as incurred.
include the group’s share of the profit and loss and other comprehensive
income of the equity-accounted investees. The group’s investment
Any contingent consideration payable is measured at fair value at the
includes goodwill identified on acquisition, net of any accumulated
acquisition date. Changes in the fair value of the contingent consideration
impairment losses. When the group’s share of losses exceeds its interest
from acquisition of a subsidiary or non-controlling interest for transactions
in an equity-accounted investee, the carrying amount of that interest,
will be recognized in Other income as gain or loss, except for the obligation
including any long-term investments, is reduced to zero, and further losses
that is classified as equity.
are not recognized except to the extent that the group incurs legal or
constructive obligations or has made payments on behalf of the investee.
When the group has entered into put options with non-controlling
shareholders on their shares in that subsidiary, the anticipated acquisition
The purpose of the investment determines the presentation of the group’s
method is used. The agreement is accounted for as if the put option had
share of profits and losses of the equity-accounted investee in the income
already been exercised. If the put option expires unexercised, then the
statement. When the entity is established to share risk in executing a
liability is derecognized and the non-controlling interest is recognized.
project or is closely related to Akastor’s operating activities, the share of
Annual Report 2016 | Financials and Notes 32
profit or loss is reported as part of Other income in Operating Profit. Share
in foreign currencies at the reporting date are translated to the functional
of the profit or loss of a financial investment is reported as part of Finance
currency at the exchange rate on that date. Foreign exchange differences
income and expenses.
arising on translation are recognized in the income statement. Non-
monetary assets and liabilities measured in terms of historical cost in a
Transactions eliminated on consolidation
foreign currency are translated using the exchange rate on the date of the
Intra-group balances and transactions, and any unrealized gains and
transaction. Non-monetary assets and liabilities denominated in foreign
losses or income and expenses arising from intra-group transactions, are
currencies that are measured at fair value are translated to the functional
eliminated in preparing the consolidated financial statements. Unrealized
currency at the exchange rates on the date the fair value is determined.
gains arising from transactions with associates and joint ventures are
eliminated to the extent of the group’s interest in the entity. Unrealized
Investments in foreign operations
losses are eliminated in the same way as unrealized gains, but only to the
Items included in the financial statements of each of the group’s entities
extent that there is no evidence of impairment.
are measured using the currency of the primary economic environment
in which the entity operates. The results and financial positions of all the
Assets held for sale or distribution
group entities that have a functional currency different from the group’s
Non-current assets, or disposal groups comprising assets and liabilities,
presentation currency are translated into the presentation currency as
that are expected to be recovered primarily through sale or distribution
follows:
rather than through continuing use, are classified as held for sale or
distribution. This condition is regarded as met only when the sale is highly
Assets and liabilities, including goodwill and fair value adjustments,
probable and the asset or disposal group is available for immediate sale
are translated at the closing exchange rate at the reporting date.
or distribution in its present condition. Management must be committed
to the sale or distribution, which should be expected to qualify for
Income statements are translated at average exchange rate for
recognition as a completed sale or distribution within one year from the
the year, calculated on the basis of 12 monthly rates.
date of classification.
Non-current assets and disposal groups classified as held for sale or
in foreign operations, and of related hedges, are included in other
distribution are measured at the lower of their carrying amount and fair
comprehensive income as currency translation reserve. These translation
value less costs to sell. Property, plant and equipment and intangible
differences are reclassified to the income statement upon disposal of the
assets once classified as held for sale or distribution are not depreciated
related operations or when settlement is likely to occur in the near future.
Exchange differences arising from the translation of the net investment
or amortized, but are considered in the overall impairment testing of the
disposal group.
Monetary items that are receivable from or payable to a foreign operation
are considered as part of the net investment in that foreign operation,
No reclassifications are made for years prior to the year when non-current
when the settlement is neither planned nor likely to occur in the
assets or disposal groups are classified as a held for sale or distribution.
foreseeable future. Exchange differences arising from these monetary
items are recognized in other comprehensive income.
Discontinued operations
A discontinued operation is a component of the group’s business that
Current/non-current classification
represents a separate major line of business or geographical area of
An asset is classified as current when it is expected to be realized or is
operations that has been disposed of or is held for sale or distribution,
intended for sale or consumption in the group’s normal operating cycle, it
or is a subsidiary acquired exclusively with a view to resale. Classification
is held primarily for the purpose of being traded, or it is expected/due to
as a discontinued operation occurs upon disposal or when the operation
be realized or settled within twelve months after the reporting date. Other
meets the criteria to be classified as held for sale, if earlier.
assets are classified as non-current.
In the consolidated income statement, income and expenses from
A liability is classified as current when it is expected to be settled in the
discontinued operations are reported separately from income and
group’s normal operating cycle, is held primarily for the purpose of being
expenses from continuing operations, down to the level of profit after
traded, the liability is due to be settled within twelve months after the
taxes. When an operation is classified as a discontinued operation, the
reporting period, or if the group does not have an unconditional right
comparative income statement is restated as if the operation had been
to defer settlement of the liability for at least twelve months after the
discontinued from the start of the comparative year.
reporting period. All other liabilities are classified as non-current.
The statement of cash flow includes the cash flow from discontinued
Financial assets, financial liabilities and equity
operations prior to the disposal. Cash flows attributable to the operating,
Financial assets and liabilities in the group consist of investments in other
investing and financing activities of discontinued operations are presented
companies, trade and other receivables, interest-bearing receivables,
in the notes to the extent these represent cash flows with third parties.
cash and cash equivalents, trade and other payables and interest-bearing
Foreign currency
borrowing.
Foreign currency transactions and balances
The group initially recognizes borrowings and receivables on the date
Transactions in foreign currencies are translated at the exchange rate at
when they are originated. All other financial assets and financial liabilities
the date of the transaction. Monetary assets and liabilities denominated
are initially recognized on the trade date.
Annual Report 2016 | Financials and Notes 33
Other investments
contracts and currency swaps to hedge its exposure to foreign exchange
Other investments include equity securities where the group has
risks arising from operational, financial and investment activities. These
neither control nor significant influence, usually represented by less than
derivative financial instruments are accounted for as cash flow hedges
20 percent of the voting power. The investments are categorized as
since highly probable future cash flows are hedged (rather than committed
available-for-sale financial assets and are recognized initially at fair value.
revenues and expenses). The group also has embedded foreign exchange
Subsequent to initial recognition, they are measured at fair value and
derivatives which have been separated from their ordinary commercial
changes therein, other than impairment losses, are recognized in other
contracts. Derivative financial instruments are recognized initially at fair
comprehensive income and presented as part of fair value reserve. When
value. Derivatives are subsequently measured at fair value, and changes in
an investment is derecognized, the gain or loss accumulated in other
fair value are accounted for as described below.
comprehensive income is reclassified to profit and loss. Impairment losses
are recognized in the income statement when the decrease in fair value is
Cash flow hedge
significant or prolonged.
Trade and other receivables
Hedging of the exposure to variability in cash flows that is attributable
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
Trade receivables are recognized at the original invoiced amount, less an
recognized in other comprehensive income as a hedge reserve. All foreign
allowance made for doubtful receivables. Other receivables are recognized
exchange exposure is hedged, of which about 80 percent qualifies for
initially at fair value. Trade and other receivables are valued at amortized
hedge accounting. The gain or loss relating to the ineffective portion of
cost using the effective interest rate method. The interest rate element is
derivative hedging instruments is recognized immediately in the income
disregarded if insignificant, which is the case for the majority of the group’s
statement as finance income or expense. Amounts accumulated in hedge
trade receivables.
reserves are reclassified to the income statement in the periods when the
hedged item is recognized in the income statement.
Current interest-bearing receivables
Current interest bearing receivables include bonds, securities and mutual
Hedge accounting is discontinued when the hedge no longer qualifies for
funds with short-term maturity. These assets are designated upon initial
hedge accounting. Disqualification occurs when the hedging instrument
recognition as at fair value through profit and loss.
expires, is sold, terminated or exercised, or when a forecast transaction
is no longer expected or the hedge is no longer effective. When a hedge
Non-current interest-bearing receivables
is disqualified, the cumulative gain or loss that was recognized in the
Interest bearing receivables include loans to related parties and other
hedge reserve is recognized immediately in the income statement unless
receivables with fixed or determinable payments that are not quoted in an
it relates to a future cash flow that is likely to occur, but don’t qualify for
active market. Such financial assets are recognized initially at fair value and
hedge accounting, in which the accumulated hedge reserve remains in
subsequent measurement at amortized cost using the effective interest
other comprehensive income until the hedged cash flow is recognized in
method, less any impairment losses.
income statement.
Cash and cash equivalents
Net investment hedge
Cash and cash equivalents include cash on hand, demand deposits held
Hedge of net investment in a foreign operation is accounted for similarly
at banks and other short-term highly liquid investments with original
to cash flow hedges. Gains or losses arising from the hedging instruments
maturity of three months or less.
Trade and other payables
relating to the effective portions of the net investment hedge are
recognized in other comprehensive income as currency translation
reserves. These translation reserves are reclassified to the income
Trade payables are recognized at the original invoiced amount. Other
statement upon disposal of the hedged net investments, offsetting the
payables are recognized initially at fair value. Trade and other payables
translation differences from these net investments. Any ineffective portion
are valued at amortized cost using the effective interest rate method. The
is recognized immediately in the income statement as finance income or
interest rate element is disregarded if it is insignificant, which is the case
expenses. Gains and losses accumulated in other comprehensive income
for the majority of the group’s trade payables.
are reclassified to the income statement when the foreign operation is
Interest-bearing borrowings
Interest-bearing borrowings are recognized initially at fair value less
Embedded derivatives
partially disposed of or sold.
attributable transaction costs. Subsequent to initial recognition, interest-
Embedded derivatives are derivatives that are embedded in other
bearing borrowings are measured at amortized cost with any difference
financial instruments or other non-financial host contracts. Under certain
between cost and redemption value being recognized in the income
conditions, the embedded derivative must be separated from its host
statement over the period of the borrowings on an effective interest basis.
contract and the derivative is then to be recognized and measured as
Share capital
any other derivative in the financial statements. Embedded derivatives
must be separated when the settlement for a commercial contract is
Ordinary shares are classified as equity. Repurchase of share capital is
denominated in a currency different from any of the major contract
recognized as a reduction in equity and is classified as treasury shares.
parties’ own functional currency, or that the contract currency is not
considered to be commonly used for the relevant economic environment
Derivative financial instruments
defined as the countries involved in the cross-border transaction. Changes
The group uses derivative financial instruments such as currency forward
in the fair value of separated embedded derivatives are recognized
Annual Report 2016 | Financials and Notes 34
immediately in the income statement. All foreign currency exposure is
Lease income
hedged, so the hedging instrument to the embedded derivative will also
Lease revenue from time charters and bareboat charters are recognized
have corresponding opposite fair value changes in the income statement.
daily over the term of the charter. The company does not recognize
Finance income and expense
revenue during days when the vessel is off-hire. Other lease income from
operating leases, mainly related to office leases, is recognized as revenue
Finance income and expense includes interest income and expense on
on a straight-line basis over the term of the relevant lease. Lease income
financial assets and liabilities, foreign exchange gains and losses, dividend
is included in operating revenue as service revenue.
income and gains and losses on derivatives. Interest income and expenses
include calculated interest using the effective interest method, in addition
Other income
to discounting effects from assets and liabilities measured at fair value.
Gains and losses resulting from acquisition and disposal of businesses
Gains and losses on derivatives include effects from derivatives that do not
which do not represent discontinued operations are included in Other
qualify for hedge accounting and embedded derivatives, in addition to the
income. Such gains may result from the remeasurement of a previously held
ineffective portion of qualifying hedges.
interest in the acquired entity. Changes in the fair value of the contingent
Revenue recognition
Construction contracts
consideration from acquisition of a subsidiary or non-controlling interest
are recognized as part of Other income.
Construction contract revenues are recognized using the percentage of
Share of profit and loss from associated companies and joint ventures,
completion method. Stage of completion is determined by the method
to the extent that these investments are related to the group’s operating
that measures reliably the work performed. Depending on the nature of
activities, are included in Other income, as well as gains and losses related
the contract, the two main methods used by Akastor to assess stage of
to the sale of operating assets.
completion are:
Technical completion, or
Expenses
Construction contracts
Contract costs incurred to date compared to estimated total
and allocated costs that are attributable to general contract activity.
Contract costs include costs that relate directly to the specific contract
contract costs.
Costs that cannot be attributed to contract activity are expensed. Tender
costs are capitalized when it is probable that the company will obtain the
When the final outcome of a contract cannot be reliably estimated,
contract. All other bidding costs are expensed as incurred. See note 4
contract revenue is recognized only to the extent of costs incurred that are
Significant accounting estimates and judgements for further description
expected to be recoverable. The revenue recognized in one period will be
of recognition of construction contract costs.
the revenues attributable to the period’s progress and adjustments related
to changes in the estimated final outcome, if any. Losses on contracts are
Lease payments
fully recognized when identified.
Lease payments made under operating leases are recognized in the
income statement on a straight-line basis over the term of the lease. Any
Contract revenues include variation orders and incentive bonuses when it
lease incentives received are recognized as an integral part of the total
is probable that they will result in revenue that can be measured reliably.
lease expense, over the term of the lease.
Disputed amounts and claims are only recognized when negotiations
have reached an advanced stage, customer acceptance is highly likely
Income tax
and the amounts can be measured reliably. Options for additional
Income tax recognized in the income statement comprises current and
assets are included in the contract when exercised by the buyer. In the
deferred tax. Income tax is recognized in the income statement except
rare circumstances where the option is a loss contract, the full loss is
to the extent that it relates to items recognized directly in equity or other
recognized when it is probable that the options will be exercised.
comprehensive income.
See note 4 Significant accounting estimates and judgements for further
Current tax is the expected tax payable or receivable on the taxable income
description of recognition of construction contract revenue.
or loss for the year, using tax rates enacted or substantially enacted at the
Goods sold and services rendered
years. Current tax payable also includes any tax liability arising from the
Revenue from the sale of goods is recognized in the income statement
declaration of dividends, recognized at the same time as the liability to pay
reporting date, and any adjustment to tax payable in respect of previous
when the significant risks and rewards of ownership have been transferred
the related dividend.
to the buyer, which is usually when goods are delivered to customers.
Revenue from services rendered is recognized in the income statement in
Deferred tax is recognized in respect of temporary differences between
proportion to the stage of completion of the transaction at the reporting
the carrying amounts of assets and liabilities for financial reporting and the
date or is invoiced based on hours performed at agreed rates. The stage of
amounts used for taxation purposes. Deferred tax is not recognized for:
completion is normally assessed based on the proportion of costs incurred
for work performed to date compared to the estimated total contract
costs. No revenue is recognized if there is significant uncertainty regarding
recovery of consideration due.
Goodwill not deductible for tax purposes
The initial recognition of assets or liabilities that affects neither
accounting nor taxable profit
Annual Report 2016 | Financials and Notes 35
Temporary differences relating to investments in subsidiaries to
calculated as the present value of estimated future cash flows, discounted
the extent that they will not reverse in the foreseeable future.
at the original effective interest rate (the effective interest rate computed
at initial recognition of the financial assets). Impairment losses are
Deferred tax is measured at the tax rates that are expected to be applied
recognized only if there is objective evidence of impairment as a result of
to temporary differences when they reverse, based on the laws that have
one or more events that occur after the initial recognition of the asset (a
been enacted or substantively enacted by the reporting date.
loss event) and the loss event has an impact on the estimated future cash
flows of the financial assets that can be reliably estimated.
Deferred tax assets and liabilities are offset if there is a legally enforceable
right to offset current tax liabilities and assets, and they relate to income
Non-financial assets
taxes levied by the same tax authority on the same taxable entity, or on
The carrying amounts of the group’s assets, other than employee benefit
different taxable entities which intend either to settle current tax liabilities
assets, inventories, deferred tax assets and derivatives are reviewed at the
and assets on a net basis, or to realize the tax assets and settle the
end of each reporting period to determine whether there is any indication
liabilities simultaneously.
of impairment. If an indication of impairment exists, the asset’s recoverable
amount is estimated. Cash-generating units (CGU) containing goodwill,
Deferred tax assets are recognized for unused tax losses, tax credits and
intangible assets with an indefinite useful life and intangible assets that
deductible temporary differences, to the extent that it is probable that
are not yet available for use are tested for 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.
realizable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
An impairment loss on goodwill is not reversed. An impairment loss on
other assets is reversed if there has been a change in the estimates used
The cost of inventories is based on the first-in first-out principle and
to determine the recoverable amount, and the change can be objectively
includes expenditures incurred in acquiring the inventories and bringing
related to an event occurring after the impairment is recognized. An
them to their present location and condition. In the case of manufactured
impairment loss is reversed only to the extent that the asset’s carrying
inventories and work in progress, cost includes an appropriate share of
amount does not exceed the carrying amount that would have been
overheads based on normal operating capacity.
determined, net of depreciation or amortization, if no impairment loss had
Impairment
Trade and other receivables
been recognized.
Provisions
Provision of doubtful debt is made when there is objective evidence that
A provision is recognized when the group has a present obligation as a
the group will be unable to recover receivables in full. Receivables are
result of a past event that can be estimated reliably and it is probable that
impaired when the probability of recovery is assessed as being remote. The
the group will be required to settle the obligation. If the effect is material,
impairment is recognized in financial items to the extent that impairment
provisions are determined by discounting the expected future cash flows
is caused by the insolvency of the customer.
at a market based pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the liability-specific risks.
Available-for-sale financial assets
The unwinding of the discount is recognized as a finance cost.
Equity investments classified as available-for-sale are considered to be
impaired when there is a significant (more than 20 percent) or prolonged
Warranties
(more than 6 months) decline in fair value of the investment below its cost.
Provision for warranties is recognized when the underlying products or
Any subsequent increase in value on available-for-sale assets is considered
services are sold. The provision is based on historical warranty data and a
to be a revaluation and is recognized in other comprehensive income.
weighting of all possible outcomes against their associated probabilities.
Other financial assets
Onerous contracts
The recoverable amounts of receivables carried at amortized cost are
Provision for onerous contracts is recognized when the expected benefits
Annual Report 2016 | Financials and Notes 36
to be derived by the group from a contract are lower than the unavoidable
Goodwill is measured at cost less accumulated impairment losses. In
costs of meeting the obligations under the contract. The provision is
respect of equity-accounted investees, the carrying amount of goodwill
measured at the lower of the expected cost of terminating the contract
is included in the carrying amount of the investment, and any impairment
and the expected net cost of continuing with the contract. Before a
loss is allocated to the carrying amount of the equity-accounted investee
provision is recognized, the group recognizes any impairment loss on the
as a whole.
assets associated with the contract.
Restructuring
When the group disposes of an operation within a CGU or group of CGUs
to which goodwill has been allocated, a portion of the goodwill is included
A restructuring provision is recognized when the group has developed a
in the carrying amount of the operation when determining the gain or loss
detailed formal plan for the restructuring and has raised a valid expectation
on disposal. The portion of the goodwill allocated is measured based on
in those affected that the entity will carry out the restructuring by starting
the relative values of the operation disposed of and the portion of the
to implement the plan or announcing its main features to those affected by
CGU retained at the date of partial disposal, unless it can be demonstrated
it. The measurement of a restructuring provision includes only the direct
that another method better reflects the goodwill associated with the
expenditures arising from the restructuring, which are those amounts that
operation disposed of. The same principle is used for allocation of goodwill
are both necessarily entailed by the restructuring and not associated with
when the group reorganizes its businesses.
the ongoing activities of the entity.
Research and development
Property, plant and equipment
Expenditures on research activities undertaken with the prospect of
Property, plant and equipment are measured at cost less accumulated
obtaining new scientific or technical knowledge and understanding is
depreciation and impairment losses. The cost of self-constructed assets
recognized in the income statement as incurred.
includes the cost of materials, direct labour, borrowing costs on qualifying
assets, production overheads and the estimated costs of dismantling and
Development activities involve a plan or design for the production of
removing the assets and restoring the site on which they are located.
new or substantially improved products or processes. Development
If the components of property, plant and equipment have different useful
reliably, the product or process is technically and commercially feasible,
lives, they are accounted for as separate components.
future economic benefits are probable and the group intends to and
expenditure is capitalized only if development costs can be measured
Subsequent costs
has sufficient resources to complete development and to use or sell
the asset. The capitalized expenditure includes cost of materials, direct
The group capitalizes the cost of a replacement part or a component of
labour overhead costs that are directly attributable to preparing the asset
property, plant and equipment when that cost is incurred if it is probable
for it intended use and capitalized interest on qualifying assets. Other
that the future economic benefits embodied with the item will flow to the
development expenditures are recognized in the income statement as an
group and the cost of the item can be measured reliably. All other costs
expense as incurred.
are expensed as incurred.
Capitalized development expenditure is measured at cost less accumulated
Depreciation
amortization and accumulated impairment losses.
Depreciation is normally recognized on a straight-line basis over the
estimated useful lives of property, plant and equipment.
Other intangible assets
Acquired intangible assets are measured at cost less accumulated
Finance leases
amortization and impairment losses.
Leases where the group assumes substantially all the risks and rewards of
ownership are classified as finance leases. At the beginning of the leasing
Subsequent expenditures
period, finance leases are recognized at the lower of the fair value of the
Subsequent expenditures on intangible assets are capitalized only when
leased asset and the present value of the minimum lease payments. The
they increase the future economic benefits embodied in the specific asset
corresponding liability to the lessor is included in the statement of financial
to which they relate. All other expenditures are expensed as incurred.
position as other non-current liabilities except for first year instalment
which is recognized as current liabilities. Lease payments are apportioned
Amortization
between finance charges and reduction of the lease obligation so as to
Amortization is recognized in the income statement on a straight-line
achieve a constant rate of interest of the remaining balance of the liability.
basis over the estimated useful lives of intangible assets unless such useful
Leased assets are depreciated over the shorter of the lease term and
lives are indefinite. Intangible assets are amortized from the date they are
their useful lives unless it is reasonably certain that the group will obtain
available for use.
ownership by the end of the lease term.
Intangible assets
Goodwill
Employee benefits
Defined contribution plans
Obligations for contributions to defined contribution pension plans are
Goodwill that arises from the acquisition of subsidiaries is presented as
recognized as an expense in the income statement as incurred.
intangible asset. For the measurement of goodwill at initial recognition,
see Business combinations.
Defined benefit plans
The group’s net obligation in respect of defined benefit pension plans is
Annual Report 2016 | Financials and Notes 37
calculated separately for each plan by estimating the amount of future
net interest expense (income) on the net defined benefit liability (asset)
benefit that employees have earned in the current and prior periods;
for the period by applying the discount rate used to measure the defined
discounting that amount and deducting the fair value of any plan assets.
benefit obligation at the beginning of the annual period to the then-net
The calculation of defined benefit obligations is performed annually by
defined benefit liability (asset) during the period as a result of contributions
a qualified actuary using the projected unit credit method. The discount
and benefit payments. Net interest expense and other expenses related to
rate is the yield at the reporting date on government bonds or high-
defined benefit plans are recognized in the income statement.
defined benefit liability (asset), taking into account any changes in the net
quality corporate bonds with maturities consistent with the terms of the
obligations.
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
Remeasurement of the net defined benefit liability, which comprises
on curtailment is recognized immediately in the income statement. The
actuarial gains and losses, the return on plan assets (excluding interest)
group recognizes gains and losses on the settlement of a defined benefit
and the effect of the asset ceiling (if any, excluding interest), are recognized
plan when the settlement occurs.
immediately in other comprehensive income. The group determines the
Note 4 | Significant accounting estimates and judgements
Estimates and judgements are continually reviewed and are based on
affect cost estimates. Experience, systematic use of the project execution
historical experiences and expectations of future events. The resulting
model and focus on core competencies reduce, but do not eliminate, the
accounting estimates will, by definition, seldom accurately match actual
risk that estimates may change significantly. A risk contingency is included
results, but are based on the best estimate at the time. Estimates and
in project cost based on the risk register for identified significant risks.
assumptions that have a significant risk of causing material adjustments to
the carrying amounts of assets and liabilities within the next financial year
Progress measurement based on costs has an inherent risk related to the
are discussed below.
Revenue recognition
cost estimate as described above. In situations where cost does not seem
to properly reflect actual progress, alternative measures such as hours or
physical progress are used to achieve more precise revenue recognition.
The percentage-of-completion method is used to account for construction
The estimation uncertainty during the early stages of a contract is
contracts. This method requires estimates of the final revenue and costs
mitigated by a policy of normally not recognizing revenue in excess of
of the contract, as well as measurement of progress achieved to date as a
costs on large lump sum projects before the contract reaches 20 percent
proportion of the total work to be performed.
of completion. However, management can on a project-by-project basis
The main uncertainty when assessing contract revenue is related to
in situations of repeat projects, proven technology or proven execution
give approval of earlier recognition if cost estimates are certain, typically
recoverable amounts from variation orders, claims and incentive payments
model.
which are recognized when, in the group’s judgement, it is probable
that they will result in revenue and are measurable. This assessment
Warranties
is adjusted by management’s evaluation of liquidated damages to be
A provision is made for expected warranty expenditures. The warranty
imposed by customers typically relating to contractual delivery terms. In
period is normally two years as one operating cycle. Based on experience,
many projects, there are frequent changes in scope of work resulting in a
the provision is often estimated at one percent of the contract value, but
number of variation orders. Normally the contracts with customers include
can also be a higher or lower amount following a specific evaluation of
procedures for presentation of and agreement of variation orders. At any
the actual circumstances for each contract. Both the general one percent
point in time, there will be unapproved variation orders and claims included
provision and the evaluation of project specific circumstances are based on
in the project revenue where recovery is assessed as probable and other
experience from earlier projects. Factors that could affect the estimated
criteria are met. Even though management has extensive experience in
warranty cost include the group’s quality initiatives and project execution
assessing the outcome of such negotiations, uncertainties exist.
model. Reference is made to note 28 Provisions for further information
about provisions for warranty expenditures on delivered projects.
One of the key uncertainties related to revenue recognition arises in the
final stages of the completion of long term contracts which can involve
Deferred and contingent considerations
renegociations with customers. The estimates of the likely outcome of
Deferred and contingent considerations resulting
from business
these renegotiations are based on management’s assessments subject to
combinations and disposals are measured at fair value at transaction date.
complex interpretations of contractual, engineering, design and project
When a deferred and contingent consideration meets the definition of a
execution issues. There can be a wide range of reasonably possible
financial asset or liability, it is subsequently remeasured at fair value of
outcomes from such renegociations and the estimates made require a
the reporting date. The determination of fair value is based on discounted
high degree of judgment.
cash flows. The key assumptions take into consideration the probability of
meeting each performance target and the discount factor.
Remaining project costs depend on productivity factors and the cost of
inputs. Weather conditions, the performance of subcontractors and others
Leases
with an impact on schedules, commodity prices and currency rates can
The determination of whether an arrangement is (or contains) a lease is
Annual Report 2016 | Financials and Notes 38
based on the substance of the arrangement at the inception date. The
Valuation of deferred tax assets is dependent on management’s assessment
arrangement is assessed for whether fulfilment of the arrangement is
of future recoverability of the deferred tax benefit. Expected recoverability
dependent on the use of a specific asset (or assets) or the arrangement
may result from expected taxable income in the near future, planned
conveys a right to use the asset (or assets), even if that right is not explicitly
transactions or planned tax optimizing measures. Economic conditions
specified in an arrangement.
may change and lead to a different conclusion regarding recoverability,
and such change may affect the results for each future reporting period.
Leases are classified as finance leases when the terms of the lease transfer
substantially all the risks and rewards incidental to ownership to the lessee.
Tax authorities in different jurisdictions may challenge calculation of
All other leases are classified as operating leases. The assessment for the
income taxes from prior periods. Such processes may lead to changes to
classification of leases is based on the substance of the transactions and
prior periods’ taxable income, resulting in changes to income tax expense
requires judgement.
in the period of change. During the period when tax authorities challenge
income tax calculations, management is required to make estimates of
Impairment of non-financial assets
the probability and size of possible tax adjustments. Such estimates may
Property, plant and equipment and intangible assets
change as additional information becomes known. Further details about
The group has significant non-current assets recognized
in the
income taxes are included in note 12 Income tax.
consolidated statement of financial position related to Property, plant and
equipment and intangible assts. The value in use of some of these assets
Onerous contracts
can be significantly impacted by changes of market conditions. The group
The group has entered into several non-cancellable lease contracts
considers whether there are indications of impairment on the carrying
for office premises which may result in vacant leased space. The group
amounts of such non-current assets. If such indications exist, an impairment
recognizes a provision for such lease contracts when the leased property
test is performed to assess whether or not the assets should be impaired.
is or will be vacant during the non-cancellable lease period. The provision
The valuations, often determined by value-in-use calculations, will often
is made for the discounted future lease payments, net of expected
have to be performed based on estimates of future cash flows discounted
sublease income, if any. Key assumptions in determining the provisions are
by an appropriate discount rate. Significant estimates and judgments have
primarily related to expected sublease income, length of vacancy periods
to be made by the management, including determining appropriated cash-
and appropriate discount rates. Further information about provision for
generating units and discount rate, projections for future cash flows and
onerous contracts is included in note 28 Provisions.
assumptions of future market conditions. References are made to note 14
Property, plant and equipment and note 15 Intangible assets.
Pension benefits
Goodwill
The present value of the pension obligations depends on a number
of factors determined on the basis of actuarial assumptions. These
The group performs impairment testing of goodwill annually or more
assumptions include financial factors such as the discount rate, expected
frequently if any impairment indicators are identified. The recoverable
salary growth, inflation and return on assets as well as demographical
amounts of cash-generating units to which goodwill is allocated have
factors concerning mortality, employee turnover, disability and early
been determined based on value-in-use calculations. These calculations
retirement. Assumptions about all these factors are based on the
require management to estimate future cash flows expected to arise from
situation at the time the assessment is made. However, it is reasonably
these cash-generating units and an appropriate discount rate to reflect
certain that such factors will change over the very long periods for which
the time value of the money. Key assumptions made by the management
pension calculations are made. Any changes in these assumptions will
include also assumptions for future market conditions, which require a
affect the calculated pension obligations with immediate recognition in
high degree of judgment. Further details about goodwill allocation and
other comprehensive income. Further information about the pension
impairment testing are included in note 16 Impairment testing of goodwill.
obligations and the assumptions used are included in note 27 Employee
Income taxes
The group is subject to income taxes in numerous jurisdictions. Significant
Legal claims
benefits – pension.
judgement is required to determine the worldwide provision for income
Given the scope of the group’s worldwide operations, group companies
taxes. There are many transactions and calculations for which the ultimate
are inevitably involved in legal disputes in the course of their business
tax determination is uncertain during the ordinary course of business.
activities. In addition, as an investment company, Akastor and its portfolio
Provisions for anticipated tax audit issues are based on estimates of
companies from time to time engage in mergers, acquisitions and other
eventual additional taxes.
transactions that could expose the companies to financial and other
non-operational risks, such as indemnity claims and price adjustment
Income tax expense is calculated based on reported income in the different
mechanisms resulting in recognition of deferred settlement obligations.
legal entities. Deferred income tax expense is calculated based on the
differences between the assets’ carrying amount for financial reporting
Provisions have been made to cover the expected outcome of the legal
purposes and their respective tax basis that are considered temporary in
claims to the extent negative outcomes are likely and reliable estimates
nature. The total amount of income tax expense and allocation between
can be made. However, the final outcome of these cases is subject to
current and deferred income tax requires management’s interpretation of
uncertainties, and resulting liabilities may exceed provisions recognized.
complex tax laws and regulations in the many tax jurisdictions where the
group operates.
Annual Report 2016 | Financials and Notes 39
Note 5 | Discontinued operations
Disposal of Managed Pressure Operations (MPO)
Disposal of Fjords Processing
In August 2016, Akastor sold Managed Pressure Operations in MHWirth
In December 2016, Akastor completed the transaction to sell Fjords
to AFGlobal, following the decision of evaluating strategic alternatives
Processing segment to National Oilwell Varco (NOV). Fjords Processing
for this operation. Managed Pressure Operations is an oilfield services
provides world-class wellstream processing technology, systems and
company supplying industry leading Managed Pressure Drilling equipment,
services to the upstream oil and gas industry. The company delivers
know how and experience.
market-leading solutions for separation and treatment of oil and gas,
based on innovative technology and extensive competence accumulated
The consideration for the disposal includes an earn-out element which
over the last 40 years. Fjords Processing is headquartered in Fornebu,
potentially could reach USD 65 million over the next six years. The
Norway, and has about 500 employees in 15 countries.
contingent consideration was recognized at fair value as of December 31,
2016.
Disposal of Frontica Advantage
In December 2016, Akastor entered into a definitive agreement to sell
Disposal of Frontica Business Solutions
Frontica’s staffing business (Frontica Advantage) to NES Global Talent
In November 2016, Akastor completed the transactions to sell Frontica's IT
in exchange for a minority shareholding in the combined entity. Frontica
business line (Frontica Business Solutions) , to Cognizant. Frontica Business
Advantage is a provider of quality workforce solutions with global
Solutions is a global provider of Information Technology Outsourcing
presence. The company has about 80 employees, with offices in Norway,
(ITO) and Business Process Outsourcing (BPO) services to the oil and
UK, USA, Brazil and Malaysia. The transaction was completed on January
gas sector. The ITO division delivers services for IT infrastructure and
6, 2017. See also note 37 Subsequent events for more information about
workplace, application management and software development, as well
the divestment of Frontica Advantage.
as consulting services. The BPO division offers transaction finance, HR and
payroll services. Frontica Business Solutions has about 570 employees,
with offices in Norway, UK, USA, Brazil and Malaysia.
MPO, Frontica (Frontica Business Solutions and Frontica Advantage) and Fjords Processing are classified as discontinued operations and the comparative
consolidated income statement has been restated to show the discontinued operations separately from continuing operations. Frontica Advantage is
classified as held for sale as of December 31, 2016.
Results of discontinued operations
Amounts in NOK million
Revenue
Expenses
Net financial items
Profit (loss) before tax
Income tax
Profit (loss) from operating activities, net of tax
Gain (loss) on sale of discontinued operations 1)
Income tax on gain (loss) on sale of discontinued operations
Net profit (loss) from discontinued operations
Basic/diluted earnings (loss) per share from discontinued operations (NOK)
2016
2015
4 616
(4 715)
5 832
(6 474)
(4)
(102)
(58)
(160)
968
(73)
734
2.71
(13)
(655)
(65)
(720)
(23)
-
(743)
(2.74)
1) Includes currency translation differences of NOK 105 million that was reclassified from Other Comprehensive Income to the income statement upon disposal in 2016.
Gain before tax from the disposal was NOK 507 million for Frontica Business Solutions and NOK 654 million for Fjords Processing, and loss before tax
of NOK 127 million for MPO. The net gain before tax on sale of discontinued operations in 2016 was negatively affected by lower earn-out expectations
on divestments from prior years.
Cash flows from (used in) discontinued operations
Amounts in NOK million
Net cash from operating activities
Net cash from investing activities
Net cash flow from discontinued operations
2016
2015
(73)
2 333
2 260
(314)
(4)
(318)
Annual Report 2016 | Financials and Notes 40
Effect of disposal on the financial position of the group
Amounts in NOK million
Deferred tax assets
Property, plant and equipment
Intangible assets
Other non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Other current assets
Non-current liabilities
Trade and other payables
Other current liabilities
Currency translation reserve
Net assets and liabilities
Total consideration at fair value
Portion of consideration received in cash, net of transaction costs
Cash and cash equivalents disposed of
Cash inflows from disposal, net of cash disposed of
Assets and liabilities held for sale
Amounts in NOK million
Deferred tax assets
Intangible assets
Current operating assets
Cash and cash equivalents
Assets classified as held for sale
Deferred tax liabilities
Trade payables
Other current liabilities
Liabilities classified as held for sale
Net assets held for sale
Disposal of subsidiaries in 2015
2016
(171)
(218)
(640)
(24)
(114)
(1 163)
(262)
(111)
89
197
758
105
(1 554)
2 587
2 644
(262)
2 382
2016
33
48
78
53
212
(29)
(54)
(94)
(177)
35
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 related party 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 35 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
Annual Report 2016 | Financials and Notes 41
Note 6 | Operating segments
Basis for segmentation
Measurement of segment performance
As of December 31, 2016, Akastor has three reportable segments which
Segment performance is measured by operating profit before depreciation,
are the strategic business units of the group. The strategic business units
amortization and impairment (EBITDA) which is reviewed by the group’s
are managed separately and offer different products and services due
Executive Management Group (the chief operating decision maker).
to different market segments and different strategies for their projects,
Segment profit, together with key financial information as described below,
products and services:
gives the Executive Management Group relevant information in evaluating
the results of the operating segments and is relevant in evaluating the
MHWirth is a supplier of drilling systems and drilling lifecycle
results of the segments relative to other entities operating within these
services globally. The company offers a full range of drilling
industries. Inter-segment pricing is determined on an arm’s length basis.
equipment, drilling riser solutions and related products and
services for the drilling market, primarily the offshore sector.
The accounting policies of the reportable segments are the same as
described in note 2 Basis of preparation and note 3 Significant accounting
AKOFS Offshore is a global provider of vessel-based subsea well
principles, except for hedge accounting. When contract revenues and
construction and intervention services to the oil and gas industry,
contract costs are denominated in a foreign currency, the subsidiary
covering all phases from conceptual development to project
hedges the exposure against the central treasury department (Akastor
execution and offshore operations.
Treasury) and hedge accounting is applied independently of whether
KOP Surface Products is a supplier of flow control equipment to
correction of the non-qualifying hedges to secure that the consolidated
the oil and gas industry. The main products are valves, wellheads
financial statements are in accordance with IFRS is made as an adjustment
and trees for offshore and land-based surface production.
at corporate level. This means that the group’s segment reporting reflect
the hedge qualify for hedge accounting in accordance with IFRS. The
all hedges as qualifying even though they may not qualify in accordance
Further, Akastor owns other investments, mainly 76 percent in Step
with IFRS.
Oiltools, 50 percent of DOF Deepwater AS, 100 percent in First Geo AS
and Cool Sorption, and 93 percent of Aker Pensjonskasse. These are
Hedge transactions not qualifying for hedge accounting represent an
included in “Other holdings”.
accounting loss of NOK 10 million to EBITDA (gain of NOK 53 million in
2015) and a loss under financial items of NOK 289 million (gain of NOK
As a result of Frontica and Fjords Processing being classified as discontinued
50 million in 2015). This is recognized as group adjustment under Other
operations, the segment reporting has been reassessed in 2016 and the
holdings.
historical comparative figures have been restated accordingly. See note 5
for more information about the discontinued operations.
Annual Report 2016 | Financials and Notes 42
Information about reportable segments
Amounts in NOK million
Note
MHWirth
Offshore KOP Surface
AKOFS
Other
holdings
Eliminations
Total
segments
14, 15
14, 15
2016
Income statement
External revenue and other income
Inter-segment revenue
Total operating revenue and other income
Operating profit before depreciation,
amortization and impairment (EBITDA)
Depreciation and amortization
Impairment
Operating profit (loss) (EBIT)
Assets
Current operating assets
Non-current operating assets
Operating segment assets
Liabilities
Current operating liabilities
Non-current operating liabilities
Operating segment liabilities
Net current operating assets
Net capital employed
Capital expenditure and R&D capitalization
Cash flow from operating activities
3 510
38
3 548
71
(269)
(353)
(552)
3 060
2 448
5 509
1 970
339
2 309
1 091
3 200
36
280
835
-
835
316
(331)
(118)
(134)
277
4 306
4 583
156
58
214
121
4 378
108
(234)
AKOFS
335
-
335
(22)
(58)
-
(80)
228
298
526
109
20
130
119
396
13
42
629
44
674
(296)
(88)
(2)
(385)
425
794
1 219
683
422
1 106
(258)
104
5
(144)
-
(82)
(82)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5 310
-
5 310
69
(746)
(473)
(1 151)
3 991
7 846
11 837
2 919
840
3 758
1 072
8 078
162
(56)
Real estate
& Other
holdings
Eliminations
Total
segments
Amounts in NOK million
Note
MHWirth
Offshore KOP Surface
14, 15
14, 15
2015 (Restated)
Income statement
External revenue and other income
Inter-segment revenue
Total operating revenue and other income
Operating profit before depreciation,
amortization and impairment (EBITDA)
Depreciation and amortization
Impairment
Operating profit (loss) (EBIT)
Assets
Current operating assets
Non-current operating assets
Operating segment assets
Liabilities
Current operating liabilities
Non-current operating liabilities
Operating segment liabilities
Net current operating assets
Net capital employed
Capital expenditure and R&D capitalization
Cash flow from operating activities
6 455
72
6 527
18
(264)
(104)
(349)
5 005
2 781
7 786
2 872
629
3 501
2 133
4 285
360
-
781
-
781
104
(355)
(1 037)
(1 288)
200
5 119
5 319
131
4
135
69
5 183
1 057
(193)
1 131
-
1 131
242
(57)
(8)
177
374
341
715
135
25
160
240
555
31
400
1 616
153
1 769
203
(153)
(107)
(57)
412
841
1 253
432
127
559
(20)
694
99
(496)
-
(225)
(225)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9 983
-
9 983
567
(829)
(1 256)
(1 518)
5 991
9 081
15 073
3 570
785
4 355
2 422
10 718
1 548
(289)
Annual Report 2016 | 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
Assets classified as held for sale
Operating assets related to discontinued operations
Elimination of intra-group assets
Consolidated assets
Liabilities
Total segment liabilities
Derivative financial instruments
Current borrowings
Non-current borrowings
Liabilities classified as held for sale
Operating liabilities related to discontinued operations
Elimination of intra-group liabilities
Consolidated liabilities
Major customers
43
Note
2016
2015
Restated
32
23
17
17
5
32
25
25
5
11 837
15 073
269
487
15
51
212
-
(10)
1 746
563
72
84
-
3 087
(87)
12 861
20 537
3 758
301
1 560
1 494
177
-
(10)
4 355
1 528
4 054
1 583
-
1 717
(87)
7 281
13 150
Revenue from two customers in MHWirth represents approximately NOK 1.5 billion (NOK 1.3 billion in 2015), and one customer in AKOFS Offshore
represents approximately NOK 600 million (NOK 485 million in 2015) 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 has revenue and no-current assets higher than 10 percent of the
group, while Singapore had revenue higher than 10 percent of the group in 2015.
Amounts in NOK million
Norway
Singapore
Other Europe
North America
South America
Other Asia
Australia
Middle East
Other
Total
Operating revenue
and other income
Non-current assets excluding
deferred tax assets and
financial instruments
2016
2 905
498
641
331
270
449
91
113
12
2015
Restated
5 759
1 424
934
824
339
406
107
168
22
2016
4 887
218
925
337
406
200
41
5
3
2015
6 451
626
1 485
514
579
176
57
29
2
5 310
9 983
7 022
9 919
Annual Report 2016 | Financials and Notes
44
Note 7 | Operating revenue and other income
Amounts in NOK million
Construction revenue
Service revenue
Product revenue
Other operating revenue 1)
Total operating revenue
Decrease (increase) in contingent considerations from business combinations
Gain on disposal of subsidiaries
Deferred gain on disposal of real estate
Gain on disposals of assets
Total other income
1) Includes rental income from investment property of NOK 60 million in 2015.
Note
20
5
2016
1 612
2 242
918
368
5 140
-
-
-
170
170
2015
Restated
4 257
3 292
1 628
402
9 580
44
303
37
19
403
Gain on disposal of assets in 2016 mainly relates to the sale of the Skandi Santos topside equipment from AKOFS Offshore to Avium Subsea AS, a joint
venture where Akastor has 50 percent ownership. The sale resulted in an accounting gain of NOK 172 million, representing 50% of the total gain on sale.
See note 35 Related parties for more information about the transaction with joint venture.
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
27
2016
1 843
250
78
133
2015
Restated
2 604
313
92
197
2 304
3 205
2016
2015
568
1 287
443
2 298
678
1 756
567
3 001
Minimum sublease income to be received in the future amounts to NOK 26 million (NOK 29 million in 2015) 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
2016
535
(9)
527
2015
Restated
891
(2)
889
Annual Report 2016 | Financials and Notes 45
The group has operating lease costs for buildings on a large number of
In addition, the group has vessel lease costs in AKOFS Offshore related to
locations worldwide. The leases typically run for a period of 12–15 years,
rental for the Skandi Santos vessel. In November 2016, AKOFS entered into
with an option to renew the lease at market conditions. The group has
a lease agreement for the Skandi Santos vessel with the 50 percent owned
also operating lease costs related to cars and inventory. These leases have
joint venture, Avium Subsea AS. The Skandi Santos lease contract expires
an average lease period of 3-5 years with no renewal options included in
in March 2020, with an option for renewal for 5 years. See note 35 Related
the contracts.
Group as lessor
parties for more information about the transactions with joint ventures.
The AKOFS Seafarer vessel was acquired in February 2015 and Aker
Wayfarer vessel was recognized as finance lease as of September 2014.
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
2016
2015
726
4 223
581
5 530
965
4 903
403
6 272
Lease income recognized in the income statement
Operating lease income relates mainly to the vessels Skandi Santos and Aker Wayfarer, offices leases to Aker Solutions and the rental business in Step
Oiltools. Operating lease income of NOK 691 million is recognized in the income statement in 2016 (NOK 1 218 million in 2015).
Note 10 | Other operating expenses
Amounts in NOK million
Rental and other costs for buildings and premises
External consultants and hired-ins inclusive audit fees
Office supplies
Travel expenses
Insurance
Other
Total other operating expenses
Fees to the auditors
2016
290
242
23
71
32
165
823
2015
Restated
445
382
29
113
37
296
1 303
The table below summarizes audit fees, as well as fees for audit related services, tax services and other services incurred by the group during 2016 and 2015.
Amounts in NOK million
2016
2015
2016
2015
Restated
2016
2015
Restated
Akastor ASA
Subsidiaries
Total
Audit
Other assurance services
Tax services
Other non-audit services
Total
3
-
-
-
3
2
-
-
-
2
10
3
1
1
15
10
2
-
1
13
13
3
1
1
18
12
2
-
1
15
Annual Report 2016 | Financials and Notes 46
Note 11 | Finance income and expenses
Amounts in NOK million
Profit (loss) on foreign currency forward contracts
Equity accounted investees
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 1)
Interest expense on financial liabilities measured at fair value
Loss on sale of available-for sale-assets 2)
Impairment loss on available-for sale-assets 2)
Impairment loss on external receivables 3)
Other financial expenses
Financial expenses
Net finance expenses recognized in profit and loss
Note
18
2016
(289)
(214)
10
28
2
40
(246)
(292)
(21)
(26)
-
(94)
(31)
(710)
(1 174)
2015
Restated
50
(73)
12
49
26
87
(205)
(279)
(21)
-
(202)
-
(35)
(742)
(678)
1) Aker Wayfarer vessel in AKOFS Offshore was recognized as finance lease as of September 2014.
2) Loss on sale in 2016 and impairment loss in 2015 on available-for-sale assets relate to the group’s shareholdings in EZRA Holdings Ltd.
3) Impairment loss on external receivables in 2016 was triggered by insolvency of certain customers as well as unrecoverability of interest-bearing receivables.
See note 33 Financial instruments for information of the finance income and expense generating items.
Foreign currency forward contracts
Profit (Loss) on foreign currency forward contracts reflects fair value on
Some foreign exchange hedge transactions do not qualify for hedge
hedge contracts that don’t qualify for hedge accounting. The loss in 2016
accounting under IFRS, primarily because a large number of internal hedge
is mainly related to hedge contracts in MHWirth.
transactions are grouped and netted before external hedge transactions
are established. These derivatives are mainly foreign exchange forward
The exposure from foreign currency embedded derivatives is economically
contracts. The corresponding contracts to the derivatives are calculated
hedged, but cannot qualify for hedge accounting and is therefore included
to have an equal, but opposite effect, and both the derivatives and the
in net foreign exchange gain/loss. Hedge accounting and embedded
hedged items are reported as financial items. The net amount therefore
derivatives are explained in note 32 Derivative financial instruments.
reflects the difference in timing between the non-qualifying hedging
instrument and the future transaction (economically hedged item).
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
Total deferred tax income (expense)
Total tax income (expense)
2016
2015
Restated
(35)
(21)
(57)
574
(18)
(192)
364
307
(120)
(2)
(122)
627
(12)
(140)
474
351
Annual Report 2016 | 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 in Norway.
Amounts in NOK million
Profit (loss) before tax, continuing operations
Tax income (expense) using the company’s domestic tax rate
2016
(2 324)
581
Tax effects of:
Difference between local tax rate and Norwegian tax rate
Permanent differences 1)
Prior year adjustments (current tax)
Prior year adjustments (deferred tax)
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)
45
(84)
(21)
6
(192)
(18)
(2)
(8)
307
25.0%
1.9%
(3.6%)
(0.9%)
0,3%
(8.3%)
(0.8%)
(0.1%)
(0.3%)
13.2%
2015
Restated
(2 195)
593
(10)
44
(2)
(6)
(140)
(12)
(84)
(31)
351
27.0%
(0.4%)
2.0%
(0.1%)
(0.3%)
(6.4%)
(0.6%)
(3.8%)
(1.4%)
16.0%
1) Relates mainly to profit (loss) from equity accounted investees, profit (loss) recognized on various tax-exempted investments and impairment of goodwill in 2015.
2) In 2016, an impairment of deferred tax asset of NOK 85 million was recognized due to the preliminary decision from Central Tax office in Norway of disallowance of tax
loss carry-forward incurred in relation to the liquidation of AKOFS Singapore in 2014. The remaining impairment relates mainly to MHWirth Inc in MHWirth, KOP Surface
Nigeria and Step Oiltools.
3) Relates mainly to changes in corporate income tax rate in Norway. The tax rate is changed from 25 percent to 24 percent effective as of January 1, 2017.
In 2015, the tax rate was changed from 27 percent to 25 percent effective as of January 1, 2016.
4) Relates to Norwegian legal entities in AKOFS Offshore with functional currency of USD.
Recognized deferred tax assets and liabilities
Amounts in NOK million
2016
2015
2016
2015
2016
2015
Assets
Liabilities
Net
Property, plant and equipment
Intangible assets
Projects under construction
Pensions
Provisions
Derivatives
Other items
Tax loss carry-forwards
Total before set offs
Set-off of tax
Total deferred tax assets (liabilities)
135
1
-
95
158
32
152
782
1 355
(756)
600
68
35
-
122
198
89
179
829
1 521
(1 053)
468
(207)
(42)
(326)
-
(1)
(102)
(91)
-
(770)
756
(15)
(205)
(146)
(453)
-
(3)
(264)
(31)
-
(1 103)
1 053
(51)
(72)
(41)
(326)
95
158
(70)
61
782
586
-
586
(137)
(111)
(453)
122
195
(175)
148
829
418
-
418
Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available, against which the deductible temporary
difference can be utilized. The deferred tax assets recognized for tax loss carry-forward are mainly related to the entities of the Norwegian tax group
where tax losses can be carried forward without expiration. The group has made an evaluation of taxable profit in the Norwegian entities for the next
five years based on management’s projection. The estimates indicate that it is probable that future tax profit will be available for which such tax losses
can be utilized.
Annual Report 2016 | Financials and Notes 48
Change in net recognized deferred tax assets (liabilities)
Amounts in NOK million
Property,
plant and
equipment
Intangible
assets
Projects
under
construction
Pensions Provisions Derivatives
Other
items
Tax loss
carry-
forwards Total
Balance as of January 1, 2015
(368)
(102)
(552)
135
204
(151)
117
448
(269)
Recognized in profit and loss
(restated)
Recognized in other comprehensive
income
Discontinued operations
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2015
Classified as held for sale as of
January 1, 2016
Disposal of subsidiaries as of
January 1, 2016
Recognized in profit and loss
Recognized in other comprehensive
income
Currency translation differences
125
-
11
130
(34)
(137)
-
(20)
75
-
9
5
-
-
-
(14)
(111)
2
52
14
-
1
Balance as of December 31, 2016
(72)
(41)
(326)
95
-
5
-
-
(6)
(9)
(1)
-
3
(453)
122
123
(63)
(30)
226
474
-
(127)
-
(5)
195
39
-
-
1
10
37
-
12
-
85
(2)
73
40
9
128
36
(175)
148
829
418
-
-
(6)
(14)
132
-
8
(13)
(16)
4
(2)
95
(23)
12
-
(22)
158
-
1
15
90
(2)
(70)
(1)
(37)
(41)
(128)
67
(35)
11
61
(66)
(211)
64
364
-
(8)
60
(3)
782
586
Tax loss carry-forwards and deductible temporary differences for which no deferred tax assets are recognized
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.
Expiry date of unrecognized tax loss carry-forwards
Amounts in NOK million
Expiry in 2018
Expiry in 2019
Expiry in 2020
Expiry in 2021 and later
Indefinite
Total
2016
2015
-
-
12
487
687
1 187
168
-
13
431
216
828
Unrecognized other deductible temporary differences are NOK 287 million in 2016 (NOK 181 million in 2015).
Note 13 | Earnings per share
Akastor ASA holds 2 776 376 treasury shares at year end 2016 (2 776 376 in 2015). 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
Basic/diluted earnings per share
2016
(1 282)
(2 017)
2015
Restated
(2 587)
(1 844)
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)
2016
2015
Restated
274 000 000
274 000 000
271 223 624
271 086 638
(4.73)
(7.44)
(9.54)
(6.80)
Annual Report 2016 | Financials and Notes Note 14 | Property, plant and equipment
The table below includes discontinued operations until these met the criteria to be classified as held for sale or distribution.
Note
Buildings
and land
Vessels
Machinery,
equipment,
software
Under
construction
49
Total
10 778
1 454
336
-
(1 207)
(374)
1 390
12 376
153
395
-
(952)
(1 107)
(132)
10 733
(4 309)
(859)
(1 225)
(47)
1 069
60
(584)
(5 896)
(727)
(511)
626
889
85
974
9
-
49
(106)
(291)
26
661
1
-
436
(6)
(7)
(43)
5 271
1 032
-
8
-
-
1 133
7 444
-
(69)
747
(566)
-
(171)
1 042
7 384
3 579
15
60
181
(594)
(83)
241
3 399
45
69
44
(325)
(1 092)
62
2 202
954
397
276
(239)
(507)
-
(9)
872
107
395
(1 225)
(55)
(7)
19
105
(208)
(44)
(9)
-
39
43
(22)
(200)
(48)
(283)
2
2
34
(494)
461
548
-
-
(1 729)
(342)
(1 037)
-
-
-
(382)
(3 490)
(320)
(118)
304
-
62
(1 910)
(462)
(474)
(169)
(47)
534
16
(140)
(2 190)
(359)
(110)
320
887
(11)
-
(10)
-
496
-
(40)
(16)
-
-
-
-
-
(3 562)
(1 463)
(16)
(5 535)
3 954
3 822
1 313
1 618
1 208
739
-
-
856
89
-
-
6 480
5 198
1 313
1 618
Amounts in NOK million
Historical cost
Balance as of January 1, 2015
Additions 1)
Reclassifications 3)
Transfer from assets under construction
Disposals and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2015
Additions 2)
Reclassifications 3)
Transfer from assets under construction
Disposals and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2016
Accumulated depreciation and impairment
Balance as of January 1, 2015
Depreciation for the year 4)
Impairment 5)
Reclassifications 3)
Disposals and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2015
Depreciation for the year 4)
Impairment 5)
Disposals and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2016
Book value as of December 31, 2015
Book value as of December 31, 2016
Of which financial lease as of December 31, 2015
Of which financial lease as of December 31, 2016
5
5
5
5
1) Includes NOK 23 million of capitalized borrowing costs in 2015. The average capitalization rate is 6.8 percent.
2) Includes additions of NOK 22 million related to discontinued operations.
3) Includes reclassifications from Other non-current operating assets (relating to Aker Wayfarer vessel) and Intangible assets.
4) Includes depreciation of NOK 126 million from discontinued operations in 2016 (NOK 211 million in 2015).
5) Includes impairment of NOK 93 million from discontinued operations in 2016 (NOK 132 million in 2015).
Annual Report 2016 | Financials and Notes
50
Finance leased asset
In addition, an impairment loss of NOK 58 million was recognized mainly
The vessel under finance lease relates to the Aker Wayfarer vessel that
related to the closing down of a manufacturing plant in Asia in 2016.
is under lease contract with Ocean Yield. Please refer to note 35 Related
parties for more information of the agreement.
Impairment in AKOFS Offshore
Commitments
An impairment loss of NOK 118 million was recognized in 2016 writing
down the cash-generating unit AKOFS Seafarer to its recoverable amount
As of December 31, 2016, Akastor entered into contractual commitments
of NOK 2.1 billion based on value in use. The impairment was mainly a
for the acquisition of property, plant and equipment amounting to NOK
result of increased discount rate (10.0%) used in the impairment test.
11 million (NOK 16 million in 2015), mainly related to the Macae plant in
The recoverable amount analysis for AKOFS Seafarer has been made
MHWirth and offshore equipment in AKOFS Offshore.
with different probability weighted scenarios covering the variation in day
Depreciation
rates and utilization based on the management’s assessment of market
conditions. See note 16 for more information about the discount rate and
Estimates for useful life, depreciation method and residual values are
key assumptions.
reviewed annually. Assets are mainly depreciated on a straight-line basis
over their expected economic lives as follows:
In 2015, an impairment loss of NOK 1 037 million related to AKOFS
Machinery, equipment and software
3–15 years
weak market conditions which are expected to continue in the short to
Seafarer was recognized. The impairment was triggered by the current
Vessels
Buildings
Land
Impairment
Impairment in MHWirth
20–25 years
8–30 years
No depreciation
medium term.
Security
The AKOFS Seafarer vessel, with carrying amount of NOK 2.2 billion as
of December 31, 2016, is pledged as security for borrowings in the group.
An impairment loss of NOK 241 million was recognized in 2016 related to
the Macae plant in Brazil. The impairment was triggered by current weak
market conditions for project related work which are expected to continue
in the short to medium term. The recoverable amount of NOK 400 million
was determined based on value in use. In determining value in use for the
cash generating unit, the cash flows were discounted at a rate of 15.9% on
a pre-tax basis.
Annual Report 2016 | Financials and Notes Note 15 | Intangible assets
Amounts in NOK million
Note
Development costs
Goodwill
Other
Total
51
Historical cost
Balance as of January 1, 2015
Reclassification 1)
Capitalized development
Disposal and scrapping
Currency translation differences
Balance as of December 31, 2015
Reclassification
Capitalized development 2)
Disposal and scrapping
Disposal of subsidiaries
Reclassification to asset held for sale
Currency translation differences
Balance as of December 31, 2016
Accumulated amortization and impairment
Balance as of January 1, 2015
Reclassifications 1)
Amortisation for the year 3)
Impairment for the year 4)
Disposal and scrapping
Currency translation differences
Balance as of December 31, 2015
Amortisation for the year 3)
Impairment for the year 4)
Disposal and scrapping
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2016
Book value as of December 31, 2015
Book value as of December 31, 2016
2 369
578
3 918
971
(60)
169
(189)
33
923
(9)
47
(103)
(228)
-
(13)
618
(281)
47
(146)
(96)
189
5
(281)
(143)
(49)
103
65
2
5
5
5
-
-
-
173
2 542
-
-
-
(648)
(48)
(129)
1 718
(347)
-
-
(280)
-
(26)
(653)
-
-
-
211
54
(304)
(388)
642
314
1 889
1 330
-
7
(6)
72
652
9
2
-
(403)
-
(25)
235
(167)
-
(59)
(157)
6
(19)
(397)
(30)
(97)
-
363
14
(147)
254
88
(60)
176
(195)
277
4 117
-
49
(103)
(1 278)
(48)
(168)
2 570
(795)
47
(205)
(533)
195
(39)
(1331)
(173)
(146)
103
638
70
(839)
2 785
1 731
1) Reclassifications to Property, Plant and Equipment in 2015.
2) Includes capitalized development costs of NOK 20 million from discontinued operations.
3) Includes amortization of NOK 28 million from discontinued operations in 2016 (NOK 63 million in 2015).
4) Includes impairment of NOK 91 million from discontinued operations in 2016 (NOK 370 million in 2015).
Impairment loss of goodwill
Research and development costs
In 2015, the impairment loss of goodwill was mainly related to Step
NOK 49 million has been capitalized in 2016 (NOK 176 million in 2015)
Oiltools (NOK 65 million) and the discontinued operation, Managed
related to development activities. In addition, research and development
Pressure Operations in MHWirth (NOK 213 million). See note 16 for more
costs of NOK 62 million were expensed during the year because the
information about goodwill impairment.
criteria for capitalization are not met (NOK 60 million in 2015).
Impairment loss of other intangible assets than goodwill
Amortization
In 2016, an impairment loss of NOK 54 million was recognized mainly
Intangible assets all have finite useful lives and are amortized over the
related to intangible assets that were no longer expected to be utilized in
expected economic life, ranging between 5-10 years.
MHWirth. The impairment loss of intangible assets recognized in MHWirth
in 2015 was NOK 87 million.
The impairment loss of other intangible assets from discontinued
operations was related to Managed Pressure Operations in MHWirth in
both 2016 and 2015.
Annual Report 2016 | Financials and Notes 52
Note 16 | Impairment testing of goodwill
Goodwill originates from a number of acquisitions. For the purpose of impairment testing, goodwill has been allocated to the group’s cash-generating
units (portfolio companies) as shown in the table below, which represents the lowest level at which goodwill is monitored in management reporting.
Amounts in NOK million
MHWirth
Frontica 1)
AKOFS Offshore
Fjords Processing 2)
KOP Surface Products
First Geo 3)
Total goodwill
2016
2015
1 063
1 093
-
145
-
103
18
203
145
327
103
18
1 330
1 889
1) Following the divestment of Frontica Business Solutions, goodwill of NOK 48 million was allocated to Frontica Advantage which is classified as held for sale as of December
31, 2016
2) Sold in 2016.
3) This portfolio company is included in Other Holdings in segment reporting.
Impairment testing for cash-generating units containing significant
well as assessment of future market development and conditions. These
goodwill
assumptions require a high degree of judgement, given the significant
The recoverable amounts of cash-generating units (portfolio companies)
degree of uncertainty regarding oil price development and oilfield service
are determined based on value-in-use calculations. Discounted cash
activities in the forecast period.
flow models are applied to determine the value in use for the portfolio
companies with goodwill. For all portfolio companies except for AKOFS
Terminal value growth rate. The group uses a constant growth rate not
Offshore, management has made cash flow projections based on budget
exceeding 2% (including inflation) for periods beyond the management’s
and strategic forecast for the periods 2017-2021. Beyond the explicit
forecast period of five years. The growth rates used do not exceed the
forecast period of five years, the cash flows are extrapolated using a
growth rates for the industry in which the portfolio company operates.
constant growth rate. For AKOFS Offshore, the cash flow projections are
made for the periods equal to estimated useful life of the vessels.
Vessel-specific day rate. For AKOFS Offshore, the cash flow projections
reflect vessel-specific rates as reflected in charter-agreements and, for
Key assumptions used in the calculation of value in use are discussed
periods when the vessels are operating in the spot market, rates achieved
below. The values assigned to the key assumptions represent
in most recent charter agreements.
management’s assessment of future trends in the relevant industries
as well as management’s expectations regarding margin, and have been
Discount rates are estimated based on Weighted Average Cost of Capital
based on historical data from both external and internal sources.
(WACC) for the industry in which the portfolio company operates. The
EBITDA used in the value-in-use calculations represents the operating
state treasury bond rate at the time of the impairment testing. Optimal
earnings before depreciation and amortization and is estimated based
debt leverage is estimated for each portfolio company. The discount rates
on the expected future performance of the existing businesses in their
are further adjusted to reflect any additional short to medium term market
risk free interest rates used in the discount rates are based on the 10 year
main markets. Assumptions are made regarding revenue growth, gross
risk considering current industry conditions.
margins and other cost components based on historical experience as
Discount rate assumptions used in impairment testing
MHWirth
AKOFS Offshore 1)
KOP Surface Products
Discount rate after tax
Discount rate pre tax
2016
9.2%
10.0%
11.4%
2015
9.3%
7.8%
10.4%
2016
11.4%
10.0%
13.0%
2015
11.1%
7.8%
11.9%
1) Discount rate pre tax and Discount rate after tax for AKOFS Offshore are equal due to the assumption that AKOFS Offshore will enter into the tonnage tax regime in
Norway.
Sensitivity to changes in assumptions
In AKOFS Offshore, an impairment testing was triggered by impairment
For the portfolio companies containing goodwill, the recoverable amounts
indicators in the fourth quarter of 2016 and an impairment loss of NOK
are higher than the carrying amounts based on the value in use analysis
118 million was recognized related to AKOFS Seafarer, see also note
and consequently no impairment loss of goodwill was recognized in 2016.
14 Property, plant and equipment for more information. Following the
The group has performed sensitivity calculations to identify any reasonably
impairment of AKOFS Seafarer, no impairment of goodwill was recognized
possible change in key assumptions that could cause the carrying amount
in AKOFS Offshore. The estimated recoverable amount of AKOFS
to exceed the recoverable amount.
Seafarer is equal to the carrying amount and hence, any adverse change
Annual Report 2016 | Financials and Notes 53
in key assumptions may result in further impairment in AKOFS Seafarer.
Impairment loss recognized in 2015
However, as a result of impairment of AKOFS Seafarer, the group believes
Due to challenging financial performance under current market conditions,
that no reasonably possible change in any of the key assumptions used
goodwill allocated to MPO and Step Oiltools was fully impaired in 2015 and
for impairment testing would cause the carrying amount of the portfolio
an impairment loss of NOK 213 million and NOK 65 million was recognized
company to exceed its recoverable amount and trigger an impairment of
in MPO and Step Oiltools, respectively. Further, a total impairment loss of
goodwill.
NOK 275 million was recognized in MPO related to Property, plant and
equipment and intangible assets, see note 14 and 15 for more information.
In KOP Surface Products, if the assumptions regarding cost level were
changed (while the other assumptions remain unchanged) so that the
In AKOFS Offshore, an impairment testing was triggered by impairment
EBITDA margin was decreased by 3.1% for both the forecast period
indicators in the third quarter of 2015 and an impairment loss of NOK 1
and terminal year when the cash flows are extrapolated into the future,
037 million was recognized related to AKOFS Seafarer vessel (see also
the recoverable amount would be equal to the carrying amount of the
note 14 Property, plant and equipment). The impairment was triggered
portfolio company.
by the current weak market conditions which are expected to continue in
the short to medium term. The recoverable amount analysis for AKOFS
In MHWirth, the group believes that no reasonably possible change in
Seafarer was made with different probability weighted scenarios covering
any of the key assumptions used for impairment testing would cause
the variation in day rates and utilization.
the carrying amount of the portfolio company to exceed its recoverable
amount.
Following the impairment of AKOFS Seafarer vessel, no impairment of
goodwill was recognized in AKOFS Offshore. However, the estimated
recoverable amount of AKOFS Offshore was equal to the carrying amount
and hence, any adverse change in key assumptions may result in further
impairment.
Note 17 | Interest-bearing receivables
Current interest-bearing receivables
Amounts in NOK million
Mutual fund
Receivable from EZRA Holdings Ltd 1)
Total current interest-bearing receivables
1) The receivable from EZRA Holdings Ltd was impaired in 2016, and the loss was recognized as Finance expenses.
Current interest-bearing receivables are classified as financial assets at amortized cost.
Non-current interest-bearing receivables
Amounts in NOK million
Receivable from DOF Deepwater AS
Other receivables
Total non-current interest-bearing receivables
2016
2015
15
-
15
16
56
72
Note
35
2016
2015
50
1
51
82
2
84
See note 31 Financial risk management and exposures for information regarding credit risk management in the group.
Note 18 | Equity-accounted investees
Equity-accounted investees include mainly joint ventures. Such investments are defined as related parties to Akastor. See note 35 Related parties for
overview of transactions and balances with joint ventures and any guarantees provided on behalf of or from such entities.
Amounts in NOK million
DOF Deepwater AS 1)
Avium Subsea AS 2)
Total
2016
Business office
Percentage of voting rights and ownership
Share of profit (loss) reported in Financial items
Carrying amount of investments
Storebø, Norway
Oslo, Norway
50%
(214)
93
50%
-
-
(214)
93
Annual Report 2016 | Financials and Notes 54
Amounts in NOK million
2015
Business office
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
DOF Deepwater AS 1)
Fjords Processing
Korea Co Ltd 3)
Other
Total
Storebø, Norway Gyeonggi, South Korea
50%
-
(74)
157
50%
5
-
19
-
1
1
5
(73)
177
1) DOF Deepwater is a joint venture with DOF ASA, which owns and operates five anchor handling tug supply (AHTS) vessels.
2) Avium Subsea is a joint venture with MITSUI &CO.,Ltd, newly established in 2016. The joint venture owns and operates the Skandi Santos vessel.
3) Fjords Processing Korea Co Ltd was a joint venture with Kolon Energy Co Ltd. The company was disposed in 2016.
Summary of financial information for significant equity-accounted investee (100 percent basis)
DOF Deepwater AS
Avium Subsea 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%)
Elimination of gain from transaction with joint venture 1)
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
2016
2015
195
101
1 221
(108)
(30)
(1 122)
(1 122)
186
93
-
93
204
(405)
(61)
(2)
(427)
(427)
149
32
1 604
(221)
(120)
(1 218)
(1 215)
314
157
-
157
306
(133)
(53)
(1)
(143)
(143)
2016
56
28
1 602
(165)
(140)
(1 256)
(1 256)
237
118
(118)
-
26
(15)
(10)
(4)
(1)
(1)
1) See note 26 Other non-current liabilities and note 35 related parties for more information about the deferred gain related to the transaction with joint venture.
For information about guarantees provided on behalf of equity-accounted investees, see note 35 Related parties.
Note 19 | Other investments
Amounts in NOK million
EZRA Holdings Ltd 1)
Aker Pensjonskasse
Other equity securities
Available-for-sale investments
Total other investments
Note
2016
2015
35
33
-
120
1
121
121
135
120
6
261
261
1) The shareholdings in EZRA Holdings Ltd were disposed in 2016 and a loss of NOK 26 million was recognized as financial expenses, see also note 11.
Available-for-sale investments that do not have an active market are measured at cost as this is considered to be the best estimate of fair value.
Annual Report 2016 | Financials and Notes
Note 20 | Construction contracts
Amounts in NOK million
Construction revenue in the period
Amounts due from customers for construction work
Amounts due to customers for construction 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
Progress billings
Advances from customers 1)
1) Advances are presented as part of Amounts due to customers for construction work.
Note 21 | 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 22 | Trade and other receivables
Amounts in NOK million
Trade receivables 1)
Less provision for impairment of receivables
Trade receivables, net of provision
Other receivables
Trade and other receivables
Advances to suppliers
Amount due from customers for construction work
20
Prepaid expenses
Accrued revenue
Total
1) Trade receivables are financial instruments and an impairment loss of NOK 39 million (NOK 45 million in 2015) was recognized in operating expenses.
Book value of trade and other receivables is approximately equal to fair value.
55
Note
2016
2015
Restated
7
22
29
1 612
4 257
262
(1 226)
(964)
1 402
(1 795)
(393)
2016
2015
8 472
(9 436)
364
15 214
(15 607)
520
2016
507
74
506
1 086
(1 353)
(169)
45
2015
Restated
594
178
691
1 464
(3 517)
(120)
2
Note
2016
2015
1 652
(107)
1 545
568
2 113
163
262
112
178
2 829
3 169
(120)
3 049
673
3 722
203
1 402
178
455
5 959
Annual Report 2016 | Financials and Notes
56
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
2016
2015
786
92
63
711
1 652
1 440
509
397
823
3 169
As of December 31, 2016, trade receivables of an initial value of NOK 107 million (NOK 120 million in 2015) were 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
New provisions
Utilized
Unused amounts reversed
Disposal of subsidiaries
Currency translation differences
Balance as of December 31
Note 23 | Cash and cash equivalents
Amounts in NOK million
Restricted cash
Cash pool
Interest-bearing deposits
Total cash and cash equivalents
2016
2015
120
39
(7)
(29)
(1)
15
107
118
45
(47)
(8)
-
13
120
2016
2015
9
135
343
487
58
195
311
563
Additional undrawn committed current bank revolving credit facilities amount to NOK 2.6 billion, that together with cash and cash equivalents gives a
total liquidity reserve of NOK 3.1 billion as of December 31, 2016. See also note 25 Borrowings.
Note 24 | Capital and reserves
Share capital
Share buy-back
Akastor ASA has one class of shares, ordinary shares, with equal rights
At the Annual General Meeting in 2014, 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. Total
capital of Akastor ASA. There is no purchase or sale of treasury shares in
outstanding shares are 274 000 000 at par value NOK 0.592 per share
2016 and as of December 31, 2016 Akastor ASA holds 2 776 376 treasury
(NOK 0.592 in 2015). All issued shares are fully paid.
shares representing 1.01 percent of total outstanding shares.
Summary of purchase and sale of treasury shares
Treasury shares as of January 1, 2015
Sale
Treasury shares as of December 31, 2015
Treasury shares as of December 31, 2016
Number of shares
Consideration ( NOK million)
2 976 376
(200 000)
2 776 376
2 776 376
500
(2)
498
498
The group purchases treasury shares to meet the obligation under employee share purchase programs. No programs were initiated in 2016 or 2015.
The Board of Directors has proposed no dividends for 2016 or 2015.
Hedging reserve
progress of the underlying construction contract as part of revenues or
The hedging reserve relates to cash flow hedges of future revenues and
expenses as appropriate. The hedging reserve represents the value of such
expenses against exchange rate fluctuations. The income statement
hedging instruments that is not yet recognized in the income statement.
effects of such instruments are recognized in accordance with the
The underlying nature of a hedge is that a positive value on a hedging
Annual Report 2016 | Financials and Notes 57
instrument exists to cover a negative value on the hedged position, see
translation differences related to the disposed entities were reclassified
note 11 Finance income and expenses and note 32 Derivative financial
from the currency translation reserve to the income statement in profit
instruments.
(loss) from discontinued operations.
Currency translation reserve
Net investments in foreign operations have been hedged with a gain of
The currency translation reserve includes exchange differences arising
NOK 71 million in 2016 (loss of NOK 65 million in 2015). Accumulated
from the translation of the net investments in foreign operations, and
loss on net investment hedges as of 2016 is NOK 70 million (loss of NOK
foreign exchange gain or loss on loans defined as net investment hedge
141 million in 2015). The net investment hedge as of December 31, 2016
or part of net investments in foreign operations. Upon the disposal of
relates to investments in the United States, Brazil, Mauritius and Cyprus.
investments in foreign operations during 2016, the accumulated currency
Note 25 | Borrowings
Contractual terms of group’s interest-bearing loans and borrowings which are measured at amortized cost. For more information about the group’s
exposure to interest rates, foreign currency and liquidity risk, see note 31 Financial risk management and exposures. For more information related to the
financial lease, see note 35 Related parties.
Amounts in million
Currency
Nominal
currency
value
Carrying
amount
(NOK)
Interest
rate
Interest
margin
Interest
coupon
Maturity
Interest terms
2016
Revolving credit facility
(NOK 1 122 million)
Revolving credit facility
(USD 313 million)
BNDES loan (Brazil)
NOK
USD
BRL
-
139
89
Financial lease obligation
USD/NOK
Total borrowings
Current borrowings
Non-current borrowings
Total borrowings
-
-
2.75%
-
July 2019 2)
NIBOR + margin 1)
0.67%
7.50%
2.75%
1.40%
3.42%
8.90%
July 2019 2)
May 2022
USD LIBOR + margin 1)
TJLP + fixed margin 4)
1 195
237
1 622
3 054
1 560
1 494
3 054
Amounts in million
Currency
Nominal
currency
value
Carrying
amount
(NOK)
Interest
rate
Interest
margin
Interest
coupon
Maturity
Interest terms
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
-
(10)
1.00%
1.90%
2.90 %
July 2017 2)
July 2019 2)
2.08 % January 2017 2)
1.80 % 3.00 %
1.60 %
1.90 %
9.40 %
May 2022
IBOR + variable margin 1)
IBOR 3M +fixed margin
IBOR 3M +fixed margin
TJLP + fixed margin 4)
1.75 %
3.75 %
March 2016
IBOR 3M+fixed margin
2 500
125
103
25
1.20%
0.48%
7.50%
2.00%
2 491
1 096
230
156
1 645
29
5 637
4 054
1 583
5 637
1) The margin applicable to the facilities is decided by a price grid based on the leverage 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, 2016.
3) Carrying amount of negative NOK 10 million in 2015 relates to issue costs.
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.
Annual Report 2016 | Financials and Notes
58
Bank debt (Norway)
a quarterly basis. At December 31, 2016, the ICR ended below the 1.5
All facilities are provided by a bank syndicate consisting of high quality
minimum level and external borrowings of NOK 1.2 billion, with maturity
Nordic and international banks. The terms and conditions include
in 2019, have therefore been reclassified from non-current to current
restrictions which are customary for these kinds of facilities, including
borrowings. On March 1, 2017, Akastor signed an agreement with its bank
inter alia negative pledge provisions and restrictions on acquisitions,
syndicate to replace its ICR covenant with a nominal EBITDA amount until
disposals and mergers and change of control provisions. The facilities
Q2 2018. See more information in note 30 Capital management.
include no dividend restrictions. There is a stand-alone mortgage on the
vessel AKOFS Seafarer as security for the facilities.
Finance lease obligation
The financial covenants are a gearing ratio based on net debt/equity,
renegotiation of the bareboat charter contract with OCY Wayfarer AS.
an interest coverage ratio (ICR) based on EBITDA/net interest costs
The lease agreement includes purchase option on three different dates.
and a minimum liquidity amount. The financial covenants are tested on
The finance lease liability is payable as follows as of December 31, 2016:
A financial lease obligation was recognized in 2014 following the
Amounts in NOK million
Less than one year
Between one and five years
More than five years
Total
Present value of
minimum lease payments
322
439
861
1 622
Interest
26
1 124
383
1 532
Future minimum
lease payments
348
1 563
1 244
3 155
Financial liabilities and the period in which they mature
Amounts in NOK million
2016
Revolving credit facility (USD 313 million) 2)
BNDES loan (Brazil)
Financial lease obligation
Total borrowings
2015
Revolving credit facility (NOK 2 000 million) 2)
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
Carrying
amount
Total undis-
counted cash
flow 1)
6 months
and less
6–12
months
1–2
years
2–5
years
More than
5 years
1 195
237
1 622
3 054
(10)
2 491
1 096
230
156
1 645
29
5 637
1 209
282
3 155
4 646
-
2 512
1 103
282
157
3 508
32
1 209
30
173
1 412
-
2 512
1 103
25
157
119
13
-
29
175
204
-
-
-
25
-
177
3
7 594
3 930
206
-
56
702
758
-
-
-
94
-
709
8
812
-
149
861
1 010
-
-
-
123
-
967
8
-
19
1 244
1 262
-
-
-
14
-
1 535
-
1 098
1 548
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 have been reclassified to current borrowings due to breach of covenant. It should be noted that the facilities
will not be terminated, see note 37 Subsequent events for information about the new agreement that has been made with the Bank Syndicate in March 2017.
Annual Report 2016 | Financials and Notes Note 26 | Other non-current liabilities
Amounts in NOK million
Deferred settlement obligations
Deferred gain related to joint venture
Other liabilities
Total other non-current liabilities
59
Note
33
2016
2015
9
55
48
112
-
-
74
74
Deferred gain related to joint venture
Other liabilities
In 2016, AKOFS Offshore sold the Skandi Santos topside equipment to
Other liabilities relate mainly to liabilities related to leasehold improvements
Avium Subsea AS, a joint venture with 50 percent ownership. The sale
and welfare fund.
resulted in an accounting gain of NOK 172 million, after elimination of 50%
of the total gain on sale. The elimination of the gain in excess of the carrying
amount of the joint venture is presented as Deferred gain related to joint
venture. See note 18 Equity-accounted investees and note 35 Related
parties for more information about the transaction with joint venture.
Note 27 | Employee benefits – pension
Akastor’s pension costs represent the future pension entitlement earned
Compensation plan
by employees in the financial year. In a defined contribution plan the
To ensure that the employees were treated fairly on the change over
company is responsible for paying an agreed contribution to the employee’s
to the new plan, the company has introduced a compensation plan. The
pension assets. In such a plan this annual contribution is also the cost.
basis for deciding the compensation amount is the difference between
In a defined benefit plan it is the company’s responsibility to provide a
calculated pension capital in the defined benefit plan and the value of the
certain pension. The measurement of the cost and the pension liability
defined benefit plan at the age of 67 years. The compensation amount will
for such arrangements is subject to actuarial valuations. Akastor has over
be adjusted annually in accordance with the adjustment of the employees’
a long time period gradually moved from defined benefit arrangements
pensionable income, and accrued interest according to market interest. If
to defined contribution plans. Consequently, the impact of the remaining
the employee leaves the company voluntarily before the age of 67 years,
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 plan
available at the date of the financial statements is not sufficient to reliably
for continuing operations was NOK 60 million (NOK 79 million in 2015).
measure the allocation of pension cost and net pension liability/asset in
The estimated contributions expected to be paid in 2017 amount to NOK
accordance with a cost/benefit approach. Akastor has therefore elected
60 million including AFP premium (see below).
to treat the scheme as a defined contribution plan in which the annual paid
Defined benefit plan
premiums to the AFP scheme are expensed in the income statement as
they are incurred. The total liability is not recognized. Based on the current
Employees who were 58 years or older in 2008, when the change took
financing model for AFP, the annual premiums are expected to increase.
place, are still in the defined benefit plan. This is a funded plan and
When or if sufficient and reliable data is available and a liability can be
represents most of the funded pension liability reported in the tables
reliably measured, the recognized liability could be significant.
below. The estimated contributions expected to be paid to the Norwegian
plan during 2017 amount to NOK 18 million.
Pension plans outside Norway
Pension plans outside Norway are predominately defined contribution plans.
Annual Report 2016 | Financials and Notes 60
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 Indonesia
Defined benefit plans other countries
Total employee benefit obligations
Movement in net defined benefit (asset) liability
Amounts in NOK million
Balance as of January 1
Adjustment for discontinued operations
as of January 1
Included in profit or loss
Service cost
Interest cost (income)
Included in OCI
Remeasurements (loss) gain:
Actuarial loss (gain) arising from:
- demographic assumptions
- financial assumptions
- experience adjustments
Return on plan assets excluding interest income
Total remeasurement
Effect of movements in exchange rates
Other
Benefits paid by the plan
Contributions paid into the plan
Balance as of December 31
Note
2016
18
60
78
8
2015
Restated
13
79
92
2016
2015
195
103
63
18
2
380
236
103
69
22
4
434
Pension obligation
2016
2015
Pension asset
Net pension obligation
2016
2015
2016
2015
814
823
(380)
(350)
434
473
(126)
-
81
-
(46)
-
18
13
31
37
(11)
18
-
44
(16)
28
(78)
-
(78)
669
20
17
37
(1)
(27)
7
-
(19)
40
21
(66)
-
(66)
814
-
(3)
(3)
-
(4)
-
-
(4)
4
-
34
(20)
14
-
(5)
(5)
-
(8)
-
1
(7)
(20)
(26)
35
(34)
1
(288)
(380)
18
10
28
37
(15)
18
-
40
(12)
28
(44)
(20)
(65)
380
20
12
32
(1)
(35)
7
1
(25)
20
(5)
(32)
(34)
(65)
434
Annual Report 2016 | Financials and Notes
Plan assets
Amounts in NOK million
Plan assets at fair value Norwegian plan
Equity securities
Government
Finance
Private and Government enterprise
Municipalities
Bonds
Fund/private equity
Total plan assets Norway at fair value
Equity securities
Debt securities
Total plan assets US at fair value
Total plan assets Germany at fair value
Total plan assets at fair value
61
2016
2015
5
2
26
30
77
136
11
152
43
67
110
26
288
5
2
40
43
138
223
8
236
50
66
116
28
380
The equity portfolio is invested globally. The fair value of the equities is
Association. The Bond investments have on average a high credit rating.
based on their quoted prices at the reporting date without any deduction
Most of the investments are in Norwegian municipalities with a credit
for estimated future selling cost.
rating of AA.
The investments in bonds are done in the Norwegian market and most of
The investment in fund/private equity is mainly funds that invests in listed
the bonds are not listed on any exchange. The market value as at year end
securities and where the fund value is based on quoted prices.
is based on official prices provided by the Norwegian Securities Dealers
Defined benefit obligation – actuarial assumptions
The group’s most significant defined benefit plans are in Norway, Germany and USA. The followings are the principal actuarial assumptions at the
reporting date for the plans in these countries.
Norway
Germany
USA
2016
2015
2016
2015
Discount rate
Asset return
Salary progression
Pension indexation
2.50%
2.50%
2.25%
0–2.25%
2.60%
2.60%
2.50%
0.75%
4.01%
4.01%
n/a
1.75%
3.89%
3.89%
n/a
1.75%
Mortality table
K2013
K2013BE
RT 2005 G RT 2005 G
2016
3.64%
3.64%
n/a
n/a
2015
3.81%
3.81%
n/a
n/a
RP-2014 Adjusted
to 2006 Total
Dataset with
Scale MP-2016
RP-2014 Adjusted
to 2006 Total
Dataset with Scale
MP-2015
The information below relates only to Norwegian plans as these represent
Assumptions regarding future mortality have been based on published
the majority of the plans.
statistics and mortality tables. The current life expectancy underlying the
values of the defined benefit obligation at the reporting date is shown
The discount rates and other assumptions in 2016 and 2015 are based
below.
on the Norwegian high quality corporate bond rate and recommendations
from the Norwegian Accounting Standards Board. It should be expected
that fluctuations in the discount rates would also lead to fluctuations
in the pension indexations. The total effect of fluctuations in economic
assumptions is consequently unlikely to be very significant.
Annual Report 2016 | Financials and Notes
62
Years
Life expectancy of male pensioners
Life expectancy of female pensioners
2016
22.1
25.4
2015
21.3
24.4
As of December 31, 2016, the weighted-average duration of the defined benefit obligation was 10.8 years.
Sensitivity analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected
the defined benefit obligation as of December 31, 2016 by the amounts shown below.
Amounts in NOK million
Discount rate (1% movement)
Future salary growth (1% movement)
Future pension growth (1% movement)
Increase
Decrease
(42)
8
28
34
(8)
(34)
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 28 | Provisions
Amounts in NOK million
Provision, current
Provision, non-current
Total provisions
2016
2015
354
333
686
553
341
894
Development of significant provisions
Amounts in NOK million
Warranties
Restructuring
Onerous
lease provision
Other
Total
Balance as of January 1, 2016
New provisions
Provisions utilized
Provisions reversed
Unwind of discount
Disposal of subsidiaries
Currency translation differences
Balance as of December 31, 2016
Expected timing of payment
Within the next twelve months
After the next twelve months
Total
207
37
(35)
(22)
-
(76)
(5)
106
101
4
106
179
227
(305)
-
-
-
1
101
66
35
101
400
108
(84)
-
30
-
(19)
436
157
279
436
108
40
(91)
-
-
(15)
3
44
25
19
44
894
413
(515)
(22)
30
(92)
(20)
686
349
337
686
Warranties
Onerous lease provision
The provision for warranties relates mainly to the possibility that Akastor,
Provision for onerous leases represents provision for vacant properties
based on contractual agreements, needs to perform guarantee work
where the group has committed to future lease payments under operating
related to products and services delivered to customers. See note 4
lease contracts.
Significant accounting estimates and judgments for further descriptions.
Restructuring
Restructuring mainly relates to significant workforce reduction and
reorganization in MHWirth in 2016 due to the very challenging rig market.
The provision includes provision for vacant office premises after the
workforce reduction and is estimated based on the detailed restructuring
plans for the businesses and locations affected.
Annual Report 2016 | Financials and Notes 63
Note
33
20
33
2016
315
122
694
1 131
1 226
107
28
2015
950
232
1 355
2 537
1 795
14
97
2 492
4 443
Note 29 | Trade and other payables
Amounts in NOK million
Trade creditors 1)
Public duty and tax payables
Accrued operating costs
Trade and other payables
Amount due to customers for construction work and advances
Deferred settlement obligations
Other
Total
1) Trade creditors are due in one year (NOK 19 million in 2015 is due after one year).
Book value of trade creditors and other current liabilities is approximately equal to fair value.
Note 30 | Capital management
Akastor’s capital management is designed to ensure that the group
Funding cost
has sufficient financial flexibility, short-term and long-term. One main
Akastor aims to have a diversified selection of funding sources in order
objective is to maintain a financial structure that, through solidity and cash
to reach the lowest possible cost of capital. These funding sources might
flow, secures the group’s strong long-term creditworthiness, as well as
include:
maximize value creation for its shareholders through:
Investing in projects and business areas which will increase the
company’s Return On Capital Employed (ROCE) over time.
Optimizing the company’s capital structure to ensure both
sufficient and timely funding over time to finance its activities at
the lowest cost.
Investment policy
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.
Ratios used in monitoring of capital
Akastor monitors capital on the basis of a gearing ratio (net debt/equity)
and interest coverage ratio (EBITDA/net interest costs). These ratios are
Akastor’s capital management is based on a rigorous investment selection
similar to covenants as defined in loan agreements for the revolving credit
process which considers not only Akastor’s weighted average cost of
facilities (see note 25 Borrowings for details about these loans) and are
capital and strategic orientation but also external factors such as market
shown below. Other borrowings in the group have no covenants.
expectations.
Funding policy
Liquidity planning
The company’s interest coverage ratio (ICR) shall not be lower
than 1.5 in Q4 2016, 3.0 in Q1 2017 and 4.0 from Q2 2017 onwards,
calculated from the consolidated EBITDA to consolidated net
Akastor has a strong focus on its liquidity situation in order to meet its
interest cost.
short term working capital needs and to ensure solvency for its financial
obligations. Akastor had a liquidity reserve per year end 2016 of NOK 3.1
The company’s gearing ratio shall not exceed 1.0 times and
billion, composed of an undrawn committed credit facility of NOK 2.6
is calculated from the consolidated total borrowings to the
billion and cash and cash equivalents of NOK 487 million.
consolidated Equity. Total borrowings in this calculation shall not
include the financial lease obligation.
Funding of operations
Akastor’s group funding policy is that all operations shall meet their
Minimum liquidity level shall exceed NOK 750 million.
funding needs directly via the central treasury department (Akastor
Treasury) . This ensures optimal availability and transfer of cash within the
The ratios are calculated based on net debt including cash and borrowings
group and better control of the company’s overall debt as well as cheaper
as shown in note 34 Financial instruments, adjusted EBITDA (earnings
funding for its operations.
before interest, tax, depreciation, amortization and adjusted for certain
items as defined in the loan agreement) and net interest costs.
Funding duration
Akastor emphasizes financial flexibility and steers its capital structure
accordingly to limit its liquidity and refinancing risks. In this perspective,
loans and other external borrowings are to be renegotiated well in advance
of their due date and generally for periods of 3 to 5 years.
Annual Report 2016 | Financials and Notes
64
Covenants in existing borrowings as of December 31
Amounts in NOK million
Gearing ratio
Net debt
Equity
Net debt/Equity 1)
Interest coverage ratio
Adjusted EBITDA
Net interest cost
Adjusted EBITDA/Net interest cost 1)
2016
2015
1 479
5 580
0.26
(35)
178
(0.2)
4 061
7 386
0.55
562
201
2.8
1) Net intererst 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 1.5 for Interest Coverage Ratio (ICR) covenant as of December 31, 2016. On March 1, 2017,
Akastor signed an agreement with its bank syndicate to replace its ICR covenant with a nominal consolidated EBITDA amount until Q2 2018 and to be
allowed to use the existing Revolving Credit Facilities to make acquisitions for up to NOK 1.0 billion under certain conditions. In addition, the minimum
liquidity amount was reduced to NOK 500 million.
The nominal consolidated EBITDA amount is adjusted for certain items as defined in the agreement; however does not share the same definition as ICR
covenant. The nominal consolidated EBITDA covenant has been agreed as follows:
Amounts in NOK million
2016
2017
2018
Q1
Q2
150
325
150
425
Q3
175
Q4
150
225
The actual nominal consolidated EBITDA as of Q4 2016 was above minimum covenant amount of NOK 150 million.
The covenants are monitored on a regular basis by the Akastor Treasury department to ensure compliance with the loan agreements. On the 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.
Note 31 | Financial risk management and exposures
The group is exposed to a variety of financial risks: currency risk, interest
currency of the group company. The group’s exposure to currency risk is
rate risk, price risk, credit risk, liquidity risk and capital risk. The market risks
primarily to USD, EUR, GBP and BRL but also several other currencies.
affect the group’s income or the value of financial instruments held. The
Akastor’s policy requires business units to mitigate currency exposure in
objective of financial risk management is to manage and control financial
any project. Akastor Treasury department manages internal exposures
risk exposures and thereby increase the predictability of earnings and
by entering into forward contracts or currency options with the financial
minimize potential adverse effects on the group’s financial performance.
market place. Akastor has a large number of contracts involving foreign
Akastor group uses financial derivative instruments to hedge certain
currency exposures and the currency risk policy has been well-established
risk exposures and aims to apply hedge accounting whenever possible
for many years.
in order to reduce the volatility resulting from the periodic mark-to-
market revaluation of financial instruments in the income statement. Risk
For segment reporting purposes, each business unit designates all
management is performed in every project. It is the responsibility of the
currency hedge contracts with Akastor Treasury as cash flow hedge,
project managers, in cooperation with Akastor Treasury, to identify, evaluate
fair value hedge, net investment hedge or identified and separated as an
and hedge financial risks under policies approved by the Board of Directors.
embedded derivative. External foreign exchange contracts are designated
The group has well-established principles for overall risk management, as
at group level as hedges of currency risk on a gross basis. More than 80
well as policies for the use of derivatives and financial investments. There
percent of the exposure value either qualify for hedge accounting or are
have not been any changes in these policies during the year.
embedded derivatives. Non-qualifying hedges are adjusted at group level
Currency risk
and included in the “unallocated” part of the segment reporting. See
note 33 Derivative financial instruments for information regarding the
The group operates internationally and is exposed to currency risk
accounting treatment of hedging and embedded derivatives.
on commercial transactions, recognized assets and
liabilities and
net investments in foreign operations. Commercial transactions and
Currency exposures from investments in foreign currencies are only
recognized assets and liabilities are subject to currency risk when payments
hedged when specifically instructed by management. As of December 31,
are denominated in a currency other than the respective functional
2016, Akastor had no active net investment hedges.
Annual Report 2016 | Financials and Notes 65
Exposure to currency risk
Estimated forecasted receipts and payments in the table below are calculated based on the group’s hedge transactions through the Akastor Treasury
department. These are considered to be the best estimate of the currency exposure. The net exposure is managed by Akastor Treasury that is allowed to
hold positions within an approved trading mandate. This mandate is closely monitored and reported on a daily basis to the management.
Amounts in million
Bank
Intercompany loans
External loans
Balance sheet exposure
Estimated forecast receipts from customers
Estimated forecast payments to vendors
Cash flow exposure
Forward exchange contracts
Net exposure
Sensitivity analysis
2016
2015
USD
EUR
GBP
BRL
USD
EUR
GBP
BRL
(68)
178
(139)
(29)
382
(171)
212
(271)
(88)
(21)
(9)
-
(29)
4
(12)
(8)
38
1
(6)
(13)
-
(19)
5
(1)
4
14
-
-
148
-
148
169
-
169
(169)
148
(106)
571
(125)
341
1 086
(471)
615
(952)
4
(23)
(41)
-
(63)
22
(72)
(50)
113
-
(27)
(15)
-
(42)
3
(12)
(9)
50
-
-
136
-
136
365
(15)
350
(350)
136
A strengthening of EUR, USD, GBP and BRL against NOK as of December 31 would have affected the measurement of financial instruments denominated
in a foreign currency and increased (decreased) equity and income statement by the amounts shown below. This analysis is based on foreign currency
exchange rate variances that the group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other
variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases. Figures in the table below only include the
effect in income statement and equity for change in currency regarding financial instruments and do not include effect from operating cost and revenue.
Amounts in NOK million
USD (15 percent weakening of NOK)
EUR (15 percent weakening of NOK)
GBP (15 percent weakening of NOK)
BRL (15 percent weakening of NOK)
2016
2015
Profit (loss)
before tax
Equity
Increase
(decrease)
Profit (loss)
before tax
Equity
Increase
(decrease)
(278)
(209)
-
1
(24)
15
(6)
(24)
(529)
56
17
(36)
(448)
91
23
(36)
A 15 percent strengthening of the NOK against the above currencies as of December 31 would have had the equal but opposite effect on the above
amounts, on the basis that all other variables remain constant. The sensitivity analysis does not include effects on the consolidated result and equity
from changed exchange rates used for consolidation of foreign subsidiaries.
The primary currency-related risk is the risk of reduced competitiveness abroad in the case of a strengthened NOK. This risk relates to future commercial
contracts and is not included in the sensitivity analysis above.
Interest rate risk
The group’s interest rate risk arises from interest-bearing borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk.
Borrowings issued at fixed rates expose the group to fair value interest rate risk. However, as these borrowings are measured at amortized cost, interest
rate variations do not affect profit and loss when held to maturity.
As the group has no significant interest-bearing operating assets, operating income and operating cash flows are substantially independent of changes
in market interest rates.
An increase of 100 basis points in interest rates during 2016 would have increased (decreased) equity and profit and loss by the amounts shown on the
table below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
Annual Report 2016 | Financials and Notes 66
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)
2016
2015
4
1
1
(38)
(31)
9
1
1
(52)
(41)
A decrease of 100 basis points in interest rates during 2016 would have
period. Such assessments are based on credit ratings, income statement
had the equal but opposite effect on the above amounts, on the basis that
and balance sheet reviews and using credit assessment tools available (e.g.
all other variables remain constant. There are no effects on equity as there
Dun & Bradstreet and Credit Watch). Sales to customers are settled in
are no interest swaps.
Guarantee obligations
cash.
Based on estimates of incurred losses in respect of trade and other
The group has provided the following guarantees on behalf of wholly
receivables, the group establishes a provision for impairment losses.
owned subsidiaries as of December 31, 2016 (all obligations are per date
Provisions for loss on debtors are based on individual assessments.
of issue):
Provisions for loss on receivables were NOK 107 million in 2016 (NOK
120 million in 2015). Revenues are mainly related to large and long-
Financial guarantees related to project performance on behalf of
term projects closely followed up in terms of payments up front and in
group companies are NOK 16.2 billion (NOK 24 billion in 2015).
accordance with agreed milestones. Normally, lack of payments is due to
disagreements related to project deliveries and is solved together with the
Financial parent company indemnity guarantees for fulfillment of
customer or escalated to the local authority.
lease obligations are NOK 5.4 billion (NOK 4.4 billion in 2015).
Financial guarantees including counter guarantees for bank/
risk. The maximum exposure to credit risk at the reporting date equals
surety bonds and guarantees for pension obligations to
the book value of each category of financial assets, see carrying amounts
employees are NOK 2.4 billion (NOK 3.5 billion in 2015).
in note 34 Financial instruments. The group does not hold collateral as
At the reporting date, there were no significant concentrations of credit
Although guarantees are financial instruments, they are considered
contingent obligations and the notional amounts are not included in the
Liquidity risk
security.
financial statements. Some of the guarantee obligations are on behalf of
Liquidity risk is the risk that the group will encounter difficulty in meeting
related parties to Akastor, see more information in note 35 Related parties.
the obligations associated with its financial liabilities. The group manages
its liquidity to ensure that it will always have sufficient liquidity reserves to
Price risk
meet its liabilities when due.
The group is exposed to fluctuations in market prices both in the
investment portfolio used in the pension benefit plan and in the operating
Prudent liquidity risk management includes maintaining sufficient cash,
businesses related to individual contracts. The investment portfolio is
the availability of funding from an adequate amount of committed credit
limited.
facilities and the ability to close out market positions. Due to the dynamic
nature of the underlying businesses, Akastor Treasury maintains flexibility
The businesses may be exposed to changes in market price for raw
in funding by maintaining availability under committed credit lines.
materials, equipment and development in wages. This is managed in the
bid process by locking in committed prices from vendors as basis for offers
The group policy for the purpose of optimizing availability and flexibility
to customers or through escalation clauses with customers.
of cash within the group is to operate centrally managed cash pooling
Credit risk
arrangements. Such arrangements are either organized with a bank as
a service provider, or as a part of the operation of Akastor Treasury. An
Credit risk is the risk of financial losses to the group if customer
important condition for the participants (business units) in such cash
or counterparty to financial investments/instruments fails to meet
pooling arrangements is that the group as an owner of such pools is
contractual obligations, and arise principally from investment securities
financially viable and is able to prove its capability to service its obligations
and receivables. Investment securities and derivatives are only traded
concerning repayment of any net deposits made by business units.
against approved banks. All approved banks are participants in the Akastor
Management monitors rolling weekly and monthly forecasts of the group’s
loan syndicate and have investment grade ratings. Credit risk related
liquidity reserve on the basis of expected cash flow.
to investment securities and derivatives is therefore considered to be
insignificant.
Assessment of credit risk related to customers and subcontractors is
an important requirement in the bid phase and throughout the contract
Annual Report 2016 | Financials and Notes 67
Financial liabilities and the period in which they mature
Amounts in NOK million
Note
Book
value
Total
cash flow 1)
6 months
and less
6–12
months
1–2 years
2–5 years
More than
5 years
2016
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)
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)
25
25
26
32
29
25
25
26
32
29
1 433
1 622
57
32
1 238
4 382
3 992
1 645
74
(218)
2 550
8 043
1 491
3 155
57
32
1 238
5 973
7 822
4 086
3 508
74
(218)
2 550
10 000
7 885
1 239
173
-
93
955
2 460
873
3 811
119
-
207
1 916
6 052
864
29
175
-
(34)
283
453
927
28
177
-
(313)
634
527
822
56
702
29
(26)
-
761
197
102
709
24
(83)
-
754
1 572
149
861
16
-
-
19
1 244
12
-
-
1 026
1 601
1 274
4 224
131
967
24
(29)
-
1 093
482
14
1 535
25
-
-
1 573
4 145
1) Nominal currency value including interest.
2) Maturity of the term loans in the table reflects that loans have been reclassified to current borrowings due to covenant breach. See note 25 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 32 | Derivative financial instruments
The group uses derivative financial instruments such as currency forward
neutral, this table also indicates when the cash flows related to project
contracts and currency options to hedge its exposure to foreign exchange
expenses are expected to impact profit and loss. The majority of project
arising from operational, financial and investment activities. In addition,
revenues are recognized in accordance with IAS 11 using the percentage
there are embedded foreign exchange forward derivatives separated
of completion method. This may result in different timing of cash flows
from ordinary commercial contracts. Further information regarding risk
related to project revenues and revenue recognition.
management policies in the group is available in note 31 Financial risk
management and exposures. Derivative financial instruments are classified
Instruments that do not qualify for hedge accounting include the external
as current assets or liabilities as they are a part of the operating cycle.
instruments used to price embedded derivatives as well as other derivative
instruments used by Akastor Treasury to hedge the residual exposure of
The table below presents the fair value of the derivative financial
the group as part of its risk mandate. As of December 31, 2016, these
instruments and a maturity analysis of the derivatives cash flows. Given
instruments only include currency forwards.
Akastor’s hedging policy and the assumption that the projects are cash
Annual Report 2016 | Financials and Notes
68
Fair value of derivative instruments with maturity
Amounts in NOK million
2016
Assets
Cash flow hedges
Embedded derivatives in ordinary commercial contracts
Not hedge accounted
Fair value adjustments to hedged assets 3)
Total forward foreign exchange contracts, assets
Liabilities
Cash flow hedges
Not hedge accounted
Fair value adjustments to hedged liabilities
Total forward foreign exchange contracts, liabilities
2015
Assets
Cash flow hedges
Embedded derivatives in ordinary commercial contracts
Not hedge accounted
Fair value adjustments to hedged assets 3)
Total forward foreign exchange contracts, assets
Liabilities
Cash flow hedges
Net investment hedges
Embedded derivatives in ordinary commercial contracts
Not hedge accounted
Fair value adjustments to hedged liabilities
Instruments
at fair value
Total
cash flow 1)
6 months
or less
6–12
months
1–2 years
2–5 years 2)
59
203
22
( 15)
269
(127)
(8)
(166)
(301)
411
707
29
600
1 746
(496)
(17)
(1)
(234)
(781)
59
203
22
(15)
269
(127)
(8)
(166)
(301)
411
707
29
600
1 746
(496)
(17)
(1)
(234)
(781)
58
141
22
(15)
206
(123)
(8)
(167)
(298)
223
459
29
593
1 304
(487)
(17)
(1)
(234)
(772)
(1 510)
2
34
-
-
35
(2)
-
1
(1)
148
176
-
6
330
(8)
-
-
-
(9)
(17)
-
28
-
-
28
(2)
-
-
(2)
40
43
-
1
84
(1)
-
-
-
-
(1)
-
-
-
-
-
-
-
-
-
-
29
-
-
29
-
-
-
-
-
-
Total forward foreign exchange contracts, liabilities
(1 528)
(1 528)
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.
Annual Report 2016 | Financials and Notes
69
Foreign exchange derivatives
the countries involved in the cross-border transaction. The embedded
Akastor Treasury hedges the group’s future transactions in foreign
derivatives represent currency exposures, which is hedged against
currencies with external banks. Approximately 80 percent of the exposure
external banks. Since the embedded derivatives are measured and
to foreign exchange variations in future cash flows are related to a few
classified in the same way as their hedging derivatives, they will have an
large projects. The currency exposure in these projects has been hedged
almost equal, opposite effect to profit and loss. In the table above, the
back-to-back in order to meet the requirements for hedge accounting.
derivatives hedging the embedded derivatives are included in Forward
They are either subject to hedge accounting or separated embedded
foreign exchange contracts - not hedge accounted.
derivatives. All other hedges are not designated as IAS 39 hedges and will
have an effect on profit or loss. Hedges qualifying for hedge accounting are
The hedged transactions in foreign currency that are subject to cash flow
classified as cash flow hedges (hedges of highly probable future revenues
hedge accounting are highly probable future transactions expected to
and/or expenses).
occur at various dates during the next one to four years, depending on
progress in the projects. Gains and losses on forward foreign exchange
Embedded derivatives are foreign exchange derivatives separated from
contracts are recognized in other comprehensive income and reported
construction contracts. The reason for separation is that the agreed
as hedging reserve in equity until they are recognized in the income
payment is in a currency different from any of the major contract parties’
statement in the period or periods during which the hedged transactions
own functional currency, or that the contract currency is not considered
affect the income statement.
to be commonly used for the relevant economic environment defined as
Unsettled cash flow hedges’ impact on profit and loss and equity (not adjusted for tax)
Amounts in NOK million
2016
Forward exchange contracts (cash flow hedges)
2015
Forward exchange contracts (cash flow hedges)
Fair value of all
hedging instruments
Recognized in
profit and loss
Deferred in equity
(the hedge reserve)
(67)
(85)
5
(104)
(72)
19
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, NOK 5 million (negative NOK 104 million in 2015) of the
settlements related to matured instruments.
value of the forward contracts have already affected the income statement
indirectly as revenues and expenses are recognized based on updated
The purpose of the hedging instrument is to secure a situation where
forecasts and progress. The negative NOK 72 million (positive NOK 19
the hedged item and the hedging instrument together represent a
million in 2015) that are currently recorded directly in the hedging reserve,
predetermined value independent of fluctuations of exchange rates.
will be reclassified to income statement over the next years.
Revenue and expense on the underlying construction contracts are
Annual Report 2016 | Financials and Notes 70
Note 33 | 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
liabilities. Financial instruments measured at fair value are classified by
prices derived from observable market transactions in an active market
the levels in the fair value hierarchy. All other financial instruments are
for 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
2016
Loans and receivables
Cash and cash equivalents
Current interest-bearing receivables
Trade and other receivables
Non-current interest-bearing receivables
Available for sale
Other investments – equity securities 1)
Fair value – hedging instruments
Derivative financial instruments
Fair value through P&L
Deferred and contingent consideration
Financial assets
Other financial liabilities
Non-current borrowings 2)
Credit facility and other current borrowings 3)
Other non-current liabilities
Trade and other payables
Fair value – hedging instruments
Derivative financial instruments
Fair value through P&L
Deferred settlement obligations
Financial liabilities
Note
Book value
Financial
instruments
measured at
fair value
Level in
fair value
hierarchy
23
17
22
17
487
15
2 113
51
121
121
Level 3
32
269
269
Level 2
103
3 159
103
493
Level 3
25
25
26
29
32
(1 494)
(1 567)
Level 2
Level 2
(1 494)
(1 560)
(48)
(1 131)
(301)
(301)
Level 2
26, 29
(116)
(116)
Level 3
(4 650)
(3 377)
Annual Report 2016 | Financials and Notes
Amounts in NOK million
2015
Loans and receivables
Cash and cash equivalents
Non-current interest-bearing receivables
Trade and other receivables
Current interest-bearing receivables
Available for sale
Shares in EZRA Holding Ltd
Other investments – equity securities 1)
Fair value – hedging instruments
Derivative financial instruments
Fair value through P&L
Deferred and contingent consideration
Financial assets
Other financial liabilities
Non-current borrowings 2)
Credit facility and other current borrowings 3)
Other non-current liabilities
Trade and other payables
Deferred settlement obligations
Fair value – hedging instruments
Derivative financial instruments
Fair value through P&L
Deferred settlement obligations
Financial liabilities
71
Note
Book value
Financial
instruments
measured at
fair value
Level in
fair value
hierarchy
23
17
22
17
19
19
32
25
25
26
29
29
32
29
563
84
3 722
72
141
120
141
120
Level 1
Level 3
1 746
1 746
Level 2
67
6 514
67
2 074
Level 3
(1 583)
(4 076)
Level 2
Level 2
(1 583)
(4 054)
(74)
(2 537)
(8)
(1 528)
(1 528)
Level 2
(6)
(6)
Level 3
(9 789)
(7 193)
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, 2015
Settlements
Net gain (loss) in the income statement
Balance as of December 31, 2015
Additions
Unwind of discount
Net gain (loss) in the income statement
Currency translation difference
Balance as of December 31, 2016
Assets
Liabilities
210
-
(23)
187
237
10
(216)
5
223
(56)
4
47
(6)
(121)
(1)
12
-
(116)
The assets and liabilities reported as Level 3 in the fair value hierarchy relate to contingent considerations from business acquisitions and disposals where
the final amounts to be paid or received depend on 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.
The credit exposure on the Level 3 asset is limited to the amount recognized and due to the nature of the arrangement the credit risk is not considered
to be significant.
Annual Report 2016 | Financials and Notes
72
Note 34 | Group companies
This note gives an overview of entities that are subsidiaries of Akastor ASA. For information about other investments in the group, refer to note 18 Equity-
accounted investees and note 19 Other investments. If not stated otherwise, ownership equals share of voting rights.
Group companies as of December 31
Company
Akastor ASA
MHWirth
MHWirth Pty Ltd
MHWirth Canada Inc
MHWirth Offshore Petroleum Engineering (Shanghai) Co Ltd
MHWirth GmbH
MHWirth (India) Pvt Ltd
MHWirth Sdn Bhd
Drilltech AS
Maritime Promeco AS
MHWirth AS
MHWirth Singapore Engineering Management Pte Ltd 1)
MHWirth (Singapore) Pte Ltd
MHWirth UK Ltd
MHWirth FZE
MHWirth Inc
MHWirth Gas & Oil- Field Equipment & Services LLC 3)
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 2)
AKOFS Angola Limited
KOP Surface Products
PT KOP Surface Products
KOP Surface Products Sdn Bhd
KOP Surface Products Nigeria Ltd
KOP Surface Products Singapore Pte Ltd
KOP Surface Products (Services) Pte Ltd
KOP Surface Products (Services) UK Ltd
Step Oiltools 3)
Step Oiltools (Australia) Pty Ltd
Step Oiltools Limited
Step Oiltools GmbH
PT Step Oiltools
Step Oiltools LLP
Step Oiltools BV
Step Oiltools AS
Location
Fornebu
Country
Norway
Ownership (%)
2016
2015
Argenton
Newfoundland
Shanghai
Erkelenz
Mumbai
Kuala Lumpur
Kristiansand
Kristiansand
Kristiansand
Singapore
Singapore
Aberdeen
Dubai
Houston
Abu Dhabi
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Oslo
Luanda
Jakarta
Kuala Lumpur
Ikoyi - Lagos
Singapore
Singapore
Aberdeen
Australia
Canada
China
Germany
India
Malaysia
Norway
Norway
Norway
Singapore
Singapore
UK
UAE
USA
UAE
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Norway
Angola
Indonesia
Malaysia
Nigeria
Singapore
Singapore
UK
Perth
Australia
Grand Cayman
Cayman Islands
Bad Fallingbostel
Jakarta
Aktau
Amsterdam
Stavanger
Germany
Indonesia
Kazakhstan
Netherlands
Norway
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
76
76
76
76
76
76
76
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
76
76
76
76
76
76
76
Annual Report 2016 | Financials and Notes
Company
Location
Country
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
AK Operações do Brasil Ltda
Aker Cool Sorption (Beijing) Technology Co Ltd
Cool Sorption A/S
Akastor Mauritius Ltd
Zoetermeer Process BV
BTA Technology AS
Akastor AS
Tromsøruffen AS 4)
Akastor Real Estate AS
Aker Cool Sorption Siam Ltd
Frontica Business Solutions Ltd
AK Pharmaceuticals LLC
AK Willfab Inc
Frontica Group AS
Frontica Global Employment Ltd
Fjords Processing AS
First Geo AS
Frontica Advantage 5)
Frontica Advantage Pty Ltd 6)
Frontica Advantage AS
Frontica Advantage Group AS
Frontica Advantage Ltd
Frontica DC Trustees Ltd
Frontica Advantage Inc
Yangon
Muscat
Kuala Lumpur
Moscow
Singapore
Bangkok
Aberdeen
Dubai
Antwerp
Rio de Janeiro
Beijing
Glostrup
Port Louis
Zoetermeer
Fornebu
Fornebu
Fornebu
Fornebu
Rayong
London
Houston
Williamsport
Fornebu
Limassol
Fornebu
Stavanger
Melbourne
Bergen
Fornebu
London
London
Houston
Myanmar
Oman
Malaysia
Russia
Singapore
Thailand
UK
UAE
Belgium
Brazil
China
Denmark
Mauritius
Netherlands
Norway
Norway
Norway
Norway
Thailand
UK
USA
USA
Norway
Cyprus
Norway
Norway
Australia
Norway
Norway
UK
UK
USA
1) New companies in 2016
2) Merged into AKOFS 3 AS
3) No non-controlling interest is recognized due to applying the anticipated acquisition method
4) Merged into Akastor AS
5) Frontica Advantage entities are classified as held for sale as of December 31, 2016
6) Liquidated in 2016
73
Ownership (%)
2016
2015
76
51
76
76
76
76
76
76
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
76
51
76
76
76
76
76
76
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Annual Report 2016 | Financials and Notes 74
Company
Disposed Entities 7)
MPO Austria Holding GmbH
Managed Pressure Operations International Limited (Cyprus)
PT Managed Pressure Operations (Indonesia)
Managed Pressure Operations International AS
Managed Pressure Operations Pte Ltd (Singapore)
MPO Research Technologies Pte Ltd
Managed Pressure Operations FZE (Dubai)
Managed Pressure Operations LLC (USA – TX)
Frontica Business Solutions Sdn Bhd
Frontica Business Solutions AS
Frontica Business Solutions Inc
Fjords Processing Australia Pty Ltd
Fjords Processing Canada Inc
Aker Midsund Engineering s.r.o
Fjords Processing France SAS
Fjords Processing 1 AS
Fjords Processing International AS
Midsund Bruk AS
Midsund Bruk 1 AS
Fjords Processing UK Ltd
Opus Maxim Ltd
Opus Plus Ltd
Fjords Processing Inc
Fjords Processing Colombia SAS
PT Aker Solution E & C Indonesia
7) Entities are referred to by company names before the disposals.
Note 35 | Related parties
Location
Country
Ownership (%)
2016
2015
Vienna
Limassol
Jakarta
Kristiansand
Singapore
Singapore
Dubai
Houston
Kuala Lumpur
Fornebu
Houston
Welshpool
Newfoundland
Prague
Vincennes Cedex
Fornebu
Fornebu
Midsund
Fornebu
Aberdeen
Guildford
Orkney
Houston
Bogota
Jakarta
Austria
Cyprus
Indonesia
Norway
Singapore
Singapore
UAE
USA
Malaysia
Norway
USA
Australia
Canada
Czech Republic
France
Norway
Norway
Norway
Norway
UK
UK
UK
USA
Colombia
Indonesia
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
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 36 Management remunerations.
position to enter into transactions with the company that would not
be undertaken between unrelated parties. All transactions with related
The largest shareholder of Akastor, Aker Kværner Holding AS, is controlled
parties in Akastor have been based on arm’s length terms.
by Aker ASA (70 percent) which in turn is controlled by Kjell Inge Røkke
and his family through TRG Holding AS and The Resource Group TRG
Akastor ASA is a parent company with control of around 70 companies
AS. The Chief Executive Officer of Akastor, Kristian Monsen Røkke, is a
around the world. These subsidiaries are listed in note 34 Group companies.
board member of Aker ASA and TRG Holding AS. Aker ASA also holds 8.5
Any transactions between the parent company and the subsidiaries are
percent of the shares in Akastor ASA directly. All entities controlled by Aker
shown line by line in the separate financial statements of the parent
ASA, including Kvaerner and Aker Solutions, are considered related parties
company, and are eliminated in the consolidated financial statements.
to Akastor, referred as “Aker entities”. The entities controlled directly by
Kjell Inge Røkke and his family through TRG Holding AS and The Resource
Joint ventures are consolidated using the equity method, see note 18
Group TRG AS, are referred as “Related parties to Aker ASA”.
Equity-accounted investees. Transactions between the group and these
entities are shown in the table below.
Annual Report 2016 | Financials and Notes
Summary of transactions and balances with significant related parties
Amounts in NOK million
Income statement
Operating revenues
Other income
Operating costs
Net financial items
Included in Net profit from discontinued operations 1)
– Operating revenues
– Operating costs
Assets (liabilities)
Trade receivables
Interest-bearing receivables
PPE under finance lease ( Aker Wayfarer)
Non-current assets under finance lease (Aker Wayfarer)
Assets held for sale
Trade payables
Financial lease liability (Aker Wayfarer)
Liabilities held for sale
1) See note 5 for information about discontinued operations.
2016
Aker
entities
Joint
ventures
Total
2015
Aker
entities
Joint
ventures
229
-
(41)
(292)
2 484
(22)
29
-
1 618
-
6
(16)
(1 622)
(1)
-
172
-
7
-
-
-
50
-
-
-
-
-
229
172
(41)
(285)
2 484
(22)
29
50
1 618
-
6
(16)
(1 622)
(1)
371
310
(200)
(279)
3 851
(87)
154
-
1 313
410
-
(51)
(1 645)
-
-
-
4
-
82
-
-
-
-
-
-
75
Total
371
310
(200)
(275)
3 851
(87)
154
82
1 313
410
-
(51)
(1 645)
-
Below are descriptions of significant related party agreements. Following
commercial separation issues between subsidiaries of Aker
the divestment of Frontica Business Solutions and Frontica Advantage,
Solutions and Akastor. The parties also entered into an
the agreements between Akastor’s related parties and Frontica will not
agreement for provisioning of transitional services to and
be addressed as related party transactions after the date of disposals. See
from Aker Solutions following the demerger, of which most
note 5 for more information about the divestment.
of the services are finalized during 2016.
Related party transactions with Aker entities
Aker Solutions
Financial guarantees: Some parent company guarantees
issued on behalf of Aker Solutions entities by Akastor (as
Akastor has entered into a number of agreements and arrangements with
their previous parent company) were not transferred in
Aker Solutions, including:
connection with the demerger. Aker Solutions is liable
to indemnity Akastor for any rightful claim such parent
In February 2016, Aker Solutions signed five-year contracts for
company guarantees and to pay a guarantee commission on
delivery of staffing services, IT services and consultancy projects
market terms until the guarantees are effectively transferred
as well as business support services within HR, finance and
to Aker Solutions or have lapsed.
procurement from Frontica Advantage and Frontica Business
Solutions. The amount charged for these services was NOK 2.2
Secondary joint liability: If an obligation that arose prior to the
billion (NOK 3.5 billion in 2015) and is included in revenues from
completion of the demerger is not satisfied by the party to
discontinued operations following the divestment of Frontica
which the obligation has been allocated under the demerger
Business Solutions and Frontica Advantage.
plan, be it Akastor or Aker Solutions, the other party will have
secondary joint liability for such obligation. This statutory
Various lease agreements from Akastor Real Estate AS and other
liability is unlimited in time, but is limited in amount to the net
Akastor companies to subsidiaries of Aker Solutions.
value allocated to the non-defaulting party in the demerger.
Following the demerger between Aker Solutions and Akastor in
Kvaerner
2014, several arrangements are still valid:
Some parent company guarantees issued on behalf of Kvaerner entities
by Akastor (as their previous parent company) were not transferred in
Agreements addressing separation issues: Aker Solutions
connection with the demerger of Kvaerner in 2011. The parent company
and Akastor entered into several agreements addressing
guarantees provided by Akastor ASA on behalf of Kvaerner entities are
various separation issues between the two parties, including
NOK 5.5 billion as of December 31, 2016. Kvaerner is liable to indemnity
but not limited to a main separation agreement, a technology
Akastor for any rightful claim such parent company guarantees and to
agreement concerning ownership and licensing rights to
pay a guarantee commission on market terms until the guarantees are
intellectual property and know-how as well as several bilateral
effectively transferred to Kvaerner or have lapsed.
license agreements and various agreements addressing
Annual Report 2016 | Financials and Notes 76
In November 2016, Kvaerner signed five-year contracts for delivery of
the loan was converted to the equity of the company. The ownership of the
staffing services, IT services and consultancy projects as well as business
joint venture remains unchanged. As of December 31, 2016, the carrying
support services within HR, finance and procurement from Frontica
amount of the shareholder’s loan from Akastor to DOF Deepwater AS is
Advantage and Frontica Business Solutions. The amount charged for
NOK 50 million (NIBOR 6 months+ 3.6 percent).
these services in 2016 was NOK 180 million (NOK 301 million in 2015)
and is included in revenues from discontinued operations following the
Akastor ASA has issued financial guarantees in favor of banks related to
divestment of Frontica Business Solutions and Frontica Advantage.
financing of the five vessels in DOF Deepwater. The liability is capped at
50 percent of drawn amount. The guarantee is NOK 533 million as of
OCY Wayfarer AS (Ocean Yield)
December 31, 2016 (NOK 589 million in 2015).
OCY Wayfarer AS and AKOFS 3 AS, a wholly owned subsidiary in Akastor,
have entered into a long term lease contract for the Aker Wayfarer
Avium Subsea AS
vessel until 2027 with purchase options on 3 different dates. This lease
In November 2016, Akastor and Mitsui established a joint venture, Avium
agreement is recognized as a finance lease and the finance lease obligation
Subsea AS, with 50/50 ownership. The joint venture acquired both the
as of December 31, 2016 amounts to NOK 1 622 million, of which NOK 322
Skandi Santos hull from DOF Subsea Rederi AS and the Skandi Santos
million is presented as current liability, representing the lease payment to
topside equipment from AKOFS Offshore. The sale of topside equipment
OCY Wayfarer AS in the next twelve months. The carrying amount of the
resulted in an accounting gain of NOK 172 mill, representing 50% of the
vessel under finance lease is NOK 1 618 million as of December 31, 2016.
total gain on sale. The joint venture then entered into a lease agreement
with AKOFS Offshore corresponding to the remaining Skandi Santos
Agreements with related parties to Aker ASA
contract duration between AKOFS Offshore and Petrobras.
Aker Maritime Finance AS
In December 2015, Akastor sold its real estate portfolio comprising of eight
Akastor AS has issued a financial parent company indemnity guarantee
properties to Aker Maritime Finance AS, a company then owned by Aker
of NOK 970 million and a financial guarantee of NOK 41 million in favor
ASA and later sold to Kjell Inge Røkke and The Resource Group TRG AS in
of finance institutions for fulfillment of lease obligations related to Avium
2016. Following the divestment, MHWirth AS, a wholly owned subsidiary
Subsea AS.
of Akastor, entered into long-term lease agreements with subsidiaries of
Aker Maritime Finance AS for properties in Kristiansand in Norway. The
Other related parties
annual lease payment is approximately NOK 22 million for a lease period
Aker Pensjonskasse
of 19 years starting October 1, 2015, with options for renewal.
Aker Pensjonskasse was established by Aker ASA to manage the
retirement plan for employees and retirees in Akastor as well as related
AK Wilfab Inc, a wholly owned subsidiary of Akastor, is together with
Aker companies. Akastor holds 93.4 percent of the paid-in capital in Aker
Aker Solutions Inc and Aker Maritime Finance AS sponsoring the US
Pensjonskasse and Akastor’s share of paid-in equity was NOK 120 million
pension plan named the Kvaerner Consolidated Retirement Plan. Aker
at the end of 2016 (unchanged from 2015). Akastor’s premium paid to
Maritime Finance AS holds two thirds of the liability of the sponsors for
Aker Pensjonskasse amounts to NOK 13 million in 2016 (NOK 15 million
the underfunded element of the plan, while the ultimate liability for the
in 2015).
remaining one third lies with Akastor.
Fornebuporten AS
Even though Akastor owns 93.4 percent in Aker Pensjonskasse, the
ownership does not constitute control since Akastor does not have the
Akastor has entered into a long-term lease agreement with Fornebuporten
power to govern the financial and operating policies so as to obtain
AS, an associated company of The Resource Group TRG AS, starting
benefits from the activities in this entity.
August 31, 2015 for headquarter offices at Fornebu. The duration of the
contract is 10 years, with two additional five-year options.
Grants to employee representative’s collective fund
Related party transactions with joint ventures
that regulate use of grants from Akastor ASA for activities related to
DOF Deepwater AS
professional development. The grant in 2016 was NOK 510 000 (NOK
Aker ASA has signed an agreement with employee representatives
During 2016, the shareholder’s loan to DOF Deepwater AS was increased
595 000 in 2015).
by NOK 114 million to NOK 200 million and thereafter NOK 150 million of
Annual Report 2016 | Financials and Notes 77
Note 36 | Management remunerations
Board of directors
The board of directors did not receive any other fees than those listed in the table below in 2016 or 2015, except for employee representatives who had
market based salaries. The members of the board of directors have no agreements that entitle them to any extraordinary remuneration.
The fees in the table below represent what is recognized as expenses in the income statement based on assumptions about fees to be approved at the
general assembly rather than what has been paid in the year.
Amounts in NOK
Kjell Inge Røkke
Frank Ove Reite
Øyvind Eriksen
Lone Fønss Schrøder
Kathryn Baker
Sarah Ryan 1)
Jannicke Sommer-Ekelund
Stig Faraas
Asbjørn Michailoff Pettersen
Siv K. Hestad
Stian Sjølund
Total
2016
2015
Audit Committee
Board fees
Audit Committee
Board fees
-
-
-
205 000
115 000
-
-
-
115 000
-
-
-
600 000
340 000
440 000
340 000
434 800
170 000
63 750
170 000
85 000
21 250
-
-
-
205 000
115 000
-
-
-
115 000
-
-
255 000
150 000
535 000
440 000
340 000
445 600
170 000
170 000
170 000
-
-
435 000
2 664 800
435 000
2 675 600
1) Board fees in 2016 and 2015 include 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
Akastor comprises the company’s CEO, Kristian Monsen Røkke, CFO Leif
are paid to the Aker companies, not to the directors in person. Therefore,
H. Borge, Investment Director Paal E. Johnsen and Investment Director
board fees for Øyvind Eriksen were paid to Aker ASA. Board fee for Kjell
Karl Erik Kjelstad. The company practices standard employment contracts
Inge Røkke was paid to The Resource Group.
and standard terms and conditions regarding notice period and severance
Audit Committee
pay for the Akastor management. Kristian Monsen Røkke and Paal E.
Johnsen have a three months’ notice period as a part of their employment
Akastor has an audit committee comprising three of the directors, which
contracts, while Borge and Kjelstad both have six months’ notice periods.
held 11 meetings in 2016. As of December 31, 2016, the audit committee
comprises Lone Fønss Schrøder (chairperson), Kathryn M. Baker and
Compensation to the executive management has a fixed element which
Asbjørn Michailoff Pettersen.
includes a base salary which pursuant to the company’s benchmarking is
competitive with other investment companies. In addition, the executive
Guidelines for remuneration to the members of the executive
management has variable remuneration, as further described below. All
management of Akastor
variable pay shall be subject to a cap.
The main purpose of the executive remuneration is to encourage a strong
and sustainable performance-based culture, which supports growth in
The salary figures for the remuneration for the executive management
shareholder value. As of December 31, 2016, the executive management of
represent what has been expensed in the year.
Annual Report 2016 | Financials and Notes
78
Amounts in NOK
Job title
Base salary
Variable
pay 5)
Other
benefits 1), 2)
Total taxable
remuneration
Pension benefit earned/
cost to company 3)
2016
Kristian Monsen Røkke
Leif Hejø Borge 4)
Karl Erik Kjelstad 4)
CEO
CFO
3 531 868
4 037 600
3 504 342
4 261 870
Investment director
3 640 699
4 316 900
Paal E. Johnsen
Investment director
2 990 055
3 224 388
9 992
43 688
28 304
11 191
7 579 460
7 809 900
7 985 903
6 225 634
Total
13 666 965
15 840 758
93 175
29 600 897
2015
Frank Ove Reite 6)
Kristian Monsen Røkke 7)
Leif Hejø Borge 4)
Karl Erik Kjelstad 4)
Paal E. Johnsen 8)
Total
CEO
CEO
CFO
2 519 166
-
1 540 735
914 708
3 446 646
1 331 143
Investment director
3 581 353
1 524 044
Investment director
1 947 355
426 888
13 035 255
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
84 260
135 849
132 654
85 396
438 157
45 765
33 963
136 592
133 189
41 214
390 722
1) Other benefits include insurance agreements, such as membership in the standard employee scheme and an additional executive group life and disability insurance.
2) Other benefits include salary in notice period and severance pay for management where employment is terminated.
3) 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.
4) Variable pay includes deferred variable payments from previous years, which are paid out on the condition of continued employment.
5) See below for further description of principles for performance based remuneration.
6) For the period between January 1 and August 9, 2015.
7) For the period between August 1 and December 31, 2015.
8) For the period between May 18 and December 31, 2015..
Benefits
Further, the executive management may be offered additional variable pay
The executive management participates in the standard employee,
arrangements going forward which differs from the ordinary variable pay
pension and insurance plan applicable to all employees in the company.
program described above. The variable pay arrangements offered to the
No executive personnel in Akastor has performance based pension plans
executive management may in its entirety be linked to the development of
and there are no current loans, prepayments or other forms of credit from
the company’s share price. The executive management may from time to
the company to its executive management. No members of the executive
time be granted a discretionary variable pay. There was no discretionary
management are part of any option- or incentive programs other than
pay paid out for 2015 or 2016, but incentive bonuses for transactions
what is described in this note.
completed in 2016 may be granted later.
Performance based remuneration
Share purchase program for Akastor’s executive management team
In addition to the fixed compensation set out above, the executive
The company had no regular share purchase program in 2016. Should the
management participates in a variable pay program. The objective of the
board of directors decide to launch a share purchase program in 2017,
program is to incentivize the management to contribute to sound financial
the executive management will be invited to participate. Had a regular
results for the company as well as executing leadership in accordance with
share purchase program been executed in 2016, the CEO would have
the company’s values and business ethics. The variable pay program potential
been entitled to purchase up to 200 000 treasury shares, as informed in
is maximized to 100 percent of the annual base salary. The payments under
the stock exchange announcement on 16 July 2015. All shares purchased
the variable pay program are determined based on three components:
under the programs are subject to a three year lock-up period under
Development of Akastor ASA’s share price
executive management may also be offered to take part in separate share
purchase programs, such as programs with a higher maximum purchase
Delivery of certain key financial and operational targets for Akastor
amount than for other managers.
which the acquired shares may not be sold or otherwise disposed of. The
Delivery of personal performance objectives during the year
Directors’ and executive management’s shareholding
For the CEO, payments under the variable pay program are determined
members of the executive management (and their related parties) as of
The following number of shares is owned by the directors and the
based on development of Akastor ASA’s share price only. Since the
December 31:
variable pay program for the executive management is partly linked to the
development of the Akastor ASA share price, it requires approval by the
general meeting and the guidelines will thereafter be binding.
Annual Report 2016 | Financials and Notes
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
Asbjørn Michailoff Pettersen
Stian Sjølund
79
2016
2015
200 000
250 000
123 074
-
200 000
4 400
45 683
5 000
839
3 050
-
200 000
142 775
123 074
-
200 000
4 400
-
-
839
3 050
-
Job title
CEO
CFO
Investment Director
Investment Director
Chairman
Deputy Chairman
Director
Director
Director
Director
Director
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 37 | Subsequent events
On January 6, 2017, Akastor completed the transaction to sell Frontica’s
On March 1, 2017, Akastor signed an agreement with its bank syndicate to:
staffing business (Advantage) to NES Global Talent to create a combined
i) replace its ICR covenant with a nominal EBITDA amount until Q2 2018;
company as a global provider in staffing services to the oil and gas industry.
and ii) to be allowed to use the existing RCF to make acquisitions for up
Initially Akastor is holding a 15.2% economic ownership position in the
to NOK 1.0 billion under certain conditions. See more information in note
combined entity with potential to increase its ownership depending on
30 Capital Management.
the growth in Aker controlled entities over the next three years. The
estimated accounting gain is approximately NOK 385 million to be
recognized in the first quarter of 2017. Frontica Advantage is presented
as discontinued operations and held for sale as of December 31, 2016, see
note 5 Discontinued operations.
Annual Report 2016 | Financials and Notes 80
Annual Report 2016 | Financials and Notes
05.b. FINANCIALS AND NOTES
AKASTOR ASA
Akastor ASA
Akastor ASA
Akastor ASA
| Income statement
| Statement of financial position
| 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
Note 12 | Related parties
Note 13 | Shareholders
Note 14 | Subsequent events
| Financial risk management and financial instruments
81
82
83
84
85
85
86
86
86
87
87
88
89
90
90
91
91
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
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
81
Note
2016
2015
2
2
3
4
15
(64)
(49)
868
819
(29)
790
790
790
16
(67)
(52)
(1 386)
(1 437)
(23)
(1 461)
(1 461)
(1 461)
Annual Report 2016 | Financials and Notes 82
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
Derivative financial instruments
Other current receivables
Cash in cash pool system
Total current assets
Total assets
Equity and liabilities
Issued capital
Treasury shares
Share premium
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
Derivative financial instruments
Other current liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Note
2016
2015
4
5
7
8
7
7
11
7
6
9
9
7
11
4
5 396
2 951
2
8 353
300
1 004
453
-
135
1 892
10 245
162
(2)
2 000
2 003
(133)
4 031
1 191
1 191
4
4 499
-
61
430
29
5 023
6 214
10 245
31
4 754
2 021
84
6 890
4 150
-
1 939
38
195
6 322
13 212
162
(2)
2 000
2 003
(923)
3 241
3 577
3 577
10
4 183
42
55
2 032
72
5 903
9 971
13 212
Fornebu, March 7, 2017 | 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
Stian Sjølund | Director
Asbjørn Michailoff Pettersen | Director
Kristian Monsen Røkke | CEO
Annual Report 2016 | Financials and Notes
Akastor ASA | Statement of cash flow
For the year ended December 31
Amounts in NOK million
Profit (loss) before tax
Adjustments for non-cash effects
Impairment of receivables
Group contribution
Changes in other net operating assets
Net cash from operating activities
Payment related to increase in interest-bearing receivables
Proceeds from repayment of interest-bearing receivables
Net cash from investing activities
Proceeds from borrowings
Repayment of borrowings
Changes in borrowings from group companies
Changes in borrowings to group companies
Proceeds from employees share purchase program
Payment of group contribution
Net cash from financing activities
Effect of exchange rate changes on cash and cash deposits
Net increase (decrease) in cash and bank deposits
Cash in cash pool system at the beginning of the period
Cash in cash pool system at the end of the period 1)
1) Unused credit facilities amounted to NOK 2.6 billion as of December 31, 2016 (NOK 2 billion in 2015).
83
Note
2016
2015
819
(1 437)
356
(1 000)
(262)
(88)
(114)
-
(114)
421
(2 853)
514
1 986
2
(42)
27
115
(60)
195
135
1 505
-
141
209
-
29
29
1 178
(1 000)
215
(937)
2
2
(543)
(304)
499
195
7
Annual Report 2016 | Financials and Notes
84
Note 1 | Accounting principles
Akastor ASA (the parent company) is a company domiciled in Norway.
Non-current borrowings are initially recorded at transaction value less
The financial statements are presented in conformity with Norwegian
attributable transaction costs. Subsequent to initial recognition, interest-
Accounting Act and Norwegian generally accepted accounting principles
bearing non-current borrowings are measured at amortized cost with
(NGAAP).
any difference between cost and redemption value being recognized in
the income statement over the period of the borrowings on an effective
Revenue recognition
interest basis.
Revenue is recognized when the service is delivered. Operating revenue
is comprised mainly of income from parent company guarantees (PCG).
Cash in cash pool system
The PCGs are invoiced when the guarantee is issued and the income is
Cash in cash pool system is the parent company’s cash as well as net
recognized on a straight line basis over the lifetime of the guarantee.
deposits from subsidiaries in the group’s cash pooling systems owned by
Insurance commissions are recognized the year the
insurance
is
the parent company. Correspondingly, the parent company’s current debt
established.
to group companies will include the same net deposits in the group’s cash
Investments in subsidiaries and associates
pooling system.
Investments in subsidiaries and associates are accounted for using the
The statement of cash flow is prepared according to the indirect method.
cost method in the parent company’s accounts. The investments are
valued at cost less impairment losses. Investments in subsidiaries and
Share capital
associates are reviewed for impairment whenever events or changes in
Costs for purchase of own shares including transaction costs are accounted
circumstances indicate that the carrying amount may exceed the fair value
for directly against equity. Sales of own shares are performed according
of the investment.
to stock-exchange quotations at the time of award and accounted for as
Dividends and other distributions are recognized as income the same
year as they are allocated from the subsidiary. If the dividend exceeds
Foreign currency
increase in equity.
accumulated profits in the subsidiary after the acquisition, the payment is
Transactions in foreign currencies are translated at the exchange rate at
treated as a reduction of the carrying amount of the investment.
the date of the transaction. Monetary assets and liabilities denominated
Classification
in foreign currencies at the reporting date are translated to the functional
currency at the exchange rate on that date. Foreign exchange differences
An asset is classified as current when it is expected to be realized or is
arising on translation are recognized in the income statement.
intended for sale or consumption as part of the operating cycle or is
expected/due to be realized or settled within twelve months after the
Derivative financial instruments
reporting date. Other assets are classified as non-current.
Subsidiaries have entered into financial derivative agreements with
the parent company to hedge their foreign exchange exposure. The
A liability is classified as current when it is expected to be settled as part of
parent company does not engage in hedging activities other than as a
the operating cycle, the liability is due to be settled within twelve months
counterparty in financial derivative agreements with the subsidiaries. In
after the reporting period, or if Akastor ASA does not have an unconditional
the parent company, derivatives from external banks are used to mitigate
right to defer settlement of the liability for at least twelve months after the
the foreign exchange exposure from the financial derivative agreements
reporting period. All other liabilities are classified as non-current.
with the subsidiaries.
Non-current borrowings are presented as current if a loan covenant
Hedge accounting is performed at Akastor group level. Refer to note 3 in
breach exists at balance date. If a covenant waiver is approved subsequent
Akastor’s consolidated financial statements for the description of hedge
to year-end and before the approval of the financial statements, the
accounting at group level.
liability is presented as non-current debt to the extent maturity date is
beyond one year.
All financial assets and liabilities related to foreign exchange contracts are
remeasured at fair value in respect to exchange rates at reporting date and
Financial assets and liabilities
resulting gains or losses are recorded in the income statement.
Financial assets and liabilities consist of investments in other companies,
trade and other receivables, interest-bearing receivables, cash and cash
Tax
equivalents, trade and other payables and interest-bearing borrowing.
Tax expense in the income statement comprises current tax and changes
The company initially recognizes borrowings and receivables on the date
differences between accounting and tax values as well as any tax losses
when they are originated. All other financial assets and financial liabilities
carry-forward at the year end. Net deferred tax assets are recognized only
are initially recognized on the trade date.
to the extent it is probable that they will be utilized against future taxable
in deferred tax. Deferred tax is calculated as 24 percent of temporary
Trade receivables and other receivables are recognized at nominal
value less provision for expected losses. Provision for expected losses is
considered on an individual basis.
profits.
Annual Report 2016 | Financials and Notes 85
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 12 million in 2015) and NOK 3 million
related costs and also no loan or guarantees related to the executive
in insurance commissions from group companies (NOK 4 million in 2015).
management team. Group management and corporate staff are employed
Income from parent company guarantees includes NOK 0.6 million from
by other Akastor companies and costs for their services as well as other
external companies and related parties (NOK 0.1 million in 2015).
parent company costs are charged to Akastor ASA. Remuneration to and
shareholding of managing director is described in note 36 Management
remunerations in Akastor’s consolidated financial statements
Fees to the auditors
Amounts in NOK million
Audit
Total
No fees related to other assurance services, tax services or non-audit services were provided.
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
Income on investment in subsidiary (group contribution)
Impairment on receivables to group companies
Impairment of receivables on related parties
7
8
Impairment of shares
Other financial income
Other financial expense
Foreign exchange gain
Foreign exchange loss
Net other financial items
Net financial items
2016
2015
3
3
2
2
Note
2016
2015
293
(8)
285
7
7
15
(237)
(221)
1 000
(292)
(64)
-
72
(4)
214
(129)
797
868
336
(8)
328
4
4
12
(211)
(199)
-
(1 265)
-
(240)
19
(1)
261
(294)
(1 519)
(1 386)
Annual Report 2016 | Financials and Notes 86
Note 4 | Tax
Amounts in NOK million
Calculation of taxable income
Profit (loss) before tax
Impairment of internal loans and shares
Permanent differences
Changes in timing differences
Generated (utilized) tax loss
Group contribution without tax effect
Group contribution with tax effect
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
2016
2015
819
292
(3)
(119)
-
(1 000)
-
(11)
23
(27)
(11)
(15)
24%
4
(27)
(2)
-
(29)
(1 437)
1 505
(4)
60
(82)
-
(42)
-
(93)
(30)
-
(123)
25%
31
(8)
(4)
(11)
(23)
Amounts in NOK million
Akastor AS
AKOFS Offshore AS 1)
Total
Registered
office
Share
capital
Number of
shares held
Percentage
owner- /
voting share
Fornebu,
Norway
1 004
1
100.00%
Oslo, Norway
733
27 128 355
55.49%
2016
2015
4 191
1 205
5 396
4 191
563
4 754
1) Shareholding in AKOFS Offshore AS was increased in 2016 following conversion of loan of USD 75 million. The remaining 44.51 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.
Note 6 | Shareholders’ equity
Amounts in NOK million
Equity as of January 1, 2015
Profit (loss) for the period
Equity as of December 31, 2015
Profit (loss) for the period
Equity as of December 31, 2016
Share
capital
Treasury
shares
Share
premium
Other paid
in capital
Retained
earnings
162
-
162
-
162
(2)
-
(2)
-
(2)
2 000
2 003
-
-
2 000
2 003
-
-
2 000
2 003
537
(1 461)
(923)
790
(133)
Total
4 700
(1 461)
3 241
790
4 031
The share capital of Akastor ASA is divided into 274 000 000 shares
The number of treasury shares held by the end of 2016 are 2 776 376
with a nominal value of NOK 0.592. The shares can be freely traded. An
and are held for the purpose of being used for future awards under any
overview of the company’s largest shareholders is to be found in note 13
share purchase program for employees, as settlement in future corporate
Shareholders.
acquisitions or for other purpose as decided by the board of directors.
Annual Report 2016 | Financials and Notes
Note 7 | Receivables and borrowings from group companies
Amounts in NOK million
2016
2015
87
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
Group contribution receivable
Other receivables on group companies
Total other receivables on group companies
2 702
(13)
(2 554)
135
300
2 951
(4 499)
(1 248)
1000
4
1 004
3 102
(410)
(2 497)
195
4 150
2 021
(4 183)
1 988
-
-
-
Interest-bearing receivables on and borrowings from group
cover a majority of the group geographically and assure good control
companies
and access to the group’s cash. Participation in the cash pool is vested in
Akastor ASA is the group’s central treasury function (Akastor Treasury) and
the group’s policy and decided by each company’s board of directors and
enters into borrowings and deposit agreements with group companies.
confirmed by a statement of participation. The participants in the cash
Deposits and borrowings are done at market terms and are dependent
pool system are jointly and severally liable and it is therefore important
of the group companies’ credit rating and the duration of the borrowings.
that Akastor as a group is financially viable and can repay deposits and
In 2016, an impairment of NOK 292 million (NOK 1.3 billion in 2015) is
against any credit balance. A debit balance does hence represent a claim
recognized related to interest-bearing receivables on group companies.
on Akastor ASA and a credit balance a borrowing from Akastor ASA.
The impairment is mainly related to receivables on Step Oiltools and MPO.
All current receivables and borrowings are due within one year.
December 31, 2016 (NOK 195 million in 2015). This amount is reported in
The cash pool systems were showing a net balance of NOK 135 million per
Akastor ASA’s accounts as short term borrowings from group companies
carry out transactions. Any debit balance on a sub account can be set-off
Cash pool arrangement
and as cash in cash pool system.
Akastor ASA is the owner of the cash pool system arrangements with
DNB, Nordea and The Royal Bank of Scotland. The cash pool systems
Note 8 | Other non-current interest-bearing receivables
Amounts in NOK million
Loan to DOF Deepwater AS (related party to Akastor) 1)
Stiftelsen Akastor Kompensasjonsordning
Total other non-current interest-bearing receivables
2016
2015
-
2
2
82
2
84
1) The loan to DOF Deepwater AS was increased by NOK 114 million during the year followed by a sale of the receivable to Akastor AS. An impairment of NOK 64 million was
booked upon realization of the receivable.
Annual Report 2016 | Financials and Notes 88
Note 9 | Borrowings
Amounts in million
Currency
Nominal
currency
value
Carrying
amount
(NOK)
Interest
rate
Interest
margin
Interest
coupon
Maturity
Interest terms
2016
Revolving credit facility
(NOK 1 122 million)
Revolving credit facility
(USD 313 million)
Total borrowings
Current borrowings
Non-current borrowings
Total
2015
Revolving credit facility
(NOK 2 000 million) 3)
Term loan
Term loan
Accrued interest
Total borrowings
Current borrowings
Non-current borrowings
Total borrowings
NOK
-
-
2.75%
July 2019 2)
NIBOR + margin 1)
0.67%
2.75%
3.42%
July 2019 2)
USD LIBOR + margin 1)
1.00%
1.20%
0.48%
1.90%
1.80%
1.60%
2.90%
July 2017 2)
July 2019 2)
3.00%
2.08% January 2017 2)
IBOR + variable margin 1)
IBOR 3M+fixed margin
IBOR 3M+fixed margin
USD
139
1 195
1 195
4
1 191
1 195
NOK
NOK
USD
-
(10)
2 500
125
2 491
1 096
10
3 587
10
3 577
3 587
1) The margin applicable to the facility is decided by a price grid based on the leverage 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, 2016.
3) Carrying amount of negative NOK 10 million in 2015 relates to issue costs.
All facilities are provided by a bank syndicate consisting of high quality
The company’s gearing ratio shall not exceed 1.0 times and
Nordic and international banks. The terms and conditions include
is calculated from the consolidated total borrowings to the
restrictions which are customary for these kinds of facilities, including
consolidated Equity.
inter alia negative pledge provisions and restrictions on acquisitions,
disposals and mergers and change of control provisions. The facilities
Minimum liquidity amount shall exceed NOK 750 million on
include no dividend restrictions. There is a stand-alone mortgage on the
consolidated level.
vessel AKOFS Seafarer as security for the facilities.
The financial covenants are a gearing ratio based on net debt/equity, an
31, 2016, the ICR ended below the 1.5 minimum level. On March 1, 2017,
interest coverage ratio (ICR) based on EBITDA/net interest costs and a
Akastor signed an agreement with its bank syndicate to replace its ICR
The financial covenants are tested on a quarterly basis and at December
minimum liquidity amount:
covenant with a nominal consolidated EBITDA amount until Q2 2018
and to be allowed to use the existing Revolving Credit Facilities to make
The company’s interest coverage ratio (ICR) shall not be lower
acquisitions for up to NOK 1.0 billion under certain conditions. In addition,
than 1.5 in Q4 2016, 3.0 in Q1 2017 and 4.0 from Q2 2017 onwards,
the minimum liquidity amount was reduced to NOK 500 million.
calculated from the consolidated EBITDA to consolidated Net
Finance Cost.
Amounts in NOK million
2016
2017
2018
The nominal consolidated EBITDA amount is adjusted for certain items
as defined in the agreement; however does not share the same definition
as ICR covenant. The nominal consolidated EBITDA covenant has been
agreed as follows:
Q1
Q2
150
325
150
425
Q3
175
Q4
150
225
Annual Report 2016 | Financials and Notes
89
The actual nominal consolidated EBITDA as of Q4 2016 was above
basis of the waiver agreed with the bank and its forecasts, management
minimum covenant amount of NOK 150 million.
believes that the risk of the new covenant being breached is low and that
The covenants are monitored on a regular basis by the Akastor Treasury
more information in note 30 Capital management in the Akastor Group
department to ensure compliance with the loan agreements. On the
consolidated accounts.
the group will continue as a going concern for the foreseeable future. See
Financial liabilities and the period in which they mature
Amounts in NOK million
2016
Revolving credit facility (USD 313 million)
Total borrowings
2015
Revolving credit facility (NOK 2 000 million)
Term loan (NOK 2 500 million) 2)
Term loan (USD 125 million) 2)
Accrued interest
Total borrowings
Carrying
amount
Total
undiscounted
cash flow 1)
6 months
and less
6–12
months
1–2 years
2–5 years 2)
1 195
1 195
(10)
2 491
1 096
10
3 587
1 345
1 345
-
2 765
1 124
10
3 899
24
24
-
38
11
10
59
20
20
-
38
11
-
49
41
41
-
75
1 101
-
1 176
1 260
1 260
-
2 615
-
-
2 615
1) The interest costs are calculated using the last fixing rate known by year end (plus applicable margin).
2) Repayment of the loan in the table is according to maturity date of the facility in the loan agreement.
Note 10 | Guarantees
The group has provided the following guarantees on behalf of wholly owned subsidiaries as of December 31 (all obligations are per date of issue):
Amounts in NOK million
Parent Company Guarantees to group companies 1)
Guarantees on behalf of Kværner 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
2016
2015
13 719
5 455
2 425
501
14 356
12 194
3 462
425
22 100
30 436
6 596
2 534
6 543
2 216
4 211
8 009
9 343
3 259
5 681
4 145
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; Cognizant Oil and Gas Consulting Services (former Frontica Business Solutions) and McGregor Pusnes AS (former Aker Pusnes AS).
Although guarantees are financial instruments, they are considered contingent obligations and the notional amounts are not included in the financial
statements.
Annual Report 2016 | Financials and Notes 90
Note 11 | Financial risk management and financial instruments
Akastor ASA has entered into forward exchange contracts with subsidiaries
the total currency exposure. These contracts have no significant impact
in 2016 with a total value of about NOK 32.8 billion (NOK 34.4 billion in
on Akastor ASA’s income statement.
2015). Large contracts are hedged back-to-back with external banks,
while minor contracts are hedged based on internal matching principles.
All instruments are measured at fair value as of December 31.
Contracts that are hedged back-to-back represent about 80 percent of
Amounts in NOK million
Forward exchange contracts with group companies
Forward exchange contracts with external counterparts
Total
2016
2015
Assets
Liabilities
Assets
Liabilities
367
86
453
(139)
(291)
(430)
1 430
509
1 939
(612)
(1 420)
(2 032)
Interest rate risk
Liquidity risk
The interest rate risk arises from interest-bearing borrowings. Borrowings
Liquidity risk is the risk that the company will encounter difficulty in
issued at variable rates expose the company to cash flow interest rate risk.
meeting the obligations associated with its financial liabilities. Akastor
Borrowings issued at fixed rates expose the group to fair value interest
manages its liquidity to ensure that it will always have sufficient liquidity
rate risk. However, as these borrowings are measured at amortized cost,
reserves to meet its liabilities when due.
interest rate variations do not affect profit and loss when held to maturity.
Interest-bearing borrowings to group companies reflect the cost of
the availability of funding from an adequate amount of committed credit
external borrowing, reducing the interest risk exposure for Akastor ASA.
facilities and the ability to close out market positions. Due to the dynamic
Prudent liquidity risk management includes maintaining sufficient cash,
Credit risk
Credit risk is the risk of financial losses to the company if customer
nature of the underlying businesses, Akastor Treasury maintains flexibility
in funding by maintaining availability under committed credit lines.
or counterparty to financial investments/instruments fails to meet
The policy for the purpose of optimizing availability and flexibility of cash
contractual obligations, and arise principally from investment securities
within the Akastor group is to operate centrally managed cash pooling
and receivables. Investment securities and derivatives are only traded
arrangements. Such arrangements are either organized with a bank as
against approved banks. All approved banks are participants in the Akastor
a service provider, or as a part of the operation of Akastor Treasury. An
loan syndicate and have investment grade ratings. Credit risk related
important condition for the participants (business units) in such cash
to investment securities and derivatives is therefore considered to be
pooling arrangements is that Akastor ASA as an owner of such pools is
insignificant. The existence of netting agreements between Akastor ASA
financially viable and is able to prove its capability to service its obligations
and the banks reduces the credit risk.
concerning repayment of any net deposits made by business units.
Loss provisions for
interest-bearing receivables are recognized
in
liquidity reserve on the basis of expected cash flow. Liquidity risk relates to
situations of negative equity if the company is not expected to be able
the risk that the company will not be able to meet its debt and guarantee
to fulfil its loan obligations from future earnings. NOK 292 million was
obligations and are managed through maintaining sufficient cash and
impaired in 2016 (NOK 1.3 billion in 2015), see also note 7 Receivables and
available credit facilities. The development in the group’s and thereby
borrowings from group companies.
Akastor ASA’s available liquidity is continuously monitored through weekly
Management monitors rolling weekly and monthly forecasts of the group’s
and monthly cash forecasts, annual budgets and long term planning.
Note 12 | Related parties
Transactions with subsidiaries and related parties are described in the following notes:
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
Akastor ASA’s agreement with Aker ASA regarding pension obligation in US are described in note 35 Related parties in the consolidated financial
statements. All transactions with related parties are done at market rates and in accordance with the arm’s lengths principle.
Annual Report 2016 | Financials and Notes Note 13 | Shareholders
Shareholders with more than 1 percent shareholding
Company
2016
Aker Kværner Holding AS
Goldman Sachs & Co
Euroclear Bank S.A./N.V.(‘BA’)
Aker ASA
Morgan Stanley & Co. LLC
ODIN Norge
Credit Suisse Securities (USA) LLC
Akastor ASA
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
Note 14 | Subsequent events
91
Note
Nominee
Number of
shares held
Ownership
110 333 615
Nominee
40 714 852
Nominee
35 124 259
23 331 762
Nominee
9 930 418
7 840 060
Nominee
3 638 779
6
2 776 376
40.27%
14.86%
12.82%
8.52%
3.62%
2.86%
1.33%
1.01%
Note
Nominee
Number of
shares held
Ownership
110 333 615
Nominee
54 603 407
Nominee
30 067 853
Nominee
Nominee
6
23 331 762
7 840 060
4 830 268
3 691 900
2 776 376
40.27%
19.93%
10.97%
8.52%
2.86%
1.76%
1.35%
1.01%
On March 1, 2017, Akastor signed an agreement with its bank syndicate to: i) replace its ICR covenant with a nominal EBITDA amount until Q2 2018; and ii)
to be allowed to use the existing RCF to make acquisitions for up to NOK 1.0 billion under certain conditions. See note 9 Borrowings for more information
about covenant compliance at December 31, 2016.
Annual Report 2016 | Financials and Notes 92
Annual Report 2016 | Auditors Report
06. AUDITORS REPORT
t
r
o
p
e
R
s
r
o
t
i
d
u
A
93
Annual Report 2016 | Auditors Report 94
Annual Report 2016 | Auditors Report 95
Annual Report 2016 | Auditors Report 96
Annual Report 2016 | Auditors Report 97
Annual Report 2016 | Auditors Report 98
Annual Report 2016 | Auditors Report Annual Report 2016 | Alternative Performance Measures
99
07. ALTERNATIVE PERFORMANCE
MEASURES
Akastor discloses alternative performance measures as a supplement
Net capital employed – Refers to the value of all assets employed in the
to the financial statements prepared in accordance with IFRS. Such
operation of a business. It is calculated by non-current assets (excluding
performance measures are used to provide an enhanced insight into the
non-current interest bearing receivables) added by net current operating
operating performance, financing and future prospects of the company
assets minus non-current operating liabilities (deferred tax liabilities,
and are frequently used by securities analysts, investors and other
employee benefit obligations and other non-current liabilities).
interested parties.
The definitions of these measures are as follows:
Gross debt – Sum of current and non-current borrowings.
EBITDA – Operating profit or loss (earnings) before (i) income tax, (ii) net
financial items, (iii) depreciation, amortization and impairment.
Net interest-bearing debt (NIBD) – Net debt minus non-current and
Net debt – Gross interest-bearing debt minus cash and cash equivalents.
EBIT – Operating profit or loss (earnings) before net financial items and
income tax.
Equity ratio – Total equity divided by Total assets at the reporting date.
current interest bearing receivables.
Capex and R&D capitalization – Expenditure on PPE or intangible assets
Order intake – Represents the estimated contract value from the
that qualify for capitalization.
contracts or orders that are entered into or committed in the reporting
Net current operating assets (NCOA) – Current operating assets minus
period.
current operating liabilities, excluding current assets or liabilities related
Order backlog – Represents the remaining unearned contract value from
to hedging.
the contracts or orders that are already entered into or committed at the
reporting date.
The tables below show reconciliation of alternative performance measures to the line items in the financial statements according to IFRS.
Net current operating assets (NCOA)
Amounts in NOK million
Current tax assets
Inventories
Trade and other receivables
Current operating assets
Current tax liabilities
Provisions
Trade and other payables
Current operating liabilities
Adjusted by NCOA related to discontinued operations
Net current operating assets (NCOA) (continuing operations)
2016
2015
65
1 086
2 829
3 980
(63)
(354)
(2 492)
(2 909)
-
1 072
2
1 464
5 959
7 425
(89)
(553)
(4 443)
(5 085)
82
2 422
s
e
r
u
s
a
e
M
e
c
n
a
m
r
o
f
r
e
P
e
v
i
t
a
n
r
e
t
l
A
100
Annual Report 2016 | Alternative Performance Measures
Net capital employed (NCE)
Amounts in NOK million
Total non-current assets
Net current operating assets (NCOA)
Non-current interest-bearing receivables
Deferred tax liabilities
Employee benefit obligations
Other non-current liabilities
Non-current provisions
Adjusted by NCE related to discontinued operations
Net capital employed (NCE) (continuing operations)
Gross debt/Net debt/NIBD
Amounts in NOK million
Non-current borrowings
Current borrowings
Gross debt
Less:
Cash and cash equivalents
Net debt
Less:
Non-current interest-bearing receivables
Current interest-bearing receivables
Net interest-bearing debt (NIBD)
Equity ratio
Amounts in NOK million
Total equity
Divided by Total assets
Equity ratio
2016
2015
7 897
1 072
(51)
(15)
(380)
(112)
(333)
-
8 078
10 732
2 422
(84)
(51)
(434)
(74)
(341)
(1 452)
10 718
2016
2015
1 494
1 560
3 054
487
2 567
51
15
1 583
4 054
5 637
563
5 074
84
72
2 501
4 918
2016
2015
5 580
12 861
43%
7 386
20 537
36%
Annual Report 2016 | Board of Directors
101
08. BOARD OF DIRECTORS
Frank O. Reite | Chairman
Frank O. Reite 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, 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 Akastor ASA.
Mr. Reite holds 200 000 shares in Akastor ASA, and has no stock options. Mr. Reite is a Norwegian
citizen and has been elected for the period 2015–2017.
Lone Fonss Schrøder | Deputy Chairman
Lone Fønss Schrøder has experience from CEO and Senior Management positions at the Danish
shipping and oil group A.P. Møller-Maersk A/S. She is Chairman of Saxo Bank, director and chairperson
for the audit committee at Volvo Cars and Valmet Oy, Director of Ikea Group 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, 2016, 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 2016–2018.
Øyvind Eriksen | Director
Øyvind Eriksen joined Aker ASA in January 2009. Mr. Eriksen holds a law degree from the University
of Oslo. He joined 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 BP, 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 31 December 2016, 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 per cent) in TRG Holding AS, the largest shareholder in Aker ASA. Mr.
Eriksen is a Norwegian citizen and has been elected for the period 2016–2018.
Kathryn M. Baker | Director
Kathryn M. Baker has 30 years of business experience in a broad range of industries and roles. She
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 current board positions include
Chairman of Catena Media Plc and Navamedic, and board member of Sevan Marine and DOF. Ms.
Baker also serves on the European Advisory Boards of the Tuck School of Business and DLA Piper
Norway and leads the Ethics Committee of the Norwegian Private Equity and Venture Capital
Association (NVCA), where she previously served as Chairman. 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 45 683 shares in the company. Ms. Baker
is an American citizen and has been elected for the period 2016–2018.
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Annual Report 2016 | Board of Directors
Sarah Ryan | Director
Sarah Ryan is a non-executive director of Woodside Petroleum and Vautron Pty Ltd and Energy
Advisor to Earnest Partners, a US investment management firm and she was previously a non-
executive director of Aker Solutions. Dr Ryan was investment director and equity analyst with Earnest
Partners, and previous to that held various senior management, technical and operational roles
during her 15 years with Schlumberger.
Dr. 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, 2016,
she held 5 000 shares in the company and had no stock options. Ms. Ryan is an Australian citizen. She
has been elected for the period 2016–2018.
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, 2016, 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 2014–2017.
Stian Sjølund | Director
Stian Sjølund currently works as Performance Optimization Engineer at MHWirth AS. Mr. Sjølund
joined the Company in 1998 as an Engineer in Drilling Lifecycle Services department. He has since
then held various positions in the company in Norway and abroad.
Mr. Sjølund holds a technical college degree in electrical engineering from Grimstad Technical
College. As of December 31, 2016, Mr. Sjølund holds no shares or stock options in the company. Mr.
Sjølund is a Norwegian citizen and has been elected for the period 2016–2017.
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 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, 2016, 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 2014–2017.
Annual Report 2016 | Management
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09. 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 spent eight years at Philly 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 Philly Shipyard. The
company is a leading U.S. commercial shipyard constructing vessels for operation in the Jones Act
market and is listed on the Oslo Stock Exchange. In recent years, it has successfully expanded its
business beyond traditional shipbuilding into investing in shipping assets and has, in addition to other
shipping investments, established a stand-alone shipping company, Philly Tankers, together with
financial sponsors. Mr. Røkke is a Board member of TRG Holding AS and Aker ASA.
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, 2016, 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 CFO of Aker Solutions in 2008–2014. He was CFO of
Aker Yards in 2002–2008, CFO of Stento ASA/ Zenitel NV in 1998–2001, CFO of Vitana (a subsidiary
of Rieber & Søn ASA in the Czech Republic) in 1994–1997, and prior to that Financial Manager in
Union Bank of Norway.
Mr. Borge holds an MBA from Pacific Lutheran University in Washington State, and is a Norwegian
citizen. As of December 31, 2016, Mr. Borge holds, directly and through a privately owned company,
250 000 shares in the company, and had no stock options.
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, 2016, he holds, 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 positions in both
public and private companies across several industries. From 1996 to 2008, Paal E. 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
Norwegian School of Economics. As of 31. December 2016, he holds no shares in the company and
had no stock options. Mr. Johnsen is a Norwegian citizen.
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Annual Report 2016 | Company Information
10. COMPANY INFORMATION
Reports on the Internet
Copyright and Legal Notice
The quarterly and annual reports of Akastor are available on
the internet. Akastor encourages its shareholders to subscribe
to the company’s annual reports via the electronic delivery
system of the Norwegian Central securities Depository (VPS).
Please note that VPS services (VPS Investortjenester) are
designed primarily for Norwegian shareholders. Subscribers to
this service receive annual reports in PDF format by email. VPS
distribution takes place at the same time as distribution of the
printed version of Akastor’s annual report to shareholders who
have requested it. Quarterly reports, which are generally only
distributed electronically, are available on the company’s
website and other sources. Shareholders who are unable to
receive the electronic version of interim reports may subscribe
to the printed version by contacting Akastor’s investor relations
staff.
Copyright in all published material including photographs,
drawings and images in this publication remains vested in
Akastor and third party contributors to this publication as
appropriate. Accordingly, neither the whole nor any part of this
publication can be reproduced in any form without express
prior permission. Articles and opinions appearing in this
publication do not necessarily represent the views of Akastor.
While all steps have been taken to ensure the accuracy of the
published contents, Akastor does not accept any responsibility
for any errors or resulting loss or damage whatsoever caused
and readers have the responsibility to thoroughly check these
aspects for themselves. Enquiries about reproduction of
content from this publication should be directed to Akastor
ASA.
Contact details
Akastor ASA
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
KOP Surface Products
77 Science Park Drive #04-01/07 Cintech 3
Singapore Science Park, Singapore 118256
+65 68 80 97 40
kopsurfaceproducts.com
First Geo
Jåttåvågveien 10, 4020 Stavanger, Norway
PO Box 289, 4066 Stavanger, Norway
+47 51 81 23 80
first-geo.com
Step Oiltools
7500A Beach Road # 16-307/312
The Plaza, Singapore, 199591, Singapore
+65 6396 3872
stepoiltools.com
Cool Sorption
Smedeland 6, DK2600 Glostrup, Denmark
+45 43 45 47 45
Coolsorption.com
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